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Which 1040 Tax Form Should I File?

By Dan Caplinger - Apr 13, 2017 at 8:06AM

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Find out which IRS form is the best one for you.

The tax filing deadline is just days away, but many taxpayers have yet to get their tax returns in. For many, the threshold question in preparing taxes is which tax form to use to file your return. With three main choices -- Forms 1040, 1040A, and 1040EZ -- making the right decision can save you a lot of headache while still letting you take advantage of every tax break to which you're entitled. By contrast, making the wrong choice can make your return unnecessarily complicated, or even worse, lead you to miss out on tax benefits that you'd otherwise be entitled to receive.

Keeping things simple with 1040EZ

Most taxpayers like to file whichever form is the least complicated for their particular situation. Form 1040EZ is a one-page form that includes the most basic information for preparing your return.

In order to use 1040EZ, you have to meet a number of qualifications. Your taxable income must be less than $100,000, and you have to have your earned income reported on a W-2 form by your employer. You can only file as single or married filing jointly; head of household, separate filing for married couples, and other special tax filing statuses aren't available.

In addition, you have to be younger than 65 and you can't claim dependents or itemize deductions. You must not have any adjustments to income, and your interest income has to be $1,500 or less. Perhaps most importantly, the only tax credit you're allowed to claim is the earned income credit.

If you meet all of these criteria, then Form 1040EZ might be your best bet. However, a more complicated form can give you more access to tax-saving benefits to which you might be entitled.

Tax forms with money.

Image source: Getty Images.

1040A: The middle of the road

A step up in complexity is IRS Form 1040A. You can claim any filing status using this form, with single parents getting the most common benefit from using head-of-household status. The form gives you access to more tax credits, such as the child tax credit, the child and dependent care expense credit, education tax credits, the saver's credit for retirement plan contributions, and credits for elderly or disabled taxpayers. You can also have adjustments to income for items like IRA contributions and student loan interest payments.

Dividend income is reportable on Form 1040A, as is retirement income from Social Security, IRA distributions, and pensions and annuities. Those who have capital gains distributions from mutual funds or similar investments can use Form 1040A as well.

However, there are still some limitations on using Form 1040A. Your income still must be less than $100,000, and a wide range of credits are unavailable. In addition, you have to take the standard deduction if you use the form. To get access to everything, you need to file the full Form 1040.

Going with the 1040 form

Form 1040 is the most flexible IRS form, letting you file your taxes and take full advantage of any provisions that apply to you. In particular, if your taxable income is more than $100,000, or you want to itemize your deductions, then you have to use Form 1040. In addition, those who run their own businesses or have sold investments that have generated capital gains must file Form 1040. Form 1040 is also the only vehicle for claiming many tax credits and deductions that are available to taxpayers, such as the foreign tax credit and deductions for moving expenses.

If you're ever in doubt, you can always file Form 1040. Even if you don't really need it, the form will give you the ability to report everything you need to tell the IRS in order to file a valid tax return.

In general, though, most taxpayers find it best to file whatever form is the simplest that still allows them to claim every tax break that they're entitled to receive. Still, that shouldn't leave you any less diligent about finding credits and deductions that can help you save money. That way, you'll never short yourself and end up paying a larger tax bill just in order to file a shorter form.

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