For decades, a goal of Republican tax reformers has been to reduce the individual income tax form to the size of a post card. However, attaining this goal has proved impossible. Even with the adoption of the Tax Cuts and Jobs Act, the massive tax reform law that took effect in 2018, IRS Form 1040 could not be cut down to post card size.
Still, the IRS wanted the form to appear shorter. So it has cut up Form 1040 into several separate pieces. Employing what the IRS calls a “building block” approach, you only complete the pieces that you need. For some, Form 1040 will be shorter. For others, it won't be. For everyone it may prove confusing. In short, this is not the Form 1040 you have seen in the past.
Here are the major changes.
Form 1040A and 1040-EZ Eliminated
All individual taxpayers will now file IRS Form 1040. You may no longer file Forms 1040A or 1040-EZ. These forms were shorter than the old 1040 and could only be used by taxpayers with simple tax situations. They are no longer needed now that Form 1040 has been redesigned.
New Basic Form 1040
The new basic Form 1040 consists of two half-sheets, which are about the size of a very big postcard.
The first page of Form 1040 is for basic data such as your address, Social Security number, and a list of your dependents. You also indicate here if you had health care coverage in 2018. You sign your 1040 on the bottom of this page.
The second page of Form 1040 contains all the important numbers for your taxes, including your income, deductions, credits, and the amount of tax you owe or will be refunded. It contains a total of 22 lines of information. The old Form 1040 had 79 lines. The missing lines have been moved to the new schedules described below.
If your tax situation is quite simple, you’ll only need to complete the basic Form 1040. However, most taxpayers will have to complete one or more new schedules and transfer the information from them to their Form 1040. The IRS has created six numbered schedules, Schedules 1 through 6, for taxpayers to input data that used to be on the old Form 1040.
- Form 1040 (Schedule 1), Additional Income and Adjustments to Income. You use this Schedule to report items such as capital gains, unemployment, compensation, prize or award money, gambling winnings, or to claim deductions, such as student loan interest deduction, self-employment tax, and educator expenses. All self-employed taxpayers will need to file this Schedule.
- Form 1040 (Schedule 2), Tax. This Schedule is used to report amounts you owe for the Alternative Minimum Tax (AMT) or if you need to make an excess advance premium tax credit repayment. Few taxpayers will file Schedule 2.
- Form 1040 (Schedule 3), Non-refundable Credits. You use this Schedule to claim all nonrefundable tax credits other than the child tax credit or the credit for other dependents. Nonrefundable credits only reduce your tax liability. If you owe no taxes, you get no credit. They include the foreign tax credit, education credits, and general business credit.
- Form 1040 (Schedule 4), Other Taxes. Use this Schedule to report other taxes you must pay, such as self-employment tax, household employment taxes, additional tax on IRAs or other qualified retirement plans, and tax-favored accounts. All self-employed taxpayers must file this Schedule.
- Form 1040 (Schedule 5), Other Payments and Refundable Credits. Taxpayers use this Schedule to claim a refundable credit other than the earned income credit, American opportunity credit, or additional child tax credit. Refundable credits are paid to you even if you owe no taxes. You also use this Schedule to report other tax payments, such as an amount paid with a request for an extension to file or excess Social Security tax withheld.
- Form 1040 (Schedule 6), Foreign Address and Third-Party Designee. Taxpayers who have a foreign address or a third-party designee (other than a paid preparer) use this Schedule to report this information.
Old Schedules Continue
Confusingly, the old lettered Form 1040 Schedules continue in use, just like in prior years. These include:
- Schedule A, Itemized Deductions. You complete this Schedule if you itemize your personal deductions instead of taking the standard deduction. As a result of tax reform, it’s estimated that only 10% of taxpayers will itemize.
- Schedule B, Interest and Ordinary Dividends. This Schedule is for interest and dividend income.
- Schedule C, Profit or Loss From Business. This Schedule is used to report your income and expenses if you operated a business as a sole proprietor. Most self-employed taxpayers file this Schedule.
- Schedule D, Capital Gains and Losses. This Schedule is used to report sales, exchanges, or certain involuntary conversions of capital assets, certain capital gain distributions, and nonbusiness bad debts.
- Schedule E, Supplemental Income and Loss. Schedule E is used to report income from rental real estate, royalties, partnerships, S corporations, estates, and trusts. Most landlords file this Schedule.
- Schedule SE, Self-Employment Tax. Self-employed taxpayers use this form to calculate their Social Security and Medicare taxes.
If you complete your return with tax preparation software, you may not notice all these changes because the software will use your answers to its tax questions to automatically complete your Form 1040 and any needed Schedules. However, you will notice a difference when you print out your tax return.