The IRS presented individuals such as obligated tax payers and tax exempt organizations the use of tax forms to report any financial information. These tax forms are used to report income, which is identified as the sum of all wages,salaries, profits, interests or any other form of earnings received within any given period of time. These forms are used to calculate any taxes owed to the federal government of the United States. There are four standard versions of tax forms used by individuals when referencing their income to the federal government.
The most widely used form to file income taxes is known as the individual Income tax return form 1040EZ. This is a simple form that can be applied to individuals who are 65 years old and younger with no dependents. They would also need to meet the requirement of no itemized deductions. Any itemized deduction is any allowable expense a individual would be able to report on their taxes in order to reduce their taxable income.
To qualify for the 1040 form individuals also has to have no advance earned income tax credit (EITC), and their taxable income for 6 months must be no more than 50,000. The next tax form provided for the purpose of filing taxes is known as the 1040A for. This form has slightly more detail to it that the 1040EZ form. Individuals who do not have any itemized deductions or a net income more than 50,000 meet the qualifications under the conditions of this form. These individuals must also claim only certain tax credits and their income comes in the forms of tips, wages, salaries, interest or ordinary dividends, capital gains, fellowship grants, annuities, pensions, or unemployment.
The other tax form is known as the extended version of 1040A which is called Form 1040. Individuals who do not meet the qualifications of 1040A are required to use 1040. It is recorded that nearly 3/4 of the American economy use this form, even with all of the qualifications of 1040A. There are a certain number of requirements a person needs in order to use this form. The last form ideally used to record revenue to the IRS is known as the 1040PC form. This is a special version of a tax return that is generated by certain income tax software such as Tax Brain, or Turbo Tax. IRS computers translates the information of this software and it has a shorter application process compared to the regular 1040.
Although these are the four frequently applied tax forms. Reports indicate that the Internal Revenue Service will showcase a release of additional forms within the next couple of years. This tax forms will mostly apply to business corporations as preventative measures to bridge the escalating tax gap. The tax gap is identified as the taxes that are owed verses the taxes that are paid. There has been a growing problem to resolve the tax gap presented from individuals and business who evade their tax obligations. The new application of tax forms are a measure to solving the problem