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The New 1040 Form Is Not So Simple

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The federal government has shrunk the iconic 1040 tax form that Americans send to the IRS every year. But that doesn’t mean doing your taxes has gotten easier or faster, and for many, the change actually makes the task trickier.

The new form consolidates the three previous versions of the 1040 (1040, 1040A, 1040EZ), reducing them all to just 23 lines on a half-size page, back and front, compared with 79 lines on the old 1040. With the new form, you check a box on the front to indicate whether you are taking the standard deduction, and you enter personal information. On the back, you list your income and withheld taxes. That’s all you have to worry about if you have very simple taxes and no investments or children. However, Americans with even slightly more complex situations or who wish to itemize deductions will need to submit supplemental paperwork—more paperwork in many cases than they had to file with the previous 1040 forms.

Example: If you need to report a retirement savings contribution credit…income such as capital gains…and/or alimony, you won’t see space for these items on the new 1040. And if you skip them inadvertently, you could under-report your income or miss tax breaks you’re entitled to.

To ensure that you report everything accurately, you’ll need to enter supplementary information on six brand-new forms, or “schedules.” Most of the information removed from the old 1040 was moved to these six new schedules. When you compare tax returns for earlier years to your 2018 return, you’ll need to figure out where information from the old forms goes on the new forms in order to avoid inaccuracies or omissions.

Because there are so many more forms now, for many filers, there’s even more reason to use tax software that walks you through lists of questions and then places your answers on the appropriate forms.­

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Source: Greg Rosica, CPA, CFP, a partner with the accounting firm Ernst & Young who specializes in private client services and tax consulting, New York City. EY.com Date: September 15, 2018 Publication: Bottom Line Personal
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