Shrinking the tax form but increasing the preparation time and cost

Shrinking the tax form but increasing the preparation time and cost

As you might remember the President said that one of the benefits of the tax reform bill he signed last December would be to allow the filing of taxes on a postcard. He didn’t say what the size of the postcard would be but he did promise that it would be very easy to complete.

Well, a draft copy of the Trump Administration’s proposed new 1040 income tax form was released this past week to the press.

Instead of the old 2-page form it is not to be a double-sided half page. OK, so that could be counted as a post card.

But exactly how do you fill in the blanks on this new form? Will it be the simplification the President promised?

Well, for small business owners the answer can be found in this description by Steve Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center

But Steve Rosenthal, senior fellow at the nonpartisan think tank Urban-Brookings Tax Policy Center, has said, “Reporting business income on the new Form 1040 will be a mess.”

Here is Mr. Rosenthal’s description of what it will take for a small business to file that postcard form:

Pass-through businesses will have to file their profits and losses on a separate page, Schedule 1, after calculating those figures on yet another separate form, Schedule C. They’ll also have to wrap that business income into their total income on the new, shortened 1040. In addition, they’ll have to report their self-employment taxes on a different form, Schedule 4. On top of all that, taxpayers must separately report their business income that qualifies for a 20 percent deduction, as well as non-qualified business income — line 9 of the new 1040 refers to separate instructions. As a result, a taxpayer will need to separately calculate both qualified and non-qualified business income.

Clearly, the tax filing process will be more complex and confusing. There is no simplification as promised.  And be ready for tax preparers to spend more time, and your money, completing all the paperwork required.

However, the President can claim that he fulfilled his promise that a tax return can be filed on a postcard even if it is 5” X 8”.

But wait. When was the last time you actually mailed in your tax return?