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Whether you use a tax professional or not, each year you file your returns, a 1040 Form like almost everybody else, with much more interest in the bottom line than the actual form you sign and date. The question is, do you know how many 1040 forms are there, which of the 1040 forms is right for you and why?
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The three forms U.S. citizens and resident aliens use for filing individual federal income tax returns are Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, Form 1040A, U.S. Individual Income Tax Return, and Form 1040, U.S. Individual Income Tax Return.
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As a general rule, the simplest tax form for your needs is the best choice. This usually saves time in preparing the return, and also allows the IRS to process the tax return more quickly.
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While all the personal income tax forms are designed to get the appropriate amount of your money to the IRS, the differences in these returns could cost you if you're not well informed.
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The IRS tax forms range from simple to complex. The simplest form, also known as the shortest form, is the 1040EZ. The 1040A and the 1040 are designed for more complex tax returns.
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There are rules and limits for each tax form. The form with the most limitations on what can be filed on a return is the 1040EZ. This one page long form is very simple, so filing is quick and easy.
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| You can use Form 1040EZ if: |
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- Your filing status is single or married filing jointly;
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- You, and your spouse if filing a joint return, were under age 65 on January 1, 2016, and not blind at the end of 2015 You (or your spouse if filing jointly) were not legally blind during the last tax year;
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- Your income, or combined incomes for joint filers, is less than $100,000;
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- Your interest income is less than $1,500;
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- You must have income only from wages, salaries, tips, taxable scholarships and fellowship grants, unemployment compensation, qualified state tuition program earnings or Alaska Permanent Fund dividends;
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- You are not a debtor in a chapter 11 bankruptcy case filed after October 16, 2005;
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- You intend to claim only the Earned Income Credit;
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- Advance payments of the premium tax credit were not made for you, your spouse, or any individual you enrolled in coverage for whom no one else is claiming the personal exemption.
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With all the restrictions for filing Form 1040EZ, it is no wonder that most taxpayers qualify to use Form 1040A, often called the "short form." This form allows you to claim the most common adjustments to income.
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You can use Form 1040A if:
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- Your total income (no matter the filing status) is under $100,000;
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- You are any age, with any filing status (including dependents);
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- You have income only from wages, salaries, tips, taxable scholarships and fellowship grants, interest, ordinary dividends, capital gain distributions, pensions, annuities, IRA distributions, unemployment compensation, taxable Social Security or railroad retirement benefits, taxable scholarship and fellowship grants or Alaska Permanent Fund dividends;
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| With 1040A: |
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- You can claim some adjustments to income, like the penalty for early withdrawal of savings, IRA contributions, student loan interest, and jury duty pay given to your employer;
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- You can claim the following tax credits: child and dependent care credit, credit for the elderly and disabled, education credits, retirement savings contributions credit, child tax credit, and earned income credit;
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- You did not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option;
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- You cannot itemize deductions.
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Form 1040 is the standard federal individual income tax form; with this form your tax return is free from restrictions. The 1040 tax form is like the base form, it includes a summary of your income and tax computations. All deductions and credits are calculated on various schedules which get attached to it.
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Any taxpayer can use Form 1040. Even though it takes longer to fill out, Form 1040 can handle any tax situation no matter how complex.
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You must file Form 1040 when:
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- You owe any special taxes, including any of the following:
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| a. |
Alternative minimum tax; |
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| b. |
Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. But if you are filing a return only because you owe this tax, you can file Form 5329 by itself;
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| c. |
Household employment taxes. But if you are filing a return only because you owe this tax, you can file Schedule H by itself;
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| d. |
Social security and Medicare tax on tips you didn't report to your employer or on wages you received from an employer who didn't withhold these taxes;
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| e. |
Recapture of first-time homebuyer credit; |
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| f. |
Write-in taxes, including uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group-term life insurance and additional taxes on health savings accounts;
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| g. |
Recapture taxes. |
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- You (or your spouse, if filing jointly) received health savings account, Archer MSA, or Medicare Advantage MSA distributions.
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- You had net earnings from self-employment of at least $400.
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- You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes.
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- Advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Marketplace. You or whoever enrolled you should have received Form(s) 1095-A showing the amount of the advance payments.
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- You are itemizing your deductions.
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- You have income from a rental, business, farm, S-corporation, partnership, or trust.
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- You have foreign wages, paid foreign taxes, or are claiming tax treaty benefits.
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- You sold stocks, bonds, mutual funds, or property.
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- You are claiming adjustments to income for educator expenses, tuition and fees, moving expenses, or health savings accounts.
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Bottom line, if you have any doubt about what form to choose, use Form 1040, you cannot go wrong by using this tax form. With Form 1040 you can get the lowest tax by having the most possibility for credits.
Of course, complex or not so complex, your tax returns will always be in the best form with the help of a tax professional.
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