Tax Form 1040: What Taxpayers Need to Know About the New IRS 1040
As April 15 approaches, millions of taxpayers this year will have to navigate the IRS’s new Form 1040. It was the result of a campaign pledge by then-presidential candidate Donald Trump to simplify tax rules so that awould be all an average taxpayer needs.
The good news is that the new 1040 is about to deliver on that commitment. It has been redesigned to be a half-page document with only 23 lines. It’s down to two pages and 79 lines. In addition, all filers will use the same form, the new 1040. You will no longer have to decide whether to use the 1040A (known as the “short form”) or the 1040EZ – they have been discontinued. If your only income is from employment and is reported on a W-2 and you don’t have any other deductions or credits to claim, that new 1040 is all you’ll need to complete.
Six new schedules
But if your situation is more complicated – because, for example, you are claiming certain deductions, credits, or owe additional taxes – you will also need to complete one or more of the six schedules that are new for 2018.
Here is an overview of the new timetables, which are designated by numbers, and who will have to file them.
Schedule 1 – This is for taxpayers with additional sources of income not reported on a W-2 (like capital gains, investment income, etc.), interest paid on student loans, or educator expenses ).
Schedule 2 – Use this if you need to report additional taxes you own, such as alternative minimum tax or taxes on other forms of income, such as a child’s unearned income from investments.
Schedule 3 – Filers claiming non-refundable tax credits, which include the retirement savings credit, certain education credits, the foreign tax credit and the residential energy credits, must use this form.
Annex 4 – This lists and totals all the other taxes that may apply to your situation. This can include self-employment tax, uncollected Social Security taxes, and additional taxes on IRA withdrawals.
Schedule 5 – Use this to claim additional refundable tax credits (other than the Earned Income Credit, U.S. Opportunity Credit, or Additional Child Tax Credit), to report estimated tax payments for 2018 and the part of any 2017 tax refund that you applied to your 2018 Tax.
Schedule 6 – You will need to file this schedule if you are using an overseas address or if you wish to designate a third party (such as your tax preparer) to discuss your return with the IRS.
How might most taxpayers react to the new forms?
Last year, more than 92 percent of tax filers used a computer program to prepare their returns. Since most tax preparation software guides individuals through the steps required to complete a return, automatically calculates taxes, and electronically file the return, few people will really notice the new form’s simplifications.
But for many of the 8% who still use paper forms, the redesigned 1040 should be much easier to use.