Definition
The form 1040 is an Internal Revenue Service document that is used to calculate, and file, federal income tax returns each year.
Explanation
When completing a tax return, it is advisable to fill out the simplest 1040 possible. Although there are numerous 1040 forms, the three most common are:
1040EZ
The 1040EZ is the easiest form to fill out. To qualify for the 1040EZ, the filer must:
Have taxable income below $100,000
Be single, or married filing jointly
Be under the age of 65
Not claim any dependents on their tax return
1040A
The 1040A is one step above the 1040EZ in difficulty. To qualify for the form 1040A, the filer must:
Have taxable income below $100,000
Not claim any capital gains or losses (capital gains distributions are allowed)
Limit tax credits to those for children, education, earned income, child and dependent care expenses
Limit deductions to those taken for traditional IRA contributions, student loan interest, or higher education tuition and fees
Not itemize deductions on a 1040A
The third form is referred to as the "standard" form 1040. This is the most complex tax form that applies to individual taxpayers. This form allows taxpayers to take more complex deductions, and additions, to income. The form 1040 is the only income tax form that allows the individual to take itemized deductions.
There are nearly a dozen schedules that can be attached to the form 1040. The most popular being Schedule A, which allows the taxpayer to itemize deductions.
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