Form 1040: Similar to a Postcard, But …With (LONG) Letters Attached

Looks to me like the Internal Revenue Service (IRS) is doing the “shuffle”!  The draft Form 1040 for 2018 certainly looks shorter, but closer inspection shows the IRS is merely shuffling the workload onto Schedules.

Right now, the IRS is very busy keeping pace with the changes wrought by the Tax Cuts & Jobs Act (“TCJA”). Part of the workload involves preparation of a draft version of the 2018 Form 1040, U.S. Individual Income Tax Return.  IRS has almost succeeded in making the Form a “postcard” size, as promised by the Trump administration.

The draft Form, which should be posted on the IRS website next week, reduces the size of the Form to a single double-sided “half-page”.  This is down from the current version of the Form’s 2 “full-pages” in length.   The double sided “half-page” gives you that warm, cozy “postcard” feel!   But astute taxpayers won’t be fooled.  While the draft 2018 Form eliminates more than 50 lines, compared to the 2017 version of the Form, it simply shuffles many items that were previously included on the longer version of the Form 1040 to numerous new “schedules” (six new ones to be precise). Oh, and did I mention that these 6 new schedules are in addition to the usual schedules (A, B, C, D, E…) that we already have with the old version of Form 1040? …. But remember folks, the postcard promise has been met!

The new Form 1040 will replace not only the current Form 1040 but the Form 1040A and the Form 1040EZ, with those forms becoming obsolete.  According to the IRS, the new Form consolidates the three versions of the 1040 into one “simple” form.  The IRS announced it will work with the tax community to finalize the “streamlined” version of the Form 1040 over the summer.

Let’s take a peek preview at some of the new “Schedules” we’ll soon be seeing.  As an example, the 2018 draft of Form 1040’s Schedule 1, “Additional Income and Adjustments to Income, includes items from the current Form 1040, lines 10 through 37, such as business income, alimony, capital gains or losses, and adjustments such as student loan interest expense.  The draft of Schedule 2, “Tax”, takes items from the current Form 1040 lines 44 through 47 including the computation of the TCJA’s new version of the “Kiddie Tax” and the notorious alternative minimum tax.  Taxpayer’s with ownership in foreign corporations and Section 965 tax liability being paid in installments will be required to complete a line on Schedule 4 for reporting the net tax liability installment from Form 965-A (a form that is still on the IRS drafting board and not yet in existence).

Ah, tax simplification at its finest!

Published June 28, 2018 

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