What is a '1040EZ Form'
Form 1040EZ is the shortest version of the Internal Revenue Service's (IRS) Form 1040, and it offers a faster and easier way to file income taxes for taxpayers with basic tax situations. In order to be eligible to use this form, filers must have taxable income of less than $100,000, interest income of $1,500 or less and no dependents. Form 1040EZ is also known as the income tax return for single and joint filers with no dependents and unofficially as the easy form.
BREAKING DOWN '1040EZ Form'For most individuals, the 1040EZ is the first tax form they ever fill out. For example, a young adult with a part-time job files a tax return at the end of the year. This person likely has a straightforward and simple tax situation. As long as he has no real estate assets, no tax shelters and no foreign income, only the most basic information requested on Form 1040EZ is needed to determine whether any money is owed or refunded.
Difference Between Form 1040EZ and Form 1040
Form 1040EZ has only 14 lines of information, while Form 1040 has 79 lines. Form 1040 has fields to include information about dependents, while 1040EZ does not. Similarly, the EZ form only has spots to record wages, salaries and tips, taxable interest under $1,500 and unemployment compensation, but in contrast, Form 1040 has at least 16 income categories including dividends, retirement account distributions, farm income, rental income, Social Security benefits and alimony among others. Additionally, Form 1040 has a long list of deductions, ranging from education costs to health care savings plan contributions, and Form 1040EZ only has a very small section devoted to credits including a line to claim the earned income credit (EIC) and a spot to record a nontaxable combat pay election.
When to Switch From Form 1040EZ to Form 1040
In some cases, an individual can file Form 1040EZ for his entire life. However, in many cases, individual's taxation situations become more complicated through the years, and as a result, they have to switch from the EZ form to the standard long form or to Form 1040A, a hybrid between the 1040EZ and Form 1040.
For example, if someone files Form 1040EZ one year, but then he has a child, he has to file Form 1040 the following year. Similarly, if someone buys real estate or earns a significant amount of investment income, he also has to switch from Form 1040EZ to Form 1040.
To learn more about the tax forms you can choose from when filing your taxes, check out What's the difference between IRS Forms 1040 and 1040EZ