Tax Tips
Which Tax Form to Use
Use the simplest form to meet your needs and avoid errors.
By Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance
February 12, 2011
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For some taxpayers, tax time is easy -- as in EZ. They are the ones who can use the IRS’s simplest tax form to complete their annual duty. (If you file electronically, the software automatically selects the simplest form for you. E-filing also speeds up the processing of your return and the delivery of your refund.)
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You can use Form 1040EZ if you are single or married with no dependents, you have taxable income of $100,000 or less, and you are younger than age 65. Plus, your taxable interest income from bank accounts and bonds can’t exceed $1,500 in order for you to use the simplest tax-filing form.
The Long and Short of It
If your tax situation is a little more complicated, choose Form 1040A, also known as the short form. You can use this form if your taxable income is $100,000 or less and you do not itemize your deductions.
However, unlike Form 1040EZ, the short form lets you claim a number of “above the line” deductions, including up to $250 of out-of-pocket expenses for educational supplies if you are a teacher or educational professional; tax-deductible contributions to an IRA; and deductions for college tuition and fees or interest paid on a student loan.
Choosing the short form also allows you to take advantage of a variety of tax credits, which are even more valuable than tax deductions. A tax credit reduces your tax bill dollar-for-dollar; a tax deduction merely reduces the amount of income that is taxed. For example, if you are in the 25% tax bracket, a $1,000 deduction would reduce your tax bill by just $250, but a $1,000 tax credit would slash your tax liability by the full $1,000.
If you have taxable income of $100,000 or more, you itemize your deductions on Schedule A, or you need to file any special forms to report self-employment income, investment gains and losses, or rental or partnership income, you must use Form 1040, also known as the long form.
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Reader Comments (2)
Posted by: Maria Ramirez at 02/10/2010 04:55:50 PM
Help! I took my paperwork to a company that stated that I owe $ 500.00 in taxes since I dont have any dependants and I am single.I want someone else to look it over for tax breaks -etc. Since did pay taxes on my house. They are charging me $50.00 to get my W2 form back. Is that legal? Also Can I file somewhere else without my w2? And is there a chance I can lower the payback amount? I made the same amount last year and rececived a refund. What changed?
Posted by: Mary Beth Franklin at 02/12/2010 11:13:42 AM
If your income is $57,000 or less, you can prepare and file your federal taxes for free at www.irs.gov/freefile. Just answer the interview-style questions and the software will automatically fill in your tax forms. It's a good way to get a second opinion on your tax return.