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As year 2019 unfolds its first chapter, so do we unveil for you the new IRS forms to be used with your tax returns. We already assigned a newsletter to the new Form 1040 which was redesigned using a building block approach and was supplemented with Schedules from 1 through 6.
The additional schedules are to be used as needed to complete more complex tax returns. The instructions for the new schedules are at the end of the Form 1040 instructions.
Schedule 1 is necessary for reporting additional income and adjustments to income that cannot be entered directly on Form 1040.
Additional income is entered on Schedule 1, lines 1 through 21, and generally includes the items that were listed in the "Income" section of the old 2017 Form 1040.
Additional income includes (but is not limited to) certain added earnings such as most prizes and awards, all gambling winnings, and earnings from an activity not engaged in for profit, such as money you made on your hobby.
The new schedule also asks you to enter: |
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Any business income. If you operated a business or practiced your profession as a sole proprietor, report your income and expenses on Schedule C or C-EZ. |
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Capital gains or losses. If you sold a capital asset, such as a stock or bond, you must complete and attach Form 8949 and Schedule D. |
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Other gains or losses. If you sold or exchanged assets used in a trade or business, see the Instructions for Form 4797. |
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Alimony received through Dec. 31, 2018 (alimony payments are no longer deductible under the new tax law as of 2019). |
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Unemployment compensation. You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you in 2018. |
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Farm income (Schedule F still applies). |
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Earnings from rental real estate, royalties, partnerships, S corporationsand trusts (to be detailed on Schedule E). |
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Net operating loss deduction. |
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Taxable refunds, credits or offsets of state and local income taxes. If you received a refund, credit, or offset of state or local income taxes in 2018, you may be required to report this amount. None of your refund is taxable if, in the year you paid the tax, you either (a) didn't itemize deductions, or (b) elected to deduct state and local general sales taxes instead of state and local income taxes. |
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Olympic and Paralympic medals and USOC prize money. The value of Olympic and Paralympic medals and the amount of US Olympic Committee prize money you receive on account of your participation in the Olympic or Paralympic Games may be nontaxable. |
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Don’t report any nontaxable income, such as child support, life insurance proceeds received because of someone's death, etc.
Adjustments to income are entered on Schedule 1, lines 23 through 36, and generally include items that were listed in the "Adjusted Gross Income" section of the old 2017 Form 1040. |
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Adjustments to income are expenses that reduce your total, or gross, income.
The amount remaining after deducting these expenses is your "adjusted gross income” (AGI). Adjustments to income reduce your tax bill but are not itemized deductions, which you list separately on Schedule A, or the deductions listed on Schedule C. That means you benefit from adjustments to income whether you itemize deductions or take the standard deduction.
Adjustments to income were previously called above-the-line deductions because they appeared on the old Form 1040 right above the line that reported your AGI. |
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| Here are the adjustments to income valid for your 2018 Form 1040, Schedule 1: |
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Self-employed health insurance. People who are self-employed can deduct health insurance premiums up to the amount of the profit from the business. |
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Health savings account deduction. You can deduct Health Savings Account (HSA) contributions you make with personal funds. |
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Retirement plan contributions by self-employed taxpayers. These include annual contributions made by self-employed people to their retirement plans, such as SEP-IRAs, SIMPLE IRAs, Keogh plans, and solo 401(k) plans. |
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IRA deduction. Contributions to IRA accounts (subject to annual threshold limits) may be deductible, depending on your income. If you were age 701⁄2 or older at the end of 2018, you can't deduct any contributions made to your traditional IRA or treat them as nondeductible contributions. Don’t complete this worksheet for anyone age 701⁄2 or older at the end of 2018. |
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50% of self-employment taxes. If you’re self-employed, you can deduct half of the 12.4% Social Security tax on net self-employment income, up to an annual ceiling, and a 2.9% Medicare tax on all net self-employment income. |
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Penalty on early savings withdrawals. You can deduct from your income penalties you had to pay to banks and other financial institutions because you withdrew your savings early from certificates of deposit or similar accounts. |
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Student loan interest. Up to $2,500 of student loan interest is deductible from your gross income provided that your AGI—before subtracting any deduction for student loan interest—is below a ceiling amount. |
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Tuition and fees deduction: as part of the new tax law, the tuition and fees deduction has been made available through 2017, but expired for 2018. In any case, this deduction was not allowed if the American Opportunity tax credit or Lifetime Learning Credit was claimed. |
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Alimony paid. You can also subtract amounts you paid in alimony, that is, a court-ordered payment to a separated spouse or divorced ex-spouse. You can’t include child support payments. For more details, see IRS Publication 504, Divorced or Separated Individuals. As mentioned earlier, the TCJA eliminates this deduction starting in 2019 for any divorce or separation agreement executed after Dec. 31, 2018, or executed before that date but modified after it (if the modification expressly provides that the TCJA applies). |
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Moving expenses for Armed Forces members. Members of the Armed Forces on active duty (or their spouse or dependents) who move pursuant to a military order and incident to a permanent change of station may deduct their moving and storage expenses. |
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Educator expenses deduction allows eligible educators to deduct up to $250 worth of qualified expenses from their income. Qualified expenses include purchases of books and classroom supplies, technology and computer software used in the classroom during the process of teaching students. This deduction may also be claimed for professional development courses related to teaching that were not reimbursed by your school or by another source. |
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Certain business expenses of reservists, performing artists, and fee-basis government officials. Although beginning in 2018 unreimbursed employee business expenses are no longer deductible, costs incurred by: (1) armed forces reservists, (2) qualified performing artists, (3) fee-basis state or local government officials, and (4) employees with impairment-related work expenses may still be claimed on Form 2106 for tax year 2018. |
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| Other adjustments to income include: |
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Jury duty pay turned over to employers; |
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Deductible expenses related to the rental of personal property; |
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Reforestation expenses; |
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Repayment of supplement unemployment benefits; |
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Attorney fees and court costs for discrimination claims or claims to recover whistleblower awards from the IRS. |
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| Most importantly, of course, is to remember that, if you want to keep up with the changes of the new tax law, it is best to talk to a tax professional who can guide you through the maze of income tax, credits and deductions efficiently and legally. |
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