Which tax form to use
By
Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance,
Source: Kiplinger Consumer News Service
For some taxpayers, tax time is easy -- as in EZ. They are the ones who can use the IRS's simplest tax form to complete their annual duty. (If you file electronically, the software automatically selects the simplest form for you. E-filing also speeds up the processing of your tax returns and the delivery of your refund).You can use Form 1040EZ if you are single or married with no dependents; you have taxable income of $100,000 or less; and you are under age 65. Plus, in order to use the simplest tax-filing form, your taxable interest income from bank accounts and bonds can't exceed $1,500, and you can't claim an additional standard deduction for real estate taxes, taxes on the purchase of a new motor vehicle, or disaster losses.
In a pilot project this year, California residents can file their simple federal and state tax forms from an iPhone. Taxpayers simply snap a photo of their 2009 W-2, answer a few basic questions, review their tax information and click send to submit and e-file, all within a matter of minutes. If the experiment is successful, Turbo Tax plans to offer the iPhone tax application, SnapTax, in other states in future years. It's available for $9.99 from the iTunes App Store.
If your tax situation is a little more complicated, choose Form 1040A, also known as the short form. This is the best choice for you if your taxable income is $100,000 or less and you do not itemize your deductions.
However, you are still able to claim a number of above-the-line tax breaks using this form, including up to $250 of out-of-pocket expenses for educational supplies if you are a teacher or educational professional; tax-deductible contributions to an IRA; and deductions for college tuition and fees, or interest paid on a student loan.
Choosing the short form also allows you to take advantage of a variety of tax credits, which are even more valuable than tax deductions. A tax credit reduces you tax bill dollar-for-dollar, while a tax deduction merely reduces the amount of income that is taxed. For example, if you are in the 25% tax bracket, a $1,000 tax deduction would reduce your tax bill by just $250, but a $1,000 tax credit would slash you tax liability by the All contents copyright 2008 The Kiplinger Washington Editors, Inc.