Sometimes, simpler is better: If you meet certain income requirements, you have the option of completing IRS form 1040A when you file your tax return, instead of form 1040. You can't claim as many deductions or credits on the 1040A as on the 1040. If your financial life isn't overly complicated, you should choose the 1040A.
Who Should Use 1040A
According to the IRS, you must meet six criteria to fill out 1040A instead of 1040. Your income must be under $100,000 and can only come from certain sources. For example, if you are self-employed, you cannot use 1040A. You also can't use the form if you have real-estate income or receive alimony. You can't deduct moving expenses, a health savings account or alimony you paid on the form either. If you don't itemize deductions, you can use form 1040A.
Forms 1040A and 1040 are identical through line 6. You can use 1040A no matter your filing status, whether you are single, married or head of household. List the number of exemptions you can claim on lines 6a through 6d. Claim one for yourself, your spouse, and one for each dependent, such as a child or dependent parent. You can claim an exemption for your spouse if you are married filing jointly, or if you're filing separately and your spouse has no income and is not filing.
Income and Adjustments
Enter your income on lines 7 through 14b. Put wages and salary from your W-2 on line 7, any interest income on line 8 and dividend income on line 9. If you received money from capital gains, enter the amount on line 10. Use line 11 to report any amounts you received from an IRA. If you received unemployment compensation, put the amount on line 13. Line 12 is for pension and annuities, and line 14b is for taxable Social Security benefits. Add up the total income, then record it on line 15. On lines 16 through 19, enter any educator expenses, IRA contributions, student loan interest or tuition and fees paid during the year. Subtract the total from the amount on line 15, then record on line 21.
Deductions and Credits
Enter the amount of the standard deduction on line 24. You must enter zero if you are married, filing separately and your partner itemizes, as you cannot take the standard deduction if your spouse itemizes. Subtract the amount of the standard deduction from your adjusted income and record on line 25. Figure out your taxable income by multiplying the number of exemptions you claimed on line 6d by $3,700 as of 2012. Record on line 26, then subtract from the amount on line 25 and record on line 27. You should enter the tax you owe on line 28. The IRS can figure out the amount for you, or you can consult tax tables. Enter the amount of any tax credits you can claim on lines 29 through 33, then subtract the amount of the credits from the tax you owe and record the amount on line 35.
What You Owe
The last few lines of the 1040A let you determine if you get a refund or if you owe tax. On line 36, enter the total amount of tax you've already paid for the year. If you have made estimated quarterly tax payments for the year, enter the amount on line 37. If you qualify for the additional child tax credit, enter the amount of the credit on line 39. Add up the total amount of taxes and credits and record on line 41. Compare the amount on line 41 to the amount on line 35. If the amount on line 35 is larger, you still owe tax. If the amount on line 41 is larger, you're eligible for a refund.