What's New About the New Form 1040 Tax Return?
The IRS has announced a new tax form for the 2018 tax year
Don’t look now but next year’s tax-filing season just got even more complicated…at least if you’re a creature of habit and you shy away from using any of the multitude of tax preparation software that’s available today.
The Internal Revenue Service is in the process of introducing a whole new tax form right on the heels of the Tax Cuts and Jobs Act—that new tax law that already has people scratching their temples in contemplation of next filing season.
Big deal, you might think. A multitude of tax forms already exists. What’s one more? But this one replaces Forms 1040, 1040A, and 1040EZ. It must be used by almost all 150 million American taxpayers.
Why a New Form?
The TCJA turned many tax provisions upside down and inside out 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 TJCA 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 result? A sleek, simplified Form 1040…sort of.
Yes, It Shrunk—But Is It Really Postcard-Sized?
The IRS has billed the new tax form as being “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.
But it’s only one page now, or at least it’s only one piece of paper. The return is printed on both sides of the page—but only on the top half. So basically what we have here is a one-page return that's cut in two with one half printed on the front and the other half printed on the back.
The front of the page is just basic, identifying information and it includes spaces for signatures. Your financial information is supposed to go on the back.
The new form much is less comprehensive, at least on the surface. The old 1040 included 79 numbered lines. This one has only 23. No, the TCJA didn’t eliminate that many tax provisions. The new Form 1040 just consolidates a lot of them.
For example, the new form only offers 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’re just not included on Form 1040 anymore. The IRS has indicated that the 1040 will automatically default to married filing jointly if it includes two names and signatures or to the single status if it includes just one, assuming none of those other boxes are checked off.
And remember all those lines on the second page of the old 1040 where you could list payments and tax credits you qualify for or made? All that has been condensed to just two lines.
You might be thinking that this still seems like a lot of information to be crammed into two half-pages and apparently the IRS agrees with you. It’s shrunk the font used on the new form. Be prepared to squint a little after you sharpen your pencil.
Can It Really Be That Simple?
“Default” and “consolidate” are scary words when it comes to things like tax liability or a potential refund. That’s why the IRS is making at least six additional schedules available that can be attached to the Form 1040 for those who don’t have very simple tax situations.
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.
Yes, those old lettered schedules are still around and no, they haven’t changed. You have to complete them, too, just as you always did—in addition to Schedule 1. And while the new Form 1040 has only 23 lines, Schedule 1 has 37.
Are you claiming any tax credits? Unless they’re dependent credits, you’ll have to complete and submit Schedule 3. If you owe any “other taxes” such as self-employment tax, net investment income tax, or the 2018 penalty for not having health insurance, that information is entered on Schedule 4.
You can see where this is going. Unless your tax situation is utterly basic, nothing has really changed. The information the IRS needs has just been relocated to other forms.
The IRS has indicated that it expects about 65 percent of all taxpayers will 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 that skews the percentage a bit. Those easy forms are replaced by the new 1040, too.
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 all these forms 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.
Time Will Tell
The IRS cautions that the current version of the new 1040 might not be the final version. The Treasury Department is still tweaking and adjusting the form in advance of next filing season, although any further changes are expected to be minor. A new draft of the form should be made available by the end of summer 2018 so stay tuned.