The Promise of the 1040 Postcard: A Missed Opportunity
The form 1040 is the form most taxpayers use to file their annual tax returns. In addition to supplying basic information about the taxpayer and his/her family, it acts as an overview or listing of various types of income, deductions, and exemptions. It also acts as an index to other necessary schedules which support the items on each line.
Of course we CPA’s, other tax professionals and the general public would welcome tax simplification and clarification of the tax laws and regulations for us and our clients. I was hoping that the “postcard” was a metaphor for real tax SIMPLIFICATION, instead it seems to be an abridged form with six brand new schedules.
A postcard may be a possible tool for those tax returns that can be filed using either the form 1040EZ or 1040A.
Right now, the postcard as proposed reflects form over substance. Alternatively, if our tax legislators could embrace block chain technology to automate our tax system it would really help ease the burden of compliance. The IRS and the states already receive documentation of many forms of income and some expenses and cost basis from third party reporters each year, via W-2, 1099, 1098, etc. How great would it be if our tax system could utilize technology to create a shell for the current year’s tax return and ask us to supply those additional items which help reduce our tax burden?
When we CPA’s and tax professionals work with our clients we assess their financial needs and concerns; the tax forms are merely a vehicle to submit information to the IRS and other authorities.
For example the work we accountants do with our individual clients is helping them understand and make informed decisions on:
- Tax planning
- Saving for retirement
- Saving for education costs
- Their withholding and estimated tax payment(s)
- Recordkeeping
- New tax laws
Generally, the new format may initially cause confusion for some taxpayers who self-prepare; they may miss out on deductions that will now be consolidated onto various backup schedules. For 2017 and prior, many deductions are shown as line items on the face of the form which tends to call attention to them.
We CPA’s and tax professionals are still deciphering various code sections of the Tax Cuts & Jobs Act while waiting for clarification we were told would come in June. We are explaining the new laws and informing our small business and individual clients about the probable effect of this law on their future tax liability. We are concentrating on the substance of the law rather than the format of the IRS forms.