The Foreign Service Journal, January-February 2019
THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2019 69 The New 1040 Is Much Shorter … But One of Six New Schedules May Be Required IRS Form 1040 appears to be much shorter this year. The new form is sufficient for taxpayers who only need to report W-2 income and will only claim the standard deduction. It is so simple that the 1040-A or 1040-EZ from past years has been abolished. However, one of six schedules will be neces- sary for taxpayers in several circumstances. The new numbered schedules are required for: (1) Those with other income, such as capital gains or Schedules C or E business income, or for taxpayers who can claim certain deductions like educator expenses, health savings accounts or student loan interest deduction; (2) Those who owe tax on a child’s unearned income or the alternative minimum tax (AMT); (3) Those who can claim nonrefundable credits such as foreign tax credits, the standard child tax credit or education credits (Form 8863); (4) Those who owe other taxes such as self-employment, unpaid Social Security and Medicare taxes, or household employment taxes; (5) Those who can claim certain refundable credits, includ- ing overpayments of estimated tax, net premium tax credits and the health coverage tax credit; or (6) A taxpayer who has a foreign address. The familiar, lettered schedules may also still be necessary to calculate: (A) Itemized Deductions. Schedule A has been changed to account for the cap on state and local taxes, home mortgage interest limits and the removal of miscellaneous itemized deductions. There is no longer an overall cap on itemized deductions, but miscellaneous itemized deductions have been eliminated; (C) Profit or Loss from a Sole Proprietorship; (D) Capital Gains & Losses; and (E) Supplemental Profit or Loss from Realty, Part- nerships or LLCs, S-Corpo- rations, trusts or estates. Note that the standard deduction, qualified busi- ness income deduction (QBID), child tax credit and credit for other dependents are still reported on the 1040. The 1040 instructions and relevant IRS product pages explain more about each of these schedules and worksheets. Taxpayers who use software or pay a preparer should compare their completed returns with the respective blank forms and schedules to check for errors or missed forms. Standard Deduction The Tax Cuts and Jobs Act of 2017 raised the standard deduction amounts: • $12,000 for individuals filing separately; • $24,000 married filing jointly; • $18,000 for heads of household. Small additional amounts are allowed for dependents, the elderly and blind taxpayers. Personal Exemption The Tax Cuts and Jobs Act eliminated the personal exemption. Beginning in 2019, the IRS will issue a revised W-4 that will no longer offer withholding exemptions. Child Tax Credit, Additional Credit and Dependent Credit Any lost benefits from the reduced personal exemption are partially made up for by the increased child tax credit—now $2,000 per qualifying child up to age 17. This includes: (1) A taxpayer’s child, sibling, stepsibling, half-sibling or their descendant; (2) With the same principal place of abode for half the tax year; (3) Who meets certain age requirements (i.e., minors); (4) Does not provide more than half their own support; and (5) Does not file a joint return with their spouse.