CHICAGO, January 15, 2019 – As a new tax season gets underway, the Illinois CPA Society has a rundown of changes to take note of before preparing your upcoming tax returns. Key need-to-know details include:
New tax season start date: The IRS announced it will begin processing tax returns on Monday, January 28. It also said tax refunds will be issued on a regular schedule, despite the year starting with a partial shutdown of the federal government.
New Form 1040: The IRS recently unveiled a newly designed, shorter Form 1040. Originally described as a “postcard-sized” tax form, the new Form 1040 has been shortened from 79 to 23 lines and replaces previous versions of the 1040, 1040A and 1040EZ.
For those using do-it-yourself tax software or online services to prepare and e-file federal and state tax returns, make sure they are compatible with the new form. The federal information that applies to your state taxes may come from a new line number on the shortened 1040. For detailed filing instructions from the IRS, please click here.
New tax return schedules: Many of the items that used to be reported on the 1040 have now moved to six new schedules that may accompany your return.
- Schedule 1: Additional Income and Adjustments to Income – including business income, capital gains and losses
- Schedule 2: Tax – including the Alternative Minimum Tax (AMT) and taxes on a dependent child’s unearned income or “kiddie tax”
- Schedule 3: Nonrefundable Credits – including credits for child and dependent care and education
- Schedule 4: Other Taxes – including the Net Investment Income Tax as well as healthcare coverage (the individual mandate) and the Additional Medicare Tax
- Schedule 5: Other Payments and Refundable Credits – including estimated tax payments and amounts paid with a tax filing extension request
- Schedule 6: Foreign Address and Third-Party Designee – including lines for taxpayers to list any foreign addresses or third-party designees who may discuss a tax filer’s return with the IRS
These new numbered schedules do not replace existing lettered schedules that many taxpayers are familiar with. Forms such as Schedule A, B, C, D, E and F are still being used and additional guidance is available at this IRS web link.
New deduction levels and limits: Two big changes that were ushered in by the Tax Cuts and Jobs Act impact both standard and itemized deductions. While previous standard deduction levels were raised, new caps have been placed on certain itemized deductions.
- New standard deductions – Levels have been raised to $12,000 for individuals and $24,000 for couples. Child credits have also been raised to $2,000 per child.
- New itemized deduction rules – State and local tax deductions are capped at $10,000, which may be far lower than many taxpayers are used to. And miscellaneous itemized deductions can no longer be deducted.
If you are wondering whether you are better off taking the new standard deduction or itemizing your return, a certified public accountant (CPA) can help alleviate confusion about new tax laws and guide you through filing season.
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