Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, February 17, 1992 TAG: 9202150083
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
BEWARE THE SHORT FORM: IT COULD COST YOU MONEY
There is something appealing about polishing off your federal tax return in 10 minutes or so, which you might be able to do by using the brief Form 1040EZ.But it could be hazardous to your financial health.
When you file 1040EZ, or even the longer Form 1040A, you forfeit any itemized deductions you have in favor of taking the standard deduction. That could cost you money, especially if you are a homeowner.
But for about 40 million people with only small deductions and incomes under $50,000, a shorter form is the way to go. Assuming you don't need to itemize deductions, here are the rules for deciding which form to use:
Form 1040EZ. You must be single, under 65, not blind, and claim no dependents or tax credits. Your 1991 income, after subtracting your personal exemption and standard deduction, must have been less than $50,000. Your income must have been totally from wages, tips and taxable scholarships except for up to $400 of taxable interest.
If no one else can claim you as a dependent - you must indicate yes or no on 1040EZ - write $5,550 on Line 4 as the total of your exemption and standard deduction. This is subtracted from total income to determine how much is taxable.
If you can be claimed by a parent or someone else, you lose your personal exemption. Use the five-step worksheet on the back of the form to calculate the figure for Line 4.
Form 1040A. This form is available to taxpayers of any filing status - single, joint return, married filing separately or head of household - so long as taxable income is under $50,000. Income is restricted to wages, tips, scholarships, interest, dividends, unemployment compensation, pensions, Social Security benefits and pay outs from an Individual Retirement Account.
You may use 1040A and still write off any qualifying contributions you made to an IRA last year, or claim the earned-income credit or child-care credit. But you may not use 1040A if you claim an adjustment for alimony paid or for self-employment health insurance premiums.
Form 1040. Any type of income that may not be reported on 1040A will require the filing of the long Form 1040. This includes capital gains, whether from the sale of investments or your principal home; dividends; barter income; earnings from self-employment; taxable state and local income tax refunds; prizes; and farm income.