Choosing the best tax form involves a great deal more than your filing status or whether you have dependents. The bottom line is always the size of the check you must write the Internal Revenue Service when you're finished completing the form and making your calculations. Your choices as a married taxpayer are Forms 1040, 1040A or 1040EZ.
The greater your income and the more complicated its sources, the better off you are filing Form 1040 – and, in fact, you may have to. The IRS sets income limits for those who want to file the easier forms, 1040A and 1040EZ. You must file a 1040 if your income – or the combined income of you and your spouse if you're married – exceeds $100,000. If you have more than $1,500 in interest income from investments or if you took any capital gains distributions, you're precluded from filing Form 1040EZ or 1040A, and if you’re self-employed or sold any property, you should only file Form 1040. The 1040EZ and 1040A are basically limited to reporting W-2 earnings. If you earned any tips that don't appear on your W-2, you must also use Form 1040.
Separate Vs. Joint Returns
If you and your spouse want to file separate married returns, you can't file Form 1040EZ. This form is limited to single filers and couples who file jointly, provided they have no dependents. Forms 1040 and 1040A are available to taxpayers of all filing statuses.
If itemizing your deductions results in a greater tax break than taking the standard deduction, you can forget using the simple forms. Forms 1040A or 1040EZ are limited to standard deductions. On a 1040EZ, you can't take above-the-line deductions such as those for student loan interest, qualifying moving expenses or alimony you might have paid. Student loan interest includes that which you paid toward your own education, not necessarily that of a dependent.
The only tax credit available to filers of Form 1040EZ is the earned income tax credit, which benefits low-income earners. You have a few more options with Form 1040A, including the retirement savings contribution credit, and you can claim any credits you qualify for if you choose Form 1040.
If you have household help, you may only be able to file Form 1040. If the individual who does work for you is your employee, not an independent contractor, you'll owe the nanny tax. This tax doesn't just cover childcare providers. You must pay the nanny tax for workers such as housekeepers or gardeners as well, so it applies even if you don't have dependents.
The IRS wants you to e-file your return – so much so that it's stopped mailing out paper forms to taxpayers. You can still access the forms on the Internet, print them out and file your taxes the hard way, but if you e-file instead, the IRS takes care of the problem of what form to use. It will tip you off as to which is best based on your personal information.
Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance and w, bankruptcy, and she writes as the tax expert for The Balance.