The Difference Between 1040 & 1040A Tax Forms

The 1040 is the longest tax form, but it also has the most potential tax breaks.
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Spending less time doing tax returns probably sounds like a great idea. That's why a lot of people choose the short 1040A form instead of wrestling with the 1040. For eligible taxpayers, there's an even simpler option: the 1040EZ. Sometimes it's to your advantage to use the 1040 even if you don't have to because it allows you to take advantage of every tax break you qualify for. The extra time spent can pay off in big tax savings.


Eligibility for 1040EZ

You may be able to use the 1040EZ if you file as single or married and filing jointly, but you can't claim dependents. As of 2015, your income, including that of your spouse if you're married, must be less than $100,000 with under $1,500 in interest income. Other than interest, income has to be from wages, tips, salaries, unemployment compensation, taxable fellowships or scholarships, or payments from the Alaska Permanent Fund. You can't use the 1040EZ if you have self-employment earnings, capital gains or losses, or if you owe taxes for a household worker. If you or your spouse is legally blind or age 65, you aren't eligible for the 1040EZ. This form is for taxpayers with uncomplicated tax situations so you can't claim any adjustments like IRA deductions or tax credits except the Earned Income Credit.


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The Short Form: 1040A

The 1040A return has more options than the 1040EZ, and you can use the 1040A with any filing status. Total income still has to be less than $100,000, but there is no limit on interest earnings or age and you can be legally blind. Income can include capital gain distributions but not capital gains or losses. A capital gain distribution refers to profits that result when you own shares in a mutual fund and the fund manager sells securities the fund owns and passes the gain on to shareholders. In contrast, a capital gain is realized when you sell an asset you own for a profit. The 1040A doesn't provide for itemized deductions – that is available only with the long 1040 form. There are a few adjustments you can make by deducting student loan interest, IRA contributions, penalties paid for withdrawing savings early and jury duty pay that you give to an employer. There are several tax credits allowed on the 1040A besides the EITC, including the Child Tax Credit and retirement savings credit.


When to Use Form 1040

Although the 1040 is the longest and most complicated tax return form, it's also the most flexible. You can write off deductions and claim tax credits for home energy improvements, adopting a child and any other individual tax credit for which you qualify. Some taxpayers must use the 1040. For example, it is required when your income, combined with your spouse's income, exceeds $100,000. You also must use the 1040 when you have capital gains or losses and more than $400 in self-employment earnings.


When to Itemize

When you use Form 1040, you can itemize, meaning you can write off tax-deductible expenses. Or, you can claim the standard deduction. Choosing between these two options is straightforward: just pick the one that gives you the biggest tax break. For example, in 2015 the standard deduction was $6,300 for single taxpayers and $12,600 for a married couple filing a joint return. If you have deductible expenses such as mortgage interest, charitable deductions and self-employment tax that total more than the standard deduction, then itemizing will save you money.