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Which 1040 Should I File?

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Not only does the IRS have a myriad of supporting forms for filing your taxes, but there are three versions of the most basic form to choose from: 1040EZ, 1040A, and the regular old 1040. They increase in their complexity and the scope of things they can cover. For instance, 1040EZ is too simple to handle any kind of deduction beyond the standard deduction. Choosing the right one to file may simplify and speed up the tax reporting process. With any way to streamline the filing process being valuable, analyzing which form to use can be a great help.

Do I Really Need to File?

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For most people, the answer is resoundingly “yes” – you do have to file your taxes. But there are certain conditions where you don’t have to bother with filling out the forms at all. Knowing whether or not you have to file can save you a lot of trouble and probably some money: the Treasury Inspector General for Tax Administration estimates that over 8 million people file unnecessary tax returns, spending $390 million and 75 million hours in doing so.

Exemptions: Personal and Dependency

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Exemptions are universally available below-the-line deductions. They are set to be worth $3,800 each in 2012 and come in two varieties: personal and dependency. Each person is allowed one personal exemption for themselves. You can also claim a personal exemption for your spouse if you are married filing jointly. Personal exemptions have no requirements to meet before you can claim them; like the standard deduction, you can claim it by virtue of existing.

The “Standard” Deduction

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The standard deduction is a large below-the-line deduction available to any person by virtue of existing. However, the standard deduction and itemized deductions are mutually exclusive – taking both is not allowed. A lot of money can be saved in the decision to itemize or not, so understanding the standard deduction is essential. 

What’s My Filing Status?

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How you file your tax return is a crucial element of tax planning. Tax brackets are calculated differently based on filing status, which means that some filing statuses are taxed higher or lower than others. Often, a taxpayer will not have much choice about how they file, but for single taxpayers with dependent children, there are options that should not be overlooked. There are five filing statuses: Single, Married Filing Jointly (MFJ), Married Filing Separate (MFS), Head of Household (HOH), and Qualifying Widow with Dependent Child.

A Brief Overview of the Tax Formula

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The general formula for calculating a person’s taxes is not too complicated. What is complicated is how to fill in each step of the formula, with most of the work going into calculating the very first element – gross income. The fact that the entire first page of the 1040 only covers the first of the four steps outline below is a testament to the complexity of the tax code, and each step of the formula deserves its own discussion. But when I started learning about taxes, I thought this very general formula was extremely helpful.