Tax forms are used while paying taxes to the Internal Revenue Service (IRS). The three tax forms which are mainly used by individuals are 1040, 1040A and 1040EZ. It’s important to understand the difference between them as each form calls for a different criterion. Amongst them, the 1040EZ is the shortest and simplest to use. However, the types of forms which you can use don’t depend upon your discretion. Given below are the 3 factors on which differences are made between the tax forms:
A.) Income:-
1.) 1040 EZ - When your total income is below $10,000 and your sources of income are wages, interests, unemployment compensations and Alaska Permanent Fund dividends. You should not have any dependents.
2.) 1040A - In this case, your income should also be under $10,000 but your sources of income should be wages, interest, dividends, capital gain distributions, IRA or pension distributions, unemployment compensation, scholarships, grants, Social Security benefits and Alaska Permanent Fund dividends.
3.) 1040 - For using this tax form, your income should be 10,000 or more, and the sources of income must be business, trust, partnership, rental, S-corporation or farm. It can also be used when you have foreign wages, or you have sold stocks, bonds, mutual funds, or property.
B.) Claims:
1.) 1040 EZ - When you do not have any adjustment to income and you are claiming only standard deduction. You can use this form when you are not claiming any other tax credits but only Earned Income Credit.
2.) 1040A - When adjustments to income such as education loan interest, IRA contributions, penalty for early withdrawal of savings, and jury duty pay given to your employer are claimed. It is also applicable when the following tax credits are claimed: education credit, child tax credit, child and dependent care credit, earned income credit, elderly and disabled and retirement savings contributions credit.
3.) 1040 - It can be used when you are claiming tax treaty benefits and the following adjustments to income: tuitions and other education expenses, and also health savings accounts.
C.) Age:
1.) 1040 EZ - It can be used if you are below 65 years.
2.) 1040A - Individuals of any age can use this form.
3.) 1040 - Individuals of any age can use this form.
Thus to avoid any mistake, the conditions given above should be kept in mind while choosing a tax form varying between 1040, 1040A and 1040EZ.