When it comes to filing taxes, the IRS has plenty of paperwork that needs to be fill out. It's not enough to say that you're filing your annual 1040 Form because there are three different 1040 tax forms for you to choose from. The easiest of them is the 1040EZ, used only by those who meet certain requirements. The 1040 Form is the longest, and is usually filed by those who have incomes that are over $100,000 or those who have a self-employment income. It's also used for those who wish to itemize their deductions.
But what happens when you don't qualify for the 1040EZ tax form but don't have the long list of deductions used in the 1040? The answer is simple, use the Tax Form 1040A. It is longer than the 1040EZ but allows for a number of above-the-line deductions that won't be permitted on the easier form. Still, this form can be quite complicated and confusing for some so it's important that before you begin, you read over the Tax Form 1040A Instructions.
When to Use Form 1040A
While the 1040A allows for more deductions than the 1040EZ, it is not for everyone. In order to be eligible to use this form, you need to have a taxable income that is below the $100,000 threshold and can only come from earned wages, scholarships and grants, interest earnings, dividend payouts, capital gains, unemployment benefits, or a qualified retirement income. Any earnings outside of these will have to be reported on the 1040 Form. You are also restricted on the type of deductions you can claim when you file the 1040A. According to the Tax Form 1040A Instructions, the only allowable deductions are contributions made to a traditional IRA and some qualified education expenses. If you have any other deductions you must use the standard form to claim them.
How to Use the Form
If you know that you are allowed to use the Form 1040A then you want to make sure that you have prepared well before you begin to fill out the form. First, gather all of your W-2 forms and make sure that you list all of your total income on lines 7 through 14 on the form. Make sure that the number listed on line 15 is the total of all your income streams together. According to the Tax Form 1040A Instructions, if any of your income from interest or ordinary dividends is in excess of $1,500, you will also have to file a Schedule B giving more detail about where that income comes from.
The next section is where you will list the allowable deductions. While the 1040A may seem overwhelming to many taxpayers, if you follow the Tax Form 1040A Instructions carefully, you'll be able to systematically work through all of the sections to determine what your taxes will amount to. It may take a little time but it can be quite rewarding to go through all of the paperwork and find that Uncle Sam owes you money for a change.