On the six-month anniversary of the passage of tax reform, the Treasury Department and IRS revealed the new postcard-size Form 1040 for use in the 2019 filing period. The new form will replace the existing forms 1040, 1040A, and 1040EZ.
Treasury Secretary Steven Mnuchin said in a statement on June 29, “The new, postcard-size Form 1040 is designed to simplify and expedite filing tax returns, providing much-needed relief to hardworking taxpayers.”
The new form is about half the size of the previous version. It reduces the size of the form to two half-pages in length and eliminates more than 50 lines.
The IRS circulated a draft version of the new form to consult with the tax community and finalize the streamlined form over the summer.
The first page of the draft form gathers information about the taxpayer and dependents, and asks for the taxpayer’s signature and pledge that the taxpayer is filing correctly. The second page collects information on the taxpayer’s income, deductions, and credits, including a dedicated line for the child tax credit.
Many of the items reported on the previous 1040 were moved to various additional schedules. These items include capital gains or losses, student loan interest expense, education credit, alimony, and business income.
American taxpayers spend more than 6 billion hours annually complying with IRS tax filing rules, according to the IRS’s Taxpayer Advocate Service. This costs the U.S. economy more than $260 billion each year in lost productivity, according to the National Taxpayers Union.
Taxpayers are expected to save time this year by skipping itemized deductions and claiming the newly doubled standard deduction instead.
According to Republican leaders, tax reform was designed to make taxes so simple that 9 out of 10 people would be able to fill out their taxes on this form.
President Donald Trump celebrated the six-month anniversary of the Republican tax overhaul, saying that his administration “unleashed an economic miracle” by signing the tax cuts and reforms bill.
“Common sense is being restored in Washington again,” he said at the White House on June 29. “We’re changing Washington, and we’re changing it quickly and for the better.”
Trump touted his economic policies during remarks, saying tax cuts made the United States the “best place on Earth” to start a business and invest.
“Hundreds of billions of dollars are coming back from overseas,” he said, adding that more than $300 billion was repatriated in the first three months of this year alone.
The Tax Cuts and Jobs Act, which was signed into law in December last year, cut corporate tax rates, allowed immediate expensing of capital investments, and moved the United States away from a worldwide system of taxation to a territorial system.
The bill also doubled the standard deduction and expanded the child tax credit for individual taxpayers.
“The typical family of four earning $75,000 will see an income tax cut of more than $2,000 and, in some cases, more,” Trump said.
The new tax code also repealed Obamacare’s individual mandate provision, which required most Americans to have a basic level of health insurance coverage or else pay a tax penalty.
Trump said he received “no credit” for dismantling the individual mandate, calling it the “most unpopular provision” in the old tax code. “But that’s OK,” he said.
“Obamacare is just about over,” he announced, adding that Health and Human Services Secretary Alex Azar would roll out a new health insurance plan “in a very short period of time.”
“It’s going to perhaps match your plan from Department of Labor. It’s going to be something very special.”
Businesses have accelerated their capital investments in recent months to take advantage of the tax cuts and the full expensing provision, which allows companies to deduct 100 percent of the cost of their capital investments in the year the investment is made.
Real fixed investment exceeded $3 trillion in the first quarter, reaching an all-time high, according to Chad Moutray, chief economist for the National Association of Manufacturers. Meanwhile, nonresidential fixed investment rose 9.2 percent year-on-year during the same period.
According to Trump, full expensing is one of the most important provisions in the new tax code.
“It’s the biggest secret in the plan,” he said. “I think it’ll go down as maybe the most important element.”