The tax-filing season officially kicked off this week, and the IRS celebrated the occasion by showing off a revised Form 1040.
The Form 1040 tax return for 2019 — the one that’s due by April 15 — looks different from its predecessor in a handful of small ways.
The changes stem from feedback from taxpayers and tax professionals, the IRS says.
If you don’t fill out your 1040 yourself — maybe a professional or software program does it for you — you might not notice the changes.
Still, the 1040’s minor makeover for tax year 2019 could affect the questions that your tax pro or tax software asks you this tax-filing season. It also could affect which and how many schedules you must file with your 1040.
So, with that in mind, let’s take a look at how the 1040 has changed.
There are three numbered schedules for 2019 — half as many as there were for 2018. Basically, some schedules were combined to fit on a single page, so now the numbered schedules take up half as many pages.
Schedules are additional forms that you file with your Form 1040 if certain situations apply to you.
No health coverage check box
Last tax-filing season, Form 1040 included a check box for “Full-year health care coverage or exempt.”
You (or your tax return preparer or software program) checked this box if you either had health insurance coverage for all of 2018 or were exempt from the Affordable Care Act requirement that everyone have coverage.
If neither was the case, you likely owed a penalty for lack of coverage, which was due at the time that you filed your federal tax return.
This tax-filing season, however, that check box is no longer on the form because that penalty is no more, as we detailed in “6 Ways Federal Income Taxes Will Be Different in 2020.”
A 1040 for seniors
Last tax-filing season, one of the biggest changes to federal tax returns was the elimination of the Form 1040-EZ — everyone used the Form 1040 for 2018.
For 2019, though, we’re back to having two versions of the federal tax return: the Form 1040 and the new Form 1040-SR.
The 1040-SR is for seniors: Taxpayers born before Jan. 2, 1955, have the option of using it instead of the 1040.
For the most part, the 1040-SR mirrors the 1040, the IRS says. The 1040-SR has a larger font size, though, and contains a “Standard Deduction Chart” that reflects the extra standard deduction amounts that seniors generally can claim.
Note that the schedules for the 1040 and 1040-SR are the same. So, for example, seniors who itemize their tax deductions rather than taking the standard deduction would need to file Schedule A, regardless of whether they use the 1040 or 1040-SR.
A line for capital gains or losses
The Form 1040 for 2018 did not include a line for capital gains or losses. Anyone with a capital gain or loss instead had to report it on Schedule 1 and thus had to file a Schedule 1 with their 1040.
This tax-filing season, the 1040 and 1040-SR have a dedicated line for capital gain or loss (Line 6). So, taxpayers with such a gain or loss in 2019 would report it there, the IRS says. In some situations, however, those taxpayers may need to file Schedule D this year.
A virtual currency question
Schedule 1 for 2019 asks about virtual currency explicitly, and the IRS says taxpayers who made transactions involving virtual currency need to file this schedule with their tax return.
The question on Schedule 1 reads: “At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
As the IRS defines it, virtual currency includes but is not limited to “convertible” virtual currencies such as Bitcoin, which have an equivalent value in real currency.
If you sell or exchange virtual currency, use it to pay for goods or services, or hold it as an investment, you could have a tax liability as a result. So, it should come as no surprise that the IRS wants to know about virtual currency transactions.
In fact, the agency also is reminding taxpayers that their record-keeping obligations apply to virtual currency:
“The Internal Revenue Code and regulations require taxpayers to maintain records that support the information provided on tax returns. Taxpayers should maintain, for example, records documenting receipts, sales, exchanges or other dispositions of virtual currency and the fair market value of the virtual currency.”
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