The IRS has issued a draft of the new Form 1040 for 2019. This form, much shorter than the one we are accustomed to, will be replacing not only the current Form 1040, but also Forms 1040A and 1040EZ. All US taxpayers (approximately 150 million) will be required to use the same form.
The IRS has warned that the draft cannot yet be relied upon as they expect at least some minor changes to be implemented as they work with the tax community. They anticipate that the final draft will be available later this summer. So what can you expect from the new “postcard” tax return?
The form uses what the IRS refers to as a “building block” approach. What this really means is that the tax form itself requests the bare minimum information necessary to calculate your tax. It asks for personal information, and income sources. The total income is then reduced by the standard deduction and the tax is then calculated.
The truth is that for many taxpayers this “postcard form” will not be enough. If you qualify for adjustments to income or have other types of income not listed on the form you must fill out a “Schedule 1”. However, if your itemized deductions are higher than the standard deduction you would fill out the old Schedule A. Qualify for credits other than the child credit? Then you have to fill out Schedule 3. Do you owe taxes other than income tax? Then you have to fill out Schedule 4.
Get the picture? Items that were originally part of the Form 1040, and which may have served as a reminder of an adjustment to income, or credit, have been removed and placed in a separate schedule. This means a taxpayer now has to hunt for these reductions. There are currently 6 draft schedules to the new 1040. These are in addition to the old Schedules which used letters and may still be applicable depending on the taxpayer’s situation. The IRS is working on revising the old schedules to comply with the changes made by the new tax law.
Thankfully since most everyone uses software, or a professional to prepare their return, many of the issues will be eliminated. It is doubtful that the complexity will be eliminated. Then again since the number of electronically filed returns increases each year, and the IRS heavily encourages filing returns electronically, does the size of the return really matter?
If you are interested in seeing the draft of the 1040, I will gladly send it to you.