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Line-by-Line Tips for Form 1040-EZ

1040-EZ: Lines 8 through 12

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Note: These instructions for Form 1040-EZ apply to the tax year 2012 only.

Line 8a: Earned Income Credit

You are eligible to claim the Earned Income Credit if you meet the following criteria:
  • Your Adjusted Gross Income on Line 4 is less than $13,980 with no qualifying children (or ($19,190 married filing jointly) with no qualifying children.
  • You and your spouse cannot be claimed as a dependent by someone else.
  • You and your spouse are between the ages of 25 and 64.
If you have children, you will need to use Form 1040A or Form 1040 to claim your dependents and calculate your earned income credit.

You can use the Earned Income Tax Credit Assistant on the IRS Web site if you are not sure if you qualify. This Web application on the IRS Web can help you determine if you qualify for the earned income credit, if your children qualify you for the earned income credit, and how much of an earned income credit you are eligible for.

How to calculate the Earned Income Credit:

Use the worksheets in the IRS Instructions for Form 1040-EZ, pages 12 through 16, to calculate your Earned Income Credit.

Use your "earned income" figure from the worksheet to look up your tax credit amount on the EIC tables on pages 17-18.

Or, if you want, the IRS to calculate your Earned Income Credit for you, enter the word "EIC" on Line 8a.

Or, even better, you can use the EIC Calculator on the IRS Web site. Go to the EITC Assistant and click on "How Much is My Credit?"

Put the earned income tax credit figure on Line 8a.

Line 8b: Nontaxable Combat Pay Election

If you served in the military and received combat pay, your non-taxable combat pay is shown on your W-2, Box 12, code Q. There will be a dollar amount next to the "Q."

You can choose to include your combat pay for Earned Income Credit purposes, or you may choose to leave it out. (Choices like this are called an "election" in tax-jargon, hence this line is called the nontaxable combat pay election.)

Calculate your earned income tax credit both ways. First calculate the credit using only your "earned income" from the worksheet, and then calculate it again using your "earned income" plus your combat pay. Take whichever credit amount is higher.

If you decide to include your combat pay, enter the amount coded as "Q" on your W-2 on Line 8b. If you are not including your combat pay for the earned income tax credit, leave Line 8b blank.

Here's a link to more information about the nontaxable combat pay election from Publication 596, Earned Income Credit on the IRS Web site.

Line 9: Total Payments

Add the figures from Lines 7 and 8a. Put the total figure on Line 10.

This represents the total amount of money paid in towards your federal income tax, or what we call refundable credits. Withholding and the earned income credit are refundable credits, which functions to act as a payment against the federal income tax. Any amount of refundable credits in excess of the federal tax liability are refundable to the taxpayer.

Line 10: Tax

Look at the figure on Line 6. This is your taxable income.

Use this figure to look up the amount of federal income tax using the tax tables in the 1040EZ instruction booklet, beginning on page 31.

Put the tax amount on Line 10.

This is the amount of federal income tax based on the taxable income. This is also called your federal tax liability. The tax tables are based on the tax rates for 2012, which range from a low of 10% to a high of 35%. To find out which tax bracket you are in, take the taxable income figure from Line 6 of Form 1040-EZ, and compare that to the tax bracket ranges based on your filing status.

Lines 11a or 12: Refund or Amount Due

Using a calculator, enter the figure on Line 9 (your total payments), and subtract the figure on Line 10 (your federal income tax).

Look at the result.

If the number is positive, you have a refund. Enter this figure on Line 11a.

If the number is negative, you owe additional tax. Enter this figure on Line 12. Owing additional tax means not enough money was withheld from your paycheck to cover your federal income tax. Any amount due is paid when you file your tax return and remit payment. The deadline to pay any tax amount is April 15, 2013, for taxes relating to the year 2012. To prevent having an amount due again next year, fill out a new Form W-4 to have more taxes withheld from your paycheck. Trying reducing the number of withholding allowances. Claiming either zero or one withholding allowances on your new W-4 is usually sufficient to avoid having a balance due. For a more detailed calculation of withholding allowances, you can utilize the Withholding Calculator application on the IRS Web site.

Lines 12b, 12c, and 12d: Direct Deposit

If you are getting a refund, the amount on Line 12a can be deposited directly to your checking or savings account. Receiving a direct deposit is faster than getting a refund check mailed to you, since there's no check to get lost or stolen. However, direct deposit comes with one big drawback. Your bank account information in this section must be absolutely 100% correct. If it's not, the IRS will be unable to help you track down your refund money. Personally, I avoid direct deposit and prefer to receive a check in the mail.

However, many people do prefer direct deposit. Here's some tips to make sure your direct deposit will arrive safely.

Get out your checkbook, and look at one of your checks. In the bottom left-hand corner you will see lots of numbers. The first series of numbers should be a 9-digit bank code. This is called the Routing Transit Number. Copy your routing transit number to Line 12b.

Next, check the appropriate box on Line 12c, depending on whether you want your refund deposited into a checking or savings account.

Next, find your account number on your check. Enter your account number on Line 12d.

Triple check your bank numbers! The IRS will send the refund to the bank account you indicate. Making a mistake here could cost you your refund. Once the IRS issues a direct deposit, it is often difficult and sometimes even impossible to get that refund back. In fact, many people have lost their tax refunds forever by making a mistake with incorrect direct deposit information. Please check your direct deposit information at least three times. If you need help with the routing transit number and bank account number, contact your bank for assistance.

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