Schedule Se 2020 - The Internal Revenue Service (IRS) has released Form 1040 for the US personal income tax return. There are several significant changes to the proposed form for the 2020 tax year: the tax return you will file in 2021. And... postcard size, it's not. Let's get right in.
Virtual currency. At first glance, the yield top doesn't look much different than the 2019 tax revenue: one interesting exception: the demand space for virtual currency. A new cryptocurrency compliance measure for taxpayers was introduced in 2019 in the form of a checkbox at the top of Schedule 1, Additional Income and Income Adjustments (downloadable as PDF). Schedule 1 is used to report income or adjustments to income that cannot be entered directly on the first page of Form 1040.
Schedule Se 2020
Last year I noted that the IRS did not hide its belief that taxpayers were not properly reporting cryptocurrency transactions. For tax years 2013 through 2015, a dip in IRS data was shown when the IRS compared data collected from Forms 8949.
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, which is electronically archived, found that in 2013 just 807 people made transactions using an asset description associated with Bitcoin; In 2014 that number was just 893; And in 2015, this number decreased to 802.
Taxpayers who are not required to file a Schedule 1 for any other purpose may remember that I am not a fan of that position because they may not know that they need to file a Schedule 1 to answer this question if applicable. Yes, tax software talks about taking it, but what if they don't? Or what if the taxpayer fills the form by hand? Or if the tax preparers don't think to ask? I said at the time, "I think that's something the IRS should look into." Clearly, they did.
I also noted at the time that "it's clear the IRS is taking reporting on cryptocurrencies seriously." The new level of demand on virtual currency signals, more than ever, that I think the IRS is taking action.
Standard deductions and dependents. Nothing to see here. The information required and the layout are often the same.
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Charitable contributions. Generally, no reference to charitable contributions appears until Schedule A. However, because of the CARES Act, charitable cash contributions of up to $300 are temporarily tax-deductible. That means you don't have to itemize to get those deductions, something many taxpayers have had to contend with as the standard deduction is increased under the Tax Cuts and Jobs Act (TCJA).
Income products. Outside of income adjustments, there is not much difference in income reconciliation. We have to get used to another row number for taxable income (temporarily row 15).
Taxes, credits and deductions. Page Two of Your 1040 Form – Your Tax, Withholding, and What You Actually Pay (or Repay) A lot changes in 2020. One thing that will immediately catch your eye is the reliable "W-2 and 1099" row that excludes federal income tax, separated into separate lines for Forms W-2, 1099 and "Other." This suggests a greater degree of control for the self-employed and gig workers (I could be wrong).
Trigger controls. We've talked about this for a while now, but now let's look at how trigger tests are reported. There is a separate reconciliation table on the second page of your 1040 form. The draft notes "see instructions" for details, but those instructions have not yet been published.
What Are Tax Schedules?
Amount due. Usually, calculating the amount you owe is pretty simple: it's taxes minus receivables and payables. But there's a new line for 2020:
Schedule H and Schedule SE files, line 37 do not represent all taxes for 2020. See Table 3, row 12e and related instructions for details.
That postponement? Under the CARES Act, employers can defer filing and paying the employer's share of Social Security taxes. The deferral applies to deposits and payments of the employer's share of social security tax for the period beginning 27 March 2020 and ending 31 December 2020. The deadline is December 31, 2022. What does this have to do with the 1040 model? This relief also applies to self-employed workers.
There are more changes to come since the IRS released a series of draft returns, but this gives you an idea of the direction things are headed (spoiler alert: more complicated, not less).
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A note of caution: this is a draft, not the real thing yet. That is, the IRS reminds you, "Do not file draft forms and do not rely on draft forms, instructions and releases for filing." The IRS cautions that "from time to time unforeseen issues arise or legislation is enacted," which means the form will be very different from the current final version. Things can change and if we've learned anything from 2020, they will.
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