Unless you are a non-resident alien and use a Form 1040NR, you might have the choice of using one of the three 1040 forms, 1040EZ, 1040A and 1040. Which form you can use depends on your circumstances; income, deduction and credits. Having an idea which of the 1040s you need might not be necessary if you use a paid preparer, it can be something you want to think about if you do it yourself and have to get the forms or you are paying for box or online tax software. After all, you need to know what you have to buy the right box.
Who can use the 1040EZ? Only about 16% of taxpayers can use the 1040EZ. First, your filing status must be single or married filing jointly and you can't claim any dependents. You also can't be 65 or older. (If you or your spouse were born on or after January 1, 1950, you can't use the 1040EZ.) And you can't have filed Chapter 11 bankruptcy since October16, 2005.
Next, your taxable income must be less than $100,000. And that income is limited to wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation, Alaska Permanent Fund dividends, and taxable interest which can’t be over $1,500. A note about tips, if you have to report your tips on Form 4137 or you have allocated tips reported in box 8 on your W-2, you can't use the EZ form.
Deductions on a 1040EZ are limited to the standard deduction. Besides not being able to use morgage interest, charitable contributions and state and local taxes to itemize deductions, that means no IRA, student loan, teacher expense, alimony paid or other "adjustment" that reduces income. And only one credit is allowed, the Earned Income Credit for returns without children.
If you had health insurance coverage for the whole year, you can use the 1040EZ to report that but not to calculate the Premium Tax Credit or Individual Shared Responsibility Penalty or exemption.
Form 1040A is open to more taxpayers. It can be used by all filing status and taxpayers with dependents. Income is expanded to include dividends and capital gain distributions. Also distributions from IRAs and pensions as well as Social Security benefits can be reported on the 1040A. Besides the standard deduction for their filing status, taxpayers can take deductions for education expenses, IRA contributions, student loan interest and tuition and fees.
Form 1040A also expands the number of tax credits that can be taken used on the return. Besides Earned Income Credit, the 1040A allows the Child Care Credit, Education Credits, Retirement Savings Credit and the Child Tax Credit. The 1040A can also be used to calculate the penalty for the Individual Shared Responsibility Penalty or report an exemption to the penalty. The 1040A can also be used for the Premium Tax Credit.
Everyone else needs Form 1040. This form allows the reporting of all types of income and all allowable deductions and credits. That includes, but not limited to business and rental income and capital gains. Using Schedule A to Itemize Deductions also requires the Form 1040.
Anyone can use Form 1040 to file their tax return. But if you qualify to use the 1040EZ and 1040A your tax headache might be milder or you won’t have to pay for the full featured tax software.