Most people hate filling out tax forms almost as much as they hate forking over dough to Uncle Sam. That's why you should use the simplest tax return form you can, especially if you're still filling out your forms by hand.
But choose carefully. While all the personal income tax forms -- 1040, 1040A and 1040EZ -- are designed to get the appropriate amount of your money to the IRS, the differences in these returns could cost you if you're not paying attention.
The EZ is the shortest and simplest form, Form 1040A is a bit more complex and the long Form 1040 is the most detailed and potentially difficult. But even though your tax life is simple and straightforward, it might be worthwhile to investigate the other two forms. Why? Generally, the longer the form, the more opportunities for tax breaks.
Health care and EZ limits
Beginning with the 2015 filing season, some individuals who previously filed Form 1040-EZ won't be able to use the shortest form to file their taxes. This applies to folks who bought Affordable Care Act-required health insurance through a state or federal exchange, also known as the marketplace.
An option upon policy purchase was to receive advance payment of the premium tax credit. This tax credit helps cover some of the insurance costs. The advance credit amount, however, must be accounted for when the policy recipient files his or her tax return.
If the advance premium amount was too small, the taxpayer will get the extra. However, if too large of an advance premium credit was paid, the taxpayer must make up the difference, either by paying any tax due or by having the amount taken from an expected refund.
Such calculations are made on Form 8962, which only can be filed with Form 1040A or 1040. If you received advance payments of the premium tax credit, you must file one of these longer forms instead of the 1040EZ.
If you did not get the premium credit in advance but got health care through an exchange and want to claim it when you file, you must complete 1040A or 1040.
How the EZ could cost you
Even if you can file 1040EZ, it might not be the best move.
Take the case of 2014 tax filer Joe P. Taxpayer. Joe finished college last year and got his first full-time job making $40,000. He's single, renting and has no investment income. A perfect 1040EZ filer, right? Sure, if you're Uncle Sam, because Joe will overpay his taxes by using the short form.