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1040EZ, 1040A or 1040 – Which Tax Form is Right for You?

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Want to know how to file a 1040 tax form? You have to pick among three: Form 1040, the 1040EZ or the 1040A. Anyone can decide to fill out the former, the regular 1040; the others have more specific requirements that you can learn about in the following sections. Here’s a quick and dirty breakdown before we leap into the details:

  • Form 1040EZ: You can’t claim any credits or deductions, with the exception of the Earned Income Credit. If that’s true of you – – check the table below to make sure – go ahead and fill it out. An added bonus: it’s by far the briefest version of the 1040.
  • Form 1040A: If you don’t plan to itemize your deductions, like for mortgage interest, then take a look at the 1040A. You might not be able to claim deductions, but you can claim tax credits, like for educational expenses.
  • Form 1040:  You can claim all the deductions and credits in the world, and anyone can use it, regardless of filing status. It’s just much longer than the other forms.

The longer the form, the more opportunities for deductions and credits, or tax breaks. It’s not terribly important that you understand the difference between those two terms, between deductions and credits; just know that both, ultimately, reduce how much the federal government takes from you.

The 1040 Breakdown: Tax Breaks You Can Claim with EachForm 1040

Form 1040EZ Form 1040A Form 1040 Earned income credit (EITC)Earned income credit (EITC)Earned income credit (EITC) IRA deductionIRA deductionStudent loan interest deductionStudent loan interest deductionEducator expenses deductionEducator expenses deductionTuition and fees deductionTuition and fees deductionChild and dependent care creditsChild and dependent care creditsElderly and disabled creditsElderly and disabled creditsEducation creditsEducation creditsChild tax creditsChild tax creditsAdditional child tax creditAdditional child tax creditRetirement savings contribution creditRetirement savings contribution credit Business expensesMedical expensesCharitable contributionsDeductible taxesHome mortgage pointsInterest expensesWork-related educational expensesCausality, disaster and theft lossesMisc.

Below, we’ll continue to elaborate so you can ensure that you’re eligible to use the form in question. Again, anyone can use the regular form 1040; you’ll just be tapping that calculator a while longer than you might with the EZ or the A.

When to use the 1040EZ tax form

Don’t choose the 1040EZ just because it’s the simplest option. Sometimes, the EZ is all you need, but a little extra paper work can equate to substantial savings. The IRS website  says you should use the 1040EZ if:

  1. You are filing as single or married jointly.
  2. You’re under the age of 65 and not blind at the end of 2012. If filing jointly

    with your spouse, you must both meet these requirements.

  3. You do not claim any dependents.
  4. Your taxable income was less than $100,000.
  5. Your interest income was not over $1,500 last year.
  6. All earned tips are included on your W-2 in boxes 5 and 7.
  7. You do not owe household employment taxes on wages paid to a household employee.
  8. You are not a debtor in a Chapter 11 bankruptcy case filed after October 16, 2005
  9. You will not claim any adjustments to income (deduction for IRA contributions, a student loan interest deduction, etc.).
  10. You will not claim any credits other than the earned income credit.

One of the biggest reasons NOT to use the 1040EZ is stipulation #10 as listed above. Basically, by using the 1040EZ, the only tax break you’re eligible for is the income tax credit (EITC), which is a credit for low-income tax payers. If you think you may be eligible for any other tax breaks, use a different form.  You don’t want to miss out on your well-deserved deductions. But, if you have absolutely nothing to claim, the 1040EZ is a quick, one-page shortcut designed to reduce the hassle of filing taxes.

When to use the 1040A tax form

The 1040A tax form allows filers to claim a number of deductions not available on the 1040EZ. Here are the 1040A requirements from the IRS website:

  1. Your taxable income is less than $100,000.
  2. Your income comes entirely from wages, salaries, tips, taxable scholarships and fellowship grants, interest, or ordinary dividends, capital gain distributions, pensions, annuities, IRAs, unemployment compensation, taxable social security or railroad retirement benefits and Alaska Permanent Fund dividends.
  3. Your taxes are only from the Tax Table, the alternative minimum tax, recapture of an education credit, Form 8615 or the Qualified Dividends and Capital Gain Tax Worksheet.
  4. You did not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option.
  5. You do not itemize deductions.
  6. Your only adjustments to income are the IRA deduction, the student loan interest deduction, the educator expenses deduction, the tuition and fees deduction.
  7. You only claim credits for child and dependent care expenses, the earned income credit, the credit for the elderly or the disabled, education credits, the child tax credit, the additional child tax credit and the retirement savings contribution credit.

Pay close attention to items #5, #6 and #7. As you can see, the 1040A offers quite a few more tax breaks than the EZ, including childcare, education and retirement savings. Still, deductions and credits are somewhat limited. If you have more to claim than the adjustments and credits listed in #6 and #7, you’ll want to tackle the 1040.

When to use the 1040 tax form

The IRS requires you to use the 1040 tax form if:

  1. Your taxable income was $100,000 or more in 2012.
  2. You have certain types of income such as unreported tips; certain nontaxable distributions; self-employment earnings; or income received as a partner, a shareholder in an “S” Corporation, or a beneficiary of an estate or trust.
  3. You itemize deductions or claim certain tax credits or adjustments to income, OR
  4. You owe household employment taxes.

In terms of tax breaks, the 1040 form is the most customizable. Because you can itemize deductions, you do not suffer the same limitations as with the 1040EZ or the 1040A; you might qualify for much more! Not sure if you qualify for additional breaks? It’s worth looking into. You’d be surprised by some of the tax deductions people successfully claim (guard dogs, swimming pools, smoking cessation programs, etc.). The IRS website is an excellent place to start.

Tax image from Shutterstock

Category: Taxes

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