This final week in June has seen the release of the first draft of the upcoming 2018 “Postcard” Tax Return from the US Treasury. After months of waiting, we are finally getting a glimpse of the changes that will be impacting next year’s tax season, even if in preliminary form. Next year’s Individual Income Tax Return – Form 1040 will replace the current version of Form 1040, as well as the current Forms 1040-A & 1040-EZ. All individual taxpayers will now be required to use the same Form 1040 to report their annual income, regardless of complexity.
The new Form 1040 has been condensed to fit into a new “postcard” format, one double-sided half sheet of paper. The new proposed format will have all of the taxpayer information on the front of the Form (page 1), including the taxpayer signature boxes and paid preparer information. The back of the Form (page 2) will contain all of summarized information regarding the taxpayer’s income, adjustments, deductions, and credits. The calculation of total tax owed or due to be refunded will be clearly indicated at the bottom of page 2.
The new draft Form 1040 has significantly reduced the number of lines used to report income. Down from 79, the proposed new Form 1040 has only 23 lines! By condensing many lines from prior versions of the Form into one, the new Form 1040 has a much cleaner, simpler look. However, with simplicity comes added complexity as well, as the condensed lines are now detailed on proposed new Schedules 1-6.
Schedule 1, Additional Income and Adjustments to Income, reports several income items such as Schedules C, D, E & F, as well as deductions commonly known as “Adjustments to Income”, or above-the-line deductions. These items constitute the bulk of page 1 of the prior version of Form 1040. Schedules 2-6 will summarize calculations and information for Tax, Nonrefundable Credits, Other Taxes, Other Payments and Refundable Credits, and Foreign Address and Third Party Designees. This information was previously detailed on page 2 of Form 1040, and is now split out amongst these 5 different schedules.
However simple or complex your tax situation, in 2018, all will now be reported on this same proposed new Form 1040. This is the first draft that’s been released for next year, and there are sure to be upcoming revisions. With tax season looming, we are all waiting in anticipation for further guidance and final regulations regarding the 2018 tax law.
If you have any questions in regards to your 2018 taxes, please contact us today.
By, Brett Sterbens, CPA