What is new in a “nutshell” for FORM 1040 for TAX YEAR 2018 was published by JD Supra on 1/29/19.
For Tax Year 2018, Taxpayers will use the new and re-designed Form 1040
Although the IRS’s sentiment is that many Taxpayers will only need to file Form 1040 and none of the NEW NUMBERED SCHEDULES, there will be Taxpayers with more complicated tax returns because they are able to claim certain deductions or credits or owe additional taxes and will need to complete one or more of the NEW NUMBERED SCHEDULES.
2018 Form 1040
- Form 1040 has been redesigned. The new design uses a “building block” approach and is supplemented with new Schedules 1 through 6.
- Forms 1040A and 1040-EZ no longer available.
- Tax rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
- The Standard Deduction amount has been increased for all Taxpayers: Single or Married filing separately—$12,000, Married filing jointly or Qualifying widow(er)—$24,000 and Head of household—$18,000.
- Personal exemptions are suspended.
- The maximum child tax credit has increased to $2,000 per qualifying child, of which $1,400 can be claimed for the additional child tax credit.
- A nonrefundable credit of up to $500 for each eligible dependent who can’t be claimed for the child tax credit.
- Social security number (SSN) required for child tax credit.
- Changes to itemized deductions. State and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately) and Taxpayers can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2%-of-adjusted-gross-income floor.
- The Alternative Minimum Tax (AMT) exemption amount is increased to $70,300 ($109,400 if married filing jointly or qualifying widow(er); $54,700 if married filing separately).
- Section 965 deferred foreign income. Taxpayers that own (directly or indirectly) certain foreign corporations, may have to include on their return certain deferred foreign income.
- Under section 951A, a US shareholder of a controlled foreign corporation must include their Global intangible low-taxed income (GILTI) on their income.
- The domestic production activities deduction has been repealed with limited exceptions.
- Some tax benefits had expired. These include the deduction for qualified tuition and fees, the mortgage insurance premium deduction, and the nonbusiness energy property credit.
What are the NEW numbered Schedules?
- Schedule 1
Have additional income, such as capital gains, unemployment compensation, prize or award money, or gambling winnings. Have any deductions to claim, such as student loan interest deduction, self-employment tax, or educator expenses.
- Schedule 2
Owe AMT or need to make an excess advance premium tax credit repayment.
- Schedule 3
Can claim a nonrefundable credit other than the child tax credit or the credit for other dependents, such as the foreign tax credit, education credits, or general business credit.
- Schedule 4
Owe other taxes, such as self-employment tax, household employment taxes, additional tax on IRAs or other qualified retirement plans and tax-favored accounts.
- Schedule 5
Can claim a refundable credit other than the earned income credit, American opportunity credit, or additional child tax credit, such as the net premium tax credit or health coverage tax credit. Have other payments, such as an amount paid with a request for an extension to file or excess social security tax withheld.
- Schedule 6
Have a foreign address or a third-party designee other than a paid preparer.
Don’t be a victim of your own making
- have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country,
- receive a distribution from, or were the grantor of, or transferor to, a foreign trust,
- are shareholders of a controlled foreign corporation and have GILTI income,
- own (directly or indirectly) certain foreign corporations,
- are not able to utilize the standard deduction
Ought to consult a specialized tax representative to complete their 2018 Tax Return. Taxpayers are reminded that Tax Returns (even if prepared by a Tax Preparer) are always signed by the Taxpayer under penalties of perjury.