We talked earlier about how the IRS was changing some tax forms.  And, if you pay attention to the nuances, you can see where the IRS is planning to clamp down on enforcement.  Today, we’ll look at the new 1040 form- the one most citizens of the USA must file.

First, let’s get one lie out of the way.  There still is no postcard 1040.  Nor do you want one- because I’m sure it would look like this.

Now, to the real deal.

 

 

 

 

First of all, it’s clear that the IRS thought it’s demand that we aver we never deal with virtual currency was being skipped over.  So, now, it’s right there- on page 1, before we answer any questions about dependents or income.

“At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

Yeah.  We aren’t going to miss that question any more.  Too many folks have not ‘fessed up’ to their cryptocurrency dealings.  If we did play around with virtual currency, our involvement will now be fully detailed in Schedule 1, Additional Income and Adjustments to Income.    (You can bet the IRS is going to be checking those numbers carefully- not unlike how Santa checks his list- twice!

Then, we get to another addition, one I told you about a while ago.  Due to the pandemic, the government is going to allow everyone the ability to declare charitable contributions– even if they don’t itemize.

Wait!  Don’t get too excited.  If we don’t itemize, we are only able to deduct $ 300 of charitable donations from our income.  (Well, that covers my first week of 2020. What about the other 51???)  Oh, yeah- that’s $ 300 per 1040 filing, not per person.  So, married filing jointly only get $ 300 per two people !  (I would have changed this had TheDonald not been petulant and avow to NOT sign the Pandemic Relief bill for which he advocated.  Which also means the rest of the 5300 page bill [yeah, no GOP objection to this at all] fails- including the funding of the US Government.)

Other than the numbering change (due to the charitable donation line), that’s it for the changes on Page 1 of the new 1040.

Page 2 should be familiar until we get to Item 25.   This change reflects the fact that there is a new sort of 1099 this year.  Those gig workers and those self-employed folks will no longer be getting a 1099-Misc.  Nope.  Now, they get the 1099-NEC.  That does not mean Not Elsewhere Classified- it means non-employee compensation.  We’ll still be giving 1099-Misc to lawyers, landlords, royalty earners, etc.  But, most of us will be getting 1099-NEC.

As a result, this year, the IRS has us listing the total amount of federal income tax that was withheld on W-2’s separately from that withheld on 1099’s (like the taxes withheld when money is withdrawn from pension plans and IRA’s prematurely, or for the 1099-NEC compensation.

Given the new 1099 and the detail on the 1040, you can bet the IRS figured out that there are tons of gig workers and self-employed folks who have been playing fast and loose with their non-payroll compensation.   That should add some bucks to the federal coffers.

Estimated tax payments are now listed on Line 26.  This also will make it harder for folks to forget to get credit for their tax payments.  (That means you, SEW!)

There’s also some additional efforts to clear up some CARES issues, the tax credits and stimulus checks that folks got – or didn’t get in 2020 for the 2019 tax year.  If we got the wrong amount- because a child was born in 2020 or we made too much money in 2019, line 30 requires we clean up those errors. (The maximum credit was $ 1200 [$ 2400 jointly filing], plus $ 500 per qualifying child.)

And, the other big change?  The note on line 37 that reminds folks if they earned non-employee compensation [reported on Schedule C), they are subject to self-employment taxes (Schedule SE)  or if they are household employers, they have obligations arising from Schedule H.  (This refers one computations on Schedule 3, line 12e- and how to include that in your tax due computations.)

This is also there because of some chicanery that TheDonald pulled.  With his 8 August 2020 Executive Order, the federal government and now the self-employed/household employers (that’s pretty much the only employers that may observe this ruling) can defer the Social Security tax from 27 March 2020 through 31 December 2021.   Half will come due on 31 December 2021 and the other half of 31 December 2022.  That’s why there is line 12e on Schedule 3.

While not really a tax item, there is a new form, Schedule LEP.  This lets the IRS know that if they wish to contact you, they should employ a language other than English- say Farsi, French, Spanish, Japanese, or 16 other languages.  (Hebrew is NOT among them; Arabic is!)

 

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Today, Anthony Fauci turns 80.  It’s Tony Fauci Day!  And, my mentor and friend, Arthur Lipper has a birthday- but DC did not develop a moniker to honor him.  They should have- he’s a great entrepreneur and entrepreneurial supporter.