COVID-19, Non COVID Tax Form Changes Highlighted By IRS Officials
Changes have been made in tax forms for the 2020 filing season IRS officials pointed out in a recent webinar.
The changes take into account both COVID-19 and non-COVID considerations.
Alterations to Form 1040
In alterations to Form 1040 for 2020, there is a change to the third-party designee checkbox.
At the very bottom of the main 1040 form in the second page in the section of the return for paid preparer use only there was a box a tax professional could check if the paid preparer was the third-party designee.
That box has been taken out of the paid preparer use only section and instead, all third-party designations will be made in the third-party designee section of the return.
A virtual currency question has been added to Form 1040. It used to be on Form 1040 Schedule 1.
The line for estimated tax payments has been put back on Form 1040. For 2019, the estimate was found on Form 1040 Schedule 3.
1040 for 2020 Includes New Line for Withheld Taxes
Also new for 2020: W-2 withholdings will have its own line.
Line 25 has been reformatted to include separate lines to report withholding from W-2s and Forms 1099. Line 25a is for withholding from Form W-2 and line 25b is for withholding from Form 1099.
Form 1040 has been reformatted, as well, to include a new line for the above the line charitable contributions deduction for non-itemizers.
The deduction is up to $300 for tax year 2020.
Line 10b now reads charitable contributions.
1040 for 2020 Includes Changes for Recovery Rebate Credit
Line 30 is new, for the Recovery Rebate Credit.
A worksheet included in the Form 1040 instructions and in tax preparation software has been created to help taxpayers figure their Recovery Rebate Credit after accounting for any economic impact payments they received.
New 2020 Form 7202 for Self-Employed Sick Leave Credit
With a brand-new Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, the self-employed can calculate new refundable credits for paid sick leave or expanded family and medical leave for specified reasons related to COVID-19 under the Families First Coronavirus Response Act (FFCRA),
Part I of Form 7202 gives the sick leave credit and Part II figures the family leave credit, and the sum of the sick leave credit and if any family leave credit will be included on line 12b of the Schedule 3 that is filed with the Form 1040.
Form 7202 had been filed separately by each taxpayer with net self-employment earnings. So, it is possible on a married filing joint return that we could see two Forms 7202s for each spouse who is self-employed and eligible for the credits.
In accord with that, a 1040 Schedule H form titled Household Employment Taxes, and that Schedule H was significantly revised for 2020 for reporting the credit for qualified sick and family leave wages.
2020 Changes for Schedule SE
On Schedule SE (Self Employment). the short version has been eliminated.
All filers are beginning in 2020 of Schedule SE will use the method of calculating self-employment tax found in Part I of the revised Schedule SE.
Schedule SE will no longer allow those joint return filers to use a single Schedule SE, each spouse with self-employment income subject to the tax must complete their own Schedule SE.
A new Part III of Schedule SE will allow filers to figure the maximum amount of self-employment tax that they may defer.
The entire amount of the self-employment tax will still be reported on Schedule 2 of the 1040. It will be on line four of Schedule 2.
The amount figured, if any, in the new Part III of the Schedule SE will be used in a worksheet in the 1040 instructions or software to figure the total amount of self-employment tax and any household employment taxes from Schedule H of the 1040 that are elected to be deferred, instead of being due with the original return due date this year.
2020 Tax Form Changes for Small Employers
Form 8881 has been given a new title, the Credit for Small Employer Pension Plans Startup Costs and Auto-Enrollment, to reflect a new Internal Revenue Code section is 45T based on a section of the SECURE Act.
The law increases the business tax credit for plan startup costs. The tax credit will increase from the current cap of $500 to up to $5,000 in certain circumstances. Additionally, small business owners are now eligible for a further $500 tax credit for three years for those plans that add that auto-enrollment feature for new employees.
Start-up costs and auto-enrollment for small employer pension plans have been added to the 2020 version of the form.
2020 Tax Form Changes for Foreign Matters
There is a brand-new Schedule NEC (Not Effectively Connected) for the tax on income not effectively connected with the U.S.
Schedule NEC often is in tandem with Schedule OI (Other Information), which among other things, collects information needed for the determination of the eligibility for certain tax benefits on the Form 1040-NR.
As an example, in item L of the new Schedule OI, taxpayers report income that may be exempt from income tax under a specific U.S. income tax treaty with a foreign country.
Form 1040-NR-EZ, a shortened Form 1040-NR (Non-Resident), has been eliminated.
To listen to a recording and read a transcript, click:
By Ted Knutson, Senior News Editor