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.
Sandy Steier is chief executive officer at 1010data.
Christopher Condo serves Application Development & Delivery (AD&D) Professionals. He is part of Forrester's AD&D coverage of DevOps tool chains, focusing on continuous integration (CI) and continuous delivery (CD) as well as software development strategies for enabling those strategies.
Previous Work Experience
Prior to his current role as an analyst, Chris was the engineering manager for the enterprise web applications team for Altran North America, where he oversaw and led the development of enterprise applications in the medical device and automated warehousing industry. Chris led a team of 10 software engineers, developed proposals, led estimation efforts, led resourcing efforts (including offshore), and also pitched in as an individual contributor. Chris has firsthand experience of developing software using agile practices and helping clients migrate to CI and CD methodologies as well as migrating to the cloud.
Prior to Altran, Chris was a senior development engineer at Microsoft for 13-plus years, working in the SaaS space starting with the Microsoft bCentral suite of online eCommerce tools targeted at small to medium businesses. Chris went on to lead software development efforts for the Office Live product suite, developing CRM and eCommerce platforms for Microsoft's growing online customer base. With Office 365, in addition to feature development, Chris worked on early tool chains that enabled global configuration and secure cloud deployments prior to their mainstream existence on the Azure platform. He also performed research and development on components to limit the impact of DOS attacks.
Before Microsoft, Chris held senior software engineering roles at FASTech, M/A-Com, and Digital Equipment Corp.
Education
Chris graduated from UMass Lowell with a B.S. in computer science. Chris is an active member of UMass Lowell Computer Science Industry Advisory Board.
Schechter is an associate attorney at Butterfield Schechter LLP in San Diego.
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.
