Federal Income Tax Update: Shorter 1040, New Brackets, Updated Exemptions

Be prepared for more schedules; death bequeaths nearly double for 2019

If you have not seen the new Form 1040, then you are in for a surprise. The form has a new look and feel for 2019, thanks to the Tax Cuts and Jobs Act (TCJA). And with tax returns in the mail, now is the time to get to know this new, shorter form.

Key provisions to be familiar with, according to tax pro Arthur Werner, are those that focus on: Section 199, death of a taxpayer, filing status issues, cancellation of debt, sales taxes, and IRS issues. Werner covers these topics and more in his comprehensive, two-day webinar for Eli Financial, “Federal Income Tax Update for the 2018 Tax Season.”

The New 1040: 23 Lines + Schedules

The big federal income tax update news for 2019 is the new 1040. It replaces the old 1040, 1040A, and 1040EZ, reports The Balance. This new form, according to the IRS, is now to be used by all American taxpayers. While some taxpayers may get away with just filling out the 1040, many will also want or need to submit one of six accompanying schedules: A, B, C, D, E, and F.

The old 1040 needed to go, The Balance notes, because it contained numerous lines for tax provisions that vanished under the TCJA. Personal exemptions are gone, for example.

Lawmakers also wanted to deliver on a promise to shrink the form, and while this 1040 is shorter than the old one, it’s still not postcard-sized. The new form is on a normal 8.5-by-11-inch sheet: Basic details go on the front, while financial information is stuffed onto about half of the back page. In all, there are 23 lines to fill out compared to 79 on the old form.

While simple is good, the catch is that the IRS still needs all the intel they needed before. This is where the agency’s “building block” platform comes in.

“Taxpayers who have more complex returns will indeed need to use additional schedules to satisfy reporting requirements,” explains Ryan Norton of Drake Software.

IRS Releases New Brackets, Updates Standard Exemptions

There’s more than the new 1040 that you need to know about as filing gears up this winter. For starters, there are new income tax brackets, reports CNBC.

The new rates, which have been adjusted for inflation, are:

  • 10%: up to $9,700 single filer/$19,400 married filing jointly/$13,850 head of household
  • 12%: $39,475/$78,950/$52,580
  • 22%: $84,200/$168,400/$84,200
  • 24%: $160,725/$321,450/$160,700
  • 32%: $204,100/$408,200/$204,100
  • 35%: $510,300/$612,350/$510,300
  • 37%: $510,301+/$612,351+/$510,301+

Also updated are the standard deductions: Now they are $12,200 for single filers and double that for married couples filing jointly. Personal exemptions remain at zero.

Healthcare Coverage Penalties Apply for One More Year

Starting in 2019, there will be no penalty for failing to maintain minimum essential health care coverage. But taxpayers who did not have adequate coverage in 2018 are looking at a $695 fine, according to HealthCare.gov.

Coverage status goes on forms 1095-A (for coverage purchased from the marketplace), 1095-B (sent from insurers to covered individuals), and 1095-C (health insurance offered at work).

Also important to note is that the TCJA nearly doubled the amount that decedents could bequeath in death, notes The CPA Journal. Before, this gift and estate tax exemption was just a tick under $5.5 million per person. In 2018, it went up to $11.18 million. And in 2019, it will be $11.4 million. The annual gift exclusion, however, will remain at $15,000 per recipient.

With new forms and an altered list of exemptions, this filing season will keep tax pros busy, says Werner, whose two-day training program, “Federal Income Tax Update for the 2018 Tax Season,” will present a detailed review of what to expect. Prepare now so you are ready when those forms start rolling in.

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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