For 1040 is the form you use to file your taxes. Currently, Form 1040 is also available as Form 1040A and 1040EZ. The form you’ll need to use depends on various factors, including your filing status, overall income, and how many dependents you’re claiming. However, Form 1040EZ is the simplest version of this form, so it’s usually the preferred choice for most filers. Here’s what you need to know about Form 1040EZ.
What is a Form 1040EZ?
IRS Form 1040EZ is the shortest, most straightforward version of the tax filing form. You can find this form on the IRS website here.
Unfortunately, only taxpayers without dependents earning less than $100,000 per year can use it. This document is only one-page long and includes four brief sections:
1040EZ Section One
The first part contains personal information like name, address, and social security number.
1040EZ Section Two
This part covers income such as wages, tips, taxable interest income of less than $1,500, and more. If your income doesn’t fall into any of these categories, as is often the case with freelancers, you’ll need to file Form 1040 or Form 1040A.
1040EZ Section Three
You can report tax withholdings and other tax credits, such as the earned income tax credit, in section four of 1040EZ.
1040EZ Section Four
shows how much you owe or if you are entitled to a refund.
Why Might You Complete Form 1040 Instead of Form 1040EZ?
If you need to report self-employment income, alimony, dividends, or capital gains, you can’t use Form 1040EZ.
You also cannot use it if you’re claiming dependents or filing as Head of Household.
Self-employed workers also don’t typically file using form 1040EZ because they can’t claim business deductions. As a result, you should use form 1040 to file your taxes.
If you insist on using Form 1040EZ, you must take the standard discount when you file. The standard deduction typically isn’t a good option if you plan on claiming deductions exceeding $12,000, so self-employed workers and freelancers should probably opt for one of the longer, more inclusive 1040 forms.
Who Can File a Simplified Return?
Form 1040EZ is for wage or salary earners. Typically, you can use this form if you receive a W2 and earn less than $100,000 over the tax year.
However, since you can’t claim dependents, it’s not a good option for taxpayers with kids.
Homeowners should also probably steer clear of this one because it won’t allow them to take deductions for state and local taxes.
How to Fill It Out
The first step to filling out form 1040EZ is to gather all of your important tax documents. This includes your W2s from all employers and other information returns like a 1099G if you received unemployment for the year.
As mentioned above, there are four sections to form 1040EZ.
- In the first section, you’ll provide your basic information like your name, address, and social security number.
- Next, you provide information on your taxable income, listed in ‘Box 1’ on your W2.
- The third section is where you will report your withholding, which can also be found on your W2.
- In the final segment, you can calculate what your outstanding tax bill is. A negative balance implies underpayment, so you might owe additional taxes if you end up with negative numbers.
However, you could receive a refund if the IRS owes you for paying too much. Many W4 workers and wage earners who pay taxes directly through their paychecks end up receiving refunds because their employers took too much money out of their checks.
By the time you finish the last section, you should know whether to expect a refund or not.
More Tax Filing Help
If your tax situation is relatively simple, filing with a 1040EZ makes a lot of sense. However, there are some downsides.
You must claim the standard deduction when you file with Form 1040EZ, so you will miss out on other tax deductions you could’ve claimed. If you fall into this category, filing a traditional Form 1040 is probably a much better option. At Shared Economy Tax, we can help you prepare and file your taxes in the most efficient way possible. Get started today with a complimentary one-on-one strategy session with one of our tax pros. Or, sign up for our tax tips newsletter using the form below.