At the end of June, the IRS unveiled a new version of the 2018 Form 1040. This postcard-sized 1040 form replaces the old 2017 1040, as well as forms 1040EZ and 1040A. While some in Washington are celebrating the design as a simpler way to file, a closer look tells a different story.
What is changing?
- Fewer lines. The new form has only 23 lines - 50 lines less than the 2017 1040. Some of the lines saved come from the elimination of exemptions, but most come from combining many old lines into a single line.
- Six new schedules. The complete 2018 1040 tax form is now seven tax forms. The 50+ lines removed from the old 1040 now exist on one of six new schedules. These schedules (referred to as Schedule 1, Schedule 2, etc.) use many of the same line numbers and descriptions as the old 1040, which will help for year-over-year comparability.
- Many new lines. Lines are added to accommodate new tax legislation, like the “Qualified business income deduction” for the new 20-percent pass through deduction for business owners.
What you need to know
- Virtually everyone now files multiple forms. This new 1040 system is anything but simple. Now the majority of taxpayers will need to complete at least one of the new schedules to file with their 1040. Even taxpayers previously using the simple 1040EZ might be required to file an additional schedule or two. The IRS website states that only “taxpayers with straightforward tax situations” will be able to skip the new schedules.
- The postcard goal is met. While the newly proposed form 1040 is postcard-sized, the type is now smaller and filing the 1040 form now requires a lot of retraining and reprogramming. Tax software companies are reprogramming their software, and the IRS is telling congress it needs millions of dollars to implement the changes.
- New forms often change. Be aware that this version of the 1040 is new and revisions are expected as forms are used and problems arise.
Unfortunately, the new 1040 form appears to be more a product of political desire rather than a strategic redesign. This added confusion is one more reason taxpayers will need help navigating this new tax landscape.