What is the Difference between 1040 and 1040a?

1,686 Views Updated: 30 Aug 2017
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What is the Difference between 1040 and 1040a?

Every tax payer, at least once in its life, has been asked the question whether he wants a Form 1040 or Form 1040A. If you are a regular tax payer or are going to file your federal or state tax for the very first time in your life, the first thing you should is which form to use.

Are Form 1040 and Form 1040 A the same or are these different? If there is a difference, do you know what it is? Well, we are not here to ask questions, rather give answers. Find answers to all your questions below.

What Is Form 1040?

Form 1040 is the broadest or most detailed option available for an individual to file a return. If you do not qualify for any other income tax form, then this is what you have to file. If the income you have earned is more than USD 100,000 and a result of self-employment, business, farming, tips that haven’t been reported to your employer, indulging in a partnership, insurance policy dividends received or distributions from the foreign trust, then this is the form you need.

There are also myriad other things that may require you to use the Form 1040. For instance, if you qualify for foreign earned income exclusion, owe household employment tax, are eligible for health coverage tax credit or claiming the adoption credit, Form 1040 is what you need. Furthermore, if you are repaying your first-time homebuyer credit, owe additional Medicare tax, a debtor in a chapter 11 bankruptcy case filed after 16 October 2005 or owe excise tax on insider stock compensation from an expatriated corporation, then again you need it.

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What is Form 1040A?

Form 1040A is slightly less detailed than Form 1040 and only allows you to claim a few tax benefits such as certain credits and deductions. To qualify for Form 1040A, you must have a taxable income of less than USD 100,000. The only deductions that you can claim in this case are student loan interest, allowable tuition and fees, IRA contributions and certain educator expenses.

The American Opportunity Credit, Earned Income Credit (EIC), Lifetime Learning Credit, child tax credit, additional child tax credit, child and independent care credit and retirement savings contribution also known as the Saver’s Credit are the only tax credits you can claim in this form. The biggest Form 1040 and Form 1040A difference lies in the fact that you are not allowed to claim itemized deductions in the latter.

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There is another form called the Form 1040EZ, which is the shortest and the simplest of all the tax forms available. However, not a lot of people qualify to file their return using it. As per IRS’ statistics, merely 16 percent of the individual income tax is filed using it. The biggest requirement for using Form 1040EZ is that your taxable income should be less than USD 100,000 and it should be earned as wages, unemployment compensation, fellowship grants or scholarships. Also, you can also use this form if you are filing tax as an individual or as a married couple.

The best-suited form for you depends on a number of factors like the size and type of your income, the various tax deductions and credits you claim. We hope now the difference between Form 1040 and Form 1040A is clear to you and you can easily make tax decisions. Share your opinions with us through the comment box below.

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