What New Tax Forms and Schedules Your Clients Need to Knowby
As you may be aware, tax return preparers are faced with a new array of tax forms and schedules for individuals in the 2020 filing season.
Amid the myriad of requests tax professionals make at busy season, the most basic is to be able to go in with confidence. As such, AccountingWEB is working with J.K. Lasser to help provide that needed boost of assurance practitioners need most at this crucial time of year.
The Season is fraught with pointed questions, from changes in forms and tax codes to processes and procedures for individuals and businesses. We trust that this article series and additional information from author Barbara Weltman and Elliot will lighten the load a bit.
We begin with some detailed information about any what the key changes in the new forms and schedules for 2019 returns are and how to address them with your clients.
While the basic tax return is not the postcard that had been promised, it is shorter than previous returns. This has been accomplished by moving various items off the basic return and onto other forms and schedules, which will be discussed in this article.
Basic Income Tax Return
Form 1040 remains available for filing by any individual. But there’s a new option for 2019 income taxes: Form 1040-SR, which is designed for seniors age 65 and older. Creation of this form was required by Bipartisan Budget Act of 2018.
Form 1040-SR is optional for taxpayers born before January 2, 1955. It allows for reporting the same income and claiming the same deductions and credits as Form 1040.
In fact, the same instructions apply to Form 1040 and Form 1040-SR. The only difference in the new form is the listing of the standard deduction directly on the return to simplify completion by hand. Because tax return preparers use software, there is no compelling reason to use the new form.
Change in Basic Schedules
For 2018 returns, there were six additional schedules accompanying Form 1040. These have been condensed into three schedules and can be used with Form 1040 or 1040-SR. The schedules are used to report items for which there is no specific line on the tax return. The schedules for 2019 income taxes are:
- Schedule 1: Additional income, such as self-employment income (or loss), unemployment compensation, prize or award money, and gambling winnings. The schedule is also used for adjustments to income (above-the-line deductions that can be claimed regardless of whether a taxpayer uses the standard deduction or itemizes). These include deductions for IRA contributions and self-employed retirement plan contributions, educator expenses, student loan interest, health savings account contributions, and one-half of self-employment tax.
- Schedule 2: Additional taxes, such as the alternative minimum tax, self-employment tax, household employment taxes, and additional tax (penalties) on IRAs and other qualified retirement plans and tax-favored accounts. A taxpayer who received an advance premium tax credit when purchasing health coverage through a government Marketplace reports any excess as a repayment here.
- Schedule 3: Additional credits, such as the foreign tax credit, education credits. and the retirement savings contribution credit. The schedule is also used for other payments and refundable credits, such as estimated taxes, excess Social Security tax withheld, and net premium tax credit.
Other New Forms and Schedules
There are new forms and schedules for claiming the qualified business income (QBI) deduction for owners of pass-through entities. Last tax season, worksheets in the instructions to the return were used. For the 2020 tax season, use:
- Form 8995, Qualified Business Income Deduction Simplified Computation, if taxable income is below a set amount based on the taxpayer’s filing status.
- If taxable income is greater, then use Form 8995-A, Qualified Business Income Deduction.
There are several schedules accompanying Form 8895-A:
- Schedule A, Specified Service Trades or Businesses
- Schedule B, Aggregation of Business Operations
- Schedule C, Loss Netting and Carryforward
- Schedule D, Special Rules for Patrons of Agricultural or Horticultural Cooperatives
As a practical matter, tax preparation software populates the forms and schedules as required, based on information inputted by you. But you may want to alert your clients to the new look of their returns that you furnish to them.
J.K. Lasser Institute is the premier publisher of consumer tax guides since 1939, when Jacob Kay Lasser first published Your Income Tax. Since then, the guide has been published continuously for over seventy years and read by over 39,000,000 people. The J.K. Lasser Institute also publishes personal finance books such as Small Business Taxes and 1001 Deductions and Tax Breaks. J.K. Lasser Institute spokespeople are regularly sought after as media tax experts.
|J.K. Lasser's Your Income Tax 2020 gives you step-by-step instructions for easy, stress-free filing.
Download the book here.
Barbara Weltman is an attorney, a nationally recognized expert on tax and small business, and a member of the J.K. Lasser Institute Team of Editors & Writers. Barbara has written dozens of top-selling business books and serves as Staples.com’s Small Business Tax Expert. Elliott Eiss is an attorney who has been writing J.K. Lasser tax...