Federal Income Tax Update: Get to Know the New Form 1040

A single form replaces 1040, 1040a, and 1040EZ—and the IRS updates its privacy standards

Internal Revenue Service (IRS) Form 1040 will look and feel different this coming tax season. But the revision hasn’t made the form as simple as most taxpayers hoped. So it will be up to you, the tax pro, to familiarize yourself with and help your clients navigate the new requirements, sections, definitions, and provisions.

What’s new: Tax pros must be prepped to handle simple Form 1040 queries, as well as questions about Section 199A, property settlements, and tax credits, says taxation specialist Arthur Werner. Werner covers these issues and more—including the death of a taxpayer, cancellation of debt, and failing status issues—in his highly-detailed two-day Eli Financial virtual boot camp, “Federal Income Tax Update for the 2018 Tax Season.”

The New Form: A Half-Sized Replacement for 1040A and 1040EZ

At the end of June, the IRS released a draft of the new Form 1040, which is designed to be a catch-all filing tool for taxpayers and to replace the current 1040, 1040A, and 1040EZ.

What it is: The form is two pages—the first is the standard set of personal tidbits such as name, dependents, and signature. The second page is the meat of the return: 23 main lines of incomes, deductions, and credits.

“This new approach will simplify the 1040 so that all 150 million taxpayers can use the same form,” the IRS said in a press release.

The form uses a “building block” approach to filing, the IRS added: Taxpayers with simple returns can squeeze everything on to the two-page 1040, while those with more complex incomes and deductions will add on schedules as needed.

IRS Also Promises to Protect Personal Data

Upcoming federal income tax updates don’t stop with new forms. Beginning this month, the IRS moved its tax transcripts to a new format in an effort to upend cybercriminal attempts to hack personal data.

This new format, explains FedSmith.com, redacts personally-identifiable information from the 1040 form and replaces it with a default format.

“Financial entries will remain visible, which will give taxpayers and third-parties the data they need for tax preparation or income verification,” FedSmith.com adds.

Let your clients know that new transcripts will contain only:

  • Last four digits of SSNs and EINs
  • Last four digits of any account or telephone numbers
  • First four characters of last names and business names
  • First six characters of street addresses, including spaces
  • All money amounts, including balance due, interest, and penalties

The move, the agency explains, builds on earlier actions meant to protect data.

“Because it is much harder now to file a fraudulent tax return that can get past our safeguards, cybercriminals know they need more legitimate taxpayer information so they can better impersonate their victims,” the IRS explained on its FAQs page. “As we’ve evolved, so have the criminals who have stepped up their data theft efforts directed as tax professionals, employers and others.”

Just because the new Form 1040 is half the length of the old form does not mean that tax filing will be any less complicated, says Werner. As with updates to the transcripts, there is a lot for tax pros to learn—and to communicate to clients—before the filing season begins in earnest.

To join the conference or see a replay, order a DVD or transcript, or read more

Jeff Schmerker

Jeff has extensive professional experience writing on a variety of topics, from pharmaceutical research to environmental history. He has published more than a half-dozen books, and he has worked as a newspaper reporter, magazine editor and restaurant reviewer. He lives in Missoula, Montana with his wife and son.

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