As part of the the Tax Cuts and Jobs Act of 2017, the Internal Revenue Service (IRS) has simplified tax form 1040 for 2018 so that all 150 million taxpayers can use the same form. The change has consolidated the three previous versions of the 1040 into one simple format.
Here are five things taxpayers need to know about the 2018 Form 1040:
- The 2018 Form 1040 replaces Forms 1040,1040A and 1040EZ with one 2018 Form 1040 that all taxpayers will file.
- Forms 1040A and 1040EZ are no longer available. Taxpayers who used one of these forms in the past will now file Form 1040.
- The 2018 Form 1040 uses a “building block” approach and allows taxpayers to add only the schedules they need to their 2018 tax return.
- The most commonly used lines on the prior year The form are still on the form. Other lines are moved to new schedules and are organized by category. These categories include income, adjustments to income, nonrefundable credits, taxes, payments, and refundable credits.
- Many taxpayers will only need to file Form 1040 and no schedules. Those with more complicated tax returns will need to complete one or more of the 2018 Form 1040 Schedules along with their Form 1040. These taxpayers include people claiming certain deductions or credits, or owing additional taxes.
The IRS says that electronic filers may not notice any changes because the tax return preparation software will automatically use their answers to the tax questions to complete the Form 1040 and any needed schedules.
Six new schedules some taxpayers will file with the new Form 1040
The 2018 Form 1040 uses a building-block approach that allows individuals to file only the schedules they need with their federal tax return. Many people will only need to file Form 1040 and no schedules.
While commonly used lines on the prior year form are still on the 2018 Form 1040, other lines are now Schedules 1 through 6 and organized by category. The six new numbered schedules are in addition to the existing schedules, such as Schedule A, Itemized Deductions, or Schedule C, Profit or Loss from Business.
Here’s a guide to help taxpayers determine what schedules they may need to file with the 2018 Form 1040:
Schedule 1, Additional Taxes and Adjustments to Income
Taxpayers use this schedule to report income or adjustments to income that can’t be entered directly on Form 1040. This includes capital gains, unemployment pay, prize money, and gambling winnings. This also includes the student loan interest deduction, self-employment tax, or educator expenses.
Schedule 2, Additional Tax
This scheduled is used by taxpayers in specific situations. Those who owe alternative minimum tax or need to make an excess advance premium tax credit repayment will file this schedule.
Schedule 3, Nonrefundable Credits
Taxpayers use this schedule to report nonrefundable credits other than the child tax credit or the credit for other dependents. These include the foreign tax credit, education credits, and general business credit.
Schedule 4, Other Taxes
Taxpayers use this schedule to report certain taxes. These include self-employment tax, household employment taxes, tax-favored accounts, and additional tax on IRAs and other retirement plans.
Schedule 5, Other Payments and Refundable Credits
Taxpayers who claim specific refundable credits or have other payments withheld will file this schedule. These other payments include:
- Payment made when the taxpayer requests an extension.
- Payment of excess social security.
Schedule 6, Foreign Address and Third-Party Designee
Taxpayers use this schedule to enter a foreign address. Anyone who wants to allow someone other than their paid preparer to discuss their tax return with the IRS will also file Schedule 6.
For questions and answers from the IRS about the new Form 1040, go here.