Completing the 1040EZ

1040 EZ vs. 1040 A

Day 3

PERSONAL INCOME TAXES

DO NOWRead the Tax Process article

In your notebook:

What is the maximum income you can earn in order to complete the 1040EZ?

What is the maximum interest you can earn in order to complete the 1040EZ?

Gross Income - Money, goods, and property you received that must generally be reported on a tax return and may be included in taxable income.

Earned Income - Wages, salaries, tips, and net earnings from self-employment and other income received for personal services

Unearned Income - Income other than pay for work performed. Interest and dividends from savings or investments are common types of unearned income

Interest Income - Income a person receives from certain financial accounts or from lending money to someone else.

Adjusted Gross Income – A measure of income used to determine how much of your income is taxable. Adjusted gross income (AGI) is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, alimony and deductible retirement plan contributions.

INCOME TAX – TERMSCategories of Income

Dependent – a person who relies on someone else for support

Exemptions – A deduction from adjusted gross income for the taxpayer, the spouse, and qualified dependents

Deduction – an expense that you can subtract from your adjusted gross income to figure your taxable income

Standard Deduction - An amount, provided by law and bases on filing status, age, blindness, and dependency that taxpayers can deduct from their adjusted gross income before tax is determined

Itemized Deduction – A specific expense that you can deduct from your adjusted gross income

INCOME TAX - TERMS

Complete the 1040EZ formhttp://www.irs.go

v

COMPARING THE 1040EZ, 1040A, 1040

1040EZ

Single, Married filing jointly

No Dependents

1040A

Single, Married filing jointly, Married filing separately, Head of Household, Qualifying Widow(er)

Dependents

1040EZ

Taxable income of $100,000

Income from Wages, salaries, tips Taxable

scholarships/grants Unemployment Income Alaska Permanent Fund

dividends

Interest less than $1500

1040A

Taxable income of $100,000

Income from Wages, salaries, tips Taxable

scholarships/grants Unemployment Income Alaska Permanent Fund

dividends

Interest (no maximum), dividends, capital gains

Pensions, annuities, Individual Retirement Accountss

Taxable Social Security and Railroad Retirement Benefits

1040EZ

Standard Deduction

No Adjustments to income

Tax Credit Earned Income Tax Credit (age

25+)

1040A

Standard Deduction

Adjustments to income Educator expenses Individual Retirement

Account deduction Student loan interest

deduction Tuition and fees deduction

Tax Credits Earned Income Credit (age

25+) Child and dependent care Education credits Retirement savings

contribution Child tax credit Additional child tax credit

1040A Instructions

The 10401040 Instructi

ons

Taxpayers need to use the 1040 if they:

Have taxable income over $100,000Itemize deductions:

Mortgage interest, charitable deductions, certain job expenses

Are self-employed

Complete the 1040EZ formhttp://www.irs.gov