New Federal Form 1040 Impact on State Individual Income Tax Forms

The impact of the newly designed 2018 federal Form 1040 on corresponding state individual income tax returns varies. Taxpayers may not see many changes to their state individual income tax return form itself for the 2018 filing season. Even for states making changes to the format of their returns, most are minor changes.

2018 Federal Form Has Fewer Lines

A glance at the 2018 federal Form 1040 reveals obvious differences in size and structure from previous years. The form is smaller and contains fewer lines. However, the reduction in content on the form itself led to the creation of six new schedules to be attached to the form as needed.

One result of the redesign is that Form 1040 and its accompanying Schedule 1 contain similarly numbered lines. Taxpayers should take extra caution in gathering information from the new federal return and schedules. Care must be taken not to collect figures from the correct line number, but incorrect form or schedule.

Starting Point Line Changed

So far states have made few significant changes to individual income tax returns as a result of the federal 1040 form redesign. An exception exists with respect to states where the computation of state taxable income begins with federal:

  • gross income,
  • adjusted gross income, or
  • taxable income.

In these instances, the state return now refers to a different line on the new federal Form 1040 to use as the taxpayer’s starting point.

Tax Cuts and Jobs Act Impact on State Forms

Taxpayers may initially surmise their state returns changed with the federal return format revision. But a number of states added new lines or schedules as a result of the enactment of the Tax Cuts and Jobs Act (TCJA) and not simply due to the new federal return formatting changes. For instance, a number of states added or changed lines and schedules to allow a deduction for personal exemptions after the disallowance of federal personal exemptions. A few examples of such states include:

  • Maine,
  • Rhode Island,
  • South Carolina, and
  • Vermont

So upon closer look, many of the changes to state returns may be from TCJA adjustments.

Other State Return Format Changes

Other than the starting point line number changes, the federal Form 1040 redesign resulted in few state form changes. Exceptions where states did make format changes include:

  • Montana consolidated the Form 2, Montana Individual Income Tax Return, to better match the federal Form 1040 by streamlining the layout of the form.
  • State returns no longer reference federal Forms 1040A and 1040EZ as they have been discontinued with the revision of the federal Form 1040.
  • If nothing else, most state returns had to change references to different line numbers of or schedules to the new federal Form 1040.

It remains to be seen whether states will make more substantial changes in their form design to follow federal in the future.

By Tralawney Trueblood, J.D., M.B.A.

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