The 2018 IRS Form 1040 has been out for a while now. Unfortunately, more than a little bit of the new tax law is on shaky ground while the government is shutdown and the IRS is playing catch up with its remaining staff.
That being said, it’s time to take a quick look at the 2018 Form 1040.
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IRS Form 1040 Simpler – Sort Of
One of the points of the new tax law was to make filing taxes easier. The supposed goal was a tax form so simple it could fit on a postcard. While the main 1040 could indeed fit on a postcard, a lot of taxpayers are going to need to add one or more “schedules” to calculate the values that go on that postcard. But, since when did a bit of reality clog up the pronouncement of politicians
The 1040 Schedules
The usual schedules from previous years are still here, including Schedule A if you are itemizing your deductions, Schedule C for small business owners and the self-employed, Schedule D for capital gains/losses, and so on.
New Schedules making their debut so that the 1040 can be artificially small include:
- Schedule 1: To any capital gains, alimony, IRA deductions, small business income (or loss)? Or, if you want to deduct educator expenses, HSA contributions, or you received unemployment benefits, say, “Hello,” to Schedule 1. – The results of your Schedule C and Schedule D get put on Schedule 1.
- Schedule 2: Schedule 2 is proof that this whole “fits on a postcard” thing is nothing more than a gimmick. Schedule 2 is just three lines and where you put your AMT tax information.
- Schedule 3: The one page tax form held these eight lines just fine, but makes the 1040 too big for a postcard, so this is where you’ll report foreign tax credits, credits for child and dependent care expenses (you’ll still need a Form 2441), Education credits (after filling in Form 8863), and a few less common tax credits.
- Schedule 4: Self-employed? You’ll need Schedule 1 to report the results of your Schedule C, but then, you’ll also need Schedule 4 to report your self-employment tax. Also on Schedule 4 – the nanny tax (along with Schedule H), and the ding for pulling money out of your retirement accounts too early.
- Schedule 5: Less common tax credits
- Schedule 6: If you have a foreign address for your tax preparer.
Did New Tax Law Help?
As you can see, the hype surrounding the simplification of tax filing was just that — hype.
There is one big exception. By increasing the standard deduction, lots of Americans won’t have any reason to itemize their deductions, eliminating the entire Schedule A from their taxes. That won’t help small business owners, but if all your income comes form W2 type employment, then the new tax law may have really simplified your taxes.