If you've ever had to file taxes, you might have come across 1040EZ Form. This form was a simplified version of the standard Form 1040, designed for taxpayers with straightforward tax situations.

This shortened version of the traditional Form 1040 was designed to cater to individuals with basic tax situations, offering a swift and uncomplicated way to fulfil their tax obligations. However, as of the 2018 tax year, the IRS bid farewell to Form 1040EZ in favour of a redesigned Form 1040.

Let's delve into the details of what Form 1040EZ was, why it's no longer in use, and what this means for taxpayers.

What Was Form 1040EZ?

Form 1040EZ, formally known as "Income Tax Return for Single and Joint Filers With No Dependents," was a condensed version of the IRS Form 1040. It was particularly suitable for individuals below the age of 65 with no dependents and earning less than $100,000 annually.

The form was about one-fifth the length of the standard Form 1040 and included fewer deductions and tax credits.

Eligibility for Form 1040EZ

To use Form 1040EZ, taxpayers had to meet certain criteria. They needed to have a taxable income of less than $100,000, earn less than $1,500 in interest income, and claim no dependents.

Additionally, both the taxpayer and their spouse (if applicable) had to be under the age of 65 at the end of the filing period and couldn't be blind. The form also had restrictions on deductions, tax credits, and certain financial situations.

Limitations of Form 1040EZ

One of the main reasons for discontinuing Form 1040EZ was its limitations. The form could only be used by individuals with specific income sources and amounts. It didn't allow for itemised deductions, deductions for things like student loan interest, or reporting of health coverage status.

Taxpayers with income from sources other than wages, salaries, tips, taxable scholarships, or fellowship grants were also ineligible to use Form 1040EZ.

Transition to Form 1040

In 2018, the IRS replaced Forms 1040EZ and 1040A with a redesigned Form 1040, which introduced additional numbered schedules to accommodate varying tax scenarios.

This transition aimed to provide taxpayers with a more flexible and comprehensive approach to filing their taxes. The decision to discontinue Form 1040EZ came as part of a broader effort to modernise and streamline the tax filing process.

Impact on Taxpayers

For many individuals, Form 1040EZ served as their introduction to tax filing. Its simplicity made it accessible to a wide range of taxpayers, especially those with uncomplicated financial situations.

However, with its discontinuation, taxpayers now need to use the redesigned Form 1040, which offers a more comprehensive framework for reporting various income sources and deductions.

Conclusion

While Form 1040EZ provided a convenient option for certain taxpayers, its discontinuation marked a shift towards a more unified and inclusive tax filing system.

The IRS's decision to retire Form 1040EZ underscores the importance of adapting to changing tax laws and technological advancements.

Moving forward, taxpayers must familiarise themselves with the redesigned Form 1040 and its associated schedules to fulfil their tax obligations accurately and efficiently.