Taxpayers were impacted by some of the most robust changes to tax reform legislation in 30 years in 2018. The 2018 Form 1040 tax return was significantly revised to accommodate these changes. The IRS indicated at the time that the revisions greatly simplified the tax form, but that opinion raised the brows of both professional tax preparers and the average Joe Taxpayer alike.
The changes did indeed shorten the tax return as promised, but they added numerous schedules that many taxpayers would have to navigate instead. They were just entering the same information in different places. Thus, the 1040 was revised again for tax year 2019.
And the IRS wasn't entirely done yet. The 2020 and 2021 Forms 1040 underwent some minor tweaks as well. But these revisions mostly just renumber some line items. The 2021 tax return is the one you'll file in 2022.
TCJA Tax Reform Legislation
Congress put a time frame on the new tax laws when it passed the Tax Cuts and Jobs Act (TCJA) in December 2017. The TCJA affects tax years 2018 through 2025. The changes will expire on Dec. 31, 2025 and the tax code will revert to pre-TCJA laws if Congress doesn't renew the legislation at that time.
Changes in Tax Exemptions
One of the notable changes to your tax return since the 2017 version is the absence of the field where you could claim personal exemptions for yourself, your spouse, and each of your dependents. These exemptions reduced your taxable income, but the TCJA has eliminated them, at least until 2026.
Read more: Claiming Dependents for Your Taxes
Changes in Tax Deductions
An unchanged option for taxpayers is the choice between taking the standard deduction or itemizing deductions. But most taxpayers will find a greater tax benefit by claiming the standard deduction because these amounts are effectively double what they were before the TCJA.
You can figure your taxes both ways by applying the standard deduction and also by itemizing your deductions to determine which is best for you. Choose the option that results in paying less tax.
The 2021 Standard Deductions
The standard deduction for your filing status essentially represents a tax-free sum of money that the Internal Revenue Service allows you to deduct from your income to lower your tax liability. The standard deduction for single or married filing separately taxpayers was $12,550 in 2021. It was $18,800 for those filing as head of household, and $25,100 for married taxpayers who filed joint returns and qualifying widow(er)s. Again, these are the figures that you would use on the tax return you'll file in 2022.
The standard deduction can't exceed the greater of $1,000 or the sum of the individual’s earned income plus $350 for the tax year if they can be claimed by someone else as a dependent. The total amount of the deduction can't be greater than the amount of the regular standard deduction they'd otherwise be entitled to claim.
There Was Another New Tax Form in 2019
The IRS rolled out a new tax return for senior citizens in 2019, IRS Form 1040SR. It's still available and in use in 2022 for the 2021 tax year. It's a simplified tax return for taxpayers who are older than age 65, or who turned 65 at any time during 2021. The form allows senior citizens to report not only their earned income, including wages, salaries and tips, but also their income from unearned sources, such as Social Security benefits, pensions and IRS distributions.
Seniors get an additional standard deduction as well. It was $1,300 in 2021, or $1,650 for unmarried filers.
2021 Tax Brackets
The percentage amounts for all tax brackets remain the same in 2021, but the incomes they span are adjusted annually for inflation. The 10-percent bracket represents income levels for taxpayers with incomes up to $9,950 if they're single in 2021 or married and filing separately, to $19,900 if they're married filing jointly or qualifying widow(er)s, and to $14,200 for heads of household.
The highest tax bracket of 37 percent covers taxpayers who have incomes greater than $523,600 if they're single or file as head of household, more than $628,300 if they're married and filing jointly, and greater than $314,150 if they're married filing separately.
Tax Filing Requirements
Taxpayers typically don't have to file tax returns if their incomes are less than the standard deduction to which they're entitled for that tax year. But some taxpayers must file a tax return even if their income is below the minimum filing requirement. File a tax return in 2022 for the 2021 tax year if you:
- Have self-employment income of $400 or more
- Have unemployment income
- Had earnings of at least $108.28 from a tax-exempt church
- Owe taxes on your retirement plan such as an individual retirement arrangement
- Received a payment from your Health Savings Account
- Can be legally claimed as a dependent on someone else's tax return, and your earned plus unearned income meets IRS guidelines for children’s and dependent’s income
Why the Changes to the 2018 Form 1040?
The IRS drafted the first new tax form for 2018 because the TCJA eliminated exemptions, increased standard deduction amounts and made other streamlined changes. The 2018 Form 1040 also absorbed forms 1040A and 1040EZ into one consolidated Form 1040. Taxpayers who formerly used these two simpler forms can only use the Form 1040 beginning with tax year 2018.
The 2018 form was sometimes referred to as the “postcard 1040” because of its condensed size, but it was actually larger than a standard postcard, and it was never designed to be mailed as such. That's still the case for tax year 2021. Taxpayers who electronically file their tax returns won’t notice the physical difference of the new tax forms because they’ll simply input their tax information according to tax-software prompts.
The New 1040 Schedules
The 2021 Form 1040 includes three additional schedules, down from six numbered schedules in 2018. But some taxpayers might not have to use any of them. You need only complete those that apply to your individual tax situation. They simply contain the consolidated information that was formerly found on forms 1040, 1040A and 1040EZ, now arranged by topic.
1040 Schedule 1
This one is for "Additional Income and Adjustments to Income." Use this schedule for reporting unemployment income, capital gains, other compensation, winnings from gambling and prize or award money. You’ll also use this schedule for claiming certain "above the line" adjustments to income, including self-employment tax, student loan interest and educator expenses.
1040 Schedule 2
Schedule 2 is for "Additional Taxes." Use it for reporting any amounts you might owe for the Alternative Minimum Tax or excess payments toward the Premium Tax Credit you received last year.
1040 Schedule 3
Schedule 3 is for "Additional Credits and Payments." You can use this to claim nonrefundable tax credits, such as the education credits, residential energy credits, the Foreign Tax Credit, the Credit for Child and Dependent Care Expenses, the Retirement Savings Contribution Credit, and the Premium Tax Credit.
This schedule also reports any payments you made to the IRS other than through withholding from your paychecks, such as quarterly estimated taxes or anything you might have paid when and if you requested an extension of time to file your tax return.
Free Tax Preparation Help
The IRS offers a free e-filing option called, appropriately, "Free File." There are two Free File options based on your income. You can use the "Free File Software" option in 2022 if your 2021 income was less than $73,000. This also includes some free state return filing options. You can use the "Free File Fillable Forms" option if your income is greater than this.
The Free File Software option walks you through prompts to complete your return, but the Free File Fillable Forms are more appropriate for taxpayers who already know how to prepare their own tax returns.
The IRS offers free help preparing their tax returns for other qualifying taxpayers as well. IRS-certified volunteers staff both these programs and provide free basic income tax preparation. You might qualify for the Volunteer Income Tax Assistance (VITA) program if your 2021 income was $58,000 or less, or if you suffer from a disability or your ability to speak English is limited.
The Tax Counseling for the Elderly (TCE) program is geared toward taxpayers who are 60 years of age and older, with specialties in pension- and retirement-related questions that senior citizens face. But you may also qualify for this program if you're not yet a senior citizen.
Volunteers are found at sites such as schools, libraries, shopping malls and neighborhood centers. You can visit IRS.gov and search for VITA/TCE Locator Tool to find a site near you, although many locations are temporarily closed due to the coronavirus pandemic.
- IRS: Questions and Answers About the 2018 Form 1040
- IRS: Publication 501
- Tax Foundation: The Tax Cuts and Jobs Act Simplified the Tax Filing Process for Millions of Households
- IRS: Here are Five Facts About the New Form 1040
- IRS: IRS Withholding Calculator
- IRS: Publication 505
- IRS: Free Tax Return Preparation for Qualifying Taxpayers
- IRS: 1040 and 2020 1040-SR Instructions Tax Year 2021
- IRS: File Your Federal Taxes Online for Free
- IRS: IRS Provides Tax Inflation Adjustments for Tax Year 2021
- Tax Foundation: 2021 Tax Brackets
- Debt.org: 2020-2021 Tax Brackets
Victoria Lee Blackstone was formerly with Freddie Mac’s mortgage acquisition department, where she funded multi-million-dollar loan pools for primary lending institutions, worked on a mortgage fraud task force and wrote the convertible ARM section of the company’s policies and procedures manual. Currently, Blackstone is a professional writer with expertise in the fields of mortgage, finance, budgeting and tax. She is the author of more than 2,000 published works for newspapers, magazines, online publications and individual clients.