One of the major goals of the Tax Cuts and Jobs Act of 2017 (“TCJA”) was to simplify the tax law so the average American can more easily file their federal taxes. The tax code has always had a bad reputation for being too long and too confusing. But, the TCJA’s attempt to make the tax code more approachable and comprehendible seems to be counterproductive.
The TCJA contained 1,097 pages when enacted. Now, with additional provisions relating to Qualified Business Income, Business Interest Limitations, and Opportunity Zone tax incentives, it’s even longer (and, some might say, more confusing). Also, another 300 pages were drafted in November 2018 for a Technical Corrections Bill to clarify some of the original text. Of course, the average American will not read through these pages. The question is how can lawmakers expect the public to so easily adapt to the new code?
Regarding the intentioned simplicity, the United States Secretary of the Treasury, Steven T. Mnuchin, was quoted saying:
“As part of the historic Tax Cuts and Jobs Act, this Administration committed to making taxes simple and fair for American families. We are delivering on this promise. The new, postcard-size Form 1040 is designed to simplify and expedite filing tax returns, providing much-needed relief to hardworking taxpayers.”
A good way to confuse the “hardworking taxpayers” is to remodel their individual tax returns (Form 1040 and 1040EZ) with a “simplified” postcard design. As stated in our recent blog post, the size of the return is very misleading and could require up to six (6) more schedule attachments.
Form 1040 went from roughly 80 lines to only 23. This is a substantial difference; however, if you received any income from a pass-through entity or have student loan interest, for example, there is nowhere to report those amounts on the new 2018 Form 1040 and you will need to attach a Schedule 1. This schedule, which is basically an additional form, consists of an additional 35 lines. Taxpayers will quickly realize they may need to attach a handful of the other new schedules, which can easily add up to 80 lines of data. So much for the so-called “simplification.”
The facelift of Form 1040 may have received the most press, but most returns were altered in some way to comply with the new code. The “simplification” is virtually inescapable. It is safe to say that if your return was complicated before the tax reform, it is just as, if not more, complicated now.
Through our blog, webinars and other educational efforts, The Tax Warriors® at Drucker & Scaccetti are helping clients understand the TCJA, and how it may impact them. Lucky for them, they can count on us to deal with the new “simplified” forms; we’ve got it under control. #AddValue