Which 1040 Do I Use?

Q. How do I know which 1040 I’m allowed to use? Does it really make a difference?

A. Yes! Each form has specific requirements that a taxpayer must meet in order to use it. IRS Tax Tip 2010-05 contains instructions on which form you should select.  Your options are:

1040EZ Requirements
Your taxable income must be below $100,000 and your earned interest below $1,500. You can only use the Single or Married Filing Jointly filing status. You must be under age 65 and not claim any dependents. You will not be claiming any of the special additional deductions for real estate taxes, motor vehicle purchase or disaster losses.

1040A Requirements
Your taxable income still must be below $100,000 to use this form. You want to claim the credits disallowed on the EZ form. You have capital gain distributions. You contributed to and IRA, paid student loan interest or higher ed tuition.

1040
Anyone can file with this form. However, if you have a simple tax situation, why go through the trouble of the long 2-page form if you don’t have to?

If you are confused about which form to file, you may wish to use the services of a professional tax preparer or CPA. Professionals are trained to help you understand your tax situation and can often make recommendations to help you improve your take home pay or lessen your tax bill in the upcoming year. Make sure you interview your tax preparer carefully. Not all of them are as prepared for any situation as you hope they will be.

So Stimulating, I Forgot How Much…

Q.  I’m doing my own taxes this year.  I can’t seem to remember how much my stimulus payment was back in 2008.  How do I find this amount?

A. This is the most common question asked to me this year.  Apparently, the government stimulus payment received by taxpayers last year was not very stimulating.  No one can rememer how much they received.  Thankfully, the IRS has an online tool available that lets you determine how much you received.  You can find it here. You will need to know the social security number of the primary filer of your tax returns, the marital status on your 2007 tax return and the number of exemptions claimed on your tax return.  Once you enter all of this information, you can se how much you received.

Everyone received a mailer from the IRS explaining the amount earlier in 2008.  Hopefully you kept that document.  It will be useful when preparing your return. If you utilize the services of a professional tax preparer, you will also need to give it to him/her to properly complete your return.  Remember, the stimulus payment is not taxable income so it does not need to be claimed somewhere on your return.   The purpose of identifying the amount you received is to determine if you are owed an extra cash.

On a side note, remember all the advantages of filing with a professional preparer. Professionals…

• utilize state of the art software to handle all new tax laws and track changes to your situation year over year
• are studied up and trained in changes and can make recommendations based on your situation
• can answer questions throughout the year if an unexpected financial situation occurs
• can answer what-if questions to help you make the right decisions without running fake tax returns
• are more flexible and can make judgment calls based on their experiences.  Software can’t do this!
• have time and experience to handle complex returns that simply are too confusing for the common taxpayer

So…if you want to take the risk and hassle out of tax preparation, contact your local professional.  And…if you already use a preparer and are happy with them, tell your friends!!