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Proposed 1040 Is Postcard-Sized, but Attached Schedules Retain Complexity

By:
Chris Gaetano
Published Date:
Aug 22, 2018

1040 postcard

A proposed change to the Form 1040, designed to make filing taxes easier, might paradoxically complicate the process for certain taxpayers. Released in late June, the new form is physically smaller than the current one, as the Treasury Department said it is meant to be the size of a postcard. This, according to Treasury Secretary Steven Mnuchin, will make filing easier.

But in order to fit onto the postcard-sized space, more than half of the 78 line items on the current Form 1040 would be moved to six separate schedules that would need to be attached to the new form. This maneuver has led Barry S. Kleiman, a member of the NYSSCPA’s Taxation of Individuals Committee, to call the ostensibly simpler form “a bit of a farce.”

“They basically just took the information on the two-page existing 1040 and moved it to six other schedules. ... So I just feel like it’s a little bit of a smoke screen,” he said.

George R. Rubino, chair of the Taxation of Individuals Committee, made a similar point: Someone with a very basic return might find the new form easier, but anyone with a remotely complex situation likely won’t find relief. In fact, the new form might lead to conflicts with clients, he noted.

“The perception is that returns will be easier to prepare, so clients may be expecting reduced fees, which may not necessarily be the case,” he said, especially in the first year when everyone is getting used to the new form. “And there [are] still a lot of supporting schedules that may not be getting the attention that is properly due.”

Daniel Lahage, another member of the Taxation of Individuals Committee, said that the proposed form could indirectly add complexity due to the widening gulf between state and federal tax systems caused by states that enacted laws in the wake of the Tax Cuts and Jobs Act. New York is one such state—it formally decoupled its tax code from the federal government’s in the spring, in legislation arising out of the state budget.

“This is going to be the most complicated thing here: We have to go through and view regulations in each and every state to see if they will match what’s going on with the federal [ones],” he said.

Yet James P. Bressingham, chair of the Society’s Relations with the Internal Revenue Service Committee, remained unconcerned about the form’s accompanying schedules. He explained that because most people don’t take itemized deductions—only the standard deduction—a smaller form will actually be a lot easier.

cgaetano@nysscpa.org

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