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FAQ

What are the differences between the old 1040 EZ tax form and the new 1040 form?
The biggest difference is that there is no longer a 1040EZ. The new 1040 has schedules added for the totals of different income types and then the totals are transferred to the location on the second page of the new 1040.It makes the actual 1040 form look much simpler, but the underlying forms (Schedule E, Schedule C, Schedule D, Etc.) all continue but the information gets moved to a schedule (Schedule 1, 2, 3, 4, etc) as needed and then some math done and move the totals to the correct location on page 2 of the 1040.
What is the largest number of forms and schedules a person can have on their federal income tax return?
There are 89 different forms available on the IRS free-file-forms site. Depending how you count, anyway. I’m excluding “additional statement” forms (e.g.: Form 2441 Information statement), separate pages of the same form (e.g.: Form 8949, Page 1 and Page 2), different versions of the same form (e.g.: Schedule C, and Schedule C-EZ), forms normally printed together (e.g.: Form 2210 and Schedule AI), and multiple copies of the same form (e.g; Schedule SE for both spouses). I’ve also excluded Form 4868 and Form 1040-ES, which are not normally filed with the main return.I’m not sure that it is possible to use all 89 forms, as some may apply to mutually inconsistent situations. It would be tough to see how you could file Schedule EIC (Earned Income Credit) while also requiring Form 6251 (Alternative Minimum Tax); as the two have AGI requirements that do not overlap.I would guess it would be theoretically possible to use maybe 80 different forms in one filing, although such a filer would have a very, very interesting life. So would their tax preparer.
Has a draft of the IRS 1040 form with all the new tax bill changes been made? I believe a few fields will be missing for deductions no longer allowed.
Hey There!2021 Tax Return: IRS 1040 (Form 1040 Draft Released: Major Changes By IRS)Major Changes in Form 1040 for 2019After the 1040’s major overhaul last year to take into account tax reform, some taxpayers told the IRS that they found the redesigned forms confusing. In response, the agency is attempting to improve 1040 with a variety of tweaks. An overview of expected changes was presented at the IRS Nationwide Tax Forum in National Harbor, Md., in early July.One big change is the reduction of the schedules. Six new schedules that appeared in 2021 will be reduced to three for 2021. Some information will return to the base 1040 form, while some of the schedules will be combined.There will be a new line for capital gains in 1040, and IRA distributions will get their line separate from pensions and annuities. In addition to Schedule, 1 is a space to enter the “date of divorce,” which accommodates the change in the tax treatment of alimony enacted by tax reform.The option to contribute to the Presidential election campaign remains the same. The explanation which accompanies the checkbox has been restored.As noted earlier, the income reconciliation that blocks on the front page where you used to transfer your items of income from separate schedules has been moved back to the first page of the return. You’ll likely also notice that Schedule D (Capital Gains) is once again on the reconciliation schedule which was disappeared in 2018.Tax reform also created the qualified business income deduction, which gets its forms in 2021. Form 8995 will be for the simple version of the QBI deduction that is available to taxpayers below certain income thresholds, while Form 8995-A will be for taxpayers subject to the more complex QBI computation.And, to modernize, the decimal places for cents are being removed from each line. The IRS says most people around, and the extra room allows for other information to be made larger or clearer.The previous version of form 1040 consolidated the spaces for several tax credits into a line or two. That proved confusing for taxpayers because separate lines for certain credits, like the Earned Income Credit (EIC) and the additional child Tax Credit vs Tax Deduction have been returned to the form.The spaces for signatures have moved to page two. This was an issue with the revised form IRS 1040 in 2021 since many tax preparers didn’t love having a full page of figures without a signature fearing it could lead to fraud or other problems.Thanks For Your Time!
What makes it so difficult or special I have to use Turbotax Deluxe instead of Turbotax Basic software when I have 1099-R (Pension income)? If the same amount as earned income (W-2 form reported) I could use the Turbotax Basic.
Intuit TurboTax has changed some of the rules regarding what qualifies for a free return. Remember that the Tax Cut and Jobs Act of 2021 did away with 1040-EZ and 1040-A forms. Now we have a postcard 1040 with six schedules that used to be on one 1040 long form (simpler indeed!).So it’s not so simple as qualifying for a 1040-EZ or 1040-A any longer. Although you could not report a 1099-R on 1040-EZ, you could on a 1040-A. However, if you had early withdrawal penalties requiring form 5329, or if you had basis calculations to perform for prior non-deductible contributions to a traditional IRA, requiring form 8606, those required form 1040. But if you had a 1099-R with a regular distribution code 7, requiring no additional forms, you still qualified for Absolute Zero.Now that everyone uses 1040, the requirements for this years online Free Edition are as follows:W-2 incomeLimited interest and dividend income reported on a 1099-INT or 1099-DIVClaim the standard deductionEarned Income Tax Credit (EIC)Child tax creditsSituations not covered in TurboTax Free Edition include:Itemized deductions (Schedule A)Business or 1099-MISC income (Schedule C)Stock sales (Schedule D)Rental property income (Schedule E)Credits, deductions and income reported on schedules 1-6, such as the Student Loan Interest DeductionAbsent is 1099-R reporting in situations covered and not covered. So I believe the situation is still the same - if you have a distribution code 7 on your 1099-R with no early withdrawals or rollovers and conversions to Roth, etc that might require the additional forms discussed above, you should be able to use the Free Version. If you are not and have a simple distribution, you can reset the system with clear and start over. One final note on your description- the basic is in the new Live product lineup. If you’re seeing basic live, you should clear and start over unless you need live expert support.
In the US, which tax deductions are dollar for dollar and which deductions are calculated as a percentage of your tax rate?
SHORT ANSWER:As far as I know, NO deductions are actually calculated as a percentage of your tax rate.However, you might think of a tax deduction (deductions lower your taxable income) as a savings to you that is based on your marginal tax rate because your tax owed will be reduced by an amount that is based on your marginal tax rate. For example, your mortgage interest of $5,000 might reduce your taxable income by $5,000. If you are in the 25% marginal tax bracket, this will “save” you as much as 5000*0.25 = 1250 dollars.In the same vein, a tax credit (credits reduce your tax owed) saves you a dollar for every dollar of the credit. Some credits are even refundable and can increase your tax refund.The longer discussion below provides a more detailed overview of deductions and credits.LONGER ANSWER:If you look at a Form 1040, you can see it is divided into sections (each section label is bolded in the discussion below). Each section includes deductions (reductions to taxable income), credits (reductions to tax), or payments (reductions to tax owed that can also increase your refund) with common characteristics.These first deductions reduce your AGI (ADJUSTED GROSS INCOME) dollar-for-dollar. They are sometimes called “above-the-line” deductions, because they are taken above line 37 where the AGI is calculated. This is a reduction of taxable income. Their value to you, as an individual taxpayer, increases as your marginal tax bracket increases.IncomeAll tax deductions here are associated with a specific type of income, e.g., rental property expenses can be deducted from rental income. They are usually detailed on another form (called a schedule) related to that income (e.g., business income and deductions on Schedule C transferred to the 1040 line 12); only the net amount shows on the 1040.Adjusted Gross IncomeDeductions here include the Health Savings Account (HSA) and traditional IRA deductions, alimony, and education-related expenses (student loan interest, the tuition and fees deduction), and some others.The next sections include deductions that reduce your TAXABLE INCOME but that may be limited by your AGI or a percentage of your AGI (these are sometimes called “below-the-line” deductions), They are also a dollar-for-dollar reduction of taxable income. As in the first sections, the value to you, as an individual taxpayer, increases as your marginal tax bracket increases, but many items have income-related limits as well which may offset the value.Tax and CreditsHere is where you find the personal exemptions and the standard/itemized deductions. If you elect to use itemized deductions, there are some that are limited to amounts that exceed a percentage of your AGI: medical (amounts over 10% of income in 2021. as well as job and misc expenses (amounts over 2% of your income in 2017).Once a preliminary tax is calculated we get into the tax credits area - these items reduce your TAXES dollar-for-dollar (much more valuable that the reduction of taxable income). The non-refundable credits in this area can reduce your tax owed to zero (0), but not below. The value to you, the individual taxpayer, does not change with tax bracket, but your AGI may limit or eliminate a credit here.Non-refundable credits include some of the education credits, credit for child care expenses, a credit for retirement savings, the child tax credit, and credits for some energy-saving improvements made to your home.Other Taxes (there are no additional credits in this section)At the end of this section (line 63) we finally get to TAXES OWED.PaymentsThe Refundable Credits in this section are the most valuable, since not only do they reduce taxes still unpaid, but they will be REFUNDED to you if your remaining tax due is below zero. The value to you, the individual taxpayer, does not change with tax bracket, but your AGI may limit or eliminate a credit here.Refundable Credits in this section include the EIC (Earned Income Credit), the additional child tax credit, and the American opportunity credit.
Is the new IRS “same 1040 for everyone” easier for you than the old tax forms? I have looked at it and it seems far more complex for me.
As others have said, to make the 1040 “postcard” size, many lines were moved to one of 6 schedules. No lines were actually removed from the process since most of the things on those lines still apply to someone (a few are “reserved” lines for things that do not currently apply).I think the “more complicated” part comes from having less information on the 1040 itself. Under the previous, longer form, if you did a calculation on a schedule or form, the net/total amount would be carried forward clearly to the 1040. The next bit of arithmetic would then be clear (e.g., subtract line 10 from line 9). Now we have:Parts of the information on the 1040 in the right-hand column (like total earned income)Parts are on the 1040 in the central notes and instructions section (like EIC or Child Tax Credit)Parts only show on the new numbered schedule (especially Schedule 1, additions and adjustments to income)Places where things are added/subtracted only have a net figure, but often not the amount that was added/subtracted.If you file using electronic software, as many of us do, the math part done automatically. However, as we review the forms to see if they make sense, things are not as clear as they were. I would have preferred more lines that do not apply than missing lines that do apply.If you file on paper, the new process has taken something that fit compactly on 2 sheets of paper and printed it on 8 pieces with less information on each. If you file electronically, the 8 parts are printed more compactly, but still need at least 2 sheets and usually 3 or more even when those sheets contain no useful information at all…
Is there any such thing as a reverse tax return or is that just an urban legend?
David Coplin has the best answer: “{this} was a proposal by Milton Freidman in his book Capitalism and Freedom.’Colloquially “reverse tax return” is sometimes used as a synonym for the Earned Income Credit. A low-income taxpayer who qualifies can receive a refund of taxes never actually paid by that taxpayer. Earned income tax credit - WikipediaThe United States federal earned income tax credit or earned income credit (EITC or EIC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit depends on a recipient's income and number of children.There is no actual “reverse tax return” form. The taxpayer files the normal tax return but may need to attach a Schedule EITC.U.S. tax forms 1040EZ, 1040A, or 1040 can be used to claim EITC without qualifying children. To claim the credit with qualifying children, forms 1040A or 1040 must be used along with Schedule EITC attached.[1] Earned income tax credit - Wikipedia
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