IRS

1040, 1040A or 1040EZ, Which is Right for Me?

December 30, 2015 : H&R Block

When we talk about filing a personal tax return, we’re talking about Form 1040. This is the “THE TAX FORM,” aka, the Individual Income Tax Form. Additional forms or schedules may be attached to it, but the 1040 is the main show.

If you are filing personal income taxes in the United States, you will complete some variety of the 1040. However, there are several different varieties of 1040 forms. We’d like to cover the top three: 1040 vs. 1040a vs. 1040EZ, and help you determine which one to use.

Let’s start with the most complex. Form 1040.

1040

You must use Form 1040 if you have more than $100,000 in taxable income. You must use Form 1040 if you have any self-employment income or had any tips that weren’t reported to your employer.

If you want to itemize your deductions, you need to use Form 1040. That will allow you to claim deductions for charitable contributions, mortgage interest paid and medical expenses, among others.

If you owe Net Investment Income Tax, you must use Form 1040.

And then there’s this list of a whole lot of other complex situations that mean you have to file Form 1040.

  • You have income received as a partner in a partnership, shareholder in an S corporation, or as a beneficiary of an estate or trust.
  • You qualify for and elect to use the foreign earned income exclusion.
  • You qualify to exclude income from sources in Puerto Rico or American Samoa because you were a bona fide resident of either.
  • You have certain foreign financial assets that you must report.
  • You have an Alternative Minimum Tax (AMT) adjustment on stock acquired from exercising an incentive stock option.
  • You owe excise tax on insider stock compensation from an expatriated corporation.
  • You’re reporting an original issue discount (OID) amount that doesn’t match the amount on Form 1099-OID.
  • You had a qualified health savings account (HSA) funding distribution from your IRA.
  • You’re a debtor in a Chapter 11 bankruptcy case filed after Oct. 16, 2005.
  • You owe household employment taxes.
  • You’re repaying the first-time homebuyer credit.
  • You’re eligible for the health coverage tax credit.
  • You’re claiming the adoption credit or you received employer-provided adoption benefits.
  • Your employer didn’t withhold Social Security and Medicare taxes from your pay.
  • You owe additional Medicare Tax or had Additional Medicare Tax withheld.

OK, on to Form 1040A.

First, your taxable income must be less than $100,000 to use Form 1040A. None of that income can be from self-employment. In fact, your income has to be solely from one or more of these sources to use Form 1040A.

  • Wages, salaries, and tips
  • Interest and ordinary dividends
  • Capital gain distributions (shown on Form 1099-DIV)
  • Taxable scholarship and fellowship grants
  • Pensions, annuities, and IRAs
  • Unemployment compensation
  • Taxable Social Security and railroad retirement benefits
  • Alaska Permanent Fund dividends

The only adjustments to income that you can claim are the IRA deduction, the student loan interest deduction, educator expenses and the tuition and fees deduction. You cannot itemize your deductions.

These are the only credits you can claim:

  • Child tax credit
  • Additional child tax credit
  • Education credits
  • Earned Income Credit (EIC)
  • Credit for child and dependent care expenses
  • Credit for the elderly or the disabled
  • Retirement savings contributions credit
  • Premium tax credit

So if you are a student or a family with regular employment, making less than 100 grand, and not many deductions to itemize, the 1040A might work for you.

Finally, Form 1040EZ.

As the EZ would imply, this is the shortest and simplest form.

To use the 1040EZ, your taxable income must be less than $100,000. Your filing status must be single or married filing jointly. You must be under 65. Your taxable interest income must be $1,500 or less.

If you plan to claim dependents, you can’t use 1040EZ.

You also cannot: owe household employment taxes, be in Chapter 11 bankruptcy, or owe Alternative Minimum Tax and use the 1040EZ.

When you use the 1040EZ, you can’t claim any deductions and the only tax credit you can claim is the Earned Income Tax Credit.

While easier sounds great, this is a key area where taking the easy way out may be a bad idea. Filing a form that’s too simple for your tax situation may cause you to forfeit credits and deductions you’re entitled to, so be sure to consult a tax pro to make sure you’re choosing the form that’s appropriate for you.

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