With 2020 finally behind us, now is the time to think about taxes. This year, there will be a few changes to consider. The Internal Revenue Service (IRS) has released a new Form 1040 U.S. Individual Tax Return, which will be used for filing tax returns for the 2020 tax year.
Here are a few things to look for on the new 1040:
- The new form makes it easier to list withholding by separating it into three separate lines: W2, Form 1099, and other forms. Self-employed taxpayers should pay special attention to this section and be sure to scrutinize deductions even more carefully.
- The new form also provides a simpler way for taxpayers to report estimated tax payments carried over from last year’s return.
- The IRS is examining virtual currency carefully, with a question listed prominently on the main page, right after the taxpayer’s name and address. If you received any virtual currency in 2020, make sure to report it here.
- The CARES Act added a few temporary tax changes that are reflected on the new Form 1040.
- The “Amount You Owe” section now indicates that the form may not represent all taxes owed. Additional taxes may include social security taxes that were temporarily deferred by employers. The deferral also applies to self-employed taxpayers.
- There is a separate line for the “recovery rebate credit” Taxpayers can reconcile any changes that may affect stimulus checks. For example, if a taxpayer made too much money to qualify in 2019, had a child in 2020, or had other changes that impacted their eligibility or amount received from the first economic recovery checks, those changes will be recorded on the new form.
- The new form will also have a place for the temporary above-the-line deduction of $300 for charitable contributions. The CARES Act enabled this one-time deduction for 2020 taxes even for taxpayers who take the standard deduction.
- There are a few areas for taxpayers who want to make changes. Individuals who want to change language for communications received from the IRS can fill out a new Schedule LEP on the 1040 form.
- Taxpayers aged 65 and older can use Form 1040-SR, U.S. Tax Return for Seniors. The simplified FORM 1040-SR features a larger font, larger spaces for information, and an embedded table that highlights the increased standard deduction.
If you need help with tax planning or preparation, contact the tax professionals at BSB. We remain abreast of changes to tax policies to help you maximize your tax benefits while remaining in compliance with current law.