Simplified 1040 “Postcard” May Cause Confusion for Lenders
Consistent with Republican promises since President Trump’s election, the IRS last week released a draft of the new version of the Form 1040 tax return for individuals designed to fit on a postcard. The new form, which is intended to replace the 1040, 1040-A, and 1040-EZ starting in 2018, consolidates much of the detail lenders have grown accustomed to and completely reformats the first two pages of the return.
Total business income from Schedule C, rental income from Schedule E, farm income from Schedule F along with a laundry list of other items will no longer be presented on the front page of the return and instead will be reported on a single line on the second page with additional information provided in a new attachment.
Though the new form is designed to simplify tax preparation, the formatting changes may cause more confusion than clarity in the first year particularly for individuals with tax situations beyond simple wages or retirement income.
Lenders, underwriters, and credit analysts will want to make sure to familiarize themselves with the new tax forms in advance of year end to ensure there are no delays in loan underwriting or renewals early next year.
If your lending staff needs assistance understanding the new forms or training on how to better analyze tax return information for customers, CLA is here to help. Please contact us.
Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.
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