Sweeping Tax Reform south of the 49th parallel lead to new forms

IRS reworking the 1040 for the 2019 Tax Season

The New 1040

In late December 2017, the president signed into law the Tax Cuts and Jobs Act. This legislation represents the largest U.S. tax reform in 30 years. The Internal Revenue Service is streamlining the Form 1040 (individual tax return) into a smaller and simpler document. This effort to help taxpayers with simpler forms comes in time for the upcoming tax season.

The new postcard-sized 1040 replaces the current 2-page Form. This August, IRS circulated a draft-copy of the new form. The IRS continues to works with the tax community to finalize the streamlined document. You will see the new streamlined version of the Form 1040 when your 2018 individual income tax return is prepared during the 2019 tax filing season.

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The IRS designed the form in hopes that 30% of U.S. filers, roughly 150 million taxpayers, could use the same form. The new form consolidates the three versions the Form (1040, 1040A and 1040EZ) into one simple form. While the form is much shorter and simpler it still allows the IRS to obtain the necessary information from each taxpayer needed to determine their tax liability or refund.

The new Form 1040 uses a “building-block” tactic. Meaning, the tax return is reduced to a simple form which is accompanied with additional schedules if needed. Taxpayers with straightforward tax situations would only need to file the new postcard-sized 1040 with no supplementary schedules.

New Schedules

This new shorter and simpler Form 1040 birthed a few other new schedules. These forms are intended to supplement this new Form 1040. These new schedules take in the lines for other income, adjustments, and credits. As well as other items normally included on the previous longer version of the Form 1040. The IRS chose to designate these new forms by numbers as opposed to the traditional lettering system.

Below is a quick overview of what the information captured by these new schedules:

  • firstly, Schedule 1 is used to report additional sources of income (not from a W-2) or adjustments to income.
  • the new Schedule 2 is a form for people with some additional forms of taxes, such as alternative minimum tax.
  • Schedule 3 is for nonrefundable tax credits such as the foreign tax credit, education credits or residential energy credit.
  • Taxpayers will add up certain taxes, such as self-employment tax, uncollected Social Security and Medicare taxes, and household employment taxes. They will then report them on Schedule 4
  • Schedule 5 is to add up tax payments, such as estimated tax payments or amounts paid with an extension.
  • lastly, Schedule 6 is where you can report a foreign address or appoint a third-party designee to discuss your tax return with the IRS on your

 

Contact us if you have any questions about the new tax forms or any other changes to the tax laws.

 

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