The Tax Cuts and Jobs Act, enacted in December 2017, is changing our tax system. It is changing the way tax is calculated for most taxpayers. Among other reforms, the new law changed the tax rates and brackets, revised business expense deductions, increased the standard deduction, removed personal exemptions, increased the child tax credit and limited or discontinued certain deductions. So it makes sense to change the Form as well.
The New Form 1040
The IRS, as part of a larger effort to help taxpayers, plans to streamline the Form 1040 into a shorter, simpler form for the 2019 tax season next April. The 2018 return will be due on April 15, 2019 unless an extension is filed.
What Are the Changes?
The New Form 1040 will be less than half the size of the current version and will be a consolidation of the current three (3) different versions in place. The current three (3) different versions are the Form 1040, the Form 1040A and the Form 1040EZ. The number of line items on the new Form will only be 23 which is more in line with the current 1040EZ. The current Form 1040 and 1040A has 79 and 51 line items respectively. Since more than nine out of 10 taxpayers use software or a tax preparer, the IRS is currently circulating a copy of the new Form 1040 to the tax community and will work with them to finalize the streamlined Form 1040 in the very near future. This will help ensure a smooth transition for people familiar with software products and the interview process used to prepare tax returns.
How This New Approach Benefits You
As stated above this new approach will simplify the 1040 so that all 150 million taxpayers can use the same form. You will still need to provide your W-2, 1099, K-1, etc. to prove your income stated on the form as you do currently. This allows the IRS to verify your information needed to determine your tax liability or refund.
The form allows for fewer line items is that it by using a “building block” approach, in which the tax return is reduced to a simple form and the form is simply supplemented with additional needed schedules if any. Taxpayers with straightforward tax situations would only need to file this new 1040 with no additional schedules.
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