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.
David Wieland is the founder and CEO of Realized, a real estate wealthtech firm that provides investment property wealth management for investors.
Brett Miller is chief financial officer at Restaurant365, where he is responsible for financial and strategic functions including accounting, audit, treasury, corporate finance and corporate strategy. He also leads all IT-related activities. Prior to joining R365, he led the M&A and global strategy teams for a Fortune 500 manufacturing company. He received his CPA license while a member of the transaction services team at KPMG.
Dr. Wayne Jenkins is an accomplished physician and executive with a proven track record of patient-centered, revenue-driven results. Over the course of his career, he's consistently transformed large, complex healthcare systems into market leaders that deliver quality and value in a dynamically changing environment. Prior to Centivo, he was the Chief Clinical Officer for Population Health at Vanderbilt University Medical Center, where he provided clinical oversight of value-based care delivery and completed the formation of Medicare Accountable Care Organizations (ACOs). Before his time at Vanderbilt University Medical Center, he served as the Senior Vice President and Chief Strategy Officer of Orlando Health, as well as President of Orlando Health Physician Partners. Previously, Wayne was the chief of radiation oncology and then subsequently the medical director for the Florida affiliate of M.D. Anderson Cancer Center, a subsidiary of Orlando Health, Inc. Wayne holds a BA from the University of Tennessee, an MD from Vanderbilt University School of Medicine, and a Master's of Health Policy and Administration from Johns Hopkins University. He is board-certified in radiation oncology and was recognized in Best Doctors in America annually from 1994 to 2015. He's published 18 scientific articles and is often sought out to speak at state and national conferences.
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.
