Posted by Fletcher Accounting and Tax Service Inc.

Three Important Things To Know About the New 1040 Form for 2019

Three Important Things To Know About the New 1040 Form for 2019

The New IRS Form 1040s was recently unveiled by the Trump administration making it into “postcard-size”. It was done to reflect the tax overhaul’s simplification of the tax code wherein corporate rates and individual tax brackets were changed. The old 1040A and the 1040EZ will be replaced by the new two-page 1040. Treasury Secretary Steve Mnuchin said the change is part of the historic Tax Cuts and Jobs Act. He also talked about the commitment of the Trump Administration to make the filing of tax returns simple and fair for American families. The shorter and easier New Form 1040 that has been reduced from 79 lines to 23, will be used by millions of taxpayers to file their annual taxes by April 15, 2019.

Here are some of the most important things should know about the new tax form.

1. It’s not a postcard. The new Form 1040 may have been nicknamed as a postcard but obviously, it isn’t. Its size is larger than the average postcard and not formatted for mailing. Personally identifiable information such as legal names, addresses, and Social Security Numbers will be found on one of its sides which means if you’re filing tax returns on paper, you will have to place the new form in an envelope along with a stamp and a trip to the post office.

New numbered schedules or attachments. The lines removed from the form has all the necessary information that is required to be reported elsewhere showing the taxpayer’s properly reports of income and calculation. There will be six new numbered schedules or attachments as a result which will feed into the new shorter Form 1040. They are the following:

Schedule 1: Additional Income and Adjustments to Income (37 lines)
Schedule 2: Tax (7 lines)
Schedule 3: Nonrefundable Credits (10 lines)
Schedule 4: Other Taxes (12 lines)
Schedule 5: Other Payments and Refundable Credits (14 lines)
Schedule 6: Foreign Address and Third-Party Designee (3 rows of information)

2. Shorter does not always mean simpler. Taxpayers may notice that many of the lines on the new form and schedules link to other forms that contain external calculations while results from one page often transfer from that page to a new page or schedule somewhere in the tax return. Notice how capital gains and losses are reported on one of six forms 8949 before flowing to the Schedule D, then to the Schedule 1 and then to the Form 1040. Time will let us know whether the new Form 1040 really makes it simpler for taxpayers or not. The change that papers filers will be experiencing is expected to be dramatic.

3. Subtle change for electronic filers. According to the IRS, 90% of the tax returns they processed this year are filed electronically. The change of the Form 1040 is expected to be more subtle for these e-filers because even though the process is likely to be the same, there are a lot of tax software as well as tax professionals who are aware of the information and regardless of the different output, taxpayers will need to understand what the are filing.  

It is still required for taxpayers to sign the new form and the IRS e-file signature authorization (IRS Form 8879) under penalty of perjury with the statement that they have examined the return, the corresponding schedules, the correctness, accuracy, and truthfulness of all the listed amounts and sources of income they received during the tax year.

There are tax industry experts who shared their thoughts about the changes. The executive vice president of the National Association of Enrolled Agents, Bob Kerr wondered if it’s a question of form over substance and if the redistribution of IRS resources required in order to implement these changes will be worth the money spent. He also talked about the states and local tax forms flow from the federal Form 1040 and his concern whether the states are ready to adjust their programming with the new version of the IRS of the Form 1040.

Taxpayers overall should expect an adventurous filing of federal income tax return in 2019. There are a lot more things that are expected to happen aside from the sweeping changes to the tax code such as the Republican tax overhaul that hasn’t been implemented and defined. Today, a new tax form with a host of new schedules is not finalized yet but is expected to be finalized soon. The November elections should tell what other changes are to be expected with regards to the laws, forms, and processes.

Fletcher Accounting and Tax Service Inc.
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