How Will Your 1040 Tax Form Change This Year
Your federal income taxes will look slightly different this year thanks to the Tax Cuts and Employment Act of 2017. Credits and deductions have changed, as has your 1040.
It’s not quite the size of a postcard, but it’s different. Here’s a breakdown.
What is 1040?
First, if you are unfamiliar with the names attached to various documents, the IRS 1040 Form is your general tax form where you report your income and calculate your refund.
There used to be the standard 1040, 1040EZ for less complex declarations, such as filing single documents, and the 1040A. This year you are only going to use the redesigned 1040 – 1040EZ and the 1040A is no longer there. (However, if you are catching up with profits in the years leading up to 2018, you will still be using it .)
You can download 1040 and fill it in manually, or use a tax program that enters your information for you.
Why was this changed?
As mentioned above, Republicans have long promoted the idea of a postcard-sized tax return, and most Americans would probably agree that this would be preferable to the combination of shapes and schedules that we have to deal with now. “The Treasury has approved a new approach that provides flexibility in how the IRS can manage future Form 1040 changes and reduce the number of 1040 Forms taxpayers have to choose from to one basic 1040 Form that all taxpayers will use,” it said. IRS .
The 2017 Tax Cuts and Jobs Act did cut your 1,040, but it didn’t make things much easier, as CNBC points out :
Although the form is now “the size of a postcard,” the document feeder will still have to deal with additional documents – known as a schedule – for the calculation of their tax breaks, including deductions for expenses on teacher and contributions to your savings account for health .
So now you have a smaller 1040 form, but there are six additional schedules to complete, depending on the credits and deductions accrued (of course, the software works with forms for most of us).
What’s really different?
The main difference is not in the deductions and training credits on your 1040, you will now do this in various tables of the 1040 form (those with a very simple tax situation will not need to fill out any of the six schedules).
“The 2018 Form 1040 uses the building block method, so the federal tax return can be consolidated into a single, simple form,” the IRS said in a statement . “If necessary, taxpayers can add new numbered tables to this form.”
The IRS notes that if you use the software, you may not notice the real difference — the machine will fill it in for you.
Appendix 1: Additional income and income adjustments
You willcomplete this field if you have additional income “such as capital gains, unemployment benefits, prize or bonus [or] gambling winnings,” according to the IRS . You must also include child support or payment income, rental income, farm income, etc.
You will also use this schedule for any withholdings, “such as student loan interest deduction, self-employment tax [or] faculty expenses,” and health savings account deduction.
Appendix 2: Tax
You need tocomplete this form if you have to pay the Alternative Minimum Tax or the Child’s Unearned Income Tax.
Appendix 3: non-refundable loans
You willcomplete Table 3 if you “qualify for a non-refundable loan other than a child tax credit or a loan for other dependents, such as a foreign tax credit, student loan [or] general business loan.”
Appendix 4: Other taxes
Table 4 will be filed if you owe “self-employment tax, home employment tax, supplemental tax on an IRA, or other relevant retirement plans and tax-exempt accounts.”
Appendix 5: Other payments and repayable loans
You willfile Attachment 5 if you can “claim a refundable loan other than Earned Income, US Alternative Credit, or Supplemental Child Tax Credit.”
Appendix 6: Foreign Address and Designated Third Party
Finally,complete Appendix 6 if you “have a foreign address or a designated third party other than your paid originator”. This is where you include your country, province, and zip code if you have a home outside of the United States, as was previously done on page 1 of 1040.
(Note: these are different from other existing timetables still in use in 2018:timetable A ,timetable B ,timetable C ,timetable D ,timetable E ,timetable F ,timetable H ,timetable J ,timetable R , timetable SE, andtimetable 8812 . )
What’s the same?
According to the IRS , the following 1040 parts are “largely” unchanged:
- spaces for names and social security numbers,
- spaces for signatures remain on the first page,
- checkboxes for selecting the filing status and
- flags for the presidential election campaign.
The checkbox for reporting full year coverage or waiver is on the first page of the 2018 Form 1040.
Then again, perhaps taxpayers who file electronic documents or hire someone (the vast majority of people) won’t notice the difference, and those with a simple tax situation won’t need to worry about the six spreadsheets. There are likely to be big changes if you decide to move from granularity to a larger standard deduction this year.