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.
Mike Ehrle is senior vice president of strategic partnerships for benefits delivery innovator at Hodges-Mace. He is responsible for deepening corporate ties with national brokers, technology consultants, HCM/payroll companies, medical and group carriers, private-equity firms and other key players in the Hodges-Mace ecosystem. Employee benefits firm Hodges-Mace aims to help employees and employers make smarter benefits decisions through a blend of innovative technologies and intelligent service solutions.
Mike was SVP of Sales for two years at Hodges-Mace before being named SVP of strategic partnerships. During this time Mike expanded the sales team from 14 to 35 people, introduced multiple new functions and processes, sold over 200 new accounts and generated approximately $40M of new revenue.
Prior to Hodges-Mace, Mike was responsible for numerous new business development, client retention, sales operations, and strategic initiatives across payer and large employer clients for Davis Vision/Highmark Health and nearly ten years at UnitedHealth Group. In addition, Mike has helped a major consulting house redesign their middle-market healthcare exchange from a product, financial and technological viewpoint. Mike has a Bachelor’s of Science in Business Administration from Drake University and a Masters of Business Administration from the University of Notre Dame.
Jeaneth Johansson is a professor of accounting and control at Halmstad University and Luleå University of Technology.
Malin Malmstrom is a professor of entrepreneurship and innovation at Luleå University of Technology.
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.
