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.
Michael Anderson is a 25-year veteran of the Property and Casualty (P&C) insurance industry. As Business Owner of Guidewire Predictive Analytics, he is focused on delivering advanced analytics solutions that enable Smart Core systems to the P&C Industry. Prior to joining Guidewire Software, Michael led Audatex U.S. Data Science and Analytics teams and served as Director, Travelers Insurance where he co-managed countrywide Auto Physical Damage Claim Operations.
Stephanie serves Security & Risk Professionals. She leads a team of analysts who provide research and advisory services on topics like IT security frameworks; governance, risk, and compliance (GRC); identity and access management (IAM); application security; data… (Read Full Bio)security; and IT infrastructure security. She also provides Forrester's coverage of specific risk topics including business continuity, IT continuity/disaster recovery, and backup and recovery.Previous Work ExperienceStephanie has more than 12 years of experience in BC/DR, backup and recovery, and information storage industries. Prior to joining the Security & Risk team, Stephanie was a principal analyst on Forrester's Infrastructure & Operations team, where she was instrumental in the development of Forrester's research and offerings in continuity, availability, and information storage and protection.Prior to joining Forrester, Stephanie was a senior analyst with Yankee Group, where she provided insight on technology trends to key system, storage, and information protection vendors and consultative advice on strategic and tactical initiatives. Before Yankee Group, Stephanie worked at EMC, first as a technical architect and then as a senior education and productivity consultant. As a technical architect, she articulated EMC's value to partners and customers and designed solutions to meet customer and new market opportunities. As an education and productivity consultant, she managed and supported complex technical training programs for business and practice managers in EMC's Technology Solutions Group. Prior to EMC, Stephanie worked at Accenture as a consultant, focusing on the implementation of business applications (SAP, PeopleSoft) for global businesses.EducationStephanie holds a bachelor's degree in business administration and finance and investments from Babson College.
Jeremiah Cruit is the chief information security officer at ThreatX.
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.
