Which 1040 Should You Use?

Most everyone who has ever paid taxes has used some version of the 1040 Federal tax form, but every year, as tax season gets started, the office is inundated with questions from new clients and more seasoned folks about which form to use.

For starters, there are 3 different 1040 forms – the 1040 EZ, the 1040A, and the “regular” 1040.  Most in the middle class can use one of the first two, and only a few need to worry about the standard 1040 – the most complicated of the three.  Right now, we’ll concentrate on the first two, as they represent the lion’s share of taxpayers.

Form 1040EZ is the briefest version of the 1040. You can’t itemize deductions or claim any adjustments to income or tax credits and you can’t have any income from self-employment, alimony, dividends or capital gains. You can use 1040EZ if all of the following are true:

• Your taxable income is less than $100,000
• Your filing status is single or married filing jointly
• You claim no dependents
• You (and your spouse if filing jointly) were under age 65 on January 1 of the year in which you file, and not blind at the end of the tax year for which you are filing
• Your income is only from wages, salaries, tips, taxable scholarship and fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends
• Your taxable interest is $1,500 or less
• 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 Oct. 16, 2005

Form 1040A is not as complex as Form 1040, but is longer than 1040EZ. Form 1040A allows you to claim a number of deductions that you are not able to on 1040EZ. If you can’t use Form 1040EZ, you may be able to use 1040A if:

• Your taxable income is less than $100,000
• Your income is only from “traditional” sources – wages, salaries, tips, social security or railroad retirement benefits, and, in some cases, dividends or interest
• You do not itemize deductions (so you can’t deduct donations or mortgage interest paid)
• You did not have an alternative minimum tax adjustment
• Your taxes are only from the Tax Table or the alternative minimum tax
• Your only adjustment to income are the IRA, student loan interest, educator expenses, and tuition and fees deductions

Like many things in tax law, this may seem clear as mud, but it really isn’t as bad as it seems.  The truth of the matter is this:  it is usually easier to simply let a professional help you and save yourself countless hours and wasted time.  In all honesty, the costs associated with having my team handle your family’s taxes are extremely low versus the time saved and the deductions captured, so I invite you to go ahead,