The New 2018 Form 1040
Along with tax reform changes from the Tax Cuts and Jobs Act (TCJA), taxpayers also have a new Form 1040 to grapple with for the 2018 tax year. The IRS introduced the concept of a whole new 1040 tax form early in 2018 on the heels of the Tax Cuts and Jobs Act which went into effect on January 1, 2018. Overall the new form is easier for simple filings and much shorter. However, taxpayers with somewhat complex filings will find a number of new changes and necessary addendums.
Why a New Form?
The TCJA turned many tax provisions upside down and inside out early in 2018. As a result, the IRS and the Treasury Department decided that the existing Form 1040 was no longer up to the task. It contained numerous lines for tax provisions that don’t exist anymore, at least until the TCJA potentially expires at the end of 2025.
As an example, no one will be able to claim personal exemptions for the next eight years and maybe even longer if Congress renews the terms of the TCJA in 2025. So the IRS got rid of the line on the old 1040 that let you enter the number of personal exemptions you were claiming. The old form also included several lines for deductions and other items that no longer apply.
The new Form 1040 is now much sleeker and simplified with only 23 lines, down from 79.
Yes, It Shrunk—But Is It Really Postcard-Sized?
The IRS has called the new tax form “postcard-sized” but don’t get too excited by that description. Form 1040 is still 8.5 x 11 inches. That’s a big postcard. It fits on one sheet of paper, front and back. The front page just covers basic, identifying information and it includes spaces for signatures. Your financial information is supposed to go on the back – or page two.
Perfecting the Changes
The IRS released the initial draft of the new tax form in June 2018 to a bit of consternation and dismay from tax professionals, not to mention the average Joe Taxpayer. The IRS then went back to the drawing board and tweaked some things. For example, the original draft of the new form offered only three filing statuses: head of household, married filing separately, or qualifying widow(er). But what if you’re married and want to file a joint return? What if you’re a single taxpayer? The same five filing statuses still exist—they just weren't included on the initial version of the new Form 1040.
The IRS indicated that the 1040 would automatically default to married filing jointly if it included two names and signatures, or to the single status if it included just one, assuming none of those other boxes were checked off. But “default” is a scary word when it comes to things like tax liability or a potential refund. The IRS has revised this issue in the final draft of the new 1040, made available on Aug. 13, 2018. The single and married filing jointly boxes are back, right there at the very top of the new form.
How to Use It
The new Form 1040 is intended to replace the old 1040, 1040A, and 1040EZ. It must be used by pretty much all 150 million American taxpayers. The IRS states:
"For 2018, you will no longer use Form 1040A or Form 1040EZ as you may have in the past. Instead, you will use the redesigned Form 1040, which now has six new numbered schedules in addition to the existing lettered schedules like Schedules A, B, C, D, E and F."In other words, all 150 million taxpayers must use the same form, regardless of their incomes or their personal financial situations.
The IRS has indicated that it expects about 65 percent of all taxpayers to submit the new 1040 with just one additional schedule. Of course, that includes those who only filed the far simpler Forms 1040EZ or 1040A in the past and this skews the percentage a bit.
And if you’re one of the 89 percent of filers who use tax preparation software, you might be blissfully unaware of all these changes. You’ll still answer a bunch of questions and TurboTax or TaxAct or whatever software provider you select will obligingly complete and e-file these forms and schedules for you.
If you’ve never e-filed before, this might be a good year to consider doing so. The IRS hopes that you do. It’s long encouraged taxpayers to get away from those paper returns. This might be a not-so-subtle nudge in that direction.
The New Schedules
Unless your tax situation is utterly basic, nothing has really changed. The IRS still needs all the same tax information from you. You're just not going to put it all on the 1040. A great deal of tax information has been relocated to other forms or schedules that you must include with your tax return when you file. The IRS calls this a "building block" approach.
For example, if you have capital gains or if your income includes unemployment compensation, you’ll have to complete and submit Schedule 1. The same applies if you’re self-employed or have any other Form 1099 income. Basically, if you normally complete Schedules C, D, E, or F with your tax return, you’ll need to complete and attach the new Schedule 1 as well.
Yes, those old lettered schedules are still around and no, they haven’t changed. You still have to complete them, too, just as you always did—in addition to one or more of the other new numbered schedules. While the new Form 1040 has only 23 lines, the latest version of Schedule 1 has 36.
Here's how the new numbered schedules work out. You can click on the links to check out the most current version of each.
- Schedule 1: Additional income and adjustments to income
- Schedule 2: Excess advance premium tax credit repayments and alternative minimum tax
- Schedule 3: Non-refundable tax credits
- Schedule 4: "Other" taxes, including the self-employment tax
- Schedule 5: Tax payments and refundable tax credits
- Schedule 6: Third party designees other than paid preparers and foreign addresses
Did you take a peek at any of these? If so, you might have noticed the word "reserved" on a few lines of these schedules. They're effectively placeholders in case the IRS decides it wants to make any further changes before the official launch of the filing season.
These schedules will accompany the following:
What about Amended Returns?
Form 1040X, the amended tax return, remains the same as it's always been. That's the form you'll file if you realize you made a mistake on your original tax return. And if you want to file a belated original return for previous tax years, the IRS has indicated that you should still use the old form for that particular tax year.