Tax Prep Dispatch: What New for Forms in 2020?

The last Dispatch discussed changes to tax law, VITA scope, and inflation adjustments for tax year 2019. This Dispatch covers changes to forms.

Discontinued Forms

Two forms have been discontinued:

  • Schedule C-EZ, Net Profit from Business (Sole Proprietorship) is now obsolete. Good-bye, old friend.
  • Form 8965, Health Coverage Exemptions, is now obsolete. This form is not needed because the Individual Shared Responsibility Payment is now zero. In other words, no more penalties for not having health insurance. Not sorry to see this one go.

New Tax Forms

There are two new tax forms:

  • Form 8995, Qualified Business Income Deduction Simplified Computation
  • Form 8995-A, Qualified Business Income Deduction

The qualified business income deduction (QBID) is the new 20% deduction generally available to Schedule C filers. It was first available for tax year 2018 and it was computed on a worksheet; that is, there was no special form. Now there are two forms. Taxpayers whose taxable income is not more than $160,700 ($160,725 if married filing separately or $321,400 if married filing jointly) can use Form 8995 - the simplified version. So, VITA will not have to worry about Form 8995-A.

But here is something that preparers do need to worry about. Taxpayers who had a 2018 business loss may have a qualified business income loss carryover that must be considered when preparing their 2019 return. This loss carryover is out of scope for VITA. It’s best to ask self-employed taxpayers if they had a Schedule C loss for the prior year. If there is a QBID loss carryover, it can be found on line 16 of the 2018 QBID worksheet, which was on page 32 of the 1040 instructions. The carryover amount is entered on line 3 of Form 8995 and it may reduce the amount of QBID for tax year 2019.

1040 Forms

Form 1040 has gone through another redesign for tax year 2019. Here’s what’s changed:

  • The Form 1040 is bigger than last year’s “postcard” size.
  • The income is back on page 1.
  • Tax, credit, and signature sections are on page 2.
  • The new forms (Schedules 1 – 6) from last year have been reduced to three forms (Schedules 1, 2, and 3).
  • The box that indicated full year health care coverage has been eliminated.

Schedules 1 – 6 have been revised and combined into three forms (Schedules 1 – 3).

  • Schedule 1 - Additional Income and Adjustments To Income is pretty much the same. Some lines have been renumbered.
  • Schedule 2 – Tax is now Additional Taxes. It is a combination of last year’s Schedules 2 (Tax) and 4 (Other Taxes).
  • Schedule 3 - Nonrefundable Credits is now called Additional Credits and Payments. It is a combination of last year’s Schedules 3 and 5. It contains nonrefundable credits, payments, and refundable credits.
  • Schedule 4 - Other Taxes is now obsolete. The information was added to Schedule 2.
  • Schedule 5 - Other Payments and Refundable Credits is now obsolete. The information was added to Schedule 3.
  • Schedule 6 - Foreign Address and Third Party Designee is now obsolete. The information was added to Form 1040.

Form 1040-SR, U.S. Income Tax Return for Seniors

Starting with tax year 2019, there is a new 1040 for senior citizens:

  • The taxpayer must be age 65 or older to use this form. On a joint return, at least one taxpayer must meet the age requirement.
  • Form 1040-SR fills the entire pages 1 and 2 of the usual 8.5” by 11” form.
  • Form 1040-SR uses a larger font than Form 1040.
  • There is a standard deduction chart at the bottom of page 1 of the Form 1040-SR to help determine the standard deduction for taxpayers who were born before January 2, 1955.
  • Taxpayers age 65 or older are not required to use the new form. It is just an optional alternative for seniors.

Note to TaxSlayer users: Form 1040-SR will be available to add to custom print sets. It will not be included in any of the TaxSlayer assigned print sets. For more information, see the TaxSlayer VITA/TCE Blog.

Confused About the New Form 1040?

To clarify, let’s review recent 1040 history:

tax year 2017 – There were three 1040s.

  • Form 1040-EZ
  • Form 1040-A
  • Form 1040

tax year 2018 – There was just one 1040 plus Schedules 1 – 6

  • Form 1040

tax year 2019 – There are two 1040s plus Schedules 1 – 3

  • Form 1040
  • Form 1040-SR

Income Forms

Form W-4, Employee's Withholding Allowance Certificate
This form has changed substantially. The concept of withholding allowances no longer applies. See the Tax Prep Dispatch, “
What’s Going on with Form W-4?” for more information. Only taxpayers starting a new job after December 31, 2019, or who want to revise their withholding, are required to use the new W-4.

Form W-2, Wage and Tax Statement

  • The IRS is ending the W-2 pilot program that used verification codes to authenticate W-2 data. Because of the January 31 deadline for employers to file W-2 forms, IRS can more quickly coordinate W-2 data with e-filed returns and the codes are no longer needed.
  • Effective for W-2s issued after December 31, 2020, employers may choose to truncate the employee’s social security number. The format will be XXX-XX-1234. Using truncated SSNs is optional.

Form 1099-MISC, Miscellaneous Income
There is no change for tax year 2019. But beginning with tax year 2020, nonemployee compensation (now box 7) will no longer be reported on Form 1099-MISC. A new
Form 1099-NEC, Nonemployee Compensation, will be used instead.

FORM 13614-C

  • The big change: Part VI – Health Care Coverage has been eliminated. Because the individual shared responsibility payment was reduced to zero, taxpayers are no longer required to report if they had health insurance coverage during the tax year.
  • A new question has been added to Part V, Life Events:
    (Last year, did you or your spouse) Have health coverage through the Marketplace (Exchange)? [Provide Form 1095-A] Taxpayers who had insurance through the Marketplace are still required to reconcile their Premium Tax Credit (Form 8962).
  • Two questions were moved from Part V, Life Events, to the Additional Information section on page 3:
    5. Live in an area that was declared a Federal disaster area? Yes No If yes, where?
    6. Did you, or your spouse if filing jointly, receive a letter from the IRS? Yes No
  • New questions regarding the taxpayer’s race and ethnicity have been added to the Additional Information questions on page 3. Taxpayers are not required to provide this information and may choose, “Prefer not to answer” for any or all of these questions.

In Conclusion!

Forms may seem like just some minor administrative tool. But, really, much of how tax law is applied and how we understand tax preparation depends on the form design.

All forms mentioned in this Dispatch can be viewed on www.irs.gov:

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