The Internal Revenue Service has released a draft version of the Form 1040 for tax year 2020 with several significant changes probably in store for next tax season.
They include moving the question about virtual currency from the attached Schedule 1 to near the top of the main form, right under the name and address, asking, “At any time during 2020, did you receive, sell, exchange, or otherwise acquire any financial interest in any virtual currency?” The question comes at a time when the IRS has made it more of a priority to crack down on cryptocurrency investors who haven’t been reporting their gains on their tax filings, including by issuing summonses to major cryptocurrency exchanges like Coinbase and Bitstamp in recent years seeking information on their customers who trade in digital currency such as Bitcoin and Ethereum.
Another big change, as Kelly Phillips Erb of Forbes noted, is the inclusion of a question about charitable contributions on the main tax form for taxpayers who claim the standard deduction. Normally, taxpayers who claim the charitable deduction have to itemize it on Schedule A, but the CARES Act this year includes a provision for taxpayers to deduct up to $300 in charitable contributions even if they’re only claiming the standard deduction. That’s why there is now a line 10b for “charitable contributions if you take the standard deduction” on the draft Form 1040. Instructions will be provided for taxpayers and tax preparers, according to the form.
The flip side of the form includes a number of changes, including splitting the federal income tax withheld line into separate entries from W-2, 1099 and other forms, as opposed to a single line for federal income tax withholding. This suggests to Erb that the IRS may be planning to do extra scrutiny of gig workers and the self-employed.
A new line has been added to page 2 for the “recovery rebate credit,” which will be reporting the economic impact payments or stimulus checks that went out from the IRS this year as a result of the CARES Act. That too will be explained in the instructions for Form 1040, and Erb says there will be a separate reconciliation schedule that will carry over to that line on the form.
Barry Zane is vice president of engineering at Cambridge Semantics. He brings substantial development experience and industry expertise in building large-scale products for data analysis.
Prior to Cambridge Semantics, Zane was co-founder and CEO of SPARQL City where he served as vice president of technology, whose high performance scalable graph database technology has been acquired by Cambridge Semantics and integrated within its Smart Data Lake and other offerings.
Previously, Zane was co-founder and CTO of Paraccel, a high performance scalable relational database system which provides the basis for Amazon Redshift. Paraccel was acquired by Actian Corporation as the Matrix product line. He was a co-founder and vice president of technology and architecture at Netezza, which after a successful IPO, was acquired by IBM. Before Netezza, Barry was CTO of Applix, Inc. Applix was also later acquired by IBM.
Barry began his career at Prime Computer, as a hardware engineer and ultimately various roles in software development and management. He holds a degree in Electrical Engineering from Carnegie Mellon University.
John Prisco is the chief executive officer and president of Quantum Xchange, provider of the first Quantum Key Distribution (QKD) dark fiber network in the U.S. His 30-year career and depth of experience in telecommunications, cybersecurity and quantum physics have led John to a pivotal moment in the emerging era of quantum computing and the future of encryption. Follow the company’s journey at quantumxc.com.
Anne Vandermey is a venture capital editor at Bloomberg News.
The “Amount You Owe” section of the form includes a new cautionary note, saying, “Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for 2020. See Schedule 3, line 12e, and its instructions for details.” Schedule3, line 12e is new, according to Erb, and corresponds to another provision of the CARES Act allowing employers to defer their portion of the payroll tax for Social Security.
The form so far does not seem to include a line for the new payroll tax deferral for the employee’s share of Social Security taxes under President Trump’s recent executive order or memorandum. The draft form is likely to change before it’s finalized, though, as the IRS receives comments from the tax practitioner and accountant communities, as well as others.
