The 2018 Form 1040 replaces prior year Forms 1040, 1040A and 1040EZ. The 2018 Form 1040 uses a building-block approach that allows individuals to file only the schedules they need with their federal tax return. Many people will only need to file Form 1040 and no schedules.

Electronic filers may not notice these changes as the tax software will automatically use their responses to complete the Form 1040 and any needed schedules. For taxpayers who filed paper returns in the past and are concerned about the 2018 changes, this may be the year to consider the benefits of filing electronically.

While commonly used lines on the prior year form are still on the 2018 Form 1040, other lines are now Schedules 1 through 6 and organized by category. The six new numbered schedules are in addition to the existing schedules, such as Schedule A, Itemized Deductions, or Schedule C, Profit or Loss from Business.

Here’s a guide to help taxpayers determine what schedules they may need to file with the 2018 Form 1040:

Schedule 1, Additional Taxes and Adjustments to Income

• Taxpayers use this schedule to report income or adjustments to income that can’t be entered directly on Form 1040. This includes capital gains, unemployment pay, prize money, and gambling winnings. This also includes the student loan interest deduction, self-employment tax, or educator expenses.

Schedule 2, Additional Tax

• This scheduled is used by taxpayers in specific situations. Those who owe alternative minimum tax or need to make an excess advance premium tax credit repayment will file this schedule.

Schedule 3, Nonrefundable Credits

• Taxpayers use this schedule to report nonrefundable credits other than the child tax credit or the credit for other dependents. These include the foreign tax credit, education credits, and general business credit.

Schedule 4, Other Taxes

• Taxpayers use this schedule to report certain taxes. These include self-employment tax, household employment taxes, tax-favored accounts, and additional tax on IRAs and other retirement plans.

Schedule 5, Other Payments and Refundable Credits

• Taxpayers who claim specific refundable credits or have other payments withheld will file this schedule. These other payments include:
  • Payment made when the taxpayer requests an extension.
  • Payment of excess social security.

Schedule 6, Foreign Address and Third-Party Designee

• Taxpayers use this schedule to enter a foreign address. Anyone who wants to allow someone other than their paid preparer to discuss their tax return with the IRS will also file Schedule 6.

More information:
About the Form 1040, U.S. Individual Income Tax Return
Questions and Answers About the 2018 Form 1040
Get Ready for Tax Filing Season
Publication 17, Your Federal Income Tax for Individuals

The December 2017 Tax reform legislation affects almost every taxpayer. The IRS is working closely with partners in the tax return preparation and tax software industries to prepare for tax reform affecting tax year 2018. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns.

As people prepare to file their 2018 tax returns this year, they can visit IRS.gov for answers to their questions about tax reform. Here are several of the resources that will help taxpayers find out how this law affects them:

Tax reform provisions that affect individuals
This is the main tax reform page with information for individual taxpayers. It includes dozens of links to more information on topics from withholding and tax credits to deductions and savings plans.

Tax reform basics for individuals and families
This publication provides information to help individual taxpayers understand the Tax Cuts and Jobs Act and how to comply with federal tax return filing requirements.

Tax reform resources
On this page, taxpayers can find helpful products including news releases, tax reform tax tips, revenue procedures, fact sheets, FAQs and drop-in articles.

Steps to take now to get a jump on next year’s taxes
This page has dozens of resources and tools that people can visit now or any time before they file their 2018 tax returns.

Paycheck Checkup
This page has information for people doing a Paycheck Checkup to see if they’re withholding the right amount of tax from their paychecks. Taxpayers can perform a Paycheck Checkup at the beginning of 2019 to make sure their withholding is correct for the rest of the year.

IRS Withholding Calculator
One way taxpayers can do a Paycheck Checkup is to use the Withholding Calculator. Checking withholding can help taxpayers protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time.

Taxpayer Advocate
The Taxpayer Advocate Service’s Tax Reform Changes website, available in Englishand Spanish, explains what is changing and what is not this year for individuals. Its interactive information can be reviewed by tax topic or line by line using a Form 1040 example and is updated to show the new 2018 Form 1040 references.

Tax reform
The main tax reform webpage on IRS.gov features information for individuals, but also takes users directly to info for people who are self-employed. It is also a great resource for anyone who does taxes or accounting for a business or charity.

Share this tip on social media — #IRSTaxTip: Individuals can find answers to their questions about tax reform on IRS.gov. https://go.usa.gov/xE53m

Last year’s Tax Cuts and Jobs Act made significant changes to the tax law that affect small businesses. The IRS posted two new resources on IRS.gov to help taxpayers understand how these changes affect their bottom line.

Here are some details about these resources:

New publication: Tax reform: What’s new for your business
This electronic publication covers many of the TCJA provisions that are important for small and medium-sized businesses, their owners, and tax professionals to understand. This concise publication includes sections about:

• Corporate tax provisions
• Qualified business income deduction
• Depreciation: Section 168 and 179 modifications
• Business-related losses, exclusions and deductions
• Business credits
• S corporations
• Farm provisions

New webpage: Tax Reform for Small Business
This one-stop shop highlights important tax reform topics for small businesses. Users can link to several resources, which are grouped by topic:

• New deduction for qualified businesses
• Withholding
• Deductions, depreciation and expensing
• Employer deduction for certain fringe benefits
• Like-kind exchanges
• Real estate rehabilitation tax credit
• Changes in accounting periods and methods of accounting
• Corporate methods of accounting
• Blended federal income tax
• Employer credit for paid family and medical leave
• Farmers and ranchers

More information:
Tax Reform Small Business Initiative

Share this tip on social media — #IRSTaxTip: New IRS resources on IRS.gov help businesses understand tax reform. https://go.usa.gov/xE35v

(All individual tax changes expire on December 31, 2025)

(Final regulations to be issued by United States Treasury Department)

KEY BUSINESS TAX CHANGES FOR 2018

The IRS urges taxpayers who make payments or receive payments to check out Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). The newly revised publication helps taxpayers understand how tax reform affects backup withholding. Backup withholding can apply to most kinds of payments reported on Form 1099.

Last year’s Tax Cuts and Jobs Act dropped the backup withholding tax rate from 28 percent to 24 percent.
This affects taxpayers who make and receive payments. Taxpayers who make payments are known as “payers,” while those who receive payments are known as “payees.”

Backup withholding can apply to payments such as:

• Interest payments
• Dividends
• Patronage dividends, but only if at least half of the payment is in money
• Rents, profits or other income
• Commissions, fees or other payments for work performed as an independent contractor
• Payments by brokers and barter exchange transactions
• Certain portions of payments by fishing boat operators
• Payment card and third-party network transactions
• Royalty payments
• Gambling winnings that aren’t subject to regular gambling withholding
• Taxable grants and agriculture payments

Here are some situations when a payee may be subject to backup withholding They:

• Fail to give a taxpayer identification number to the payer
• Give an incorrect TIN
• Supply a TIN in an improper manner
• Underreport interest or dividends on their income tax return
• Fail to certify that they’re not subject to backup withholding for underreporting of interest and dividends

To stop backup withholding, the payee must correct any issues that caused it. They may need to give the correct TIN to the payer, resolve the underreported income and pay the amount owed, or file a missing return.

A TIN can be a:

• Social Security number
• Employer identification number
• Individual taxpayer identification number
• Adoption taxpayer identification number

The newly revised Publication 1281 is packed with useful information. It will help any payer who is required to impose backup withholding on any of their payees.

More information:

• The Backup Withholding page
• Publication 505, Tax Withholding and Estimated Tax
• Publication 1335, Backup Withholding Questions and Answers
• Form 945, Annual Return of Withheld Federal Income Tax
• Publication 15, Employer’s Tax Guide

Share this tip on social media — #IRSTaxTip: Newly revised publication helps taxpayers understand changes to backup withholding https://go.usa.gov/xPmgQ

WASHINGTON — The Internal Revenue Service today urged taxpayers who requested the six-month filing extension to double check their tax returns and file on or before the mid-October deadline. IRS e-file and Free File are excellent filing options and are still available.

More than 14 million taxpayers filed for an extension in 2018 and, although Oct. 15 is the last day for most people to file, some may have more time. They include:

• Members of the military and others serving in combat zonelocalities still have more time. They typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.
• Taxpayers in several disaster area localities who already had valid extensions now have more time to file. Currently, taxpayers in parts of California, North Carolina, South Carolina and Texas qualify for this relief. For details, see the disaster relief page on IRS.gov. However, like other extension filers, these taxpayers were required to pay what they owed by April 18, which was this year’s filing deadline for 2017 tax returns.

Recordkeeping and Adjusted Gross Income

As a reminder, taxpayers should keep a copy of their tax returns and supporting documents for a minimum of three years. It’s more important than ever for taxpayers to have prior-year tax returns available as the IRS made changes last year to protect taxpayers and authenticate their identity. To authenticate their identities, taxpayers will need to enter either of two items: their prior-year AGI or their prior-year self-select PIN and their date of birth. If married filing jointly, both taxpayers must authenticate their identities with this information.

Extension filers should also plan ahead if they are using a software product for the first time as using an electronic PIN is no longer an option.

Those who lack access to their prior-year tax returns can go to irs.gov/transcript and use Get Transcript Online or Get Transcript by Mail to get last year’s AGI.

A ‘Paycheck Checkup’ is important

The Tax Cuts and Jobs Act, enacted in December, made major changes to the tax law. Any of these far-reaching changes could have an impact on the refund many taxpayers will receive when they file their 2018 tax return.

The agency urges taxpayers on extension to complete a “Paycheck Checkup” now so that if a withholding amount adjustment is necessary, there’s more time for withholding to take place during the last quarter of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax – so more tax will have to be withheld from each remaining paycheck.

Withholding Calculator

This handy tool, available on IRS.gov, will help taxpayers determine if they should complete a new Form W-4 and, if so, what information to enter on a new Form W-4 for necessary withholding adjustments. It’s helpful if taxpayers have their completed 2017 tax return available when using the Withholding Calculator to estimate the amount of income, deductions, adjustments and credits to enter. Filers also need their most recent pay stubs to compute the employee’s withholding taken from their pay so far this year.

Quick and easy payment options

IRS Direct Pay offers taxpayers a fast and easy way to pay what they owe. Direct Pay is free and allows individuals to securely pay their tax bills or make quarterly estimated tax payments online directly from checking or savings accounts without any fees or pre-registration.

Taxpayers can also pay by debit or credit card. While the IRS does not charge a fee for this service, the payment processer will. Other payment options include the Electronic Federal Tax Payment System (enrollment is required) and Electronic Funds Withdrawal which is available when e-filing. Taxpayers can also pay what they owe using the IRS2Go mobile app. Those choosing to pay by check or money order should make the payment out to the “United States Treasury.”

Individual taxpayers can go to IRS.gov/account and login to view their balance, payment history, pay their taxes and access tax records through Get Transcript. Before setting up an account, taxpayers should review Secure Access: How to Register for Certain Online Self-Help Tools to make sure they have the information needed to verify their identities.

WASHINGTON — The Internal Revenue Service today urged high-income taxpayers and those with complex tax returns to check their withholding soon to avoid an unexpected tax bill or penalty when they file their 2018 federal income tax return in 2019.

The Tax Cuts and Jobs Act, the tax reform legislation passed in December, made major changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the Child Tax Credit, limiting or discontinuing certain deductions and changing tax rates and tax brackets.

Any of these far-reaching changes could have a big impact on the tax refund or balance due on the tax return taxpayers file next year. That’s why the IRS encourages every employee to do a “paycheck checkup” soon to check that they are having the right amount of tax taken out of their pay. The IRS Withholding Calculator and Publication 505, Tax Withholding and Estimated Tax, can help.

A checkup is especially important for those with high incomes and complex returns because they are often affected by more of these changes than people with simpler returns. This is also true if they also make quarterly estimated tax payments to cover other sources of income or are subject to the self-employment tax or alternative minimum tax.

Changes that affect high-income taxpayers

For 2018, the standard deduction nearly doubled to $24,000 for joint filers and $12,000 for singles. There were also numerous changes to itemized deductions, including:

– A $10,000 cap on deductions for state and local property, sales and income taxes.

– New limits on deductions for some mortgage interest and home equity debt.

– Higher limits on the percent of income a taxpayer can deduct as charitable contributions.

– No deduction for those miscellaneous expenses that, in prior tax years, had to exceed 2 percent of a filer’s income to qualify. These included investment expenses and un-reimbursed employee expenses such as travel, meals, entertainment and uniforms.

Many who itemized in the past may find they’ll pay less tax in 2018 by taking the standard deduction.

Do a ‘paycheck checkup’ soon

Checking and adjusting how much tax is withheld from pay now can prevent an unexpected tax bill and penalties next year at tax time. It can also help taxpayers avoid a large tax refund, if they’d prefer to have their money in their paychecks throughout the year.

Taxpayers need to adjust their withholding as soon as possible for an even, consistent amount of withholding throughout the rest of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax – so more tax will have to be withheld from each remaining paycheck.

Whether someone uses the Withholding Calculator or Publication 505, it’s helpful to have their completed 2017 tax return handy to help estimate the amount of income, deductions, adjustments and credits to enter. They’ll also need their most recent pay stubs to help compute their withholding to date.

Employees can use the results from the Withholding Calculator or Publication 505 to help determine if they should complete a new Form W-4, Employee’s Withholding Allowance Certificate, and what information to include on the form.

Though primarily designed for employees who receive wages, the Withholding Calculator can also be helpful to some taxpayers receiving pension and annuity income. Recipients of pensions and annuities can change their withholding by completing Form W-4P  and submitting it to their payer.

All taxpayers should remember that if their personal circumstances change during the year, they should re-check their withholding.

Taxpayers who change their withholding for 2018 should recheck their withholding at the start of 2019. This is especially important for taxpayers who reduce their withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. So, if taxpayers don’t submit a new Form W-4 for 2019, their withholding might be higher or lower than intended. To help protect against having too little withheld in 2019, taxpayers should check their withholding again early in 2019.

People with more complex situations may need to use Publication 505

Taxpayers with more complex situations might need to use Publication 505 instead of the Withholding Calculator. This includes employees who owe self-employment tax, the alternative minimum tax or tax on unearned income from dependents. It can also help those who receive non-wage income such as dividends, capital gains, rents and royalties. The publication includes worksheets and examples to guide taxpayers through these special situations.

In some of these situations, a household may make estimated tax payments but also have tax withheld by an employer. It’s important to account for both amounts when figuring how much tax to have an employer withhold. Publication 505 helps taxpayers include estimated tax payments; the Withholding Calculator does not.

Adjusting withholding

If an employee determines they should adjust their withholding, they should complete a new Form W-4 and submit it to their employer as soon as possible. Some employers have an electronic method to update a Form W-4.

If an employee has a change in personal circumstances that reduces the number of withholding allowances they can claim, they must submit a new Form W-4 within 10 days of the change with the correct number of allowances.

As a general rule, the fewer withholding allowances an employee enters on the Form W-4, the higher their tax withholding will be. Entering “0” or “1” on line 5 of the Form W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state’s department of revenue to learn more.

Additional information

The Withholding Calculator does not request personally identifiable information such as name, Social Security number, address or bank account number. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone and be alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered in it.

The calculator and Publication 505 are not tax-planning tools. Taxpayers needing advice regarding the new tax law and their personal situation should consult a trusted tax professional.

Taxpayers can get more information on these topics at www.irs.gov/withholding. Additionally, IRS.gov/getready has information about steps taxpayers can take now to get a jump on next year’s taxes, including how the new tax law may affect them.

WASHINGTON — The Internal Revenue Service issued proposed regulations today for a new provision allowing many owners of sole proprietorships, partnerships, trusts and S corporations to deduct 20 percent of their qualified business income.

The new deduction — referred to as the Section 199A deduction or the deduction for qualified business income — was created by the Tax Cuts and Jobs Act. The deduction is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year.

The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the lesser of 20 percent of their qualified business income plus 20 percent of their qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.

Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited. Those limitations are fully described in the proposed regulations.

Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.

In addition, Notice 2018-64, also issued today, provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction. More information may be found at www.IRS.gov.

Taxpayers may rely on the rules in these proposed regulations until final regulations are published in the Federal Register.

Written or electronic comments and requests for a public hearing on this proposed regulation must be received within 45 days of publication in the Federal Register.

IR-2018-160, Aug. 3, 2018

WASHINGTON – The Internal Revenue Service issued guidance today on new tax law changes that allow small business taxpayers with average annual gross earnings of $25 million or less in the prior three-year period to use the cash method of accounting.

The Revenue Procedure outlines the process that eligible small business taxpayers may obtain automatic consent to change accounting methods that are now permitted under the Tax Cuts and Jobs Act, or TCJA.

The TCJA, enacted in December 2017, expands the number of small business taxpayers eligible to use the cash method of accounting and exempts these small businesses from certain accounting rules for inventories, cost capitalization and long-term contracts.  As a result, more small business taxpayers will be allowed to change to cash method accounting starting after Dec. 31, 2017.

The Department of the Treasury and the Internal Revenue Service welcome public comments on future guidance. For details on submitting comments, see the Revenue Procedure.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.