The IRS has unveiled a new streamlined Form 1040 that reflects the many tax law changes made by the Tax Cuts and Jobs Act of 2017. Churches will want to let employees know that the new form is different from its predecessors in several ways, including the following:
- It is half the size of the previous Form 1040 and consists of two half-pages.
- Health care coverage (mandatory through 2018) is reported by checking a box on page 1 (it was reported on line 61 on the 2017 form).
- All personal exemptions were repealed after 2017 and so there is no way to claim them on the 2018 Form 1040.
- Some lines have been consolidated. For example, taxable and tax-exempt interest are reported on line 2 (they had separate lines on the 2017 form).
- Wages are now reported on line 1 (instead of line 7 for the past several years).
- Adjusted gross income (AGI) is reported on line 7 (instead of line 37 for the past several years).
- Standard deduction is reported on line 8, and is significantly larger than in 2017 ($12,000 for unmarried persons and $24,000 for married persons filing jointly).
- Several credits are now reported on Schedule 3 and consolidated on line 12b (they were reported on separate lines in 2017).
- Many lines in the previous Form 1040 have been deleted and transferred to various schedules. For example:
1. Business income is reported on Schedule C as in prior years, but is then posted to Schedule 1 of Form 1040 rather than line 12 as in prior years. In fact, the 79 lines on the 2017 Form 1040 have been reduced to 23, a reduction of more than 50 lines.
2. Adjustments to income, reported on lines 23–37 of the 2017 Form 1040, are now reported on lines 23–36 of Schedule 1 (Form 1040).
3. Schedule 2 (Form 1040) lists taxes that were reported on lines 45–47 in the 2017 Form 1040.
4. Schedule 3 (Form 1040) lists “nonrefundable credits” (including credits for child and dependent care expenses and education credits) that were reported on lines 48–55 in the 2017 Form 1040.
5. Schedule 4 (Form 1040) lists “other taxes” (including the self-employment tax) reported on lines 57–64 in the 2017 Form 1040.
6. Schedule 5 (Form 1040) lists “other payments” (including self-employment taxes) that were reported on lines 65–75 in the 2017 Form 1040.
Caution. Let your employees know there may be additional changes to the 2018 Form 1040 before it is finalized. Warn them against filing an early draft of the form.