Simplified Form 1040SR Proposed for Seniors

October 29, 2018

For years Form 1040EZ and Form 1040A have been available to individuals as a simpler and more convenient way of filing their income tax returns. Unfortunately, many seniors, age 65 and older, do not qualify to be eligible to utilize those specific forms and are required to use the standard Form 1040. The additional length and complexities of Form 1040 pose challenges for seniors and frequently result in errors when the tax returns are self-prepared. Some of the common mistakes made by seniors include miscalculating Social Security benefits and missing the additional standard deduction that is available for taxpayers of age 65 and older and/or blind.

Earlier this year, the Bipartisan Budget Act of 2018 was passed and will attempt to remedy these problems by requesting the Secretary of the Treasury to create a new Form 1040SR. The Form 1040SR will only be available to individuals age 65 and older and will expand the items of gross income to be included, different from Form 1040EZ. The current Form 1040EZ allows a taxpayer to only include wages, unemployment compensation, and taxable interest up to $1,500. The new Form 1040SR will expand the income categories to include Social Security benefits, retirement distributions and annuities, interest, dividends, and capital gains and losses. In contrast to Form 1040EZ, there will be no limit on the amount of interest and dividends, including tax exempt interest/dividend income. Additionally, there will not be any limitation on taxable income when determining the filing eligibility for the new form.

There are still several uncertainties and questions to be answered regarding what will ultimately be included in the form. For example, it is still unknown if the form will give seniors the option to take the greater of the standard deduction or itemized deductions. If the form stays true to being as simple as intended, it may only allow the standard deduction with the additional standard deduction available to taxpayers 65 and older. Hopefully the final Form 1040SR will ultimately be simpler, easier to read, less complicated, and require less time to complete to make tax compliance for seniors as easy as possible.

Form 1040SR will not be available to seniors until tax year 2019. This means it will first become available during the 2020 filing season. We will continue to monitor if the IRS releases any drafts of the new form.

For more information regarding this proposal or the filing options available to you, please contact Anatoli Pilchtchikov or one of our tax advisors at 301.231.6200.