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What is a Tax Return?

A tax return consists of the forms used to report income and file income taxes with the Internal Revenue Service (IRS). Some returns require a single form, while others require multiple worksheets. Tax returns enable taxpayers to determine their income tax liability, pay taxes owed, or request refunds.

Choosing a Tax Return Form

There are three tax return forms to choose from: the 1040EZ, 1040, and the 1040A.

Form 1040EZ

Taxpayers under age 65 who claim no dependents and have a filing status of Single or Married Filing Jointly may file form 1040EZ. Filers are also subject to income guidelines; taxable income must be under $100,000 for the year.

This form is the easiest to file. However, there is a tradeoff for simplicity. Filing a 1040EZ returns means giving up any income adjustments or tax credits, other than the Earned Income Tax Credit (EITC). If you can deduct student loan interest or own your home, you may miss out on big tax savings if you opt for this form.

Form 1040A

Form 1040A is subject to the same income limits as the 1040EZ but offers filers more options. Taxpayers may file under any of the five statuses offered by the IRS, and can claim more adjustments and credits. However, you can’t itemize deductions on this form. Adjustments allowed on the 1040A include some retirement contributions, educator expenses, student loan interest, and college tuition and fees. In addition to the EITC, the following credits are also allowed on this form:

  • Child Tax Credit
  • Additional Child Credit
  • Education Credits
  • Dependent Care Credit
  • Elderly and Disabled Credit
  • Retirement Savings Credit

Form 1040

The IRS requires for taxpayers who make over $100,000 per year or itemize deductions to use form 1040. Self-employed filers and taxpayers who receive income from property sales must also use this form. Although 1040 is much longer than the other options, it offers over a dozen income adjustments to reduce taxable income.

Tax Return Penalties

Failing to file returns by the April deadline results in a failure-to-file penalty. If you owe taxes, you may also face a failure-to-pay penalty.

The late filing penalty is assessed at 5 percent of your tax bill per month or partial month past the deadline. The late payment penalty accrues at 0.5 percent per month or partial month. Each penalty can reach up to 25 percent of owed taxes. Because the failure-to-file penalty is much higher, the IRS recommends filing your taxes even if you can’t pay.

Tax Return Statute of Limitations

Generally speaking, the IRS has three years to conduct an audit and ten years to collect back taxes. The dates for each statute of limitation begin either when the return is due or when it is filed, whichever is later. There is no statute of limitations for false, fraudulent, or missing returns.

Tax Return Issues

Certain issues may delay your return or trigger an audit. Use these five tips to make filing your return go as smoothly as possible.

  1. Double check math, especially with multiple forms.
  2. Make sure names are correct. Last names must match the social security number on file.
  3. Include side job income. Leaving earnings off a return can result in being audited.
  4. Don’t forget to sign your return. E-filers must sign with a personal identification number.
  5. File whether or not you can pay your tax bill. Fees are much higher for filing late than they are for paying late. 
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