The voices of Tax Policy Center's researchers and staff
When tax filing season begins in a few weeks, you’ll likely hear senior Trump Administration officials and some congressional Republicans boasting yet again about how the 2017 Tax Cuts and Jobs Act helped them achieve their long-standing goal of fitting the IRS Form 1040 on to a postcard.
At least they did if your idea of a postcard is a two-sided 5x7.5 inch piece of paper. And if you are willing to ignore the additional six schedules that IRS form writers had to invent to squeeze the 2018 Form 1040 on to that oversized postcard.
The postcard is little more than a public relations stunt. It is, one might say, the border wall of tax forms—a largely symbolic waste of taxpayers’ money aimed at convincing the public that government has done something that it in fact has not done.
Sleight of hand
While taxpayers had to pay IRS staffers to redesign the 1040, this sleight-of-hand postcard will not make their tax filing easier. In fact, by at least one measure, it will be harder: The instructions for the 2018 Form 1040 are 117 pages, 10 pages longer than in 2017.
The tax form writers did legitimately drop a few lines. For example, the TCJA repealed personal exemptions, so they deleted those lines. Mostly, however, they merely moved lines and boxes from the prior 1040 to one of the new schedules.
For instance, the first page of the old 1040 included 17 lines for listing different kinds of income. The new 1040 preserves only seven of those lines for reporting wages, interest, dividends, and various forms of retirement income.
Does this mean you no longer need to tell the IRS about your capital gains, business income, or alimony? No such luck. But instead of putting the information on the1040 itself, you’ll add it to Schedule 1 and then move it all to line 6 on the 1040.
The new forms do the same with adjustments to income. They used to be on the 1040, now they are on Schedule 1. Similarly, non-refundable credits landed on Schedule 3 and self-employment taxes were exiled to Schedule 4.
These, of course, are in addition to the old schedules A, B , C, D and the like that have not gone anywhere. Nor have any of the other forms for reporting Health Savings Account contributions, foreign tax credits, child care expenses, and on and on.
How much simpler is this? Not at all. How much time have you saved? None. In fact, if you are one of the last Americans doing a return by hand, this makes filing slightly more complicated since you now must transfer numbers from the new schedules to the 1040—a new opportunity to make a mistake.
Indeed, that number-shuffling gives rise to instructions like this (from Schedule 1): “Combine the amounts in the far right column. If you don’t have any adjustments to income, enter here and include on Form 1040, line 6. Otherwise, go to line 23.”
The complicated simplification story
The Administration is using these gimmicks to try to tell an overly-simplified simplification story. The real post-TCJA tax filing tale is more complicated.
On one hand, the TCJA did make tax season easier for the 27 million filers who would have itemized under prior law but now can take advantage of a much larger standard deduction. For that, the president and congressional Republicans deserve credit.
On the other hand, the IRS eliminated the old 1040 A and 1040 EZ, which were easy ways for people with very simple tax situations to file. Now those folks, many of whom had only wage income and claimed only the standard deduction, will have to use the new, more complicated (for them) 1040.
Still not a postcard
Then there are those who want to claim the TCJA’s special 20 percent deduction for pass-through business income. The tax break is sweet. Understanding the rules for claiming it? Not so much. Similarly, millions more households will be eligible for the expanded Child Tax Credit. Their taxes will be reduced, but they’ll also have to file for the first time a Schedule 8812.
Of course this whole post card business is a little 1970s anyway. These days, more than nine in 10 of us file electronically and the software we, or our preparers use, is entirely indifferent to the size of the Form 1040. Besides, how many people under 50 even have seen a postcard?
Oh, one other thing: According to US Postal Service regulations, that 5x7.5 sheet of paper does not qualify as a postcard. It still is too big.
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Mark Lennihan, File/AP Photo