Dramatic Changes in New 2018 Form 1040
The new IRS Form 1040 U.S. Individual Income Tax Return for 2018 looks completely different than in previous years. Drastically different!
The front of the form is a half page asking for the names of your family members, your Social Security number and your signatures. That's it.
The back of the form contains 23 lines, many of them new for 2018.
Although Form 1040 is shorter, it will require family child care providers to fill out at least two, and maybe up to five, new Schedules to complete! Because of this significant change, providers should be on the alert to make sure the correct Schedules are filed.
Here’s asummary of the new Schedules:
Enter your Schedule C profit (line 31). You will fill out Schedule C as in previous years and there are no new changes to Schedule C. Transfer the amount from line 31 to Schedule 1, line 12.
Enter half your Social Security/Medicare tax. You will fill out Schedule SE Self-Employment Tax as in previous years and there are no new changes to this form. Transfer the amount on line 6 of this form to Schedule 1, line 27.
Enter any tax deductible contributions to IRAs on line 32 of Schedule 1.
Enter any eligible health insurance premium deductions on Schedule 1, line 29. You are entitled to deduct 100% of your health insurance premium deductions if you are not eligible to participate in an employer-sponsored health insurance plan.
This Schedule has nothing to do with your business. You would only fill it out if you pay the alternative minimum tax.
If you are eligible for the child and dependent care credit, enter the amount from Form 2441 Child and Dependent Care Expenses, line 11, to Schedule 3, line 49. You are eligible for this credit if you pay someone else (not a family member) to care for your child while you are working. This can include hiring a babysitter while you attend trainings or send you child to a preschool program during your work week.
If you are eligible for education credits such as the Lifetime Learning Credit or the American Opportunity Credit, enter the amount from Form 8863 Education Credits, line 19 to Schedule 3, line 50.
Enter your self-employment tax (Social Security/Medicare) from Schedule SE Self-Employment Tax, line 5.
Enter any estimated tax payments you made in 2018 using Form 1040ES Estimated Tax
Summary: All providers must fill out Schedule 1 and 4, and may have to fill out one or more additional Schedules. You may also have to fill out additional lines on these Schedules depending on your personal financial situation. These new Schedules may be confusing to some family child care providers and tax preparers. If you are using a tax preparer, be sure that Schedules 1 and 4 are completed and attached to your tax return.
Qualified Business Income Deduction
If you show a profit in your business (Schedule C, line 31) you want to make sure there is a number on Form 1040, line 9. This represents the Qualified Business Income Deduction that allows you to reduce some of your federal taxable income. This is a major change on Form 1040 that will benefit family child care providers. I will write about how to calculate this amount in my next blog post.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.flickr.com/photos/aidanmorgan/5524891107
For details on how to fill out Form 1040 and all other business tax forms, see my 2018 Family Child Care Workbook and Organizer.
