I know it’s not tax time just yet, but I’m excited: The new, redesigned 2018 Form 1040 is out. If you haven’t seen it yet, go to IRS.gov and search for Form 1040, or type in this address: www.irs.gov/pub/irs-pdf/f1040.pdf.
It is short: 23 lines, compared with 79 for last year’s Form 1040; one page instead of two.
All taxpayers who used to file Forms 1040A and 1040EZ (income under $100,000, with no itemized deductions) will now use the new Form 1040 instead.
Those who have been using Form 1040 all along — a number I’m estimating at roughly 25 million taxpayers out of a total of about 150 million tax filers (2015 data from the IRS Statistics of Income Division) — will be using various schedules as in the past, such as Schedule A for itemized deductions.
Because the new 1040 is an outgrowth of tax reform, I also suggest that you read IRS Publication 5307, “Tax Reform Basics for Individuals and Families,” at https://www.irs.gov/pub/irs-pdf/p5307.pdf.
Let’s go through just a few points that are important to people saving for retirement.
The new Form 1040 requires an adjustment to how you report IRA and pension distributions (Lines 4a and 4b). In prior years, you entered these amounts on different lines; now they are combined on the same line.
If you received a Form 1099-R, Box 1 shows the distribution from your IRA, which you would report on line 4b. But what if that was a valid rollover? (Read Publications 590-A and 590-B.)
You would enter the Box 1 figure on line 4a. If you rolled over into another IRA, for example, in a timely and correct manner, you would write “Rollover” next to line 4b. Assuming the total distribution was rolled over, you would enter zero on line 4b, which means it is not a taxable distribution. If the rollover was to a qualified plan, such as a 401(k), provide that information on the return.
What if you made a “qualified charitable distribution” (QCD) from your IRA? A QCD is a distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions.
For example, Bill, age 77, made a $25,000 distribution directly from his IRA to a charitable organization. Bill would enter the $25,000 distribution on line 4a, but zero on line 4b. He would also write in “QCD” next to line 4b.
These are just a few of the nuances that you’ll need to be aware of. You’ll want to read the instructions for the new form, which you can find here: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.
We’ll talk more about taxes as the tax season develops. In the meantime, write to me with questions.
The deadline to nominate 401(k) participants for the first 401(k) Champion Award has been extended to Feb. 15.
A panel of independent judges will choose finalists based on their responses to this question: “If you were to advise co-workers on why they should participate in (and/or maximize) their 401(k), what would you say?”
Three $1,000 awards will be granted. Go to juliejason.com/award for more details.