If you are dreading the idea of filling out your 1040 income tax form and feeling lost, you probably aren’t alone. The 1040 tax form was overhauled and revamped in 2018, designed to be shorter and hopefully less confusing. But after a few years, it’s clear this isn’t really the case.
“Remember when the IRS said they were simplifying the tax return and it could be completed on a postcard-sized form? Well, forget it. We are back to two pages for 2020, along with three additional schedules as part of the Form 1040,” says Abby Eisenkraft, CEO of Choice Tax Solutions Inc., a tax and financial services company in New York City and an IRS enrolled agent.
As for this year’s sequel, the 2020 1040 income tax form, the plot isn’t dramatically different, but there are just enough new twists and turns to possibly hold a taxpayer’s interest. (Hint: If you invested in cryptocurrency last year, you’ll definitely want to read on.)
What Is IRS Form 1040?
A quick definition: Form 1040 is a federal income tax form that most people use to report their tax information to the Internal Revenue Service. On the form is your income, any tax deductions or credits you can claim and the amount of taxes that you will be refunded — or, sigh, the amount of taxes that you owe.
Other Types of 1040 Forms
There are several different types of IRS 1040 forms that some people may need to fill out.
— Form 1040-NR. If you’re a nonresident alien or the representative of a deceased one, you might need to file this form. (If you’re looking for 1040NR-EZ on this list, don’t. The IRS has kicked this form to the curb. It no longer exists.)
— Form 1040-ES. This form is for people who pay estimated quarterly taxes.
— Form 1040-V. If you have a balance on the “amount you owe” line of the 1040 or 1040-NR, you might fill this out. It’s a statement that goes along with the taxpayer’s payment.
— Form 1040-X. Did you make a mistake on a previously filed 1040? You can make any changes and include them on your Form 1040-X.
Before you sit down to fill out a 1040, you’ll want to make sure you have your W-2 nearby. That will have your earnings information on it. If you’re a freelancer, or if you have had part-time gigs throughout the year, you may have a 1099 — or multiple 1099s with earnings information on them.
On the 1040, those first seven lines are all income-related questions. You’ll need to provide information such as interest, dividends, pensions, annuities, IRA distributions or Social Security benefits.
To file your taxes as smoothly as possible, you’ll want to have on hand any paperwork that shows what you’ve earned. If you’re handing off your taxes to a tax preparer, you’ll still want to have all of that information — if you aren’t uploading it onto a tax preparer’s website.
What Is the Difference Between 1040EZ, 1040A and 1040?
The forms 1040EZ and 1040A no longer exist.
When the Tax Cuts and Jobs Act was signed into law in December 2017, it consolidated the forms 1040, 1040A and 1040EZ into a single and redesigned Form 1040. So unless you’re filing old tax forms, there’s no need to pay 1040A or 1040EZ any mind.
What Is 1040-SR?
While the 1040EZ and 1040A are no more, Form 1040-SR is relatively new, and it’s a four-page form that seniors can fill out.
“It’s available for use for those 65 or older, with an increased font size, but those with more complicated tax situations will have to use the regular Form 1040,” Eisenkraft says.
Four pages might sound like a lot, but remember that there is an increased font size, which translates into more pages.
Who Should Fill Out IRS Form 1040?
Anyone who files taxes. That said, Shann Chaudhry, a San Antonio business and estate attorney who often advises clients on knotty tax issues, says, “Most taxpayers will only have to file a Form 1040 with no schedules.”
Where Can I Get the 2020 Form 1040?
Tax software programs, of course, have it. If you hire a tax preparer, he or she will have one. Your library might have the forms. You can find 2020 Form 1040 on the IRS website as well. You can complete the form on the IRS website, if you want, and then print it out and mail it in.
What to Know About the New 1040 Schedules
There are a number of small but significant changes that some taxpayers will want to be aware of:
Cryptocurrency. “One of the most notable changes is the question about digital currency, above the fold on page 1 of the form,” Chaudhry says. “The IRS has been cracking down on proper reporting of income from Bitcoin, Ethereum and other digital currencies.”
Chaudhry adds that the IRS has been chasing down taxpayers who haven’t been reporting, so make sure you report any cryptocurrency activity.
Things get more complicated if the virtual currency account is outside of the United States, Eisenkraft says. “A ( Report of Foreign Bank and Financial Accounts) may need to be filed as well, and there will be additional reporting required on Schedule B,” the tax form where you report interest and dividend income earned in 2020.
Charitable deductions. In 2018, due to the changes to the standard deduction, it became less financially advantageous to itemize things like deductions to charity. But there has been a change to the 2020 1040 income tax form. The IRS came up with a special provision to make it easier for people to benefit from giving to charity and encourage charitable giving during the pandemic.
“If you don’t itemize, you can still claim monetary charitable contributions up to $300 on your tax return. If you don’t take the standard deduction, all charitable contributions are reported on Schedule A,” Eisenkraft says.
[Read: New Rules for Charitable Giving.]
Changes due to COVID-19. First, the stimulus checks you received are not considered income. You won’t owe tax on your stimulus payments, and they won’t increase your income so that you’ll pay more taxes.
If you didn’t receive your stimulus check, or if you received some but not all of it, you will want to visit line 30 of Form 1040 and claim your “recovery rebate credit.”
As the IRS website states, “Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 Form 1040 or 1040-SR. To determine whether you are an eligible individual or the amount of your Recovery Rebate Credit, complete the Recovery Rebate Credit Worksheet in the instructions for Form 1040 and Form 1040-SR.”
And if you are self-employed and spent a lot of work time taking care of family members who were sick with COVID-19, check out Form 7202 to see if you can claim qualified sick and family leave equivalent credits under the Families First Coronavirus Response Act.
When Should I File My Taxes?
Tax season officially begins Feb. 12, 2021, when the IRS begins accepting and processing 2020 tax returns.
The deadline to file for your taxes, though, is the traditional April 15, 2021. Last year the filing deadline was moved to July 15 due to the pandemic.
It seems unlikely that the April 15 date will change this year, but it could. Procrastinators, take heart, though. You can always file an extension and not send in your taxes until Oct. 15.
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Update 02/01/21: This story was published on an earlier date and has been updated with new information.