Just as Golidlocks had to try out three chairs before she found the one that was just right, taxpayers sometimes need to work to find the appropriate version of the flagship 1040 tax form. Form 1040 A is simpler than Form 1040, but not as simple as Form 1040 EZ. Let's see which form is right for you.
Form 1040 EZ
Form 1040 EZ (.pdf file) can make preparing and filing your tax return a breeze -- but it's not an option for everyone. You qualify to use it if all of the following conditions apply:
- Your filing status is single or married filing jointly.
- You're not claiming any dependents.
- You're not itemizing your deductions.
- Your taxable income is less than $100,000.
- Your taxable income is limited to wages, salaries, tips, taxable scholarship and fellowship grants, unemployment compensation, and/or Alaska Permanent Fund dividends.
- Your taxable interest was not over $1,500.
- Your earned tips, if any, are included in boxes 5 and 7 of your Form W-2.
- You (and your spouse if filing a joint return) were younger than 65 and not blind at the end of the tax year.
- You do not owe any household employment taxes on wages you paid to a household employee.
- You are not a debtor in a Chapter 11 bankruptcy case filed after October 16, 2005.
- You're not claiming any adjustments to income, such as for IRA contributions or student loan interest.
- You're not claiming any credits other than the earned income credit.
- You bought health insurance through a government-sponsored marketplace and received the advance premium tax credit or you will claim the premium tax credit.
Clearly Form 1040 EZ is not for everyone, and it's not even desirable for many of us, as we frequently owe less in taxes if we itemize our deductions and we are (hopefully) saving for retirement by making contributions to IRAs. So in a sense, it's kind of a good sign if you don't qualify for the 1040 EZ.
Form 1040 A
Next up is Form 1040A (.pdf file), which is allowed if you have a more complex financial life than those using form 1040 EZ, but not that complex a financial life. You may be allowed to use Form 1040 A if you meet the following criteria:
- Your taxable income is limited to wages, salaries, tips, taxable scholarships and fellowship grants, interest, ordinary dividends, capital gain distributions, pensions, annuities, IRAs, unemployment compensation, taxable Social Security or railroad retirement benefits, and Alaska Permanent Fund dividends.
- Your taxable income is less than $100,000.
- You're not itemizing deductions.
- Your only adjustments to income are the IRA deduction, the student loan interest deduction, the educator expenses deduction, and/or the tuition and fees deduction.
- The only credits you're claiming are the credit for child and dependent care expenses, the earned income credit, the credit for the elderly or the disabled, education credits, the child tax credit, the additional child tax credit, the net premium tax credit, and/or the retirement savings contribution credit.
- You did not have an alternative minimum tax (AMT) adjustment on stock you acquired from the exercise of an incentive stock option.
Using Form 1040 A is also permitted if you received dependent care benefits or if you owe tax from the recapture of an education credit or the alternative minimum tax.
Finally we come to the standard Form 1040 (.pdf file). This is the most complex of the three options, though an I.Q. of 175 is not necessary. Here's a quick way to know whether this is your form -- you must use it if you meet any of the following conditions:
- Your taxable income is $100,000 or more.
- You're itemizing deductions.
- You're claiming certain tax credits or adjustments to income.
- You owe household employment taxes.
- Your income includes unreported tips, dividends on insurance policies that exceed the total of all net premiums you paid for the contract, self-employment earnings, or income received as a partner, a shareholder in an S corporation, or a beneficiary of an estate or trust.
It's possible that due to your circumstances the guidelines above still don't make it crystal clear which form to use. If so, consider using the IRS's "What is the simplest form to use to file my taxes?" automated interview, which will take you through a series of questions and eventually reveal which form is right for you. You may also find the Form 1040A Instructions (.pdf file) and its additional information useful.
Every taxpayer will have to use one of these three forms, so take a few minutes to be sure you're using the best one. And don't despair if you have to use the most complex one -- its upside is that it allows you to take maximum advantage of tax breaks available to you.