1040 Tax Forms: Which One Should You Use?
Form 1040, U.S. Individual Income Tax Return
The vast majority of taxpayers must decide between filing a federal form 1040 and a federal form 1040-EZ. For most, the decision hinges on whether you itemize. If you plan to itemize your deductions, you must file form 1040. In most cases, you'll itemize if your deductions are more than your standard deduction. For 2010, the amounts for the standard deduction were $5,700 for single taxpayers and $11,400 for married taxpayers filing joint returns. Additional standard deductions are available for the blind and for taxpayers over age 65.
That said, if you can't decide between the two returns, there's usually no harm in filing the federal form 1040.1040EZ, Income Tax Return for Single and Joint Filers With No Dependents
Federal form 1040EZ is exactly as advertised: It's easy. You may file a form 1040EZ if you're filing as single or married filing jointly with no dependents. If you have dependents or if you're filing as head of household, qualifying widow(er) or married filing separately, you may not use the form 1040EZ. You can't file with the form 1040EZ if you're blind or over age 65, either -- those additional standard deductions are only available on the form 1040.
Income restrictions apply if you're using the form 1040EZ. Your taxable income must be less than $100,000 and you must not be claiming any adjustments to income ("above the line" deductions, such as alimony or IRA deductions). Your income must consist of wages, salaries, tips, taxable scholarship or fellowship grants, unemployment compensation or Alaska Permanent Fund dividends; not self-employment income, rents or capital gains and losses. Your taxable interest must not be more than $1,500.
Besides not being able to itemize using the form 1040EZ, your credits are also limited. If you claim credits, you can only file form 1040EZ if you're claiming the earned income credit or the Making Work Pay Credit. If you claim the earned income credit and received advance income credit payments, you can't use the form 1040EZ.
A few other quirky rules apply. You can't use form 1040EZ if you owe household employment taxes on wages you paid to a household employee. Similarly, you can't file form 1040EZ if you've been in a chapter 11 bankruptcy case filed after Oct. 16, 2005. Finally, if you were a nonresident alien at any time in 2010, your filing status must be married filing jointly to use form 1040EZ. If your filing status isn't married filing jointly, you may have to use form 1040NR or 1040NR-EZ.
Even if you can use federal form 1040EZ, that doesn't mean you should. It may benefit you to use form 1040-A or 1040 instead. Pay attention to special deductions that might apply to you, such as the increased standard deduction for the purchase of a qualifying new vehicle or if you suffered personal casualty losses from certain federally declared disasters. If you're not sure, most tax professionals or tax software should be able to walk you through the options to determine the most favorable filing status for you.
1040NR, U.S. Nonresident Alien Income Tax Return
The U.S. imposes a tax on "worldwide" income for its citizens and residents. Nonresidents, however, generally file a form 1040NR and pay income tax only on U.S. source income. You file a form 1040NR if you're engaged in a trade or business in the U.S. during the tax year and you're a nonresident alien, meaning, in most cases, that you don't have a green card or that you haven't spent enough time in the U.S. to be considered a resident. You must file a form 1040NR if you meet that criteria even if you have no income from your trade or business in the U.S., you have no U.S. source income or if your income is exempt from U.S. tax under a tax treaty.
You don't need to file if, as a nonresident alien, your only U.S. trade or business was the performance of personal services with wages of less than $3,650 and you don't need to file to claim a refund of over-withheld taxes, satisfy additional withholding or claim partially exempt income. Exceptions also apply if you're a nonresident alien student, teacher or trainee in the U.S. temporarily on an "F," "J," "M," or "Q" visa, and you have no taxable income.
The rules for residency may be different for income tax purposes than for immigration purposes, so check with your tax professional to be certain of your status.
1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents
If the rules for filing a form 1040NR apply (see above) and you have no dependents, you may be able to file using the shorter form 1040NR-EZ. File a form 1040NR-EZ if you could file a form 1040NR based on residency, you have no dependents and aren't claimed as a dependent on another person's U.S. tax return. Additionally, to file 1040NR-EZ, your taxable income must be less than $100,000 and your income from U.S. sources must come from wages, salaries, tips, refunds of state and local income taxes, and scholarship or fellowship grants. If you have taxable interest or dividend income, you may not file form 1040NR-EZ.
Similar to the form 1040-EZ, those taxpayers who file form 1040NR-EZ may not claim itemized deductions (except for state and local income taxes). Additionally, taxpayers who file form 1040NR-EZ may not claim any tax credits.
As with the form 1040NR, the rules for residency may be different for income tax purposes than for immigration purposes, so check with your tax professional.
1040-A, U.S. Individual Income Tax Return
The underutilized form 1040-A can be thought of as a hybrid tax return: It's kind of like a cross between the federal form 1040 and the federal form 1040EZ. You can file a form 1040-A if your taxable income is less than $100,000 and your income is derived from wages, salaries, tips; interest and ordinary dividends; capital gain distributions; taxable scholarship and fellowship grants; pensions, annuities and IRAs; unemployment compensation; taxable social security and railroad retirement benefits and Alaska Permanent Fund dividends. You cannot use the form if you claim other types of income such as self-employment income, unreported tips, partnership or S corporation income or trust and estates income.
Certain "above the line" adjustments may be claimed on a form 1040-A, including educators expenses, IRA deductions, student loan interest deductions and tuition and fees deductions. You may not itemize deductions on a form 1040-A.
You may claim a limited number of credits using the form 1040-A, including the child tax credit, the additional child tax credit, education credits, earned income credit, credit for child and dependent care expenses, credit for the elderly or the disabled, retirement savings contributions credit (sometimes called the "saver's credit") and the Making Work Pay Credit. You can also use form 1040-A if you received advance earned income credit (EIC) payments, dependent care benefits, or if you owe tax from the recapture of an education credit or the alternative minimum tax (some restrictions and other exceptions apply).
Generally, if you have income from foreign sources, you may not file a form 1040-A. If you owe household employment taxes or if your employer didn't withhold Social Security and Medicare, you can't file a form 1040-A. Additionally, some credits such as the health coverage tax credit, first-time home buyer credit and adoption credit also disqualify you from filing a form 1040-A. Finally, if you're a debtor in a bankruptcy case filed after Oct. 16, 2005, you may not use the form 1040-A.
The form 1040-A is considered a simpler version of the form 1040, but not as easy as the form 1040EZ. Your tax professional or tax software should be able to determine whether the form is appropriate in your case.
1040-C, U.S. Departing Alien Income Tax Return
Filing a form 1040-C is sometimes referred to as "getting your sailing papers." The form is used by aliens who intend to leave the U.S. (or any of its possessions) in order to report and, if applicable, pay tax on income received or expected to be received for the entire tax year. A form 1040-C isn't a final return. You must still file a final income tax return (either a form 1040 or form 1040NR) after your tax year ends.
1040-PR, Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta Propia (Incluyendo el Crédito Tributario Adicional por Hijos para Residentes Bona Fide de Puerto Rico)(2009 version)
The form 1040-PR is the Spanish equivalent of the form 1040-SS for residents of Puerto Rico. For information in English, see the explanation for form 1040-SS below. Para obtener información en español, visite el sitio web del IRS.
1040-SS, U.S. Self-Employment Tax Return(Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico -- 2009 version)
The form 1040-SS is a short form for reporting self-employment income for certain taxpayers. Use form 1040-SS if you, or your spouse if filing a joint return, do not have to file a form 1040; had net earnings from self-employment of $400 or more (or you had church employee income of $108.28 or more); and are a resident of Guam, American Samoa, the U.S. Virgin Islands, Commonwealth of the Northern Mariana Islands or Puerto Rico (you can file either Form 1040-PR in Spanish or Form 1040-SS).
1040ES, Estimated Tax for Individuals
You use a form 1040ES to make estimated payments to the IRS throughout the year. Most taxpayers who rely on withholding (those of you who receive a form W-2) won't have to make estimated payments. You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your federal income tax return. Typically, this means self-employed persons, taxpayers with significant investments, pensioners, landlords, and partners and S corporation shareholders, although other situations may also trigger estimated taxes.
Unlike many of the other forms 1040, this form will be filed more than once during the year: for the most part, estimated taxes must be paid quarterly. If you skip a payment or pay late, you could be subject to penalties.
Exceptions and safe harbors apply. If you're not sure whether you should be making estimated payments, check with your tax professional. He or she can help you figure out the dates and payment amounts for the coming tax year (2011) based on your tax liability for the current tax year (2010). In most cases, you'll get a set of predated forms 1040ES for the coming tax year, if applicable, when you sign this year's return.
Estimated tax forms are also available for the form 1040-NR and the form 1040-PR: they are the form 1040ES-NR, U.S. Estimated Tax for Nonresident Alien Individuals and form 1040ES-PR, Contribuciones Federales Estimadas del Trabajo por Cuenta Propia Y Sobre El Empleo de Empleados Domesticos-Puerto Rico, respectively.
1040-V, Payment Voucher
This is, of course, the form the IRS loves best -- it's the form you use to mail in your tax payment. The IRS would love for you to use the form when you mail in your payment (to keep the paperwork straight) but there's no penalty if you don't.
1040X, Amended U.S. Individual Income Tax Return
After all this, what happens if you make a mistake? It's not the end of the world -- you simply correct your error using the form 1040X. Use form 1040X to file an amended federal income tax return if you originally filed using forms 1040, 1040-A, 1040EZ, 1040EZ-T, 1040NR, or 1040NR-EZ. Do not simply file another return -- trust me, this will just confuse IRS. You'll file a separate form 1040X for each year you're amending.
It's not a quick procedure to file an amended return. You should expect to wait two to three months for processing, so if you have a claim for refund, be patient. If you owe additional tax, expect to pay interest and possibly penalties, depending on the facts. Do not, however, file a form 1040X to request an abatement of penalty or a refund of penalties and interest -- use a form 843, Claim for Refund and Request for Abatement instead.
If you still have questions about the 1040 series, check with your tax professional, or go straight to the source and give the IRS a call at 1-800-829-1040.