What taxpayers should know about the new IRS Form 1040
As April 15 nears, millions of taxpayers this year will have to navigate the IRS' new Form 1040. It's the result of a campaign promise by then-presidential candidate Donald Trump to simplify tax rules so that a postcard-size form would be all an average taxpayer needs.
The good news is that the new 1040 comes close to fulfilling that pledge. It has been redesigned to be a half-page document with just 23 lines. That's down from two pages and 79 lines. Also, all filers will use the same form, the new 1040. No longer will you have to decide to use the 1040A (known as the "short form") or 1040EZ -- they've been discontinued. If your only income is from a job and is reported on a W-2 and you have no other deductions or credits to claim, this new 1040 is all you'll need to complete.
Six new schedules
But if your situation is more complicated -- because, for example, you claim certain deductions, credits or owe additional taxes -- you'll also need to complete one or more of the six schedules that are new for 2018.
Here's a rundown of the new schedules, which are designated by numbers, and who will need to file them.
Schedule 1 – This is for taxpayers with additional sources of income not reported on a W-2 (such as capital gains, income from investments, etc.) or for those claiming additional adjustments to income (such as contributions to IRAs, Health Savings Accounts, interest paid on student loans or educator expenses).
Schedule 2 – Use this if you need to report additional taxes owned such as the alternative minimum tax or taxes on other forms of income such as a child's unearned income from investments.
Schedule 3 – Filers claiming nonrefundable tax credits, which include the retirement savings credit, certain education credits, foreign tax credit and residential energy credits, should use this form.
Schedule 4 – This one lists and totals all other taxes that may apply to your situation. That 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, American opportunity credit or the additional child tax credit), to report 2018 estimated tax payments made and the portion of any 2017 tax refund that you applied to your 2018 tax.
Schedule 6 – You'll need to file this schedule if you use a foreign address or want 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 over 92 percent of filers used a computer program to prepare their returns. Since most tax-prep software guides individuals through the steps needed to complete a return, automatically calculates the taxes and electronically files the return, not many will really notice the new form's simplifications.
But for many of the 8 percent who still use paper forms, the redesigned 1040 should be a lot easier to use.