In June, the IRS introduced a new, shorter Form 1040 that everyone will have to use when filing their 2018 federal income tax returns.
The new form will replace the three existing forms: the 1040, 1040EZ and 1040A.
Although it’s still officially in draft version, it’s important to understand how the new form — touted as postcard-size by government officials — could affect how you’ll file your 2018 federal income tax return next year. The form promises big changes for virtually everyone who files a tax return, and not all of those changes will necessarily make life simpler for all filers.
Want to know more?
What’s the background?
When Congress passed the Tax Cuts and Jobs Act at the end of 2017, many of its provisions applied to tax years between 2018 and 2025. So when you filed your 2017 tax return in 2018, not much changed as a result of tax reform.
However, the tax reform law will make significant changes to many filers’ 2018 taxes, including suspending personal exemptions. Many of the IRS forms for filing your income tax returns are changing, likely to conform with the changes ushered in with tax reform.
So the IRS and U.S. Treasury Department decided that a new, simpler 1040 tax form was needed. When the government agencies announced the new form, Treasury Secretary Steven Mnuchin said, “The new postcard-size Form 1040 is designed to simplify and expedite filing tax returns, providing much-needed relief to hardworking taxpayers.”
What are people saying?
But is the new one-page, double-sided 1040 really going to be easier? The answer appears to be both yes and no.
“The 1040, which was previously a two-page document, is now made up of two postcard-size pages and six additional schedules — eight pages in total,” says Christina Taylor, senior manager of tax operations for Credit Karma Tax®. “If you have W-2s, dependents and file with the standard deduction, the new 1040 may be easier to read this year.”
However, “those with complicated tax situations may find the new 1040 and its six supporting schedules harder to read,” Taylor says. “If you have multiple credits [or] large investments … you could have a more difficult time with this year’s 1040.”
The new 1040 achieves its trimmed-down physique by moving some information that used to be on the old forms onto six new schedules. If any of that information is pertinent to your tax situation, you’ll need to file the schedule for that information along with your 1040.
How could this affect you?
Unless your tax situation is very basic — for example, you claim the standard deduction and have only W-2 income — you may find you need to file additional paperwork when submitting your 2018 federal income tax return.
For example, if you had both W-2 wages and unemployment compensation in 2017, you could still use the 1040EZ — the simplest tax form — as long as you meet all other requirements for using the form. For 2018, you would need to use the new 1040 and file Schedule 1 to report your unemployment compensation.
In addition, certain education-related tax breaks that you could have claimed on the 1040A — which was slightly more complex than the EZ but still simpler than the old 1040 — now require filing additional schedules. For example, the deduction for student loan interest, which was reported on Line 18 of the 1040A and Line 33 of the old 1040, now also requires you to file Schedule 1 in addition to the new 1040.
The draft of Schedule 1 is 36 lines long. And, there’s also still a worksheet to calculate your student loan interest deduction.
What’s next?
The IRS typically opens the tax season and begins accepting returns for the previous year in January. So it’s unlikely the draft 1040 will change much — if at all — before then.
The draft of the new 1040 and the accompanying instructions are both available online to review. Even if your filing situation was simple last year, things might change for you this year because of tax reform and the new 1040 form. It might be a good idea to investigate the new form to see what changes could affect you.
“This year especially, it’s important for taxpayers to feel empowered while preparing their taxes,” Taylor says.