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As we all know, tax season is in full flight here in the United States. Taxpayers are frantically digging through their records and collecting their W2’s/1099’s, and CPA’s and other tax preparation professionals are churning out 80 hour work weeks to meet the deadline.
How are you doing so far in getting your taxes filed?
Per usual, for me this year, the rate limiting step is getting my last two Forms 1099-DIV/1099-INT from Sogotrade.com and Zecco.com (now TradeKing). They always claim that they are working towards a February 15th deadline for getting everyone’s tax forms issued. However, without fail, they manage to get an extension until the first week of March to issue these forms. This, of course, is a pain for me because I then have to hustle a little more to mail out my tax forms to my accountant to then turn around/prepare.
All side-tangents aside (no pun intended), the real reason that I’m writing this post is that around tax time every year, I see advertisements stating how an accountant or tax prep company is offering some GREAT deal for a limited time only to have them help you prepare a 1040EZ for only $XX.99.
- At Walmart, the H&R Block booth near the checkout area is advertising “$39.99 to prepare your 1040EZ.”
- On the advertising place-mats at a local restaurant, I recently saw an accountant ad that stated “they’ll help you do your 1040EZ for only $59.99.”
Ok, so let’s stop right there. Did I miss something? The 1040EZ was a filing form built by our friends at the IRS to be EASY, right? Why would you need to pay to get help with it?
Well, I think that the whole reason why people think that taxes are difficult is that there is a certain stigma that has been built by our society over the years that taxes are evil, unfair, long-winded, technical, too hard to understand without a PhD in economics, and/or not something that is not worth your time.
Well, I’m here to provide a little moral support and tell you that this form is not some complicated animal that you need help/to pay for to fill out. You can fill it out just fine by yourself (or better yet, with the help of a free online tax preparation/filing software, something which will be covered elsewhere in more depth).
So, how does one get started filling out a 1040EZ? I’m glad you asked! Read on!
Step 1 – Meet/Print Off Your New Friend – Mr. 1040EZ
By clicking here, you can access the current tax year’s respective 1040EZ directly from the IRS’ website.
This is a one-page federal tax filing document that is built to be non-intimidating. Check out the picture below. The entire document fits within the confines of this blog post column. Nothing that small can be very scary, right?! 🙂
There are only 12 numbered boxes to fill out along with your writing your usual personal information in the grey boxes at the top.
In addition, you might also want to download and scan through the official IRS publication describing how to fill out the form 1040EZ. You can download the most recent one by clicking here. Unfortunately, due to the nature and regulations of taxes, they have to put many extraneous FYI-type paragraphs in to this publication, causing it to be a full 42 pages describing how to fill out one tiny 1 page form. And the IRS wonders why people thinks taxes are difficult to understand, eh?
Step 2 – Quick Check to Make Sure a 1040EZ is the Right Form for You – Taking the Standard Deduction
Before proceeding, you want to check just briefly that a 1040EZ is indeed the right type of federal tax form for you to be filling out.
Essentially, by opting for use of the 1040EZ (instead of the longer 1040), you are saying that you want to take “the standard deduction” instead of itemizing your deductions. In other words, it makes sense to use the form 1040EZ if the standard deduction ($5,950 for 2012) is greater than any itemized deductions you could list out (charity contributions, mortgage interest, etc). In addition, you are also basically saying that, “Hey, I have very simple finances – likely only 1 source of income and very few non-retirement investments (mostly consisting of interest bearing savings accounts).”
Having established that, you also should go through the really good checklist the IRS put together in their 1040EZ publication shown below to make sure you qualify for the use of the 1040EZ.
Also, listed below are “1040EZ deal-breakers” in the sense that if you RECEIVED one of the forms listed below, you do NOT qualify to file a 1040EZ and must file a Form 1040.
- 1099-MISC (this would disqualify me).
- 1099-DIV (this would also disqualify me).
Step 3 – Filling Out Your 1040EZ – Income Section – Boxes 1-6
So, by now, you’ve determined that filing a 1040EZ form is right for you and you’ve downloaded/printed out a copy to work off of. Now, it’s time to actually fill it out to determine how much of a refund you will receive or how much in unpaid taxes you still owe.
The first part of the 1040EZ form is the income section, and it contains 6 total boxes to fill out. Listed below are some important points I noticed while reading through the IRS’s 1040EZ instructions that you might want to pay special attention to:
- On Line/Box 1, as the name implies, this is where you enter the total amount of your wages that is shown on your W2(s).
- However, one thing that is slightly tricky here is that on Line 1, you must also include your total amounts of non W2 income as well, including wages earned as a household employee, tip income not reported to your employer, and untaxed fellowship/scholarship income (like I have in my role as a graduate student).
- Line/Box 2 for Taxable Interest is where you report the amounts displayed on any forms 1099-INT that you received.
- As mentioned above, 1099-DIV amounts are not suitable for a 1040EZ.
- Line/Box 5 – This is simply the place where you write in the total amount of deductions that you are going to take.
- Deductions are your friend – they reduce your taxable income.
- This includes the standard deduction ($5,950 per person for 2012) plus exemptions ($3,800 per person for 2012).
Step 4 – Calculate Your Total Taxes for the Year – Box/Line 10
Aside from signing and including your direct deposit banking information on the form 1040EZ, the only other step that you need to do that can be a little bit confusing is to calculate the amount of taxes you needed to pay for the year, often called your tax liability.
In order to to do this, you will need to locate where the value written in Line 6 (that you already filled out) falls in the series of Tax Tables shown on pages 31-39 of the IRS’ 1040EZ publication.
Shown below is an example excerpt from this table. All you need to do is find where your Line 6 Taxable Income falls in the ranges shown and then merely follow that number across to the next few columns to determine how much tax you are responsible for.
Once you complete this step, you can then proceed to calculate either the refund you will receive or the additional amount of taxes you owe.
Step 5 – Mail in Your Return
Having calculated how much you will receive as a tax refund or additional taxes that you still need to pay, now is the time to complete the final step and mail in the tax return.
In order to do this, you will need to click here to view the 2-page Form 1040-V. This is a form that contains instructions on how to file your federal tax return, where to send it, and what all to write on the check (if you owe more taxes).
On Page 2, you’ll see a table of addresses for where to send your tax return if you are sending a check and another set of addresses for if you are not sending a check for additional taxes. Simply follow the instructions, and stick your return in the mail. Make sure to make an extra copy for yourself for future records as well!
So, there you have it – 5 easy steps to help you fill out your own Form 1040EZ and file your federal tax return so you don’t have to fall in to the trap of paying someone $40-$60 to do it for you when you are out shopping at Wal-Mart or dining at restaurant and see an advertisement!
Aside from saving money, I feel that it’s also a good learning experience to have some working knowledge of how taxes work. And, using an easy form like the 1040EZ can be a good way to get this process started.
Of course, as I eluded to above, there are (in my opinion) easier free ways to fill out and file your 1040EZ using free online tax preparation programs instead of you having to manually input the numbers yourself. Applications such as TurboTax and H&R Block Online ask questions in an organized fashion that help assemble your return for you. Just watch out because while they don’t make any money off of you for a simple federal tax filing, there are a lot of extra features that they quickly charge you for, and can add up!
How about you all? Have you seen any “awesome” deals where people are charging to fill out your 1040EZ for you? Do you fill out your taxes yourself or employ the help of an accountant?
If you file yourself, do you fill out the tax forms directly, or use a computer program like the ones listed above?
Share your experiences by commenting below!