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What's Different on 2020's IRS Form 1040?

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With tax season well underway, it's important to remind clients that this year's 1040 form is a bit different from 2019's, thanks to the coronavirus pandemic. Expert Julian Block kicks off the first of a three-part series on the subject by discussing topics that pertain to educators, volunteers and more to ensure tax compliance.

Mar 11th 2021
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2020’s 1040 form differs in a number of ways from the 2019 version. What follow are the highlights of several differences.

Educator expenses (line 10 of Schedule 1, Additional Income and Adjustments to Income). Internal Revenue Code Section 62(a)(2)(D) allows educators to claim above-the line deductions of as much as $250 for qualifying unreimbursed expenses that they paid out-of-pocket.

The IRS realized it had to respond to the corona crisis; it expanded the list of eligible expenses. Rev. Proc. 2021-15 approves certain COVID-19 costs paid or incurred after March 12, 2020. Outlays that pass muster include: face masks; disinfectant; hand soap; hand sanitizer; and disposable gloves.

Will the IRS limit its crisis response to just an enhanced tax break for educators? What about individuals who volunteer to help raise funds or perform other tasks on behalf of charitable organizations like religious groups, schools, and hospitals? They, too, incur unreimbursed out-of-pocket expenses.

So far, no word from the IRS on whether it will allow volunteers to deduct COVID-19 costs.

Expenses incurred by volunteer workers (line 11 of Schedule A, Itemized Deductions). Suppose someone I’ll call Veronica regularly volunteered to help raise funds for established charitable organizations, outfits that focus on problems like preserving our forests, hunger, homelessness and improving educational opportunities for disadvantaged individuals.

Many charities have shifted somewhat from their usual activities so as to deal with the corona crisis. For example, they deliver food and other necessities to those who live in multifamily buildings (about 25 percent of Americans, as noted on April 21, 2020, by the Washington Post,) places where tensions build, because it’s often impossible for residents to isolate themselves.

Veronica’s response: Use her car to deliver food to beleaguered individuals and to drive them to medical appointments. To safeguard herself, Veronica uses her own funds to pay for things like face masks, gloves and other items of protective clothing.

None of her purchases are adaptable for ordinary wear. If they were, they wouldn’t be deductible.

The odds favor an IRS announcement that it will expand the list of charitable expenses that it allows Veronica and other volunteers to claim on line 11 of Schedule A. New deductions likely will include COVID-19 costs paid or incurred after March 12, 2020, just as the agency allows her to claim car mileage (the standard mileage allowance is 14 cents per mile), tolls and parking.

But new deductions for, say, face masks are cold comfort for Veronica, because an increased deduction on 2020’s Schedule A accomplishes nothing. What gums things up is that it no longer pays for her to itemize on Schedule A.

For starters, renter Veronica pays no real estate taxes or interest charges on a home mortgage (lines 5 and 8).

Tax-savvy Veronica opted to live in a state that doesn’t impose income taxes. And even if she did pay them, the Tax Cuts and Jobs Act imposes a $10,000 cap on write-offs for such taxes (line 5e).

Let’s pivot to the threshold on deductions for medical expenses. The big hurdle: her payments for uninsured expenses are allowable only to the extent that they surpass the nondeductible threshold of 7.5 percent of 2020’s adjusted gross income (line 3). Veronica’s don’t come close.

Schedule A’s charitable contributions are all that’s left for Veronica. Her checks to charities and volunteer expenses (line 11) and noncash donations, such as contributions of used clothing, furniture and kitchen items to outfits like Goodwill (line 12) are nowhere near the standard deduction amount authorized for single filers like Veronica.

On 2020’s Form 1040 (line 12 on page one), a single person’s standard deduction is $12,400. It increases to $14,050 for Veronica and other singles who are at least 65.

In a subsequent column, I’ll discuss relaxed rules for 2020 that allow nonitemizers to deduct charitable contributions (Form 1040’s line 10b on page one).

Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 350 and counting). 

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