The NEW 1040...

... Is not a postcard as promised! Maybe in 2020? But probably not. There are so many changes to the form 1040 this year. Let's dive in and see what's new in the 1040 world. So many interesting new things to look at!

Let’s just say that people who used to hand write their tax returns probably shouldn’t do that anymore. The form looks so different! Everything that used to be in one spot is jumbled up and put into another spot. Things that were previously on the 2nd page are now on the 1st page and certain things that were on either pages 1 or 2 are now on a completely different form!

There is no more 1040EZ or 1040A - the 1040 is now the catch all. When a return gets more complex, the complexities are transferred from 6 different schedules to the appropriate line on the simplified 1040 base form.

So, what do the new schedules look like? In short, they are the long form 1040 broken up into 6 different forms. Not all taxpayers will need to use the new schedules. Some will only need to use 1 or maybe 2 of them, depending on their tax situation. Let's look at what kind of items are on each form.

*Schedule 1 - this schedule is for additional income and adjustment items such as alimony, business income, rental income, line 21 income, educator expenses, IRA deductions, student loan interest, and many other items that used to go directly on the 1040 long form. It's important to note that in addition to the new schedule, computations for certain types of income and deductions should still be computed using the appropriate/ relative schedules, forms, and worksheets. For example, if there is business income to report, a Schedule C should still be filed along with the Schedule 1, carrying the information to the 1040.

*Schedule 2 - is a very short schedule used simply to show amounts for either Alternative minimum tax or Excess advance premium tax credit repayment. These used to be entries on the old long form 1040, page 2. This will not be a commonly used schedule for taxpayers.

*Schedule 3 - is used for nonrefundable credits, such as day care credits, education credits, retirements savings credits, etc. This will be one of the more commonly used schedules for many taxpayers. Again remember, if any of these credits are claimed, they must first be calculated on the form or schedule they normally are calculated with, then transferred to the new schedule, and from there entered on the 1040. *Schedule 4 - this one is for other taxes due in addition to taxes from the tax table. Such taxes include self employment taxes (or the SE tax), health care individual responsibility, additional medicare taxes, etc. Once calculated on their appropriate form, they are transferred to the applicable line on Schedule 4, and from there entered on the 1040.

*Schedule 5 - this is for the other payments (such as estimated payments) and refundable credits such as net premium tax credit or excess social security taxes paid.

*Schedule 6 - which is specifically for taxpayers with a foreign address or those who want to designate someone other than their tax preparer to discuss their tax return with the IRS. It's safe to say many taxpayers won't need to use this schedule either.

As you can see, the most common Schedules seem to be Schedule 1 because of the income and deductions, Schedule 3 for those nonrefundable credits, and possibly Schedules 4 & 5 especially for the self employed business owners.

---

Let's take a step back for a minute and put a magnifying glass on the 1040. If you look at page 1 of the 1040*, you'll notice it's for all the necessary and personal information about the taxpayer and all individuals in the household. This includes their filing status, social security number(s), mailing address, signatures of taxpayer(s), as well as the tax preparer information (if applicable).

If you look on page 2, what are the direct entries on the new 1040? Notice there are only 23 line entries compared to 76 lines on the Form 1040 for 2017. That's a third of what it used to be! Now we see why there are 6 schedules to compensate for the changes made to the main form.

Since form 1040 is now simplified, what are some of the items that allow direct entry without having to pass the any of the 6 new schedules? Of course, W2 income will be reported directly on the form 1040, as well as taxable interest and dividends, pensions, social security income, the standard or itemized deductions, child tax credit, withholdings from any source, refundable credits such as Earned income credit and the Additional child tax credit. It's safe to say that these are some of the most common entries for taxpayers and most of these items keep the tax return fairly simple.

Although these entries do not have to pass through any of the new schedules, their calculations will still be computed on the appropriate form or schedule as they have been in the past. An example would be Additional child tax credit, which is computed on Form 8812. The computation will be carried directly to the appropriate line on the 1040 (avoiding the entry on any of the 6 new schedules).

You may not notice many of these changes if you use a software to prepare your tax return since online tax programs will be updated and will ask you the relevant questions for your tax situation. Also if you have a tax professional file your taxes, you wouldn't notice much of a change unless you're used to looking through the packet once the return is printed. It's still nice to have an idea of what's going on behind the scenes with all these new tax law changes that have been happening since the beginning of 2018!

If you'd like to see a draft of the new form 1040 and/or the 6 new schedules, please click the appropriate links below and you will be redirected to the IRS form links. *1040 - https://www.irs.gov/pub/irs-pdf/f1040.pdf *Schedule 1 - https://www.irs.gov/pub/irs-prior/f1040s1--2018.pdf *Schedule 2 - https://www.irs.gov/pub/irs-pdf/f1040s2.pdf *Schedule 3 - https://www.irs.gov/pub/irs-dft/f1040s3--dft.pdf *Schedule 4 - https://www.irs.gov/pub/irs-dft/f1040s4--dft.pdf *Schedule 5 - https://www.irs.gov/pub/irs-pdf/f1040s5.pdf *Schedule 6 - https://www.irs.gov/pub/irs-pdf/f1040s6.pdf

#taxreform #taxlawchanges #IRSschedules #IRSforms #IRS1040 #2018tax #1040 #taxlaw #money #accounting #business #governmentshutdown2019 #refund #taxes #temeculanews #murrietanews #quickread #taxupdates2019 #taxupdates #helpwithtaxes #needataxperson #taxperson #localtaxservice