Ep. 167 | A Sneak Peek at the New Form 1040
Download MP3Hey, everybody. Welcome back to the Teaching Tax Flow podcast. John Tripolsky here from the TTF team, joined by my co-host, Chris Picciurro Today, we're gonna talk about a sneak peek. That's right.
John Tripolsky:We're gonna give you a little peek behind the curtain, what you can expect on the new form 10:40. So can't think of anything or anybody better, I should say, than Chris. So, Chris, run us through this, man. What's, what's happening with the new ten forty?
Chris Picciurro, CPA:Well, the yeah. This is our holiday gift from teaching tax flow to you. We're gonna talk through the new form ten forty. This is the individual tax turn that taxpayers that are US tax residents fill out on an annual basis. We'd love to hear your comments about it, what you might what what you think should get added, what you like that got added.
Chris Picciurro, CPA:John's actually gonna put a link to what we're talking about, excuse me, in the show notes. So if you're watching on YouTube, yeah, definitely chime in with your thoughts. Would love to hear them. Remember that the one of our three laws of teaching tax flow is that your tax agencies are your involuntary business partner, and the IRS and Department of Treasure Treasury frequently change the form ten forty. It's supposed to become easier.
Chris Picciurro, CPA:Right? Change the form ten forty, and if you read through the tea leaves, it's telling us, okay. What are some of the things that that even though we, as tax professionals and taxpayers, electronically file our tax returns, what's getting missed in creating some type of matching issue between what the IRS gets on file on their transcripts and what taxpayers file. And if there is a discrepancy, maybe they create a separate box, for the on the taxpayer to fill out. So that's kind of the gen that is the genesis of what has changed on the form ten forty.
Chris Picciurro, CPA:The other thing is we do have o b three, right, then one big beautiful bill act. So there are some provisions on that act that, within o b three that have changed the format of the form ten forty. So, yeah, I'm excited to jump back in. This is a you know, this is something that we're all gonna be looking at, and we're gonna start at the top page one of the ten forty. So, again, if you're driving or walking your dog or out for a jog or just listening with a with a looking at a crackling fire right now, we don't you know, we're we know that you might not have this form in front of you, but we want you to be aware of what what has to be, provided.
Chris Picciurro, CPA:So
John Tripolsky:I love you said the word easy too because that word usually doesn't come out of your mouth very often. Although, in in your defense, you did not say that it is easy. You said their goal was to make this easier.
Chris Picciurro, CPA:Their goal is to make it yeah. Remember, we're supposed to have a post card, but we certainly do not.
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Chris Picciurro, CPA:Remember, there's no such thing as an easy tax return. That is that is a belief that that we have. So, alright, let's talk about that new ten forty. Obviously, here are some of the changes and things that now this information that I'm gonna talk about may have been reported within tax software or somewhere else on the ten forty through a schedule or a separate form, but now as part of that base form. So the first thing is is not too pleasant.
Chris Picciurro, CPA:If a if a taxpayer deceased or a spouse deceased, before you the you would indicate that when you're preparing the tax turn, and it would print out on the ten forty and allegedly get get reported to the IRS. Well, obviously, that might not have went as smoothly as expected. So now on the top of the first page of the ten forty, there's a box that says if someone deceased and the date that they passed away is clearly indicated on that form ten forty. So that's chain that's change number one. There also is a new interesting right?
Chris Picciurro, CPA:Remember when digital assets came out, in that question? That question is actually the same. There's a new question that says, check here if your main home or your spouse says if filing a joint return was in The US for more than half of 2025. So what they're trying to figure out, residency. Right?
Chris Picciurro, CPA:So you're gonna check that. The default's gonna be yes. Most people's main home was in The United States for over half the year, but some taxpayers might have lived abroad as their main residence for for more than half the year. That's a brand new question on the first page of the ten forty. Now dependents have always been listed on the ten forty, the first page, where they asked for the first name, last name, Social Security number, and the relationship to you.
Chris Picciurro, CPA:But now it's also asked that if they've lived with you for more than half of the year. Yes or no? And was it in The United States? There's also a spot where you have to identify if the dependent is a full time student. Now remember that mean that doesn't mean they're a full time student the entire year.
Chris Picciurro, CPA:That means they were a full time student for at least half of the year, which is defined by five months. So that's why a lot of times colleges will trickle into that May before they graduate, or they start that August. So you're technically a half full time student for half the year if you're if you're doing one semester. And I guess you could have both. Are you permanently and totally disabled?
Chris Picciurro, CPA:Though so those are two checkboxes now on the front of form ten forty. There are also two credits. Now these checkboxes were there before, where are you eligible for the child tax credit or another credit? So those were always, out there. You know, that was there before, but now we have that new checkbox for full time student and disability.
Chris Picciurro, CPA:Here's another very, very interesting thing, John. Remember, and I think we've talked about this in our filing status episode. Gosh. I don't remember the episode number anymore.
John Tripolsky:It's been a bit. At least a couple months.
Chris Picciurro, CPA:Yeah. We've had
John Tripolsky:it Oh, maybe a year.
Chris Picciurro, CPA:Filing status. There's now a check. Because remember, you could be married, legally married, but for tax purposes, unmarried. Okay? If you've lived apart for at least six months of the year, And, obviously, there's a lot of discrepancy.
Chris Picciurro, CPA:You might have had someone one spouse file as married separate. You might have one spouse file as single or had a household. So now on the front page of ten forty, there's a checkbox that says, check if your Maryland if your filing status is married, filing separate, head of household, and you lived apart from your spouse for the last six months of 2025, or you're legally separated according to your state law under written separation agreement or decree or separate maintenance, and you did not live in the same household as your spouse at the 2025. So, ultimately, remember this, John. When someone passes away or when someone is born or when someone gets married or when someone is legally separated, Typically, those are things that get filed with a state or locality, especially marital status.
Chris Picciurro, CPA:The IRS, federal government doesn't know your marital status. It's a self reporting thing. So that means when you do get married or if you get legally separated for at the end of the year, by the end of the year, and if you've lived apart for six months. So again, obviously, there are issues with people not either, you know, formerly married people that didn't file, the same way for lack of a better term. Right?
Chris Picciurro, CPA:That's the best I think
John Tripolsky:the trend here, I mean, some of these changes. Right? It's I could absolutely see how there could be a discrepancy. And and I think you refer to it as matching, like matching discrepancies. So really putting it all in one form, it does make more I mean, in in my humble opinion.
John Tripolsky:Right? Like, it does make more sense, I would say. Right? And and I could see why some of these even and, Chris, I could be wrong. This is the first time I've looked at this, even though we've talked about this specific form update, first time I've seen it, is even the way in the the formatting look different for dependents.
John Tripolsky:I'd I don't remember it being columns like that, but I could be wrong.
Chris Picciurro, CPA:No. It was rows. So it went from rows to columns. Absolutely.
John Tripolsky:So they got a new director of spreadsheets or something over at the IRS who likes, you
Chris Picciurro, CPA:know, columns and studies. Yeah. Remember the federal government, the the IRS's software has been designed ages ago. So they need to chain you you think chain if you're listening to this and you work somewhere or own a business and you think changing from, you know, Microsoft three sixty five to to the Google Suite's a pain in the butt or changing tax softwares or changing your CRM, can you imagine the federal government trying to change your software? I can imagine.
Chris Picciurro, CPA:Data security that they have to keep in in place. So
John Tripolsky:I don't know long they've using Abacus until probably, like, ten years ago. So if anybody doesn't know what an Abacus is, look it up. Probably played with one at some point. But So the
Chris Picciurro, CPA:other change yeah. The other changes, we when you have a child that that has dividends or investment income, sometimes you're you might be a parent that is subject to the kiddie tax. And you can make an election basically to just report your dependent children's income on your personal return instead of the dependent child filing a separate tax return, having to figure out your tax rate. That obviously was an issue. So now on the form ten forty, if you're in that situation, you can check and say, yeah.
Chris Picciurro, CPA:My child's dividends are part of my tax return. My child's capital gains are on my tax return. Because think about it. Those capital gains and dividends are getting reported on a year end statement, typically a ten ninety nine b or ten ninety nine d I v in the child's Social Security number. So if you do report your child's income on your personal return, that's telling the IRS, hey.
Chris Picciurro, CPA:Don't send me a nasty letter. Where's my tax return for the dependent child? Yeah. I I already reported it on my return. But we've never had that.
Chris Picciurro, CPA:I mean, obviously, you could check some boxes in the tax software, but maybe that wasn't getting through into the IRS transcript. So now there's a separate box that you can check for that. There's also a new box for IRA distributions if you do what's called a QCD. Now we talked about this. This is an amazing tax planning tool for people that are required to take a minimum distribution from their retirement accounts and elect to send that directly to a charity to and that's called a qualified charitable distribution.
Chris Picciurro, CPA:That's not new but there's a new box now because obviously, again, you gotta think whenever there was a matching problem, now there's a new box just to to identify that. So the QCD box is new. There's another new box under Social Security benefits talking about the, LSE, lump sum election. So what that means and we will talk about this in our future podcast episode, we're gonna break down the s Social Security Fairness Act, SSFA, and we have a lot of taxpayers that are gonna get a lump sum from Social Security either from from basically back Social Security pay they should have received when due to it getting limited and before the Social Security Fairness Act was enacted. Or what if they were applied for disability and had to wait several years to get paid?
Chris Picciurro, CPA:So the bottom line is there are a lot of Social Security recipients that get Social Security back pay or disability back pay that applies to a previous year, but they received it in the current year, you can make an election to be taxed at the previous year's rate if that's better for you. That's called the lump sum election. Before you used to have, there was never a checkbox. You would report it but there's an obviously that was an issue with IRS. They were struggling to pick that up.
Chris Picciurro, CPA:They're struggling to calculate the IRMAA, which is a Medicare premium, having to pay Medicare premiums that are higher than the normal. Bottom line is now there's a box you could check to say the lump sum election. And, also, if you're married, filing separate, and lived apart from your spouse for the entire year, there's another box you can check. So, obviously, there's an issue with people that are either, you know, married filing separate or in the process of getting legally separated. There's matching problems for those taxpayers.
Chris Picciurro, CPA:So very interesting. You know we're gonna have another new schedule A, but the other main difference we're gonna talk about is on the tax and credit deduction, area of the $10.40. The final thing I'm gonna mention is that we have the new schedule one a, and that schedule one a calculates four new temporary deductions. Comment if you are gonna if you think you're gonna be eligible for any of these deductions on our YouTube channel, and I can promise you we have additional content on this, but that's gonna be the no tax on tips, no tax on overtime, a new vehicle interest deduction, and the new senior deduction. All four of those deductions get reconciled on a schedule one a.
Chris Picciurro, CPA:That schedule one a flows onto the 10:40 on line 13 b. So my point is if you are one of the estimated 40,000,000 taxpayers that will be affected by those new rules, you will have a more complicated ten forty. And, yes, you're gonna have to file schedule one a, and that'll jump jump on the the ten forty. So I know I threw a lot at you. Many people really don't stare at the ten forty that much, and I'm glad for that because you probably have a better social life than than I do.
Chris Picciurro, CPA:But I want everyone to be aware of some of the changes, and it all comes down to making sure you have your ducks in a row when you either self prepare your return or you work with a tax professional. If you want the best result possible, you need to be organized, especially on those tips and overtime. You need to look at those previous or that final pay stub, and hopefully, breaks down. That that breakdown is provided from your employer. If you're self employed, you could definitely have tip income.
Chris Picciurro, CPA:Right? And you're gonna wanna make sure that that gets reported properly as well.
John Tripolsky:Absolutely. No. But this I mean, it's good that we go over this. Right? Because I think if anything, this can kinda be viewed as almost your your text filing compliance playbook, for lack of better terms.
John Tripolsky:Right? Like, see this. Obviously, they've made adjustments to fix issues they've had in the past. So kudos to them. They acknowledged it, they did something about it.
John Tripolsky:Whether it makes it more easy or complex, we'll find out with time. But really a lot of this, right, it's knowing what they're gonna ask always helps you ahead of time. It's like preparing for an interview. If Like, you have the questions that you're gonna ask before the interview, you know what to prepare for. Same thing here.
John Tripolsky:It saves you from ruffling around, you know, the the day before a deadline to get everything together. So kudos to you, Iris. We'll give you a little round
Chris Picciurro, CPA:of more thing in. One more change. I I should have said this before, but I agree with you. Prepper you know, being prepared is important. If you made estimated tax payments, this is where it gets confusing where if you're married filing joint, you made the estimated tax payments together.
Chris Picciurro, CPA:A lot of times that only shows up potentially on the on the first spouse's social number. So if you made estimated tax payments with your former spouse and you're splitting those estimated tax payments, you need their Social Security number to put on your tax return. So, again Ah. Be very aware now. One.
Chris Picciurro, CPA:Very and and yeah. And and it makes sense, and we wish everyone a very safe, happy, blessed holiday season. This little gift is from the teaching tax flow team. Again, John's gonna put the link to what we're talking about this form. So you got, John, you got to open a Christmas or Hanukkah or holiday gift a little earlier than everyone else if you listen to this or watched us.
John Tripolsky:K. We'll take it. We'll take it. I'll give you one more little preview. Right?
John Tripolsky:So next week, we're gonna talk about something really fun, which is the most commonly missed deductions, which I look forward to that one because I know there's a ton of them that people miss and they have questions about. So we're gonna solve that one too. And that gives it gives you something to listen to when you're driving back from family members' houses or something over the holidays and, you know, you gotta put headphones in.
Chris Picciurro, CPA:Young one that you need to get to sleep. Right? Just put this podcast on. I'm sure they'll they might There
John Tripolsky:you go. We'll play a little, bluey or whatever the popular kid song is in the background of this for you.
Chris Picciurro, CPA:But,
John Tripolsky:as Chris mentioned, everybody have a great holiday season, and we're gonna see you back here again, as always, on the Teaching Tax Flow podcast next week. So we're talking different date, same day of the week, completely different topic. Have a great week, everybody.
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