A little over a year ago, the Tax Cuts and Jobs Act (TCJA) was passed which amounted to the biggest overhaul of the tax code in 31 years. With preparation of our tax returns looming, be ready for changes. Over the next few weeks, we will talk about some of these changes so you can be prepared when you start working on your 2018 taxes!
During the discussion prior to the passage of the TCJA, simplification of the Form 1040 was often mentioned. The new 1040 Form is now a half page on both sides. Everyone required to file individual taxes will use this form as forms 1040A and 1040EZ will no longer be used. Many folks who have, in prior years, filed the Form 1040 will be required to file schedules in addition to the Form 1040.
- Schedule 1 is required if you have other income or deductions. Examples are:
- Capital gains income
- Unemployment compensation
- Prize or award money
- Gambling winnings
- Student loan interest deduction
- Self-employment tax deduction
- Educator expenses
- Schedule 2 is required if you owe alternative minimum tax or you need to make a repayment because you received excess advance premium tax credit for your health insurance.
- Schedule 3 is used to claim nonrefundable credits other than the child tax credit or the credit for other dependents. Examples of these credits are:
- Foreign tax credit
- College education credits
- General business credit
- Schedule 4 is where you would list other taxes you owe such as:
- Self-employment tax
- Household employment taxes
- Additional tax on IRA or other retirement and plans and tax-favored accounts
- Schedule 5 is used to claim refundable credits other than the earned income credit, American opportunity credit, or additional child tax credit. This schedule is also used if you have made other tax payments such as an amount paid with your request for an extension or if you had excess social security tax withheld.
- Schedule 6 is used if you have a foreign address or you have a third part designee other than your paid preparer.
The changes to the tax code can seem very confusing at first, which is why I thought it would be helpful to devote a few blogs to education about the overhaul. If you’re worried you won’t be able to understand the changes enough to prepare your own taxes this year, please reach out! I’d love to help.
Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.