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Moving Backwards – New Form 1040-SR for 2019



Annette Nellen Form 1040-SR

You’re online reading this blog post so you know that technology can do a lot, usually making our lives easier. For example, can you imagine filing a complex tax return without the aid of tax prep software? Well, IRS statistics show that for fiscal year 2018, about 12% of individual federal tax returns were filed on paper (but some of this could have been prepared using software). The balance were prepared by a paid preparer, or otherwise online or via the free file system. This is still a lot of paper filings given a total of almost 153 million individual returns files (about 18.6 million paper filed) (2018 IRS Data Book, p 2).  I think many of these paper filed ones are fairly simple returns, perhaps with just one or two Forms W-2.

When using tax prep software, you’re asked questions and you need to enter information from your tax reporting forms, such as W-2 and 1099. Good tax prep software performs the required calculations and produces a return that you can print and file or much easier, e-file. It doesn’t really matter much what the return looks like, just that your required information is on it.


Well, despite this reality today and that e-filing continues to grow, a proposal offered since at least 2009 (H.R. 728, Seniors’ Tax Simplification Act of 2009), calls for the IRS to create a new individual income tax form for use by seniors – those age 65 or older. This form 1040-SR, finally made it into legislation that was enacted in 2018 – P.L. 115-123 (2/9/18), effective for the 2019 tax year.

The enacting legislation calls for this new form to:

“be as similar as practicable to Form 1040EZ, except that–
(1) the form shall be available only to individuals who have attained age 65 as of the close of the taxable year,
(2) the form may be used even if income for the taxable year includes–
(A) social security benefits (as defined in section 86(d) of the Internal Revenue Code of 1986),
(B) distributions from qualified retirement plans (as defined in section 4974(c) of such Code), annuities or other such deferred payment arrangements,
(C) interest and dividends, or
(D) capital gains and losses taken into account in determining adjusted net capital gain (as defined in section 1(h)(3) of such Code), and
(3) the form shall be available without regard to the amount of any item of taxable income or the total amount of taxable income for the taxable year.”

Well, the IRS got rid of Form 1040EZ starting in 2018.

With this new form, which the IRS released on July 11 – draft Form 1040-SR, U.S. Tax Return for Seniors, taxpayers and their preparers will need to spend time figuring out if the taxpayer should file Form 1040-SR.  Seniors may still file the regular 1040, and I assume that is what will happen.  But, tax prep software will likely ask this question: “If the taxpayer and spouse are age 65 and older and qualify to use Form 1040-SR, do you want that form produced?”

What is the point of all of this? Well, if we were still filing tax returns on paper and without the aid of tax prep software, perhaps it would be helpful except that the senior still needs to be sure they have the right type of income and deductions to qualify to use the form rather than just using Form 1040.

I refer to this as a step backward because the form isn’t needed. Form 1040 is just fine.

Also, any change in filing should be to make greater use of technology.  For example, have a system that regularly grabs your digital data, such as those automatic deposits of your paycheck into your bank account, and your Quickbooks data if self-employed, and bank and brokerage data, and calculates your tax liability on a daily or weekly basis. In fact, with so much digital data and the ease of making non-digital data digital, this would be a much more efficient system. But instead, there continues to be too much focus on paper as the basis of our 21st century tax system. We need to change that mindset to move forward to have a more efficient and simpler compliance system.

What do you think? Annette Nellen

 

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Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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One thought on “Moving Backwards – New Form 1040-SR for 2019

  1. Avatar harold smythe says:

    so typical of the E&Y type of CPA, “depend on the electronics!” I have clients in their 40s and 50s and 60s who REFUSE to use even e-mail, let alone electronic tax returns. just because it is more familiar to yoiu and easier on your work-schedule does NOT mean it should be forced on everyone else. in many cases this 1040SR is perfect for the seniors it is designed for. taxable SS and retirement is the only income they have. why should they be required to file a full-fledged 1040 and to do it electronically? what is the advantage to THEM?

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