2018 Tax Form Design
The New 1040 Isn’t Exactly A Postcard!
February 1, 2019
By Matthew E. Miller, CPA, MBA
Well, the calendar flipped to another year which means tax season is upon us. You’ll recall more than a year ago Congress passed the Tax Cuts and Jobs Act, a bill that promised simplification of the filing process by eliminating so many of the complexities of the tax code that you would be able to file your tax return on a postcard. You might even recall some news coverage on the passage of the bill that showed Congressional leadership holding a postcard symbolizing the new Form 1040.
In keeping with the promise made to the American taxpayers, the individual tax forms have been redesigned for the 2018 tax filing season. True to the word of our insightful legislators, pages 1 and 2 of the new 1040 are the exact size of a postcard. If you duplex printed pages 1 & 2 onto one sheet of paper, then cut-off the extra page, you would have a postcard 1040!
Page 1 will contain your name, address, filing status, social security number, name of your spouse (if applicable), list of your dependents, and a signature line. Page 2 will contain 7 income lines, one total deduction line, 8 lines for calculation of taxable income, tax, tax credits, and withholding resulting in a balance due or refund. All of that information fits nicely on the new postcard sized 1040, but there is only one problem. Tax returns are filed on an 8½” x 11” sheet of paper, which means the rest of the page will be blank! BLANK! BLANK!
So, if you prepare your return using a subscription based software or if you use the services of a professional tax preparer, don’t be alarmed when you see the half sheet pages one and two of your form 1040. Your return has been correctly prepared.
Aside from some brief mockery, the purpose of this article is to give you a brief overview of the new 2018 individual tax forms in an effort to help you navigate your way through your tax return. We have included links to the IRS website so you can see the forms for yourself.
Form 1040, Pages 1 & 2 – as discussed above.
The need to abbreviate pages 1 and 2 to the new postcard size Form 1040 created the need for the IRS to create 6 new schedules (aptly named Schedules 1 – 6) to report information for lines on previous 1040s, that were removed to accomplish the goal of a new postcard sized 1040.
Schedule 1: Additional Income and Adjustments to Income – this new 36 line form replaces lines 10 through 36 from page 1 of the previous 1040 design. Schedule 1 contains 14 blank “Reserved” lines (6 boxes) for future use.
Schedule 2: TAX – This 1/8th page form contains 4 lines (one “Reserved” for future use). One line will be used to report AMT tax, the next line is a repayment of Premium Tax Credit for recipients of credits for health insurance premiums paid in prior years, and the fourth line is a total line.
Schedule 3: Nonrefundable Credits – This ¼ page contains 8 lines (one “Reserved” for future use) is used to report information reported on lines 48-55 on the previous version of form 1040.
Schedule 4: Other Taxes – Another ¼ sized page! This schedule will report additional taxes such as self-employment tax, penalties on early distributions from retirement plans, household employment tax, etc.
Schedule 5: Other Payments and Refundable Credits – At ¼ page in length, including 4 boxes “Reserved” for future use, this form will report all of your payments to the IRS. These 11 lines replace lines 64 – 74 on the previous version of 1040.
Schedule 6: Foreign Address and Third Party Designee – Click here to see for yourself.
In typical government fashion, tax reform and simplification resulted in 8 pages replacing 2 pages. All the other forms and schedules you are used to seeing will still be utilized with little redesign. Schedule A to report your itemized deductions will still be used. Schedule B to report your interest and dividend income will still be used. Schedule C to report your self-employment income will still be used. Schedule D to report your capital gains and losses will still be used. And so on.
The good news is most tax software will have a facsimile form 1040 Reconciliation Worksheet identical to what you have used in past tax years. Use the facsimile form 1040 to review your taxes until you are familiar with the design of the new forms.
My editorial comments aside, this tax filing season will have some challenges. Your understanding of the new tax forms will be a challenge. Software companies rewriting programs will be challenged. The IRS trying to match income reported on your return to amounts reported by 3rd party sources may also be challenged. Toss into that mix a 35 day government shutdown!
The IRS opened the 2019 tax season on Monday, January 28th. Given the professionalism of the Service, I’m sure they are ready to go. As you prepare for tax season, gather your material carefully and with diligence, anticipate some challenges, and file as early as you can.
We are here to help in any way you need.