A look at the proposed new Form 1040 and schedules
Monday, July 02, 2018
UPDATE, Jan. 28, 2019: The Internal Revenue Service has approved the final version of the 2018 tax year Form 1040. You can read more about the new form and its six schedules in New filing season + new tax law = new Form 1040, schedules.
Did you spend your weekend looking at the new Form 1040, which the Treasury Department and Internal Revenue Service officially unveiled on June 29?
I didn't think so. That's OK. Most of us, either individual taxpayers or our tax pros helping us file, don't look at literal paper tax forms any more. We use computer software that walks us through the filing process.
Still, it's worth reviewing the new form since it's been revised to account for tax law changes in the Tax Cuts and Jobs Act (TCJA).
Form highlights: The new Form 1040 is shorter. And smaller.
It has 23 lines, although some have sublines or ask of multiple bits of tax data, instead of the .79 lines on the current 1040.
Physically, the smaller form is half the size of the previous, 8 ½ x 11-inch page version. But like the original, you have to enter information on both the front and back of the form.
That means the 1040 isn't really a postcard. You knew that wasn't going to happen since such an open mailing would reveal all your personal and tax data to tax identity thieves (not to mention your nosy neighbors you know are peeking at what's in your curbside snail mail box).
This new Form 1040 will be the only tax return for tax years 2018 through at least 2025, when the TCJA provisions are scheduled to end. The 1040A and 1040EZ are gone starting with the 2019 filing season.
And while it might take a bit of getting used to, Treasury and the IRS say the aim of the revision is to make things simpler for taxpayers, whether they're filing electronically or opting for traditional paper tax filings.
But some taxpayers might question whether the new 1040 truly meets that simplicity goal. They will have to fill out as many as six — yes, 6, seis, sei, etc. — additional new forms, or schedules as they're known in tax-speak, to complete their returns.
The IRS, in a phone call with National Association of Tax Professionals (NATP) representatives last week, said it expects about 30 percent of taxpayers will file the 1040 alone and another 65 percent will file the 1040 alone or the 1040 and one other schedule.
Form 1040 changes: OK. Now for some new Form 1040 specifics. (Note: I've inserted images of the draft 1040 below. You can click on those for larger looks or also view the form as a PDF on the IRS website.)
Page 1 focuses on your personal information. Here you'll enter your name, your spouse's name, dependents' names and all those folks' Social Security numbers. You'll also let Uncle Sam know if you also are eligible for additional tax relief because of your age or vision impairment.
That dependent info on this new 1040, however, won't translate into exemption amounts. Exemptions, both personal and for dependents, were eliminated under the TCJA. But dependent data is still needed if you claim on page 2 of the 1040 other tax breaks, such as the child tax credit, the new family credit, the child and dependent care credit or the Earned Income Tax Credit.
The optional $3 donation to the Presidential Election Campaign remains on the form. It wasn't in a draft that was leaked early.
There also still is the IRS question as to whether you had health care coverage for the entire year. Yes, the Affordable Care Act's (ACA) requirement that you have minimally acceptable medical coverage is still in effect for the 2018 tax year. The checkbox on the 1040 is where you'll answer that Obamacare query.
Finally, you and your spouse, as well as your tax preparer if you use one, sign on this first page.
Then you flip the page over and on page 2 start entering all your tax-related numbers.
Some of the data entered on the previous 1040 goes here, such as your W-2 info on your wages or salary.
Interest, dividends (both ordinary and lower-taxed qualified amounts) and retirement payouts (both taxable and nontaxable amounts) are still there on lines 1 through 5.
Your added income is included on line 6 after you fill out the new Schedule 1. More on this in a minute.
And now your adjusted gross income (AGI) is figured on line 7.
Deductions, either the new larger standard amounts that still are shown on the form or itemized deductions on Schedule A (it'll be revised, too), go on line 8.
Line 9 accounts for the new TCJA qualified business income deduction. We're told to see instructions, but we're also still waiting on IRS guidance about this new tax break.
Your taxable income shows up on line 10 after you subtract lines 8 and 9 from 7.
Line 11 is where your tax due amount goes. Again, you'll need to consult the instructions and attach the new Schedule 2 (again, more below*).
The child tax credit and/or the new family credit for other dependents go on line 12 along with other nonrefundable credits after completing, you got it, another schedule, this time Schedule 3*.
Then there's addition and subtraction and Schedules 4* and 5* to get to the amount of tax you paid throughout the year and the amount you still owe or are due as a refund.
About those schedules: As you saw in the revised 1040 overview, in several cases (noted by *) the entries will come after you complete related schedules.
Here's an overview of what the six new schedules cover. You can click the schedule titles to look at the PDF versions.
Schedule 1, Additional Income and Adjustments to Income
The current Form 1040 asked you to report certain added earnings on line 21. This includes (but is not limited to) most prizes and awards and all gambling winnings and earnings from an activity not engaged in for profit, such as money you made on your hobby. Now those amounts will go on line 21 of the new Schedule 1.
This new schedule also asks you to enter a business income (the existing Schedule C or C-EZ is still required); capital gains or losses (Schedule D in certain cases is still required); alimony received (this will change in 2019 under the new tax law); unemployment compensation; farm income (Schedule F still applies); earnings from rental real estate, royalties, partnerships, S corporations and trusts (to be detailed on Schedule E); and taxable refunds, credits or offsets of state and local income taxes.
That new 1040 line also is also where you'll report your adjustments to income. These amounts previously were known as above-the-line deductions because of their placement on page 1 of Form 1040 (and some on 1040A) just above those form's final page one line that showed your adjusted gross income. We tax scribes will have to come up with a new catch-all description for at least the next few years.
Regardless of what they're called, these adjustments/deductions include most of the old standbys: educator expenses; costs incurred by military reservists, performing artists and fee-based government officials (details still go on Form 2106); Health Savings Accounts, aka HSAs (Form 8889 still required); moving expenses but only if you're in the armed forced (Form 3903 still required); several self-employment related costs (retirement plan contributions, health insurance premiums and half of self-employment tax reported on Schedule SE); savings withdrawal penalty amount; student loan interest; traditional IRA deduction; and, for the 2018 tax year, alimony paid.
Schedule 2, Tax
This short schedule is the core of our tax system, the tax due on your income. On the old, 2017 tax year Form 1040, this info went on line 44. On the new form, it will go on line 11 after you do the Schedule 2 calculations. As you do now, this could be as simple as looking at the IRS provided tax table or going through worksheets depending on the tax treatment of your types of income.
Schedule 3, Nonrefundable Credits
All tax credits are better than tax deductions because they reduce your tax bill dollar-for-dollar. But some credits are worth more. Refundable credits could, as their name says, get you a refund if you don't owe any tax. Nonrefundable tax credits, however, also are just like their name sounds. They can reduce your tax bill to zero, but you won't get a refund. Still, not a bad deal. If you can claim nonrefundable credits, you'll now do so on Schedule 3.
Schedule 4, Other Taxes
Here's where you'll report, as the schedule says, other taxes you owe. They include self-employment tax, some Social Security and Medicare taxes, household employment taxes, retirement plan taxes and the ACA penalty tax.
Schedule 5, Other Payments and Refundable Credits
The big items on this schedule are the estimated tax you paid and the amount you sent Uncle Sam when you got an extension to file. There's also Obamacare's premium tax credit, which people who use state exchanges or the federal marketplace to purchase health. There also are lots of lines that are "reserved" for future entries.
Schedule 6, Foreign Address and Third Party Designee
This schedule isn't noted on the new Form 1040, but you'll need it if, as its name indicates, have a foreign address or want to let someone else talk to the IRS about information on your tax return.
More 1040 tweaks expected: That's a lot of tax documents to take in! It's a good thing that we've got six months to absorb it before the 2019 filing season starts.
Also note that this draft likely will be tweaked before any final form is released. In the preface to the new 1040, the IRS said — and that's the agency's emphasizing bold type below — that:
We generally do not release drafts of forms until we believe we have incorporated all changes. However, in this case we anticipate it is likely that this draft will change at least slightly before being released as final. Whether this draft changes or not, we will post a new draft later this summer with our standard coversheet indicating we do not expect that draft to change.
The IRS also said it will be working with the tax preparer community (and that includes the tax software manufacturers who make the products most of us use) to finalize the streamlined Form 1040 over the summer.
Latest 1040 revision reactions: So are you thrilled with or upset about the new Form 1040?
Chances are you're more miffed if you're a long-time taxpayer who's been using the current, long 1040 for a long time. Change is hard for most of us, even if it does sometimes work in our favor.
But Treasury, the IRS and the GOP tax writers who pushed the new law through last year are standing by the changes.
This building block approach to the new Form 1040, whereby the actual return is reduced and then supplemented as needed with the new schedules, offers filers flexibility, according to the IRS. Filers with straightforward tax situations would only need to file the new 1040 with no additional schedules. Others will be able to select the schedules that fit their circumstances.
Still, reaction to the formal announcements was, at least on social media, mostly negative or at least unimpressed.
One dissenter is Tax Analysts' Joe Thorndike, who admits on Twitter that he thinks the quest for a postcard-sized return is worthwhile.
Actually, unlike many others, I don’t think the quest for a postcard return is silly; symbolism matters. But not at the expense of clarity and ease of compliance. There was a way to do this that wasn’t asinine. https://t.co/lV5suCSDE4— Joe Thorndike (@jthorndike) June 27, 2018
But even Thorndike qualified his support: "There was a way to do this that wasn't asinine."
Perhaps that observation should be the tagline for every tax document … and law.
I'm presuming you mean the larger standard deduction amount for visually impaired or older taxpayers. That amount is found on page 35 of the Form 1040 instructions. https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
If you're a single filer, the amount to enter on the new Form 1040 for your standard deduction is $13,600. The chart noted above has the amounts for other older and/or legally blind filers.
I hope this helps. Thanks for reading.
Posted by: Kay Bell | Friday, April 12, 2019 at 02:23 PM
Where do you put the information for the visually impaired deduction. I heard it was on the schedules but which one of the 6 schedules ? I just don't see it but then again I am visually impaired! Three days to go before the drop dead date of April 15th. I'm Googled to near insanity. I would appreciate any answers or clues prior to that. I'm at: email@example.com
Thanks in advance
Posted by: Lopaka Lolo | Friday, April 12, 2019 at 04:20 AM
The finalized new 1040 form and schedules is discussed in this post: https://bit.ly/2UggQ1S
All additional income is now accounted for on Schedule 1. Your Schedule E calculation goes on Schedule 1 line 17. That is totaled along with other entries in the additional income section on line 22.
That amount then is entered on line 6 of Form 1040.
Hope this helps.
Posted by: Kay Bell | Sunday, March 31, 2019 at 07:22 PM
As was mentioned in a previous comment, there does not apperar to be a line on the new 1040 form to report loss or income from rental property (using Schedule E to calculate).
Posted by: Eva Corbin | Sunday, March 31, 2019 at 04:10 PM
Wayne, yes as under prior tax law, state income tax refunds remain taxable if you used the state taxes as an itemized deduction to help get to get a refund. The amount on the Form 1099-G you got from your state tax department now goes on the new Form 1040 Schedule 1, specifically on line 10. The amounts from Schedule 1 then are transferred to line n Form 1040, line 6. I hope this helps. Thanks for reading. Kay
Posted by: Kay Bell | Saturday, February 09, 2019 at 08:50 PM
do you still report your state tax refund on your federal and if so where do you put it
Posted by: wayne perry | Saturday, February 09, 2019 at 06:14 PM
Wow thanks so much for this article and the line instructions and explanations. I didn’t know what the heck was going on with the new 1040 instructions and where the schedules where. The 1040 instructions are so unclear and where to print out the schedules or if you need to. I dont see how the new 1040 is easier. I had everything pafigured out with the old form and now I have to start over again!
Posted by: Pete | Saturday, February 09, 2019 at 10:47 AM
Thank you so much for posting this! I'm filing my own taxes and was a bit confused - this was very helpful.
Posted by: Mislav | Friday, February 08, 2019 at 09:34 AM
Line 17 is still needed for reporting S Corporation data.
All the schedules I fill out for S Corp have no place on new form
to report gain or loss
What do I do?
Posted by: Margaret D. Thompson | Monday, February 04, 2019 at 10:41 AM
I agree with Joe Thorndike, there was a way to do this that wasn't asinine. I'm embarrassed for those who thought this design was a good idea and every time I see the paperwork reduction notice printed at the bottom of the form, I laugh. I would have found a way for the two half pages to fit on one page at least!
Posted by: Sherri Middleton | Friday, February 01, 2019 at 03:15 PM
Hey, David. I've just put up a new post on the final Form 1040 https://www.dontmesswithtaxes.com/2019/01/2019-filing-season-means-new-tax-laws-and-new-form-1040-and-schedulesllions-if-you-go-by-the-agencys-prior-filing-season-dat.html under the new tax law. The line 12 you're seeing in the instructions is for line 12 of the new 1040's Schedule 1. https://www.irs.gov/pub/irs-pdf/f1040s1.pdf That amount from Schedule 1 then goes on line 6 of the new Form 1040. Yeah, it's a mess! Hope this and my new post helps! Thanks for reading. Kay
Posted by: Kay Bell | Monday, January 28, 2019 at 06:05 PM
Where do you report business income on form 1040 for 2018? 2018 Schedule C directs to post income on Line 12 of form 1040, but that line is no longer related to business income. The schedule instructions do not match the form 1040.
Posted by: DAVID FORREST SCHAUF | Thursday, January 24, 2019 at 03:34 PM
Chuck, the new Schedule F is much more complicated. The IRS is still working on (as of 12/30/18) the instructions for the Schedule. You can see the draft at https://www.irs.gov/pub/irs-dft/i1040sf--dft.pdf
I haven't ever filled out farm income, but it looks like the key is line 9 on the new Schedule F. Info on where to report that amount taking into account various factors is on page F-10 of the draft instructions.
I suspect/hope that this will be handled by tax software, with the you and I use on our own or that our tax preparers will use. Still, not optimal in trying to understand how/where our earnings are reported.
Posted by: Kay Bell | Sunday, December 30, 2018 at 02:05 PM
Farm income used to be reported on schedule F (still does), but does not say where to enter it on 1040 sheet......used to be on line 18 but there is no line 18 anymore. Read thru all the instructions but no help
Posted by: chuck | Sunday, December 30, 2018 at 10:47 AM
This is an extremely valuable digest of the TCJA. It will be most helpful to VITA/TCE/AARP when they start preparing for their training programs in November, 2018. - TCJA certainly is not appreciated in the states w/ high property taxes + paying state income tax, in some cases both high $. - I do free taxes. Will families with moderate incomes, 2-5 kids, benefit from the higher CTC & ACTC balanced against the loss of exemptions of $4,000+, vs $500 for FTC credit? I think not. - The last year, for 5 years, for ACA penalties. The financial complexities, many had to pay back subsidies, & hardships caused by the HC system are just not reported. Clients, should I struggle through the market place, pay premiums & cannot use the HC or do not need the benefits. So many of our clients took the penalty. All need HC. A single payer system would have been a good start for the USA experiment, plus medicaid Thank you again.
Posted by: Gary Wheelock | Sunday, November 04, 2018 at 09:21 PM