Tax Forms (February 2017)

Tax Tips

Which Tax Form to Use

By Michael Aston, E.A.
Alhambra Tax Center

 

Tax time is upon us, and let’s see what we have in stored: the 1040EZ, the 1040A, or the 1040. (The 1040NR is for non-resident individuals and will not be covered in this month’s article.)

The 1040EZ -- is the simplest form which is used for single or married taxpayers, with no dependents, and are under the age of 65. Your taxable income must be less than $100,000 and you did not receive any unemployment, taxable scholarship, Alaska Permanent Fund, and taxable interest greater than $1,500. When using the 1040EZ, you are not allowed to claim any adjustments to Income (no IRA or Student Loan Interest deductions). And the only credit that can be claimed is the Earned Income Credit (EIC).

The 1040A -- is known as the “Short-Form” -- because it’s a condensed version of the 1040. There’s no age limit, but the taxable income must be less than $100,000. As for adjustments, you can take Education Expense, Student Loan Interest Deductions, Tuition and Fees, and IRA deductions. With the 1040A you are not able to itemize your deductions. And the credits that are allowed are:

·       Child and Dependent Care Expense.

·       The credit for the elderly or the disabled.

·       Education Credits

·       Retirement Savings Contribution (Savers Credit).

·       Child Tax Credits.

·       The Earned Income Credit.

·       The Additional Child Credit.

·       Premium Tax Credit (Health Insurance)

The 1040 -- is known as the “Long-Form” and is used by most Taxpayers. Think of the 1040 as the “Vacuum-Form” where everything gets reported, all the different types of taxes are assessed, and your money disappears.

The State of California has two forms: the “540 2EZ” and the 540. (I have no clue why they call the form a ‘540 [space] 2EZ’. One would think California could make it easy, and call it a 540-EZ). There is also a 540NR for non/part year residents of California.

The 540 gets a little complicated since the State of California starts with the Federal Adjusted Gross Income. This is the figure after all the adjustments on the Federal return (1040 line 37, 1040A line 21 or 1040EZ line 4). If you have adjustments on the Federal return that California does not conform to then you will need to add a 540 CA (once again we have the blank space). The “CA” in the 540 CA actually is the abbreviation for California Adjustments, not California.

For more information on the forms, you can go to irs.com, ftb.ca.com, or contact your tax professional.

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