Many tax payers hate filling out their tax forms just as much as they hate paying their taxes. This is why it is important that you use the simplest tax form possible, especially if you still paper file.
However, you are going to want to make sure that you choose the form carefully. While all 1040 forms are for personal income they all have differences which could affect you negatively if the correct 1040 tax form is not filled out.
1040EZ is the shortest and simplest of the forms while 1040A is more complex and the long Form 1040 is very detailed and said to be the most complex of them all. However, when selecting your tax form you have to explore all of the forms even if you think your tax situation is simple and straightforward. This is because usually the longest form will allow you to get the maximum amount of tax breaks.
Form 1040 EZ
The Form 1040 EZ is the simplest IRS form. The IRS has even doubled the earning limit on filers who use it so it is available to a large percentage of tax payers. You can file form 1040 EZ if you are filing single or married filing jointly, are younger than 65 on the last day of the year, you were not legally blind by the last day of the year, your interest income is below $1500, and your income is under $100000.
The ease of filing out the one page form is appealing to most tax payers yet you have to remember that it is so short because it limits the number of ways for you to save on your taxes.
For example, you cannot claim the earned income tax credit which is a great way for people who make low amounts of money to lower their taxes or even maximum their refund. So, it is very important that you look over all three forms to see which one is going to benefit you the most before making your decision.
Form 1040A is a step up from 1040 EZ. The earning limits are increased on this form so more tax payers have access to it. When using this form you can file as single, married filing jointly, married filing separately, qualifying widow, or head of household.
You are able to claim earned income tax credit, additional child, education, dependent care, elderly or disabled, the child, and retirement savings – none of these can be claimed on 1040 EZ. You can file this form if your income is under $100,000; you have capital gain distributions but no other capital gains or losses, and do not itemize your deductions.
Additionally, form 1040A allows you to claim several adjustments to your income. These are usually referred to as above-the-line deductions since you claim them just before the bottom line of the form.
This way you are not only reducing your total gross income but you are reducing your taxable income as well which results in a smaller tax bill. Adjustments that can be made on this form include educator expenses, some IRA contributions, some college and tuition fees, and student loan interest.
If you have large earnings, other income, complex investments, or want to itemize your deductions you are going to have to go with form 1040. However, this form does come with a lot of paperwork that has to be filled out.
The good news is among all of this paper work you can get additional credits that other 1040 forms do not have available. In fact, this form has more than a dozen above – the-line deductions that you can claim directly on the form. This allows you to reduce your gross income which results in a lower taxable income.
You can include a variety of things on form 1040 ranging from self-employment taxes paid, moving expenses, alimony payments, and many more. You should file form 1040 if your income is more than $100,000, you itemize deductions, you have self-employment income to report, or you received income from the sale of a property.
The IRS Publication 17 “Which Form Should I Use” section has more than seventeen examples for you to go by. Additionally, keep in mind just because you used one form in the past does not mean it is applicable to your current tax situation. Choosing the correct form is the way to insure that you keep more of your hard earned money.
Using Turbo Tax online to file your taxes
When you file online with TurboTax 2014 you are making your life easier. They do not request that you know the tax code. Instead Turbo Tax asks simple questions regarding your unique tax situation, puts the information into the correct forms, and gives you the tax deductions and tax credits that you are entitled to so you can keep the maximum amount of your money.