DEFINITION of '1040A Form'

The 1040A Form is a simplified version of the 1040 form for individual income tax. To be eligible to use a 1040A form, an individual must fulfill certain requirements such as not itemizing deductions, not owning a business, and having a taxable income less than $100,000.

Unofficially known as the "short form".

BREAKING DOWN '1040A Form'

Most US tax payers use the IRS Form 1040 to file their income tax returns. The 1040 Form is a detailed form which gives taxpayers with complex investments, itemized deductions, multiple tax credits, and more than $100,000 annual income more opportunities to lower their tax liability. Since additional tax paperwork is usually required with the 1040 Form, individuals with simpler tax situations may opt to use the 1040A form instead.

Form 1040A is a simplified version of Form 1040. The two-page form allows taxpayers to report ordinary income, some deductions, and credits. Individuals that fall under any of the five status options – single, head of household, married filing separately, married filing jointly, or widowed – can file their tax returns using the 1040A. While the 1040A form is available to taxpayers of any age and filing status, not everyone qualifies to use this form. Tax filers who use the form must have earned less than $100,000 taxable income and did not exercise any incentive stock options (ISO) during the tax year. The income reported must be earned as a wage, salary, tip, capital gain, dividend, interest income, unemployment compensation, pension, annuity, taxable Social Security and railroad retirement benefit, taxable scholarship or grant, and Alaska Permanent Fund dividend. Any other form of income, such as business income, must be reported on the more complex form 1040.

Form 1040A also gives taxpayers the opportunity to claim several tax deductions to reduce their taxable income. However, the only deductions that can be claimed include student loan interest, post-secondary tuition and fees, classroom expenses, and IRA contributions. Taxpayers using Form 1040A cannot claim itemized deduction. This limitation means that if an individual qualifies for other deductions from sources such as charity donations or mortgage interest deductions, and the total itemized deductible amount is more than the standard deductions, it would not be advantageous to use 1040A.

Claiming tax credits can also be done using the 1040A form. Tax credits reduce the bottom line or total tax bill of a taxpayer. The credits that can be claimed using this form are the American Opportunity Tax Credit (AOTC), Lifetime Learning Credit (LLC), Earned Income Credit (EIC), child tax and additional child tax credit, child and dependent care credit, credits for the elderly or disabled, and retirement savings contribution credit.

Another variant of Form 1040 is Form 1040EZ which is even simpler and easier to fill out than Form 1040A. But with Form 1040EZ, the individual must file as either a single tax payer or married filing jointly. No deductions can be claimed and only the EIC tax credit can be claimed using 1040EZ. While the 1040A form can be slightly more complex compared to the 1040EZ form, it is still relatively simple in comparison to the 1040. Once an individual's financial situation becomes complicated with dependents, special deductions, and credits (such as those associated with post-secondary education tuition), most taxpayers will often need to switch from filing with the 1040EZ to the 1040A.

 

RELATED TERMS
  1. 1040 Form

    The 1040 is the standard Internal Revenue Service form taxpayers ...
  2. Total Tax

    The composite total of all taxes that is owed by a taxpayer for ...
  3. Form 1098

    Form 1098 is a form filed with the Internal Revenue Service (IRS) ...
  4. Form 1040X

    A form used by taxpayers who have to amend their tax returns ...
  5. Tax Deduction

    A tax deduction is an allowance that lowers a person’s tax liability ...
  6. Amended Return

    An amended return is a return filed in order to make corrections ...
Related Articles
  1. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  2. Taxes

    Tax Credits And Deductions For Parents

    Your children can help you save on your taxes with these credits and deductions.
  3. Taxes

    20 Tax Changes You Need To Know About

    Don't miss out on the tax changes. Here's a list that you need to know about.
  4. Retirement

    Top Tax Tips for Retirees

    Filing your taxes during retirement can be just as time consuming as when you were employed. We have some tips to help you out.
  5. Taxes

    The Purpose Of 1099 Forms

    The need for 1099 forms and why you must track the income reported on them. If you don't, the IRS will find it anyway and go after you – a costly mistake.
  6. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  7. Taxes

    Making Sense of the 2017 Tax Changes

    Here is a brief overview of some of the changes introduced by the Tax Cuts and Jobs Act of 2017, and how they may affect your taxes.
  8. Taxes

    Increase Your Tax Refund With Above-The-Line Deductions

    Find out about these deductions and how you can use them to lower your tax bill.
  9. Taxes

    Inaccurate Tax Return, Now What?

    If the IRS finds errors, it will cost you. Find out how to fix them, and how to prevent them in the first place.
RELATED FAQS
  1. Where on my 1040 form do I report AGI (adjusted gross income)?

    Learn more about IRS Form 1040 and your adjusted gross income, or AGI, which is the figure the IRS uses to figure your total ... Read Answer >>
  2. How do I know whether to itemize deductions or take the standard deduction?

    Taking the standard deduction is the easiest and most common method chosen by filers, but many taxpayers may wind up paying ... Read Answer >>
Hot Definitions
  1. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  2. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  3. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  4. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  5. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  6. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
Trading Center