Filing tax returns is one of the most hectic things Americans must do. It is tough and very demanding. As a taxpayer filing individual tax returns, IRS provides you with several options. They include: Form 1040, 1040A, 1040ES, and 1040EZ. Form 1040 is designed for people with complex tax situations but Form 1040EZ is for people with very simple tax issues.
Requirements and characteristics of Form 1040EZ
- It is an easy and simple form.
- It has the highest number of conditions and restrictions.
- Your marital status is of importance. You file tax returns through this form as a married couple together or as a single person.
- You must have an income of 100,000 dollars or less.
- You must be under the age of 65 at the end of the financial year.
- You must be able to see.
- You must have no dependent.
- You must not be in the Chapter 11 bankruptcy after October 16, 2005 until to date.
- Your income must only be from wages, salary, fellowship grants, unemployment compensation, tips, interest income of less than 1500 dollars and Alaska Permanent Fund dividends
- You must not be paying household employment tax on wages of the household employees.
- You should include your earned tips in box 5 and 7 of Form W-2.
- Premium taxes should not have been paid on your behalf. You must have enrolled in coverage for whom no one else claims a personal exemption.
You must reach all these requirements to use Form 1040EZ.
This form can be used by anyone. Anyone who is self-employed, earns more than 100,000 dollars taxable income, owes household employment tax or itemize deductions must use this form. This is where the difference between Form 1040 and Form 1040EZ comes.
Requirements and characteristics of Form 1040
- Complex Form to fill out.
- You must have a taxable income of more than 100,000 dollars.
- It is a more customizable document when talking about tax breaks. You can itemize your deductions.
- There are options present to claim credits and deductions.
- You owe household employment tax to household employee wages.
- Is the only form for a self-employed taxpayer.
- Your total insurance policy dividends are more than the premiums you paid.
- You were a bona fide resident of Puerto Rio or American Samoa. You, therefore, qualify to exclude income from sources in these places.
- There are situations that can only be accommodated by this form They include:
- You are a beneficiary of an estate or trust.
- The employer has not withheld Medicare taxes and Social security.
- You have adjustments form alternative minimum tax(AMT)
- You have income from a partnership or S corporation.
- You have distributions from a foreign trust.
- You have tips that you did not report to your employer.
If using form 1040EZ, you cannot claim dependents. Other than the earned income credits, you cannot claim tax credits. Or any adjustments to income. This is the main disadvantage of Form 1040EZ. If you want to benefit from claiming adjustments, credits or dependents consider using Form 1040. Form 1040 is more flexible and accommodative.
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