1040 Vs. 1040A Income Tax Forms
Filing taxes may seem like a complicated process to many people. However, the Internal Revenue Service has made various efforts to simplify the process of filing a tax return by developing the 1040 series of forms. Form 1040A is a simple tax return form the IRS intends for tax filers who are reporting only income earned from traditional work wages. If you have a more nuanced tax situation than that, however, you'll need the more robust Form 1040. The two forms have little in common aside from the basic information they collect.
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Tax Credits
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The types of tax credits you can claim on Form 1040 or Form 1040A are very similar. Tax filers can claim a wide array of common tax credits such as the Child Tax Credit, the Educator Tax Credit and the Earned Income Credit on either form.
However, there are some differences: The Foreign Tax Credit, an exemption for income taxes paid to a foreign country; the Adoption Credit for families who adopted one or more children during the fiscal year; and the Health Coverage Tax Credit. If you intend to claim any of these credits, you must use Form 1040 to file your taxes. You can't claim the Foreign Tax Credit on any of the other 1040 form variations, including Form 1040A.
Types of Income
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The types of income you can report on Form 1040 are much more varied than the allowable types of income on Form 1040A. On Form 1040A, you can only report wages from a job for which you receive a W-2 tax form, as well as some limited forms of unearned income, such as Social Security benefits and retirement pension distributions. If you need to report income as an independent contractor or from self-employment, or if you received most kinds of unearned income, such as rental property income, royalties or the sale of stocks and bonds, you can only report those on Form 1040.
If you owe taxes from income earned through self-employment, you must use Form 1040 to file your taxes. You can't use Form 1040A to report or calculate any kind of self-employment taxes you may owe. Form 1040A only allows you to calculate taxes you owe from wages recorded on a W-2 from your employer.
In addition, the formula for calculating your adjusted gross income differs between the two forms. On Form 1040A, you can make a very limited number adjustments to your AGI, but only on Form 1040 can you adjust your overall gross income for itemized deductions, such as alimony payments, student loan interest paid and health insurance premiums.
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Income Levels
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Anyone filing a tax return using Form 1040A must have a household whose total income earned was less than $100,000 for the year. This is true of people filing as individuals or heads of households, as well as married couples filing jointly. For married couples filing jointly, their total combined income can't exceed $100,000 as of 2010. If your household income does exceed that amount, you can only use Form 1040 to file your taxes.
Itemized Deductions
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If you intend to itemize deductions on your tax return, or you anticipate deducting anything more than the standard deduction for your tax bracket, you will need to use Form 1040 to file your taxes. Form 1040A only allows the tax filer to take the standard deduction. You can't itemize any deductions or account for deductible expenses, such as legal fees, business expenses and medical premiums on Form 1040A.
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References
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