Learning About Income Tax Forms

income tax formsIn the past, when individuals had to file income taxes, they would either wait in the mail for their income tax forms to come from the IRS or picked up copies of standardized forms from their local post office. Now these forms are made available online so that you can download and print it out or file your forms electronically. Even with the advancements made to accommodate the world of technology, you still need to understand what these forms are and the difference between each form.

The basic forms for individual tax returns are 1040, 1040A, and the 1040 EZ forms. Being misinformed when it comes to filing income tax forms and which forms apply to your tax situation is a waste of your time and effort that could be spent on other things. In order to avoid this, examine your tax situation and learn about each form, so that if your situation changes, you will file the correct form.

The 1040 form is what was once considered the “long form.” This is because individuals that filed with this form, typically were either self-employed or itemizing their deductions. The attachments that are required to be filed with this form are also known as schedules, this is what made filing taxes for many individuals the least anticipated task of the year. The 1040A and 1040EZ are simplified forms that can be interchangeable with one another depending on your specific situation. The 1040EZ is for individuals that do not have dependents to claim and that are not required to file 1040, otherwise if you are claiming dependents then you would file the 1040A unless you fall under other circumstances that require you to file 1040.

Most individuals will know if they have to file the long form. If you receive 1099 as an independent contractor or you are self-employed, you would need to file the Schedule C which can only be filed on 1040. This is where you report your business profit and loss based on earnings and expenses. Other schedules that you may encounter, include Schedule E which applies to individuals with rental properties and Schedule D which is for reporting capital gains and losses.

The 1040EZ allows individuals that make under a certain income threshold, without kids an easier way to file taxes. Keep in mind that if you receive any self-employment income or 1099 you cannot report this information on 1040EZ. This is for W-2 employees only to file their taxes that meet the requirements. Your filing status may also have a bearing on whether you can file 1040EZ. If you are married filing separately, innocent spouse or head of household then you can only use 1040 or 1040A. Typically, with the head of household you have dependents to claim, therefore you would need to file 1040 or 1040A. Certain tax credits that may benefit you cannot be filed on the 1040EZ either. In order to claim certain tax credits, you would need to file 1040 or 1040A.

Understanding the proper form to file not only saves you a lot of wasted time and effort, but it also ensures that you are maximizing your refund potential. By filing the wrong income tax forms, you may lose out on credits and deductions that could benefit you.