New filing season + new tax law = new Form 1040, schedules
Monday, January 28, 2019
The Internal Revenue Service today begins processing millions, if you go by the agency's prior filing season data, of early-filed tax returns.
IRS staff are going to face more than the usual filing season chaos since most of them are coming back to work after 35 days of being shutout. (Short story: Get ready for some delays.)
Filers, too, are in for some challenges.
Now only did the Tax Cuts and Jobs Act (TCJA) make the most changes to the tax code in more than 30 years, the documents we use to comply with the tax laws have been revised, too.
I took a look at the Schedule A that itemizing taxpayers use in my earlier filing checklist post. Today, here's a review of the new — and now only — Form 1040.
There can be only one: Yes, Highlander fans, the "only one" catch phrase also now applies to the form that we use to report our annual income to the IRS.
In the past, we had a choice of three 1040s: the long 1040, which has been around since the dawn of what we call the modern tax code in 1913; the slightly shorter 1040A; and, as the name implied, easiest to complete 1040EZ.
Now everyone one, regardless of how simple or complicated their tax situation, will use Form 1040.
And despite decades of promising a postcard-size tax return, the TCJA didn't quite get us there.
Rather, the new 1040 is about the size of an over-sized postcard. OK, so the politicians sort of kept their promise. Sorta.
But it has lines to complete on both sides. So it really can't be sent in like a postcard.
And that also-promised tax simplification? It doesn't show up in the new 1040.
This reduction in Form 1040 tax entries — the new document goes from the prior form's 79 numbered lines to 23 — means that many taxpayers will have to use one or more of the new schedules associated with the revised Form 1040.
3 1040 forms 1040 - 2 = 6 new tax documents: How many new schedules?
By consolidating three prior 1040 forms into one, the TCJA new forms math means the IRS has created six new numbered schedules. I'll get to these a bit later, promise!
And these new forms are in addition to the existing lettered schedules like Schedules A, B, C, D, E and F.
Now you're starting to realize why you use tax software or take your taxes to a professional for preparation and filing. And that federal lawmakers don't know the definition of simple.
Realistically, the good news is that a lot of us will only need to file the new Form 1040 without any added schedules. (Not the hubby and me. Our taxes, like our life together, are way too complicated, but that's for another post. Maybe even another whole blog. But I digress.)
So why, you probably are asking right about now, should you keep reading? Because I'm still somewhat old-school when it comes to taxes.
I long ago learned that by examining the forms, you get a good idea of the tax laws and sometimes even a glimpse into the tax policy that created them.
If that interests you — and I hope, since you're here at the ol' blog, it does — buckle up. Here goes!
Form 1040: First, a look at the new 1040 itself. The IRS released a draft version last summer to generally scathing reviews.
After taking that criticism and additional comments into account, the tax agency gave us an early Christmas present (yes, that holiday is kind of weird in our house) with last December's release of the new tax year 2018 Form 1040.
That's the new 1040 atop the older version below.
If you want an up-close-and-personal look, you can download the new Form 1040 and its instructions.
Here are some highlights.
New Form 1040 Page 1: There are several items that are the same on the new Form 1040. Most notably, atop this revised tax return are the same blocks, although resized in some cases, you've always seen.
They are where you enter your name, your spouse's name if you're married and filing a joint return and your Social Security number(s).
You still choose a filing status.
And you still tell Uncle Sam about the folks you can claim as tax dependents.
Your health care coverage info now goes on page 1. Yes, that Affordable Care Act (ACA), aka Obamacare, requirement is still there. The Republican removal of the reporting requirement didn't take effect until this year, so you won't have to worry about it when you file your 2019 taxes next year.
But for 2018, you still have to mark the checkbox that's moved from page 2 to page 1 to tell Uncle Sam that you had acceptable medical coverage last year or were exempt from having to buy a policy.
A quick tip here. If you're still searching the new Form 1040 for where to enter your personal exemptions amount, stop.
These write-offs were eliminated by the TCJA.
Tax law change advocates say that most of us won't miss these amounts thanks to the new, larger standard deductions. We'll see.
After entering all that info, the new 1040 has a place for your signature (and your spouse's if you're married filing jointly), along with the date, your occupation and your Identity Protection PIN if you got one of these identifying numbers in connection with tax identity theft.
There's also the block for your paid tax preparer, if you used one, to enter his or her information and sign and date.
These signature blocks and associated info used to be on page 2.
A quick tip here. Even though this filing requirement now is
on page 1, don't fill out these sections
— that is, don't sign your return —
until you've finished filing.
An incomplete form that has a signature is like a blank check
for an unscrupulous tax preparer.
As for the new 1040 page 2 …
New Form 1040 Page 2: All your income information that used to be on page 1 of Form 1040 now is on page 2, aka the back of the form if you printed it out.
The IRS still wants you to report on your 1040 all your wage and salary income, which generally is on the W-2 you get from your employer. This goes on line 1 of page 2.
You'll also enter on this line any tips, etc. you got. The specific "etc." considerations are detailed in the 1040 instructions.
A quick tip here. Don't add any earnings you got as a sole proprietor, contractor, freelancer or from gig jobs
— basically the information you report on Schedule C or C-EZ, which are still around —
on this first line of page 2. These amounts now are reported on Schedule 1 (more on all the new schedules in a minute), which essentially looks like the bulk of the page 1 lines on the old Form 1040, and go on the new Form 1040 line 6.
Again, yay software and tax pros!
Some other sundry income items, such as tax-exempt interest, qualified and ordinary dividends, Social Security and other retirement benefits, are reported here, now on lines 2 through 5.
Small businesses will note line 9 is for the new qualified business income, aka Section 199A, deduction.
The TCJA enhanced child tax credit and new one for other dependents is on line 12. The still-in-place Earned Income Tax Credit and other credits for which you might qualify go on line 17.
And, oh yeah, the option to claim the tax-reform increased standard deduction amount is on line 8.
Amid all these entries and directions to subtract or add are places for your taxable income computation, as well as for any taxes you already paid, either through payroll withholding and/or estimated taxes and your ultimate total tax amount.
That tax figure will determine, based on how much you had withheld or submitted as 1040-ES quarterly payments, whether you'll get a refund (which will show up on line 19) or have to write the U.S. Treasury a check (that's now on line 22).
Migrating adjustments: Wait! What happened to those above-the-line deductions that used to be at the end of the old 1040 and helped cut your gross income to a lower adjusted gross income (AGI) amount, which is now line 7 on the new Form 1040?
Some of these write-offs are still around. But now they've moved to the new Schedule 1 (again, more on 2018 schedules in a minute).
You'll find on Schedule 1 this filing season the option to claim:
- Educator expenses
- Certain business expenses of reservists, performing artists, and fee-basis government officials (you'll still need to fill out Form 2106)
- Health savings account deduction (and Form 8889)
- Moving expenses for members of the Armed Forces (and Form 3903)
- Deductible part of self-employment tax (and Schedule SE)
- Self-employed SEP, SIMPLE and qualified plans
- Self-employed health insurance deduction (NOT the ACA health insurance you checked off on page 1)
- Penalty on early withdrawal of savings
- Alimony paid and the spousal support recipient's Social Security number (yes, this isn't changed by the TCJA until 2019)
- IRA deduction
- Student loan interest deduction
A couple of lines are reserved in case Congress gets around to renewed some of these deductions, which were part of the tax extenders package that expired.
Whew! It's good to know these still are around, albeit on another form.
Six new schedules: Schedule 1 has gotten a couple of mentions in this discussion of the new Form 1040.
It's likely to be the most used of the new forms attached to the revised tax return lone form.
But we can't ignore the others. As threatened promised, the table below offers a quick synopsis, courtesy the IRS, of what's on all the new TCJA Form 1040 schedules. If you want to see specifics, just click the schedule name links to see the forms (in PDF format).
If you …
Then use …
Have additional income, such as capital gains, unemployment compensation, prize or award money, gambling winnings. Have any deductions to claim, such as student loan interest deduction, self-employment tax, educator expenses.
Owe Alternative Minimum Tax (AMT) or need to make an excess advance premium tax credit repayment.
Can claim a nonrefundable credit other than the child tax credit or the credit for other dependents, such as the foreign tax credit, education credits, general business credit.
Owe other taxes, such as self-employment tax, household employment taxes, additional tax on IRAs or other qualified retirement plans and tax-favored accounts.
Can claim a refundable credit other than the earned income credit, American Opportunity Credit, or additional child tax credit. Have other payments, such as an amount paid with a request for an extension to file or excess social security tax withheld.
Have a foreign address or a third-party designee other than your paid preparer.
Are you ready to file now? Probably more like overwhelmed.
Final filing tips: But things should be manageable, especially if your use tax software or have a tax pro on retainer.
All you tax software users, just make sure that when you open it you do let it update so that you have all these and other IRS forms you might need this first year of filing under the new tax laws.
If instead you turn over your taxes to a professional, make sure you gather all the information that your tax preparer asks you to bring so he or she can get your return done properly and quickly.
And to all, taxpayers and the IRS alike, take a breath and be patient.
I will begin RMD and want to figure out what my taxes will be beforehand. I know they take out 10%, but Id like to figure out if 10% is enough for the RMD for IRS so that I can budget. DO you know what percentage IRS charges for taxes on RMD's? Is there a calculator on line? I could not find one. And if I get a tax program, to make a dummy tax return before next year, is there a goodone to help me make sure taxes are paid properly. I am so afraid my social security income will change due to RMD?! Thank you.
Posted by: sandi | Thursday, September 26, 2019 at 09:53 PM
Bruce, I'm presuming that since your and your spouse both paid SE tax, you each will fill out a Schedule C and separate SE schedules. Since your total, combined income is reported on your joint 1040, you can put both your Schedule C earnings on the same Schedule 1, since it and your Schedule Cs will be sent to the IRS with your 1040. Tax software should take you through this. Kay
Posted by: Kay | Saturday, April 06, 2019 at 01:06 PM
Well even if completely filled out and signed some could just throw away and replace page 2.... no signature on that page, but where the meat of the numbers are. And WHY NOT just make it one page!?! As stupid as Donald Trump.
Posted by: d | Friday, April 05, 2019 at 12:49 PM
Hi, I'm wondering if both spouses need to fill out a Schedule 1, say, if both paid self-employment tax, or if the information can be combined onto one Schedule 1 for couples who are filing their 1040 as married filing jointly. Thanks, Bruce
Posted by: Bruce Van Zante | Wednesday, April 03, 2019 at 04:55 AM