What was Form 1040A?
Form 1040A was a simplified version of Form 1040 for personal income tax. To be eligible to use a 1040A form, an individual had to meet certain conditions such as not detailing the deductions, not being a business owner and having a taxable income of less than $ 100,000.
Unofficially known as the “short form”, the 1040 A was eliminated for the filing of the 2020 taxation year, due on April 15, 2019, in favor of the revised 1040 form which debuted that year. .
Understanding Form 1040A
Most American taxpayers use the IRS 1040 form to file their income tax returns. Form 1040 is a detailed form that gives taxpayers with complex investments, detailed deductions, multiple tax credits and more than $ 100,000 in annual income more opportunities to reduce their tax liability. Since additional tax documents are generally required with Form 1040, people with a simpler tax situation previously had the option of using Form 1040A instead.
Key points to remember
- Form 1040A was a simplified version of Form 1040 for personal income tax.
- Tax filers using the form must have earned less than $ 100,000 in taxable income and not have exercised incentive stock options during the tax year.
- The form was deleted for the 2020 taxation year in favor of the revised 1040 form.
- Another variation of Form 1040 was Form 1040EZ, which was even easier to complete than the 1040A and was also eliminated from the 2020 tax return.
Form 1040A was a simplified version of Form 1040. The two-page form allowed taxpayers to report ordinary income, certain deductions and credits. People who fell under one of the five status options – single, head of household, separate marriage declaration, joint or widow declaration – could file their income tax returns using 1040A. Although Form 1040A is available to taxpayers of all ages and reporting status, not everyone was qualified to use this form.
Reporters who used the form must have earned less than $ 100,000 in taxable income and not have exercised incentive stock options (ISO) during the tax year. Reported income must have been earned in the form of wages, salary, tip, capital gain, dividend, interest income, unemployment benefit, pension, annuity, taxable social security and railway retirement, stock market or taxable grant and dividend benefits from the Alaska Permanent Fund. Any other form of income, such as business income, had to be reported on the more complex Form 1040.
How Form 1040A Works
Form 1040A also gave taxpayers the opportunity to claim several tax deductions to reduce their taxable income. However, the only deductions that could be claimed included interest on student loans, tuition and fees for post-secondary education, class expenses and ERI contributions. Taxpayers using Form 1040A could not claim a detailed deduction. This limitation meant that if a person was eligible for other source deductions such as charitable donations or mortgage interest deductions, and the total deductible amount detailed was greater than the standard deductions, it would not have been beneficial to use 1040A.
Form 1040A could also be used to claim tax credits. Tax credits reduce a taxpayer’s bottom line or total tax bill. The credits that can be claimed using this form were the U.S. Opportunities Tax Credit (AOTC), Lifetime Credit (LLC), Earned Income Credit (EIC), Child Tax Credit and the additional tax credit for children, the credit for child and dependent care, the credits for the elderly or disabled, and the retirement savings contribution credit.
Form 1040A vs form 1040EZ
Another variation of Form 1040 was Form 1040EZ, which was even simpler and easier to complete than Form 1040A and was also eliminated from the 2020 income tax return. But with Form 1040EZ, the individual had to file as a single taxpayer or as a declaration of marriage jointly. No deduction could be claimed and only the EIC tax credit could be claimed using 1040EZ.
Although the 1040A form is slightly more complex than the 1040EZ form, it was still relatively simple compared to the 1040. Once their financial situation became complicated with dependents, special deductions and credits (such as those associated with post-secondary tuition fees), most taxpayers had to switch from the 1040EZ deposit to 1040A.
The redesigned Form 1040 which debuted with the 2020 tax year is designed to be much easier to use than its predecessor. For this reason, forms 1040A and 1040EZ have been deleted.