The IRS recently released a draft of its new Form 1040 that every American taxpayer will use to file their 2018 tax returns early next year. And as expected, the new form is significantly different than the one it replaces. With that in mind, here are the five most important takeaways from the newly released draft Form 1040 that Americans should know.

It is the size of a postcard

During the 2016 presidential campaign, then-candidate Donald Trump proposed simplifying the tax code to a point where the average American could fill out their taxes on a postcard.

Black notebook with Tax Reform in yellow letters on the cover.

Image source: Getty Images.

Well, it seems like this will come true -- at least somewhat. The new Form 1040 is a postcard-sized document with just 23 lines, down from 79 on the current form. You can view the IRS's draft copy on the agency's website, but in a nutshell, the front contains all of the taxpayer's identifying information, while the back contains the actual tax calculation.

There are six new schedules

For many people, the new 1040 will indeed make filing taxes simpler. However, for Americans with somewhat complicated tax situations, this may not be the case.

In addition to the familiar schedules many taxpayers have to use, such as Schedule A for itemized deductions and Schedule C for self-employment income, there are at least six brand-new schedules taxpayers may need to use.

The new schedules are designated by numbers instead of letters, and here's a quick overview of what the new schedules are for:

  • Schedule 1 is for taxpayers with additional sources of income (not from a W-2) or adjustments to income, such as IRA contributions, student loan interest, and health savings account contributions.
  • Schedule 2 is a form for people with some other forms of taxes, such as on a child's unearned income.
  • Schedule 3 is for nonrefundable tax credits
  • Schedule 4 is where taxpayers will add up certain taxes, such as self-employment tax, uncollected Social Security and Medicare taxes, and others.
  • Schedule 5 is to add up tax payments, such as estimated tax payments or amounts paid with an extension.
  • Schedule 6 is where you can appoint a third-party designee to discuss your tax return with the IRS on your behalf.

The bottom line is that while the 1040 itself has gotten smaller, most of what was removed has simply been transferred to these schedules. So, the overall paperwork hasn't become as simple as the new Form 1040 might make it seem.

The 1040-EZ and 1040-A are gone

If you're wondering why the IRS would take one tax form (the old 1040) and effectively replace it with seven (the new 1040 plus the six new schedules), there's actually a pretty valid reason.

Previously, there were three versions of the 1040. The standard form 1040 could be used by anybody, but was rather complicated. The 1040-A is commonly known as the "short form," and could be used by taxpayers with relatively simple tax situations, such as not itemizing deductions, not owning a business, and having a taxable income under $100,000. And finally, the 1040-EZ was for the simplest tax situations.

Now, the latter two forms will no longer exist, and all Americans will use the same Form 1040 to file their taxes. The topic of "which 1040 do I use?" often confused taxpayers, so now this will not be an issue.

Some parts of the old form are gone completely

While the new Form 1040 isn't quite as simplified as it may appear at first glance, there are a few things that are no longer on the form or on any of its numerous schedules, thanks to the Tax Cuts and Jobs Act.

Just to name a few, these tax items are nowhere to be found, as they were eliminated for the 2018 tax year:

  • The personal exemption
  • The alimony deduction
  • Miscellaneous deductions, which were formerly deductible if they exceeded 2% of AGI
  • The deduction for moving expenses

This is just a draft

As a final point, keep in mind that this is not the finalized 1040 that will be used during the 2019 tax filing season. This is just an early draft, which the IRS released purely for informational purposes. The actual form that taxpayers will use to file their 2018 returns may look significantly different.

In fact, the IRS said that, "in this case we anticipate it is likely that this draft will change at least slightly before being released as final."

In other words, while the draft of the new 1040 and its accompanying schedules can give you a good idea of what the 2018 tax changes will look like on paper, these are not necessarily the actual forms you'll file.

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