When you file your 2018 federal taxes in early 2019, you are going to encounter a new Form 1040. Nearly every American taxpayer uses a 1040 when they file. Understanding the changes in new forms and procedures is critical in filing your taxes. With that in mind, here is what every U.S. taxpayer should know about the 2018 1040 form.
The New 2018 1040 Form is Postcard-Sized
One of the biggest political selling points of the last round of tax reform was that the simplification of the tax code would allow the average taxpayer to complete their filing on a form the size of a postcard. In the end, the new Form 1040 does fall into those parameters.
The 2018 1040 form consists of only 23 lines for completing the calculations. Previously a Form 1040 had 79.
When viewing the 1040 as a postcard, the filer’s identifying information, such as their name and address, go on the front. All of the tax calculation lines are on the back.
For individuals who only need to use the 2018 1040 form to file their taxes, the process will indeed be simpler. However, if your situation is more complex, yours may actually become more challenging.
Say Goodbye to the 1040-EZ and 1040-A
In previous years, taxpayers had to choose between three 1040 forms. The “which 1040 do I use?” question was common, but it won’t be an issue any longer.
Instead, everyone will use the new 2018 1040 form, period. Then, if your taxes are more complicated than that form can cover, you’ll use additional schedules to fill out the rest.
Six New Schedules for 2018 Taxes
Many taxpayers complete additional documents when they file their taxes. For example, if you itemize your deductions, then you use Schedule A. Self-employment incomes also has a separate schedule: Schedule C.
Now, there are six new schedules to potentially contend with, depending on your situation. These were numbered instead of lettered and separated out some common tax-related categories.
- Schedule 1 covers income or income adjustments that aren’t listed on a W-2, like IRA contributions and student loan interest.
- Schedule 2 covers certain other kinds of taxes, like a child’s unearned income.
- Schedule 3 addresses nonrefundable tax credits.
- Schedule 4 calculates certain additional taxes, like those for self-employment or uncollected Medicare and Social Security taxes.
- Schedule 5 allows you to add up tax payments, such as amounts paid through an extension or estimated payments made throughout the year.
- Schedule 6 enables taxpayers to designate a third-party to discuss their return with the IRS.
Effectively, many of the removed lines from the previous version of Form 1040 are now found in those schedules. While this makes the 2018 1040 form easier to navigate, individuals who need the additional schedules won’t experience much relief.
Certain deductions no longer exist thanks to the Tax Cuts and Jobs Act. You won’t find a personal exemption, alimony deduction, dependency exemption, moving expenses deduction, or miscellaneous deductions on the new 2018 1040 form or any of the schedules.
This is just a few of the deductions that are simply gone for this tax year. In some ways, this simplifies tax filing. If you previously relied on these to lower your tax burden, not seeing them may be a disappointment. However, since the standard deductions went up, the loss of these deductions might be offset.
For example, a single person without dependents in 2017 received a $6,350 standard deduction along with a $4,050 personal exemption. That totals to $10,400.
In 2018, that same person gets a standard deduction of $12,000 automatically. This means their tax liability may go down.
However, a married couple with three kids received a $12,700 standard deduction in 2017 along with $20,250 in additional deductions, bringing their total to $32,950. For 2018, they’ll only get $24,000 as a deduction, so their tax liability could be higher.
Is the New 2018 1040 Form Better?
Ultimately, whether the Simplified 1040 you’ll use when you file your next round of federal taxes is better or worse than those used previously depends on your unique situation. Individuals with the simplest returns may appreciate the shorter form. However, a substantial number of taxpayers will end up using new schedules to fill in the gaps, depending on their situations.
Overall, the 2018 1040 form and new schedules cover virtually the same information, minus the deductions that are no longer available. Many taxpayers will gather the same documents before they file and use a similar amount of time to file their taxes.
In some cases, a slight unfamiliarity with the new forms may cause some households that complete their taxes by hand to need to dedicate more time to the process. Essentially, any new method can feel longer since it isn’t in your comfort zone.
The Process May Feel the Same
Taxpayers who use services to file their taxes, including in-person options or software-based solutions, might not feel like the process is much different. If you work with a tax professional, they will likely take care of the paperwork, so for you, the process will likely seem the same.
Similarly, if you use sophisticated software with a question-and-answer approach, you might not notice any difference in filing. Looking at the actual forms doesn’t usually happen until the end, so these filers might not feel much of a difference either.
In reality, the biggest potential for surprise comes from the updates to the actual tax code. Changes to the deductions and tax brackets mean some filers will owe more than in previous years while others will owe less. If you haven’t estimated your tax burden for the year, it’s wise to do so immediately. That way, when it comes time to file, the final number might not catch you off guard.
Do you like the 2018 1040 form? Tell us your thoughts in the comments below.
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