The IRS has released the new-and-improved Form 1040 for your 2018 individual federal income tax return. The good news is the return is now postcard-sized if your tax situation is super-simple. The bad news is it’s probably not — in which case the new Form 1040 is just alarmingly different than before rather than simpler. So if you really hate change, stop here and hire a tax pro to prepare your 2018 return. Otherwise, please keep reading, but make sure you’re sitting down.
Key Point: The due date for your 2018 Form 1040 is 4/15/19, unless you live in Maine or Massachusetts, in which case your deadline is 4/17/19. You can automatically extend your return to 10/15/19 by filing Form 4868 with the IRS on or before the applicable deadline. Find Form 4868 at www.irs.gov.
The base postcard return
The front side of the postcard is just for informational stuff like your name, address, Social Security number, dependents, and filing status. Your signature also goes on this side.
The back side is for numbers (income, deductions, taxes, and credits). It bears a family resemblance to the bottom half of page 1 and page 2 of the old Form 1040.
In the simplest situations, you only have to file the base postcard return. More likely, you’ll also have to file one or more of new Schedules 1-6.
Even if you only have to file the base postcard return, you may have to fill out some worksheets that are included in the Form 1040 instructions. For example, if you claim the new deduction for qualified business income from pass-through entities (sole proprietorships, LLCs, partnerships, and S corporations), there’s a worksheet to calculate your allowable deduction. You don’t file these worksheets with your return, but you should keep them with your tax records for the year.
Key Point: Forms 1040A and 1040-EZ, which were simplified versions of the old Form 1040, have been eliminated for 2018. Everybody now files the base Form 1040 plus any additional required schedules and forms.
Those may include:
New Schedule 1 (Additional Income and Adjustments to Income)
If you have additional income and/or adjustments to income, you must file the new Schedule 1 with your base postcard return. For example, you must file Schedule 1 if you had business income, capital gains; unemployment compensation; alimony received; or gambling winnings. You must also file Schedule 1 if you are claiming so-called above-the-line deductions for things like deductible IRA and self-employed retirement plan contributions; self-employed health insurance premiums; 50% of self-employment tax; HSA contributions; student loan interest; or educator expenses.
New Schedule 2 (Tax)
File this if you owe the alternative minimum tax (AMT) or have to repay excess advance Obamacare premium tax credits that were sent to your health insurance company.
New Schedule 3: (Nonrefundable Credits)
File this if you are claiming nonrefundable tax credits other than the child tax credit or the new $500 credit for other dependents. These include the credits for higher-education expenses, child and dependent care expenses, adoption expenses, retirement savers, residential energy-saving expenditures, electric vehicles, and foreign taxes.
New Schedule 4 (Other Taxes)
File this if you owe other taxes such as the 10% penalty tax on early retirement account withdrawals, the penalty tax for not having Obamacare-compliant health insurance coverage, the additional 0.9% Medicare tax on higher earners, or the 3.8% net investment income tax on higher-income individuals.
New Schedule 5 (Other Payments and Refundable Credits)
File this if you have tax payments or refundable credits (treated the same as tax payments) that cannot be entered directly on Form 1040. These include quarterly estimated tax payments, the tax payment with an extension request on Form 4868, the Obamacare health insurance premium tax credit, and the credit for overpaid Social Security tax if you had several employers last year.
New Schedule 6 (Foreign Address and Third-Party Designee)
File this if you have a foreign address or want to allow another person (other than your paid preparer) to discuss your return with the IRS.
You may still have to file some old-school schedules
As in the past, you may still have to file one or more of the following additional schedules with your base Form 1040.
* Schedule A if you itemize deductions. However, many folks won’t be itemizing for 2018, because the standard deduction amounts were almost doubled by the Tax Cuts and Jobs Act. For 2018, the standard deductions are $12,000 for unmarried individuals, $24,000 for married joint-filing couples, and $18,000 for heads of households.
* Schedule B if you had more than $1,500 of income from interest and/or ordinary dividends or if you had certain types of interest and dividend income (such as tax-free interest from U.S. Savings Bonds used to pay qualified higher education expenses).
* Schedule C if you had a profit or loss from one or more business activities.
* Schedule D if you had capital gains or losses.
* Schedule E if you had royalty income or income or loss from rental real estate, a partnership, an LLC treated as a partnership for tax purposes, an S corporation, or an estate or trust.
* Schedule F if you had income or loss from a farming or ranching activity.
* Schedule SE if you owe the self-employment tax.
* Schedule H if you owe payroll taxes for household employees.
* Schedule EIC if you are claiming the earned income tax credit.
* Schedule 8812 if you are claiming the refundable additional child tax credit.
You may still have to file some old-school forms, too
As in the past, you may still have to file one or more additional tax forms with your base 2018 Form 1040. For example, if you owe the AMT, you must file Form 6251. If you had capital gains, you must Form 8949 in addition to Schedule D. If you claim the credit for child care expenses, you must file Form 2441. As in the past, the list goes on and on.
Has anything really changed?
As with most tax questions, the answer is yes and no. In the simplest situations, taxpayers can now file the postcard-sized base Form 1040 and be done with it. Good for them. These folks may be able to dispense with paid tax preparers. But if your tax situation has any degree of complexity, preparing your 2018 return won’t be any easier than before. But it will be different. And your paid preparer may charge more than before as a result. Sorry about that.