The IRS has released the final version of the 2018 Form 1040, Individual Tax Return. Individual taxpayers, and their tax return preparers, will have to contend with the newly organized form, along with six new schedules, as they prepare their tax returns in 2019.
In February 2019, a National Taxpayer Advocate Report discussed the potential for taxpayer errors on the new form.
States have updated their tax return forms as a result of the federal changes.
Simplified Filing for 1040 Taxpayers Under TCJA
A long-standing election promise by President Trump, as well as many in GOP leadership in Congress, was to make filing annual tax returns easier. A significant talking point for much of 2016 and 2017 was to make a “postcard-sized” Form 1040.
Much of this simplification was seen as being accomplished by the Tax Cuts and Jobs Act. The Act eliminated many deductions formerly available to individuals, while nearly doubling the amount of the standard deduction. However, these changes had only a minimal impact on the contents of the former Form 1040. Instead, the simplification of the 2018 1040 form was accomplished at the IRS.
No More 1040A or 1040EZ in 2018
The 2018 Form 1040 eliminates the need for simpler forms used by individuals in the past: the Form 1040A and Form 1040EZ. The Form 1040A was for filers who didn’t itemize their deductions. The Form 1040EZ was for filers who didn’t:
- itemize; or
- have dependents.
Beginning with the 2019 filing season, however, nearly all taxpayers will be able to use the same Form 1040. The point of one form is to:
- make filing easier for all taxpayers;
- lessen the burden of the IRS having to process multiple kinds of tax forms.
Note, however, Congress requires that, beginning with the 2020 filing season, a new Form 1040SR must be available for taxpayers over the age of 65. So the administrative benefits to the IRS may be short-lived.
A La Carte Tax Returns: Six New Schedules
The 2018 Form 1040 is about a half page in size, and double-sided. The form did not shrink because of smaller font or because content was completely eliminated. Instead, many of the lines of the former Form 1040 have been shifted to one of six schedules that are part of the Form 1040. Those six schedules are:
- Schedule 1 – Additional Income and Adjustments to Income
- Schedule 2 – Tax
- Schedule 3 – Non-refundable Credits
- Schedule 4 – Other Taxes
- Schedule 5 – Other Payments and Refundable Credit
- Schedule 6 – Foreign Address and Third Party Designee
If a taxpayer uses a schedule, they attach it to their Form 1040. As has always been the case with schedules, amounts figured on them are brought into the Form 1040 to calculate adjusted gross income, taxable income, tax, etc. But just as with Schedule A, taxpayers only use a schedule if they need it.
Example: Former Form 1040EZ Filer
Under the old Form 1040, an individual with no itemized deductions or dependents received alimony would have had to use Form 1040 rather that Form 1040EZ simply because of the alimony. The majority of the old Form 1040 would have been blank.
With the new Form 1040, this individual would use the same form as everybody else, and would include Schedule 1 to report the alimony.
Line Numbers on the New Schedules
Possibly aiding in the transition to these new forms, much of the line numbering from the old Form 1040 is carried over to the schedules.
For example, the student loan interest deduction, which was Line 33 on the old Form 1040 is now Line 33 on Schedule 1.
However, there is a potential for confusion as both Form 1040 and Schedule 1 have similarly numbered lines.
For example, both have a Line 10. Special attention will have to be given to make sure that the proper amounts are reported on the appropriate lines where there are two line numbers that are the same..
Some Items Retained on 2018 1040
A few of the more popular credits are reported on the Form 1040, rather than on a new schedule. These are the:
- newly expanded child tax credit;
- additional child tax credit;
- earned income credit; and
- American opportunity credit.
Notably, the new qualified business income deduction is also on the Form 1040, rather than on another schedule.
By Michael Henaghan, J.D.
Additional resources on Form 1040 are available to enhance your knowledge and prepare for tax season.