Which Tax Form Is Right for You?
January 26, 2015 / Sara Davis / File My Taxes
Tax season is approaching, and that means getting all of your finances and tax forms in order. Yet don't let the stigma of the season get you down. Filing your taxes doesn't have to be intimidating. Don't face tax season thinking it will be difficult, but remember that it is important. There are many avenues of assistance for filing your taxes, such as the Volunteer Income Tax Assistance (which is free).
The first step of the process is knowing which form to use. Depending on your situation, you might look into the advantages of many different forms. But the most commonly filed forms are the 1040s: 1040, 1040A and 1040EZ. And though it would seem that forms all beginning with the same numbers would be similar, there are significant differences among them.
A main difference is that it affects how much money comes back to you, noted CBS News.
This form is used most often, as it is the shortest and simplest to fill out, leaving less room for error, reported Bankrate. In order to qualify for this form, you must meet the following criteria from the IRS:
- Your filing status is single or married, in which case you would file jointly.
- You do not claim any dependents.
- Your taxable income is less than $100,000.
- Your taxable interest of $1,500 or less.
- You do not claim any adjustments to income, such as a deduction for IRA contributions or student loan interest.
- You do not claim any credits other than the earned income credit.
- You do not owe any household employment taxes on wages you paid to a household employee.
- If you earned tips, they are included in boxes 5 and 7 of your Form W-2.
- You are not a debtor in a chapter 11 bankruptcy case filed after October 16, 2005.
You must meet all of these items to use the 1040EZ filing form. There are a few more specific details as well, such as you can't have income from alimony or capital gains.
1040A and 1040
These tax forms are more complicated, with 1040 being longer and more complex than the 1040A. They are designed for individuals who are self-employed or itemizing their expenses. The criteria to qualify for either of these forms is much more specific as well, when compared to the 1040EZ.
However, while these forms are more specific, they contain options to receive additional money in your return. For instance, a 1040 form allows you to itemize your expenses, which means you can single out donations to charitable events or mortgage interest payments and deduct them from your taxes. But while taking the time to receive additional funds in your tax return sounds great, there are also additional qualifications. For instance, to qualify for a 1040 you have to earn at least $150,000 a year.
All forms are worth looking into and are available for free to review, use or learn about at the IRS website.
File for FREE
Filing correctly the first time is the way to go. Again, this doesn't mean paying to have it done. According to CBS News, one of the biggest mistakes people make when filing their taxes is paying to have it done when there are many options that cost nothing. But just because it's free doesn't mean there isn't help along the way.
Volunteer Income Tax Assistance
There are programs such as the Volunteer Income Tax Assistance, which is sponsored by the IRS and provides free tax preparation by volunteers. These volunteers are trained as well, so they know what they're talking about. You are eligible for this program if your income is less than $53,000 a year, you have a disability, are elderly or have limited English speaking skills.
There are also programs designed for anyone 60 years and older, called Tax Counseling for the Elderly, and a software program for those with an income less than $60,000.
Know your game plan for filing your taxes and carry through with it easily. Seek out advice and get it done correctly. In fact, preparing your taxes at the beginning of the year is a great way to help yourself reflect on last year's spending and income, and establish a budget for moving forward.