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What’s New for 1040A, EZ tax form filers?

For 2009 tax returns, filed in 2010

New Forms & Schedules

For tax year 2009 (filed in 2010) the IRS has re-classified some forms and added new forms related to the Economic Stimulus (ARRA) legislation:

Standard Deduction Increased for Most Taxpayers

Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions. The basic standard deduction is:

The additional Standard Deduction amounts for age 65 or older and/or blind are:

The Standard Deduction for a dependent is the greater of $950 or the sum of $300 and the dependent's earned income, not to exceed $5,700 (plus $1,400 if age 65 or blind).

Child Tax Credit

If the total Child Tax Credit exceeds the amount of tax liability, the excess credit is refundable to the extent of the smaller of - The amount of the Child Tax Credit remaining after reducing regular tax or AMT to "0", or 15% of the taxpayer's earned income in excess of $12,550.

Additional Child Tax Credit

Eligibility for the refundable child tax credit in 2009 and 2010 has been increased and more taxpayers will now qualify for the credit. The earnings threshold to qualify for the refundable credit is now lowered to $3,000. For 2008, it was $8,500.

Education Credits

The American Opportunity Tax Credit, which is really an enhanced Hope credit, provides eligible taxpayers in 2009 and 2010 with a credit up to $2,500 of the cost of tuition and related expenses paid during a taxable year. You will need to spend at least $4,000 to get the full credit, however. For 2009 and 2010, the Hope credit applies to the first four years of college, rather than just the first two years. The Hope credit is a per-student credit (meaning there's no per return maximum), and it can be claimed each year the student has qualifying expenses. Taxpayers receive a tax credit based on 100% of the first $2,000 of qualified expenses paid during the tax year and 25% of the next $2,000 ($500). Forty percent of the credit is refundable, which is good news for lower-income students and families paying for college. The credit begins to phase out for taxpayers with adjusted gross income in excess of $80,000 for individuals and $160,000 for couples filing jointly.

See IRS News Release

Unemployment Benefits

The first $2,400 of benefits in 2009 is now exempt from federal income taxes. You will pay tax only on benefits received in excess of this amount.

Making Work Pay Tax Credit

Unlike last year, the stimulus check is not automatically in the mail for most taxpayers. For approximately 95% of America’s working families, their refundable tax credit of up to $400 for working individuals and up to $800 for working couples will be paid through a reduction of income tax withholdings (in other words, an increased paycheck). The reduced withholding is scheduled to start no later than April 1 of this year. Note: Certain retirees and veterans will be receiving a $250 check sometime this year, however.

Making Work Pay & Government Retiree Credits is on Schedule M.

This tax credit is calculated at a rate of 6.2% of your earned income (or joint income if filing MFJ - Married Filing Jointly). If you earn at least $6,450 and are not phased out of the credit, you will receive $400. Eligibility for the 'Making Work Pay' credit starts to phase out for individuals with adjusted gross incomes over $75,000 and phases out completely at $95,000. For couples, the phaseout starts $150,000 and completely phases out at $190,000.

Retirement Contributions

IRA deduction expanded. You may be able to take an IRA deduction if you were covered by a retirement plan and your 2010 modified AGI is less than $66,000 ($109,000 if married filing jointly or qualifying widow(er)). If your spouse was covered by a retirement plan, but you were not. you may be able to take an IRA deduction if your 2010 modified AGI is less than $177.000.

The amount of the Retirement Savings Contribution Credit (aka Saver's Credit), which is calculated on Form 8880, is determined as follows:

SINGLE, QUALIFYING WIDOW(ER), MARRIED FILING SEPARATE

HEAD OF HOUSEHOLD

MARRIED FILING JOINT

Earned Income Credit

The stimulus bill now temporarily expands the earned income tax credit for working families with 3 or more children for 2009 and 2010. These families will receive up to $629 more EIC based on this change.

The EIC has increased for people with three or more children and for some married couples filing jointly. You may be able to take the EIC if:

Three or more children lived with you and you earned less than $43,279 ($48,279 if married filing jointly), Two children lived with you and you earned less than $40,295 ($45,295 if married filing jointly), One child lived with you and you earned less than $35,463 ($40,463 if married filing jointly), or A child did not live with you and you earned less than $13,440 ($18,440 if married filing jointly).

The bill also increases the beginning point of the 2009 and 2010 phaseout ranges for all married couples filing a joint return, regardless of the number of children.

In order to be eligible to claim the Earned Income Credit investment income cannot exceed $3,100.

Standard Deduction for Certain Filers

State or local real estate taxes, new motor vehicle taxes, or a net disaster loss. (Schedule L).

Retirees on Social Security

As part of Recovery Act, a one-time payment of $250 will be available to retirees and disabled individuals receiving certain Social Security, Supplemental Security Income, Railroad Retirement benefits, and veterans' benefits. This check will automatically be paid to the appropriate individuals by the government. Retired government workers who do not receive Social Security benefits will be eligible to claim a $250 tax credit on their 2009 tax return.

Expiring Tax Benefits

The following benefits are scheduled to expire (next year) and will not be available for 2010.

For more details, please refer to the 1040A Instructions

For a list of forms we support please see Our Limitations

 

Archived: What's new for tax year 2008 (filed in 2009)