Filing Your Taxes: The 1040, the 1040A and the 1040EZ

Internal Revenue Service imposes a progressive tax on the income of individuals, requiring that every April we gather our W-2s, stock information, interest statements, contributions to their IRAs and etc. (such as college tuition and fees receipts or home closing papers) and brace for the long haul. Once gathered, the question then becomes what form to file.

Any American can file a standard 1040. The 1040 form is designed to handle any tax situation. So if you have any doubt about which form to file, the IRS recommends the use of the 1040. It is however, complex. The 1040 consists of 2 pages excluding its 11 other attachments called schedules. Page one gathers tax payer information such as the number of dependants, income items, and adjustable gross income (AGI). The next page calculates deductions and credits and applies funds which were withheld from wages.

The qualifications which require an individual to file a 1040 are as follows:

• Income is $100,000 or more
• Stocks, bonds, mutual funds, or property were sold
• Deductions are being itemized (such as mortgage interest or charity)
• Received income from a rental, business, farm, S-corporation, partnership, or trust
• Adjustments to income for educator expenses, tuition and fees, moving expenses, or health savings accounts are being claimed

* IRS.gov ©2008

There are of course a number of other forms a tax payer can file. If you are not itemizing your deductions and make less than $100,000 annually, you have the option to file a 1040A. Nicknamed the “short form”, the 1040A puts limitations on where your AGI can draw from. For all intents and purposes, it only allows for wages, salaries, tips, taxable scholarships and fellowship grants, interest, or ordinary dividends, capital gain distributions, pensions, annuities, IRAs, unemployment compensation, taxable social security or railroad retirement benefits, and Alaska Permanent Fund dividends. If your file a 1040A you are also only allowed to claim the credit for child and dependent care expenses, the earned income credit, the credit for the elderly or the disabled, education credits, the child tax credit, the additional child tax credit, and the retirement savings contribution credit.

Sound easy enough? No? Meet the following criteria and choose to take the standard deduction instead of itemizing and you are allowed to file a 1040EZ; the simplest form to fill out.

• Your filing status is single or married filing jointly
• You, and your spouse if filing a joint return, were under age 65 on January 1, 2009, and not blind at the end of 2008
• You claim no dependents
• Your taxable income is less than $100,000
• You have only wages, salaries, tips, taxable scholarship and fellowship grants, unemployment compensation, qualified state tuition program earnings, or Alaska Permanent Fund dividends, and your taxable interest was not over $1,500
• You do not owe any household employment taxes on wages you paid to a household employee
• You did not receive any advance earned income credit payments
• You are not a debtor in a Chapter 11 bankruptcy case filed after October 16, 2005
• You do not owe any alternative minimum tax
• You do not claim an education credit, retirement savings contributions credit, or a health coverage tax credit
• You do not claim a student loan interest deduction, an educator expense deduction, or a tuition and fees deduction

* IRS.gov ©2008

The 1040EZ is designed to be the shortest and easiest tax form to file with only six sections. It is also the fastest for the IRS to process. Please bear in mind that the longer the form, the more opportunities there are for tax breaks.