Besides the recent changes to the tax law – the Tax Cuts and Jobs Act – there have been changes to Form 1040. Namely, the phase out of Form 1040A and Form 1040EZ. All reporting is now consolidated on a single form without the need to select the proper one. There may still be a little bit of confusion out there because many publications may reference forms 1040A and 1040EZ. They are no longer accurate and for the updated instructions on completing Form 1040, click here.
Even though this recent change impacts all taxpayers, it is barely noticeable by those who use tax software to file taxes. One of the first steps of tax software is to ask series of questions that help select a proper form to file. Tax form question never actually comes up when filing electronically. All the answers taxpayer provides help build his profile and automatically complete all the required forms.
The more complex is your tax situation, the more forms you have to complete. The new Form 1040 comes with additional schedules. Depending on your situation, you may be required to fill out the following:
- Schedule 1 – Additional Income and Adjustment to Income
- Schedule 2 – Alternative Minimum Tax or repayment of advance premium tax credit
- Schedule 3 – Nonrefundable Credits
- Schedule 4 – Other Taxes, such as self-employment tax, household employment taxes
- Schedule 5 – Other payments and Refundable Credits
- Schedule 6 – Foreign Address and Third-Party Designee
The main reason behind the recent changes is the need to simplify tax filing process. The IRS decided it wasn’t beneficial to have multiple forms 1040 and instead opted for what is called “building block” approach. Form 1040 is your main “block” and for many taxpayers with simple tax scenarios that may be the only form they need to complete. Once more elaborate tax situations arise, additional forms and schedules – or building blocks – may be required to complete the return.