The Difference Between Major IRS Forms
Editor’s Note: The Form 1040A and Form 1040-EZ were eliminated after the TCJA. The content of this post only applies to prior to 2018.
When it comes to taxes, it seems like there are endless 1040 Forms. Plus, when you hear about an offer to file your federal and state taxes for free with 1040 Form variations you wonder if you really do qualify.
So, how do you see if you state and federal tax returns can be filed using major IRS forms like 1040, 1040EZ, or 1040A Forms? And, what’s the difference between 1040 vs. 1040A, and a 1040 vs. 1040 EZ?
This post offers you insight into the different 1040 Forms:
Determining the Difference Between IRS Forms:
What is a 1040 Form?
The blanket term “Form 1040” is used to describe the return individuals use to report their income taxes annually to the IRS. However, it is not limited to just one standard form. Instead, there are there are several different versions of this form; the most common of which are Form 1040, Form 1040A, and Form 1040EZ. The correct version you should file depends upon a number of factors mainly dealing with the size and types of your income and the various tax deductions and credits you claim.
What is a 1040A Form?
If you’re questioning “What is a 1040A Form?” and how is it different than a traditional 1040, here’s the answer: A 1040A is a simplified version of the 1040 Form used to report your annual earnings and calculate federal taxes. Form 1040A eliminates some deductions and tax credits available on the Form 1040, but it offers more flexibility on reporting income than the 1040EZ.
In order to be eligible to file Form 1040A you must meet the following prerequisites:
- Your taxable income must be less than $100,000 and only come in the form of wages, interest and dividends (no limit), capital gain distributions, scholarship and fellowship grants, retirement benefits, Social Security or Railroad Retirement benefits, unemployment compensation, or Alaska Permanent Fund Dividends.
- The only deductions you can claim are those for IRA contributions, student loan interest, certain educator expenses, and allowable tuition and fees.
- The only tax credits you can claim are the child tax credit, the additional child tax credit, the American Opportunity Credit, the Lifetime Learning Credit, the Earned Income Credit (EIC), the child and dependent care credit, and the retirement savings contribution (Saver’s Credit).
One big limiting factor with Form 1040A is that you cannot claim itemized deductions. So even if you otherwise qualify to file this form it may not be advantageous to do so if you have a home mortgage, give to charity, or have other allowable deductions that in total exceed the standard deduction.
What is a 1040EZ?
So, what is a 1040EZ? As its name implies, 1040EZ is by far the simplest and shortest tax form. However, only small percentage of people qualify to file this return. In fact, IRS statistics show that only about 16% of individual income tax returns are filed using Form 1040EZ. The reason for this is that the form has several restrictions:
- Your taxable income must be less than $100,000 and only come in the form of wages, scholarship and fellowship grants, unemployment compensation, Alaska Permanent Fund Dividends, or interest (less than $1,500).
- You can only file as single or married filing jointly.
- You cannot claim any children, or any other person, as your dependent.
- You cannot claim any deductions from your income.
- You cannot have received an advanced premium tax credit.
- The only tax credit that you can claim on the form is the Earned Income Tax Credit (EITC).
- You (and your spouse if filing a joint return) must be under the age of 65 and not blind.
- You also cannot: owe household employment taxes, be in Chapter 11 bankruptcy, or owe Alternative Minimum Tax
If you do not meet these requirements you will have to file the slightly more complicated Form 1040A or the full Form 1040.
Even if you qualify to use Form 1040EZ, it may still be more suitable to file Form 1040A vs. a 1040. For example, if you qualify to claim the Saver’s Credit for making retirement contributions it may be more advantageous to file Form 1040A.
[Refresher: Form 1040 vs. 1040EZ]
In simple terms, 1040EZ is the easiest of the 1040 Forms to fill out, vs. a slightly more complex Form 1040.
[Refresher: Form 1040 vs. 1040A]
Form 1040A is a shortened variation of Form 1040.
The Full Version of Form 1040
If you are required to file a tax return, but do not qualify to file either Form 1040EZ or Form 1040A, you must file the full version of Form 1040.
If you receive these types of income, you must file a 1040:
- Self-employment income
- Tips you didn’t report to your employer
- Income you receive as a partner in a partnership, a shareholder in an S corporation or beneficiary of an estate or trust
- Insurance policy dividends totaling more than the premiums you paid
- Distributions from a foreign trust
You also must file a 1040 if any of these apply:
- You qualify for 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 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 1099OID.
- You owe household employment taxes.
- You’re eligible for the health coverage tax credit.
- You’re claiming the adoption credit or you received employer-provided adoption benefits.
- You’re a debtor in a Chapter 11 bankruptcy case filed after October 16, 2005.
- Your employer didn’t withhold Social Security and Medicare taxes from your pay.
- You had a qualified health savings account (HSA) funding distribution from your IRA.
- You’re repaying the first-time homebuyer credit.
- You owe additional Medicare Tax or had Additional Medicare Tax withheld and must file Form 8959.
- You owe net investment income tax and must file Form 8960.
- Your taxable income is more than $100,000.
It is important to note that 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 select a reputable tax preparer.
After reading this post, are you confident in the differences between 1040 Forms and the difference between 1040 vs 1040A, and 1040 vs. 1040EZ.
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