The short two-paged US Individual Income Tax Form 1040A is a very simple and short form to use when filing your taxes. It is generally used by taxpayers with a taxable income that is below $100,000 and decides that they would rather take the standard deduction instead of choosing itemized deductions.
However, the taxpayers who decide to use the 1040A tax return can only have income from the following sources: interest and ordinary dividends, capital gains distributions, pensions, annuities, and IRAs, taxable scholarships and fellowship grants, wages, salaries, and tips; unemployment compensation; railroad retirement benefits and taxable social security. For those you who are citizens of Alaska - Alaska Permanent Fund dividends are also included.
Any taxpayer, regardless of the income gained, who received any income from self-employment (an example of this would be income from a farm or a business), any income received as a partner in a business partnership or as a shareholder in an S corporation, or as a beneficiary of an estate or trust; received any dividends on insurance policies that exceed the total of all net premiums, had received income from sources located in US territories like Puerto Rico and/or American Samoa; received a distribution from a foreign trust or owe the excise tax on insider stock compensation from an expatriated corporation must use the longer 1040 form.
The adjustments to income, when using Form 1040A, can only come from one of the following: contribution deductions to an IRA, classroom expenses, college tuition and fees, and student loan interest deductions. A taxpayer cannot use their medical savings account, moving expenses, alimony, or penalties for early withdrawal from a saving account for an adjustment. They must claim the standard deduction, and they cannot have any incentive stock options.
The only credit given to taxpayers who used the 1040A Form is the credit for child and dependent care expenses, the child tax credit, any other additional child tax credit, hope and lifetime learning education credits, EIC, retirement savings contribution credit, the credit given to those who are elderly and/or disabled, adoption credits, and/or education credits.
In conclusion, it is very difficult to qualify for the Form 1040Abut the two major advantages of using being able to use this form is that taxpayers who use it are only taxed based on the guidelines of the alternative minimum tax sheet and the advance earned income credit (EIC). If a person is lucky enough to fit all the requirements, using Form 1040A can save them a lot of time, energy, and money.