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.
Nic Beique is the Founder and Chief Executive Officer of Helcim, a payments company that delivers an easier, smarter, and more affordable payment experience with a human touch.
He is a technical founder with over fifteen years of payments experience and a deep passion for team culture, marketing, and product. His track record includes developing payment platforms for both SMBs and Fortune 500 companies.
He has been recognized for his contributions to the payment industry and tech economy in Canada as the EY Entrepreneur Of The Year Prairies Technology overall.
The research reveals fraud prevention and low-friction experiences are top priorities for banks, and they recognize the need to balance both across multiple channels and transaction types.
Driven by his early encounters with remote work challenges, Boston-based CEO Sean Nolan co-founded Blink. This all-in-one "super-app" empowers frontline workers with the digital tools, connections, and resources they need on their personal phones. Blink bridges the gap between management and millions of individuals across industries, from bus drivers to healthcare workers, fostering engagement, belonging, and a 26% reduction in staff turnover. With over 300 clients, including Stagecoach and Domino's, and used seven times daily by 300,000+ workers, Blink is revolutionizing the frontline experience, one tap at a time.
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.
