After much back and forth with the public, the IRS has released the final version of its newly redesigned Form 1040. Fulfilling the Tax Cuts and Jobs Act’s promise to simplify tax filings, the new Form 1040 is considerably shorter than previous iterations, and comes with six related tax schedules, that taxpayers may or may not need to file depending on the state of their finances.
The CPAs at Hall & Company want to give you a brief overview of each schedule, and its subject matter:
Known as the “Additional Income and Adjustments to Income” schedule, this filing is exclusively for individuals who have to report additional income, such as unemployment, prize money, or capital gains.
The next schedule in the Form 1040 docket pertains to tax alternatives. Citizens who have to pay an alternative minimum tax than what would be considered typical, or need to make an extra advanced premium tax credit repayment must file this schedule starting with the 2019 tax season.
The third schedule is regarding nonrefundable tax credits. Taxpayers who can claim any nonrefundable credits must file this along with their Form 1040. This only pertains to tax credits which are not related to alleviation for dependents, foreign tax credits, education credits, and general business credits.
The next schedule is exclusively for individuals who owe additional taxes. For example, if you have to pay self-employment, household employment, or additional retirement account taxes, this section should be filed in the upcoming tax season.
If you are able to claim refundable credits that differ from the earned income tax credit, American opportunity tax credit, or additional child tax credit, then a schedule 5 filing will also be required. This is specifically set up to help simplify the whole filing process, looping together other payment types, such extensions to file, or reporting excess social security tax withheld.
The final schedule to the Form 1040 was created for foreign address and third-party designees. This is for taxpayers who happen to live abroad or have a designated third-party that differs from the paid tax preparer.
Long story short, instead of requiring taxpayers to essentially fill out the manuscript of a document that was the previous Form 1040, the IRS is immensely simplifying the filing process. By pairing the form with six schedules, citizens have the opportunity to file in a much more efficient manner, only having to fill out a schedule if it really pertains to their situation.