For years, the holy grail of tax reform has been to make the tax code so simple that your return could fit on a postcard. The new tax law makes progress toward that goal. Sort of.
For the 2018 income tax return, the IRS plans to consolidate all three versions of Form 1040–1040, 1040A and 1040EZ–into one document that’s about half the size of the current tax return. But the shorter form won’t necessarily make it easier to file your taxes. In order to shrink the form, the IRS had to move a number of commonly used tax credits and deductions to supplemental forms. Taxpayers will also need to use these forms, known as schedules, to report income from capital gains and self-employment.
A taxpayer who has a straightforward tax situation “would only need to file this new 1040, with no additional schedules,” the IRS says. As a result of the tax overhaul, the vast majority of taxpayers will claim the standard deduction instead of itemizing. But even taxpayers who don’t itemize may need to use the supplemental forms. Several money-saving tax breaks available to non-itemizers, such as education tax credits and the write-off for student-loan interest, have been moved to separate schedules.
The change will affect only taxpayers who file their tax returns on paper. “For people who use a tax professional or use software, which amounts to well over 90% of filers, the experience is going to be the same,” says Kathy Pickering, of H&R Block’sTax Institute.
This article provided by NewsEdge.