The link between you and the income taxes you pay is a paper or online form known as the 1040 – actually, that would be the 1040, 1040A or 1040EZ. Knowing which form to file is only part of the picture. You must also know how and where to file. The what, how and where are critical to minimizing taxes and avoiding problems with the Internal Revenue Service (IRS). (For more, see The Purpose of IRS Form 1040.)
What to File
Deciding which 1040 form to file is a matter of matching your status with the right form. If you use tax-filing software, the software will advise you on which form to use. Even if you go the software route, it’s good to know how that advice is determined. If you file your taxes using a paper form – the information here will save you a lot of time and research.
Form 1040EZ is simple to fill out, but has restrictions as to who can use it. You may use Form 1040EZ if your filing status is single or married filing jointly, you claim no dependents, and you and your spouse (if applicable) are under the age of 65 and not blind.
The following additional stipulations apply:
Taxable income below $100,000 that consists of wages, salaries, reported tips, taxable scholarships/fellowship grants, unemployment compensation, Alaska Permanent Fund dividends and/or taxable interest of $1,500 or less.
No owed employment taxes on household employee wages.
You must not be a debtor in a Chapter 11 case filed after October 16, 2005.
No itemizing deductions, claiming adjustments to income or taking any tax credits besides the earned income credit. (For more, see Are You Really Eligible For The Earned Income Tax Credit?)
If you bought health insurance under the Affordable Care Act and received advance payment of the premium tax credit on your coverage, you must account for that credit. You can only account for the advance payment on Form 8962, which you must file with Form 1040A or 1040.
If 1040EZ is not an option, 1040A may be appropriate for you.
The following rules apply when filing with Form 1040A:
In addition to the sources listed for 1040EZ, taxable income can also come from annuities, capital gain distributions, IRAs, ordinary dividends, pensions, taxable Social Security/railroad retirement benefits and/or interest of any amount.
Taxable income must also be under $100,000.
No itemizing deductions
Adjustments to income restricted to the IRA deduction, educator expenses deduction, student loan interest deduction and tuition and fees deduction.
Credits limited to those related to child and dependent care expenses, child tax and additional child tax, earned income, elderly or disabled, education, net premium tax and retirement savings contribution.
The IRS also accepts the 1040A if you received dependent care benefits or owe tax from the recapture of either the alternative minimum tax or an education credit.
You can always use Form 1040, but you are required to do so if any of the following apply:
Taxable income is $100,000 or greater.
Your income includes unreported tips, insurance policy dividends that exceed the aggregate net premiums paid for the contract, self-employment earnings and/or income received as a partner, shareholder in an S corporation, or beneficiary of an estate or trust.
You itemize deductions or claim tax credits or adjustments to income not previously mentioned.
You owe household employment taxes.
If you still have questions, see: When Must You Use Form 1040?
How to File
Once you know which form you plan to use, you need to know how to file. Each form comes with instructions, and the simpler the form, the easier the instructions.
Before you gather up all those paper forms and start sharpening pencils, however, check out IRS Free File on IRS.gov. This IRS website has free tax software (if your income is less than $60,000) and free Fillable Forms (if your income is $60,000 or more). The guidance for Fillable Forms is minimal, so if you prefer the software route, your income exceeds $60,000 and you want more help, you may want to look into commercial options such as TurboTax, TaxAct and H&R Block. (For more, see H&R Block Vs. TurboTax Vs. Jackson Hewitt.)
Where to File
Once taxes are done, you must file them with the IRS. With software, you simply follow directions and your taxes should be filed properly. Or you could go to E-File Options for Individuals for additional information.
With paper forms, the correct mailing address should be printed on the forms. Alternatively, go to Where to File Addresses for Taxpayers and Tax Professionals for guidance.
The Bottom Line
Just because you used a particular income tax form in the past doesn’t mean you should use it every year. Your situation may have changed and deductions that did not apply in the past may now. In this case, filing the wrong form can cost you money.
If using the wrong form causes you to fail to report income, you could hear from the IRS – also not a desirable outcome. Either way, it makes sense to study your options and do it right the first time.