For those of you who are chomping at the bit to see how the TCJA has affected the forms for the 2018 filing season, do I have some good news! I attached a PDF to this note to show the draft versions of the forms that will be completed to file your federal returns next year. Below is a summary of the the new, abbreviated form 1040 with the new Schedules 1 through 6. The classic supporting schedules and forms like Schedule A (itemized deductions), B (interest, dividends, and foreign banking questions), C (self-employment), D(capital gains), and all the rest are essentially unchanged and must be filed if they are applicable to your return.
The new 1040 is just a two-sided half-sheet of paper. If all your income is from wages, interest, dividends, pensions, IRA, or Social Security and you do not need to complete another form or schedule like Schedule B, you are done. The standard deduction and tax calculation from the tax table are reflected on page 2. NOTE: The short form, 1040A, and the 1040EZ forms have been discontinued. All taxpayers will file a 1040 regardless of complexity or simplicity.
Schedule 1
This schedule is used to report income from sources other than the basic income reported on the 1040. It includes self-employment income, capital gains, state tax refunds, Schedule E rents and royalties, Schedule E page 2, farming and fishing, unemployment compensation, alimony received, and miscellaneous income. Schedule 1 is also used to report adjustments to income (what used to be on the lower third of the classic 1040) like alimony paid, pension/IRA contributions, HSA contributions, and the like.
Schedule 2
This is only used to report any alternative minimum tax or advance health insurance premium tax credit received for those whose income pushed them to the point where they have to repay some or all of the government subsidy for their health insurance premiums.
Schedule 3
This is where all non-refundable tax credits will pop up. Most importantly for you Teslans, the $7,500 BEV tax credit will flow from form 8936 onto Schedule 3. For those of you who are taking the credit as a part of your business, it too will flow onto this schedule from form 3800, General Business Credits.
Schedule 4
Other taxes assessed are reported here, including self-employment, net investment income, additional Medicare, nanny, and the 10% penalty for early withdrawal of funds from qualified plans.
Schedule 5
Other refundable payments appear here, including the credit-elect from your 2017 overpayment, all ES payments, any amount paid with your extension, excess Social Security taxes withheld if employed at two or more jobs during the year, and the off-road fuel tax credit used by farmers and others who pay road taxes on their gasoline and diesel.
Schedule 6
Probably not applicable, but it is used for foreign addresses and to allow the IRS to share limited information with your paid preparer.
If you examine the line numbers on many of these schedules, they are the identical numbers that used to be on the classic 1040. These new schedules still require the completion of any supporting forms and schedules just as we have been doing for decades. The real change in all this is that this abbreviated form 1040 is a one-size-fits-all form, and taxpayers with more complicated returns need to complete one or more of the schedules 1-5 in order to present the information in a condensed manner on the 1040 proper.
Qualified Small Business Deduction
For those who are self-employed or have investments in small businesses, the up to 20% deduction for the income from these entities will be reported on line 9 of the 1040, and this amount will be subtracted from taxable income. As of this draft version, there is no supporting form to list and calculate the amount of this deduction. Since this calculation is rather complex for a number of taxpayers, I suspect that the Service is working on a form to report these profits, losses, and other salient information to arrive at the correct amount of this deduction. I would stay tuned on this item to see what comes down the pike in February or beyond.
The new 1040 is just a two-sided half-sheet of paper. If all your income is from wages, interest, dividends, pensions, IRA, or Social Security and you do not need to complete another form or schedule like Schedule B, you are done. The standard deduction and tax calculation from the tax table are reflected on page 2. NOTE: The short form, 1040A, and the 1040EZ forms have been discontinued. All taxpayers will file a 1040 regardless of complexity or simplicity.
Schedule 1
This schedule is used to report income from sources other than the basic income reported on the 1040. It includes self-employment income, capital gains, state tax refunds, Schedule E rents and royalties, Schedule E page 2, farming and fishing, unemployment compensation, alimony received, and miscellaneous income. Schedule 1 is also used to report adjustments to income (what used to be on the lower third of the classic 1040) like alimony paid, pension/IRA contributions, HSA contributions, and the like.
Schedule 2
This is only used to report any alternative minimum tax or advance health insurance premium tax credit received for those whose income pushed them to the point where they have to repay some or all of the government subsidy for their health insurance premiums.
Schedule 3
This is where all non-refundable tax credits will pop up. Most importantly for you Teslans, the $7,500 BEV tax credit will flow from form 8936 onto Schedule 3. For those of you who are taking the credit as a part of your business, it too will flow onto this schedule from form 3800, General Business Credits.
Schedule 4
Other taxes assessed are reported here, including self-employment, net investment income, additional Medicare, nanny, and the 10% penalty for early withdrawal of funds from qualified plans.
Schedule 5
Other refundable payments appear here, including the credit-elect from your 2017 overpayment, all ES payments, any amount paid with your extension, excess Social Security taxes withheld if employed at two or more jobs during the year, and the off-road fuel tax credit used by farmers and others who pay road taxes on their gasoline and diesel.
Schedule 6
Probably not applicable, but it is used for foreign addresses and to allow the IRS to share limited information with your paid preparer.
If you examine the line numbers on many of these schedules, they are the identical numbers that used to be on the classic 1040. These new schedules still require the completion of any supporting forms and schedules just as we have been doing for decades. The real change in all this is that this abbreviated form 1040 is a one-size-fits-all form, and taxpayers with more complicated returns need to complete one or more of the schedules 1-5 in order to present the information in a condensed manner on the 1040 proper.
Qualified Small Business Deduction
For those who are self-employed or have investments in small businesses, the up to 20% deduction for the income from these entities will be reported on line 9 of the 1040, and this amount will be subtracted from taxable income. As of this draft version, there is no supporting form to list and calculate the amount of this deduction. Since this calculation is rather complex for a number of taxpayers, I suspect that the Service is working on a form to report these profits, losses, and other salient information to arrive at the correct amount of this deduction. I would stay tuned on this item to see what comes down the pike in February or beyond.
