Wednesday, January 6, 2021

WHAT’S NEW ON THE 2020 FORM 1040 (AND 1040-SR)?


Here is what is new on the 2020 federal income tax return.

While the 2020 Form 1040 is still not a full 8½ x 11 page – I have absolutely no clue why it is not – it is a little bigger and has larger print.

A new question is included after entering name(s), Social Security number(s) and address – “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”.  All my clients, and I expect the majority of taxpayers, will answer “no”.

Page one has 15 lines – up from the 11 on last year’s return.  Much of the increase represents a replacement of what was previously an “a”, “b” and “c” designation with a number.  The line for “Adjustments to income” has an “a” for carryover from Schedule 1 and a “b” for the new “above the line” deduction for up to $300 of charitable contributions for non-itemizers.

Page 2 continues with Lines 16 through 38 (the 2019 form had only 24 lines) – again most of the additional lines are replacements of letters with numbers.  Estimated tax payments are now reported separately on Page 2 and no longer on Schedule 3.  The category for “Federal income tax withheld” is broken down into 3 items – Form(s) W-2, Forms(s) 1099 and Other forms.  And there is a new line for the refundable “Recovery Rebate Credit”.

The 2020 Form 1040-SR has similar changes.  Page 1 ends at Adjusted Gross Income (the 2019 version ended at “Taxable Income), and the “Standard Deduction Chart” that had been at the bottom of Page 1 is expanded and is now on a new Page 3.

Except for the change to Schedule 3 mentioned above, the 2020 Schedules 1, 2 and 3 appear to be the same as 2019.

There is one major tax law change that is not specifically reflected in the Form 1040 or 1040-SR but is included in the instructions.  According to the instructions for Schedule A Line 19 – “You no longer need to be younger than age 70½ to make a deduction for your contributions to an IRA.” 

As a result of the SECURE Act you can make contributions to a traditional IRA account as long as you have qualified “compensation” – taxable salaries and wages, net earnings from self-employment as a sole proprietor or a partner, nontaxable combat pay, taxable alimony, and nontaxable difficulty of care payments – regardless of your age.  You have until April 15, 2021 to make a contribution to an IRA for tax year 2020.

I will post on changes to the 2020 New Jersey and New York individual income tax returns when the forms are available.


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