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Insights

A short summary of the changes to the new IRS Tax Form 1040

By January 10, 2019 No Comments
In 2018, taxpayers will use a newly designed IRS form 1040, U.S. Individual Income Tax Return (1040).   The most notable changes to the 1040 are:
  • A reduction of size and information contained on the 1040. The new Form 1040 has 23 lines, down from 79, and is roughly the size of a postcard.
  • An increase in the number of schedules in the 1040. The 2018 Form contains 6 new schedules (outlined below):
    • Schedule 1 – For taxpayers with additional sources of income (not from a W-2) or adjustments to income, such as IRA contributions, student loan interest, and health savings account contributions.
    • Schedule 2 – For taxpayers with other forms of taxes, such as a child’s unearned income.
    • Schedule 3 – For nonrefundable tax credits.
    • Schedule 4 – Used by taxpayers to add up other miscellaneous taxes, such as self-employment tax, uncollected Social Security, and Medicare taxes.
    • Schedule 5 – Used by taxpayers to add up tax payments, such as estimated tax payments or amounts paid with an extension.
    • Schedule 6 – Used by taxpayers to appoint a third-party designee to discuss their tax return with the IRS on their behalf.
Due to these new schedules, the IRS has allocated new data points that are important to the LoanBeam Self Employed Analysis workbooks. Here is a quick comparison of the changes from the 2017 Form to the new 2018 Form:
Old Form
New Form
Wages were on Line 7
Wages are now on Page 2 Line 1
Taxable Interest was on Line 8a
Taxable Interest is now on Page 2 Line 2b
Tax Exempt Interest was on Line 8b
Tax Exempt Interest is now on Page 2 Line 2a
Ordinary Dividends were on Line 9a
Ordinary Dividends are now on Page 2 Line 3b
Qualified Dividends were on Line 9b
Qualified Dividends are now on Page 2 Line 3a
Taxable Refunds (State/Local) were on Line  10
Taxable Refunds (State/Local) are now on Schedule 1 Line 10
Alimony Received was on Line 11
Alimony Received is now on Schedule 1 Line 11
IRA Distributions were on Line 15a and 15b
IRA Distributions & Pensions are now combined on Schedule 1 Lines 4a and 4b
Unemployment was on Line 19
Unemployment is now on Schedule 1 Lines 19
Social Security was on Line 20a
Social Security is now on Page 2 Line 5a and 5b
Other Income was on Line 21
Other income is now on Page 2 Line 21
Additional changes to the 1040 include:
  • A new definition of who can use Form 2106.
    • The IRS has redefined tax payer eligibility to file for Unreimbursed Employee Expenses under Form 2106. Eligible groups are Armed Forces Reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses. Any employees who do not fit into one of the listed categories may not use Form 2106.
  • A change in Meals and Entertainment allowance.
    • The Schedule C for Self Employed borrowers has changed the description for Line 24b from “Meals and Entertainment” to “Meals” to align with 2018 tax reporting guidelines. Note: The change in wording did not affect the 50% deduction.