IRS unveiled a draft copy of the new form 1040 which is a double-sided half-sheet of paper, making it 8-1/2” x 5”. One side is basically just your name, address, dependents, and the signature section. The other side shows all the calculations.

IRS accomplished this feat by leaving only the lines that the majority of tax filers actually use, and moving everything else to six new schedules. For example, the new form has lines to show income only for wages, interest, dividends and retirement. Any other type of income you might have, such as capital gains, rentals, flow through income from K-1s, self-employment and so on, will be summarized on new Schedule 1.

The payments section has been reduced to two lines… one for taxes withheld, and the other for everything else, such as estimated tax payments and certain refundable credits, which again, will go on a new schedule. The same goes for adjustments to income such as IRA or SEP retirement deductions, self-employed health insurance, etc., as well as itemized deductions, credits, and other taxes, such as self-employment tax for example, or the penalty for not having health insurance coverage all year (2018 is the last tax year for that, as things currently stand).

Apart from fulfilling any campaign promise our current President may have made, this has to be a good move on IRS’s part purely from a logistical perspective. They already had three versions of the 1040 to deal with: 1040EZ for taxpayers with no dependents and basically just wage and limited interest income, 1040A which allows for dependents as well as dividend and retirement income, and the regular long form 1040. The tax reform bill Congress passed in December also mandated IRS come up with yet a 4th version they dubbed the 1040SR, for retirees to accommodate more than the 1040A could handle, but still shorter than the regular long form. The redesigned 1040 replaces all four versions.

Frankly, the new form doesn’t really change anything in terms of preparing and filing a tax return. The length of the form is a moot issue for the majority of taxpayers who already prepare and file their returns electronically, either by themselves or through a CPA or other tax service. And no matter how long or short the tax form is, most people still have to gather and report all the same information as before. If you’re eligible for the new 20% deduction for business income, there will in fact be even more data and calculations needed to get that benefit. If you’re one of those who used to itemize deductions and now won’t thanks to the higher standard deduction in effect for 2018, maybe it will be little less. But that doesn’t have anything to do with a new form per se, and you may well still need to figure up your itemized deductions anyway in order to decide if the standard deduction actually is higher or not.

As always, please feel free to get in touch with us if you have questions about this or any other tax matters.

Best wishes,

Neilley & Co. CPAs

You can see a draft copy of the new 1040 at http://bit.ly/2J2zLmV.