While filing taxes it is important to consider which tax form you should use. There are three basic forms that you can use for personal income taxes: 1040EZ, 1040A, and the 1040. While most tax payers are able to use any of the three, choosing the wrong form for your individual tax needs could end up costing you hundreds or even thousands of dollars.
The 1040EZ is the simplest form that meets the needs of those with the least complicated taxes. This form has certain limitations such as your income and earned interest. The 1040ez is intended for single or joint individuals with an income less than 100k who has less than $1,500 in interest income and no dependents. Other restrictions apply such as age limitations. This tax form is so simple it is only one page long.
The 1040A is a little more complex yet still offers the advantage of not having to itemize all of your deductions. This form allows more filing status such as married and filing separately, qualifying widow or widower and head of household. This form is still relatively simple yet it allows you to make adjustments for items such as student loan interest, educator’s expense, IRA contributions, tax credits, and many others. This would be an excellent form for a recent college graduate who is paying interest on student loans and just purchased a new home last year. They can use this form to claim the first time homebuyer’s tax credit.
The 1040 is intended for higher income earners who earn more than $100k (or even less) and would like to itemize their deductions. Unlike the 1040ez and the 1040a you do not take the standard deduction with the 1040. If your total deductions exceed the standard deduction the then this would be the form that you would use. Your standard deduction depends on your filing status. The standard deduction for single, married filing jointly, married filing separately, head of household, and qualifying widow(er) are $5,700, $11,400, $5,700, $8,350 and $11,400 respectively. An example of a 1040 filers would be a self-employed individual with multiple investments, multiple deductions, multiple tax credits, etc.
Whichever tax form you choose be sure to choose wisely. Using the incorrect form could mean the difference between receiving a tax return and paying additional taxes. You can read more about tax forms at the official IRS website.
Author: Mike Smitt