Earlier this summer, the IRS and the Treasury Department unveiled a new postcard-sized 1040, which aims to replace the current 1040, 1040A and 1040EZ for next season. The IRS says the postcard form omits all but essential information and relegates the rest to supplemental schedules.

This could be a sea change for filing, but have clients noticed?

“So far, I’m not sure my clients are even aware that a preliminary form has been released,” said Enrolled Agent Laurie Ziegler of Sass Accounting, Saukville, Wisconsin. “Once it is finalized, we’ll educate them via our electronic newsletter as well as our website.”

“Clients are saying and asking nothing yet,” said John Dundon, an EA and president of Taxpayer Advocacy Services in Englewood, Colorado. “I plan to inform them at the appropriate time that preparation fees are based on the number of forms, schedules and worksheets required to substantiate claims made on the tax forms – and that as a result of the new postcard 1040, there will be additional forms required for even the most basic of returns.”


Misconceptions

On the Taxmama blog, EA Eva Rosenberg spells out some common (and uncommon) “nitty-gritty” misconceptions the average client might have about the postcard return:

  • It’s not a postcard, so don’t worry about your personal information being exposed to the mail carrier, your mail box handlers, your neighbors or anyone else.
  • It’s designed to be e-filed (though it probably can be paper-filed)
  • The basic tax return has been reduced from 78 lines to 23 lines. All of the numerical data is on page two.
  • Qualifying information regarding the standard deduction has been moved to the first page of this postcard: being claimed as dependent by someone else; being age 65 or older or blind; and whether the spouse itemized on a separate return or is a dual-status alien.

Rosenberg added that the new postcard includes a box about health insurance coverage for the full year and that schedules feed into this short form for additional income and adjustments, tax and non-refundable credits and other matters.

“You can still use Schedule A and enter that information on Line 8 of the postcard,” Rosenberg writes.” Income from business, farm, rentals or partnerships, as well as depreciation and capital gains or losses and other types of income, flow through to Schedule 1.

“Overall, this will make it easier for people who have jobs, can use the standard deduction, and don’t have children who qualify for the Child Tax Credit and Earned Income Credit,” she added. “This should cover about 30 percent of taxpayers. The IRS estimates that 65 percent of taxpayers will only need one additional schedule.”

House Ways and Means Committee chairman Kevin Brady, R-Texas, holds a sample postcard showing a simplified tax form as House Speaker Paul Ryan, R-Wis., looks on
House Ways and Means Committee chairman Kevin Brady, R-Texas, holds a sample postcard showing a simplified tax form as House Speaker Paul Ryan, R-Wis., looks on Bloomberg News


‘Gimme a break’

The latter makes no sense, Rosenberg added, as students or people with children need at least two schedules to claim the refundable and non-refundable portions of the child tax credit and/or the American Opportunity Credit. “In other words,” according to Rosenberg, “lower-income taxpayers will still be providing the same complex information as ever. For everyone else, nothing will really change.”

“The postcard that has been released in a multi-schedule form: Gimme a break!” said Morris Armstrong, an EA and registered investment advisor with Armstrong Financial Strategies, in Cheshire, Connecticut. “I made a point of discussing with most of my clients that in 2019 their returns will likely be simpler and that they may benefit. Not one ever asked, ‘Hey, can we file a postcard?’”

“So far just some general discussion about more simplicity in the prep process,” said Brian Stoner, a CPA in Burbank, California, adding, “No chance: With e-file and tax prep software I don’t expect input screens to be any simpler, plus [the postcard] adds schedules and worksheets to almost every return except maybe the 1040EZ, which will no longer exist.”

“If anything, coming in conjunction with the tax reform plus the fact that the majority of states have not conformed to the changes in federal tax law, tax preparation will probably be more complicated,” Stoner said.

Will the postcard gain wide acceptance? “We have a better chance of seeing Trump’s tax return before we ever see a legitimate postcard-type return in America,” Connecticut’s Armstrong said.

Added Stoner, “A friend of my daughter asked me, ‘What is a postcard, anyway?’ It’s also interesting that if you paper file and mail this ‘postcard,’ you have to put it in an envelope [to protect against ID theft], so it will cost much more to mail it than a postcard.”

Jeff Stimpson

Jeff Stimpson

Jeff Stimpson is a veteran freelance journalist who previously served as editor of The Practical Accountant.