Most people when preparing their taxes tend to use the same tax forms they used the previous year. This practice is so engrained it can be traced back to whichever forms their parents used until someone else suggests using a different tax document. The suggestion typically comes with the help of a tax professional or preparer. That said, there are multiple ways to report you income taxes, depending on your individual situation. While choosing the simplest form tends to be the common suggestion, it could also mean leaving money on the table in terms of eligible tax refunds. It depends how much work you want to do filing taxes.
For the first time in the annual process, tax filers need to choose and obtain their own documents and forms. For the 2010 tax year, the IRS is no longer mailing out all the materials since they can be easily downloaded via the Internet. It is helpful to note that working with the IRS automated filing approach, e-File, the system can choose a form for you.
The most basic tax filing form for people is the 1040EZ. This document is allowed if you earn under $100,000, you are filing either as an individual or married (not separate married), you’re under age 65, there are no dependents involved and you have less than $1500 interest earned. If you have itemized deductions, this form will not allow them. You only take the standard deduction with the 1040EZ. As a result, a person’s tax refund could be limited more than necessary if there are eligible deductions such as mortgage interest, medical expenses, etc.
The 1040A is a much more detail tax form. Again, your income needs to be under $100,000 for taxable funds, you have capital gains investments and you’re claiming various tax credits, and you want to claim IRA transactions or student loan credits. This form will allow itemized deductions for a filer to maximize his eligible refund. Of course that then means keeping more documentation on file to support the numbers you report.
The 1040 Form is required for those filers who earn over $100,000 in taxable funds, you claim itemized deductions and tax credits, self-employment earnings are involved, or property sale transactions are reportable. Again, by itemizing much of this detail, tax refunds can be higher than a simpler form, but there is a higher expectation of documentation in case of review or audit.
As noted above, the IRS is pushing filers towards significant use of electronic filing, whether through its e-File system or other consistent means (i.e. vendor or tax preparer software). Filers can always access IRS forms and publications on the IRS website at www.irs.gov. These are search and menu driven databases that can easily be used to find the right document. The system is available via Internet access any day of the week.
Form 1040EZ, Individual Income Tax Return (PDF 105K)
Form 1040A, Individual Income Tax Return (PDF 138K)
Form 1040, Individual Income Tax Return (PDF 181K)
Publication 17, Your Federal Income Tax
Publication 17, Your Federal Income Tax (PDF 2.3MB)