Form 1040 vs. 1040-EZ: What Was the Difference?
Examine the former role of the simplified 1040-EZ tax form and how its purpose was integrated into the modern, universal Form 1040 for all filers.
For many years, individuals with straightforward financial situations could use the simplified Form 1040-EZ. However, this form is now obsolete and has been discontinued by the Internal Revenue Service (IRS). Understanding the differences between the former 1040-EZ and the standard Form 1040 provides context for why the tax filing process was streamlined into a single, unified document for all individual taxpayers.
Understanding the Form 1040-EZ
Introduced in 1982, Form 1040-EZ was designed as the simplest of the individual income tax returns. The ability to use this form was governed by a strict set of eligibility criteria that had to be met without exception.
A filer had to use either the Single or Married Filing Jointly filing status and be under the age of 65. The form could not be used by anyone claiming dependents. Furthermore, a taxpayer’s taxable income had to be less than $100,000 for the tax year.
Income sources were also severely limited for 1040-EZ filers. The only types of income that could be reported were wages, salaries, tips, unemployment compensation, and taxable scholarship or fellowship grants. Taxable interest income was permitted, but it could not exceed $1,500. Using this form meant forgoing the ability to claim most tax deductions and credits, as filers could not itemize deductions or claim adjustments for things like student loan interest or educator expenses.
The Role of the Standard Form 1040
The standard Form 1040 has always served as the universal and comprehensive document for individual income tax filing. Unlike the 1040-EZ, it was not designed for a specific subset of taxpayers but rather to accommodate every possible financial situation. Its structure allows for the reporting of all types of financial activities that the tax code addresses.
In contrast to the limitations of the 1040-EZ, the Form 1040 accommodates all filing statuses, including Head of Household and Married Filing Separately. It has no upper income limit, making it the required form for individuals earning $100,000 or more. The form also allows taxpayers to claim any number of dependents and the associated tax benefits.
Form 1040 is necessary for reporting all varieties of income beyond basic wages, such as self-employment income, capital gains from selling assets like stocks, or rental income. It is also the only form that allows taxpayers to itemize deductions on Schedule A, which can be beneficial for those with significant mortgage interest, state and local taxes, or medical expenses. This form allows for claiming a wide array of tax credits for education, retirement savings, and other specific circumstances not available to 1040-EZ filers.
The Discontinuation and Modern Filing
The IRS officially discontinued Form 1040-EZ, along with the intermediate Form 1040-A, following the 2017 tax year. This change was part of a broader tax reform effort aimed at simplifying the filing process for everyone.
The modern Form 1040 employs a “building block” approach to tax preparation. The main form itself is relatively short and captures the most common types of income and deductions. For more complex situations, taxpayers attach numbered schedules to their return as needed. For example, a person with self-employment income would attach Schedule C, while someone with capital gains would attach Schedule D.
This redesigned system means that a person with a simple tax situation, who would have previously used the 1040-EZ, now files using the standard Form 1040. However, their return remains simple. They complete the main two-page form and will likely not need to attach any, or perhaps only one, of the supplemental schedules. This approach creates one starting point for all filers.