Form 1040EZ

What Is Form 1040-EZ?

The IRS Form 1040-EZ was a form that was designed to facilitate individuals and joint filers with no dependents to file their income tax returns.

The IRS Form 1040EZ was discontinued in 2018. It was used to file income tax returns for single and joint filers without dependence. The form was initially introduced as a condensed version of the Internal Revenue Service's (IRS) Form 1040, aiming to simplify the tax filing process.

The form was created to facilitate easier tax returns for citizens making less than $100,000 annually. This form was a much more simplistic type and could be more easily understood by citizens. 

Eliminating a lot of unused tax return sections and reducing the overall form to 1/5 of its original length made filing 1040EZ much easier and quicker than filing with a regular 1040 form. 

Although the simplicity of the form was appealing, there was little room to specify itemization and deductions on your tax returns. 

If you're looking to file your federal income taxes, remember that Form 1040EZ is no longer in use. Depending on your specific situation, you'll need to use the updated Form 1040 or potentially other tax forms. 

It's always advisable to consult the official IRS website or a tax professional for the most up-to-date and accurate information regarding tax filing requirements.

Sections Of Form 1040EZ

The number of sections on this form is heavily reduced compared to a regular 1040. Below will show each of the major sections of 1040EZ along with the required information:

1. Personal Information 

At the start of all tax forms will require you to write down some personal information. This information includes things like your name, your address, and your Social Security number. 

2. Sources of Income

Although a citizen can earn an income in many robust ways, you can list only a few on this form. The Form 1040EZ allows you to report specific sources of income, including:

• Wages, salaries, and tips
• Taxable interest of $1,500 or less
• Unemployment payments
• Alaska Permanent Fund dividend

3. Payments, Tax, Credits

In this form section, you would write down all tax payments you had already made through withholds on your paychecks. This included holes that would be listed on a W-2 form from your employer.

You could also claim that in this section if you qualified for the EITC (Earned Income Tax Credits). 

4. Calculation 

This section involves calculating the total tax you owe. If you haven't paid the total amount of taxes owed for this year, you will have to pay whatever remains, and if you overpaid via deductions on your paycheck, you may be eligible for a refund.

5. Signature 

Although most people think signing your tax form is obvious, many taxpayers forget to send their returns before mailing them to the IRS. Your signature must be noticeable and distinct when written at the bottom. Additionally, if you're married, your spouse will also have to sign at the bottom.

Who Was Eligible To File Form 1040-EZ?

Although the 1040EZ was created to simplify the process of tax returns for citizens, it ended up limiting the number of citizens that could effectively use the form. There were a multitude of requirements that shrunk the number of people that could use the form.

These convoluted requirements made it much more difficult for the average citizen to file one of these forms and take advantage of its simplistic design. 

The most basic requirements to file a form 1040EZ were that the taxpayer had to have an income of less than $100,000, less than $1,500 of interest income, and no dependence. 

Down below are the requirements for a form:

• Age: If filing jointly, the taxpayer and their spouse had to be under 65 years old.
• Blindness: The taxpayer could not be blind during the end of the filing period.
• Deductions: No deductions were allowed for student loan interest, educator expenses, tuition costs/fees, or itemized deductions.
• Tax Credits: A filer couldn’t use tax credits for retirement savings, health coverage, and education.
• Advanced Earned Income Credit (EIC): The filer couldn’t receive any advance earned income credit (EIC).
• Bankruptcy: The filer couldn’t be a debtor under a Chapter 11 bankruptcy.
• Premium Tax Credit: If the filer filed jointly with their spouse or dependents did receive premium tax credit payments for health coverage plans.
• Household Employee Tax: The filer can’t own any household employee tax on wages paid to household employees. 

These are some of the few requirements needed to file a 1040EZ. With the requirements listed above, it's easy to see how a large portion of the population wasn't allowed to file these forms. 

But during that time, for most individuals, the 1040EZ was one of the first tax forms they ever filed. Most high school students employed usually fulfilled all the criteria required to file these forms. 

The problems only start later in life when individuals marry, claim dependents, and begin to make more money. 

Why Was Form 1040EZ Discontinued?

Besides the heavy limitations on who could file a 1040EZ, multiple factors contributed to its replacement in 2018. Here are the factors that moved the 1040EZ into retirement.

1. Allowances and Credits 

Compared to the newer 1040 forms, the older one didn’t allow taxpayers to add allowances and credits on their return easily. The shortened form didn’t have any section to add these credits. 

2. Limited Eligibility 

Additionally, the form limited the people who could file it through wage limitations. Also, there were limits on what types of wages people could have. Anyone with income other than wages, salaries, taxable scholarships, or grants couldn't use the form.

3. Simplicity

The major problem with the 1040EZ was its simplicity. This form was managed to be brought down to 1/5 the length of an original 1040. 

4. Health Coverage

The form didn't allow taxpayers to report health coverage. Taxpayers that used form 1040EZ had to report their health coverage separately. This caused even more confusion during the tax-paying season for these few individuals. 

Form 1040EZ vs. 1040 

Starting in 2018, the old form 1040EZ was eventually replaced with the 1040 form. Before 1040EZ, although shortened to make tax paying easier, it was eventually scrapped due to its limitations. As of 2023, the 1040 is the primary form most taxpayers use.

Compared to Form 1040, a 1040EZ only allowed taxpayers a few credits or deductions. These included earned income credit EIC and elect non-taxable combat pay. 

Although this limitation seems extreme, form 1040 had 80% more lines than a 1040EZ. This included sections about dependence and fields to include them. 

One of the main differences between the 1040 and 1040EZ is that the 1040EZ did not allow individuals to claim dependents and reduce their taxes by doing so. But similarly to a regular 1040, the 1040EZ version had sections to record wages, salaries, and tips. 

Some sections didn't include taxable interest under $1,500. There were also sections to include unemployment compensation payments and many other wages and sources of income for taxpayers. 

1040EZ allowed filers to write down income from wages, tips, salaries, taxable grants and scholarships, and unemployment compensation. But, compared to a 1040 form, many more income categories were unavailable. 

Form 1040 and similar forms had at least 16 income categories or gave more options. Available categories under the options included dividend payments from stocks, farm and rental income, and retirement account distributions. They're even sections for easier access and entry of Social Security benefits for older people. 

Alimonies and other forms of income were also allowed to be written down. These forms included a long list of deductions ranging from the cost of education and healthcare plans. 

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Accounting Equation
• Accounting Profit
• Assurance Services
• Expanded Accounting Equation
• Flat Tax