IRS Releases Draft of 2019 Form 1040; Revises Drafts of Form 8895 and Form 8995-A

(Parker Tax Publishing August 2019)

The IRS released a draft of the 2019 Form 1040, in which it reduced by 50 percent the number of schedules accompanying the Form 1040. Additionally, the IRS issued revised drafts of Forms 8895, Qualified Business Income Deduction Simplified Computation; Form 8895-A, Qualified Business Income Deduction; Form 8895-A, Schedule A, Specified Service Trades or Businesses; Form 8895-A, Schedule B, Aggregation of Business Operations; and Form 8895-A, Schedule C, Loss Netting and Carryforward. IRS Website.

Background

During July, the IRS began releasing drafts and second drafts of various tax forms, including the following:

(1) Initial 2019 Draft of Form 1040;

(2) Draft 2019 Form 1040, Schedule 1;

(3) Draft 2019 Form 1040, Schedule 2;

(4) Draft 2019 Form 1040, Schedule 3;

(5) Draft 2019 Form 1040, Schedule A;

(6) Revised Draft - Form 8995, Qualified Business Income Deduction Simplified Computation;

(7) Revised Draft Form 8995-A, Qualified Business Income Deduction;

(8) Draft Form 8895-A, Schedule A, Specified Service Trades or Businesses;

(9) Draft Form 8895-A, Schedule B, Aggregation of Business Operations;

(10) Draft Form 8895-A, Schedule C, Loss Netting and Carryforward; and

(11) Draft Form 8895-A, Schedule D, Special Rules for Patrons of Agricultural or Horticultural Cooperatives.

Draft 2019 Form 1040

The draft 2019 Form 1040 has some major changes from the 2018 Form 1040. While the 2018 Form 1040 had six schedules for an individual to possibly contend with (Schedule 1, Additional Income and Adjustments to Income; Schedule 2, Tax; Schedule 3, Nonrefundable Credits; Schedule 4, Other Taxes; Schedule 5, Other Payments and Refundable Credits; and Schedule 6, Foreign Address and Third Party Designee), the draft Form 1040 has only three schedules (Schedule 1, Additional Income and Adjustments to Income; Schedule 2, Additional Taxes; Schedule 3, Nonrefundable Credits).

On the draft Form 1040, a line was added on the front page for a taxpayer's foreign country address and a new section was added on page 2 for the name and contact information of a third party designee other than a paid preparer, thus eliminating the need for Schedule 6 of the 2018 Form 1040. Additionally, where capital gains and losses were reported on Schedule 1 of the 2018 Form 1040, they are now reported on the front page of the draft Form 1040. Where many of the tax credits were reported on the 2018 Schedule 4, they have now been moved to either page 2 of the draft Form 1040 or to the revised version of the draft Schedule 2, Additional Taxes. Where the qualified business income deduction was reported on page 2 of the 2018 Form 1040, it is now reported on page 1 of the draft Form 1040.

Revised Draft of Form 8895 and 8895-A

While the qualified business income deduction in Code Sec. 199A was first available in 2018, there were no forms on which to calculate the deduction. The IRS issued schedules in IRS Pub. 535 Draft Worksheet, upon which taxpayers could calculate the deduction for their returns. Taxpayers are supposed to keep those worksheets as backup for the deduction taken on the return. The IRS announced that new forms would be available for 2019 tax returns.

In April, the IRS released the first drafts of the new forms, Form 8995 and Form 8995-A, that must be filed when taking the qualified business income deduction under Code Sec. 199A. The IRS has now revised that first round of draft forms by making cosmetic changes to the forms. For example, the draft Form 8895-A released in April was six pages and was composed of four parts and four schedules: Part I, Trade, Business, or Aggregation Information; Part II, Determine Your Adjusted Qualified Business Income; Part III, Phased-in Reduction; and Part IV, Determine Your Qualified Business Income Deduction. The newly released draft Form 8895-A still has the four parts that the earlier draft version had, but the schedules in the earlier form are now stand alone schedules.

For a discussion of the qualified business income deduction, see Parker Tax ¶151,100 through ¶157,100.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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