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Tax Season Basics: Should I Be Using A 1040EZ Form?

shutterstock 772309453
shutterstock 772309453

 

What did you do to deserve this? Ever ask yourself that question, particularly around tax season? Well, the answer is nothing. Actually, that’s not entirely accurate. By remaining in society you have implicitly, non-verbally given your consent to this low-key, legal torture. So, unless, you plan to join Henry David Thoreau at his log cabin near Walden Pond, you’ll have to learn to get used to it, unfortunately.

First off, what is a 1040EZ form?

The 1040EZ is the 1040 form for dummies. That’s not true, but it is a shortened version of the 1040 form. If you have more basic tax circumstances than the average Joe and Jill, then this condensed version might be a no-brainer alternative to the more involved standard IRS 1040 form when it comes to filing your taxes. If this form is to be of any use to you, you must have taxable income of less than $100,000, and less than $1,500 in interest income. You may not claim any dependents either.

It’s probably too simple, but maybe not.

For the vast majority of 1040EZ filler-outers, this will be the first IRS form that they have ever been tasked to complete. The reason is that due to the simple and constrained nature of the form, most people’s tax situations are too involved and complex for this form to be of any value to them. However, this is not true for your average high-schooler with their first part-time job. For them, this form is golden in its simplicity and brevity. But that’s not necessarily the case. It is not exclusively high schoolers who are reaching out for a 104EZ form come tax season. But if you have dependents to claim and deductions to make, you might look to the 1040 standard.

1040 vs. 1040EZ

Form 1040 classic (standard) has 80 percent more lines than form 1040EZ. One huge difference is that Form 1040 has sections about dependents, whereas the 1040EZ prohibits individuals from claiming any dependents. Like the standard 1040, the 1040EZ form has fields to document your wages, salaries and tips, and taxable interest under $1,500. The filer may also include unemployment compensation payments. The 1040 has more than 16 income categories — as well as allowing for Social Security benefits, alimony, and other forms of income — whereas the EZ only has one or two credits and deductions available (maybe three…).  Filers may include an earned income credit (EIC) and elect nontaxable combat pay. That long list of deductions on the standard 1040 Form? You know, including education costs and health care savings, and things like that? Yeah, it ain’t on the 1040EZ form.

Takeaway

As things get complicated you tend to “age out” of the 1040EZ. For instance, one year you may file a 1040EZ (because it’s so darn easy! *cue laughter) and the next — finding yourself with a newborn baby, or a full-time job — you may need the 1040 standard. But if your fiscal situation at the moment is pretty simple, then why not use a “pretty simple” form too? That’s where the IRS 1040EZ form comes in.

 

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