By David Schaper, CPA firstname.lastname@example.org
There have long been campaign promises of simplifying the federal tax code, with pledges of ultimately filing personal taxes on a postcard. To be amenable to this, the IRS recently released the draft 1040 tax return for individuals to take into consideration all of the tax changes that are effective for 2018. The size of this 1040 has been dwindled to 2 half-pages and eliminated more than 50 lines compared to the 2017 version.
Does this mean that your taxes have been simplified and will require fewer pages, time, and effort to file? Most likely the answer is no, especially if you are a business owner. Various income and deductions items have been moved to an additional schedule, Schedule 1, which must be attached to the 1040. This schedule includes lines for alimony, business income, capital gains, farm income, real estate, pass-through activity from partnerships and S corporations, health savings account deductions, and IRA deductions, among others. So instead of these tax items being on the front of the 1040, they have simply been shifted to a separate schedule that must be attached to the 1040.
The new 1040 also summarizes other information that must be detailed on a separate schedule, which was previously on the 1040. This information includes a form to detail the various types of tax liabilities, a form to detail various nonrefundable credits and a form to detail other federal tax payments and refundable credits.
The 1040 has become simpler to file for 2018 if you only have wage income, interest income, and do not own a home. Otherwise, it has not become simpler to file as many politicians have promised, they have merely put this information onto other forms that must be included in your tax filing. Combine these separate schedules with new complex tax laws for qualified business income deductions and many other changes and a Reno CPA may still be needed to assist you in your filings.