MLEX US Tax Watch: Low-income advocates concerned about postcard-sized tax forms

“Advocates for low-income taxpayers say the new, oversized postcard Form 1040 return – created by the 2017 tax reform law – could pose challenges for those taxpayers and their representatives.

The Internal Revenue Service claims on its website that many taxpayers will only need to file the postcard without any of its accompanying six schedules. Low-income advocates say they’re providing taxpayers with more paperwork so far than they were with earlier forms.

Before the tax overhaul and the big postcard, Erie Free Taxes in Erie, Pennsylvania, would give taxpayers coming to its free volunteer income tax assistance (VITA) preparation sites “one sheet of paper for their tax return,” said Susan Holtgrefe, an enrolled agent who runs a VITA site for the organization. Now, she said, they’re giving taxpayers “several” pages to serve the same purpose. That’s a worse situation, she said, “especially for your poor clients who have reading issues or language difficulties.”

Tax professionals may find it harder to catch errors until they’re familiar with the new forms and schedules and how their software incorporates them, said Christine Speidel, who directs the federal tax clinic at Villanova University’s Charles Widger School of Law, in an e-mail.”

Walking a taxpayer though their final printed return is more complicated in 2019 with the Form 1040 broken up and up to six additional schedules feeding into it,” she said. “This is concerning because taxpayers are generally charged with reviewing and understanding their returns; errors often lead to accuracy penalties which many taxpayers find unfair.”

Errors, however, aren’t a concern for Prepare and Prosper, a St. Paul, Minnesota, organization that offers VITA tax preparation and help with financial services in the Minneapolis/St. Paul area, said Katy Schultz, the organization’s tax and financial services director. Time could be, though.”

There’s probably going to be a longer tax preparation and/or review process,” Schultz said, adding that a mandatory quality review that’s part of the VITA process could take more time.

The new 1040 form hasn’t caused complications for Prepare and Prosper’s tax preparers, Schultz said, because her organization’s software is partly form-based and partly interview-based.”

We’re seeing an increase in the number of pages we’re printing, but we haven’t heard anybody voicing confusion over the new forms, I think primarily because we’re doing the tax preparation,” she said, adding her organization was able to access many of the publications it needed for volunteer training because they were released before the start of the partial government shutdown that shuttered the IRS for 35 days.”

FREE TAX PREP

Team Resources

MEDIA

PREPARE + PROSPER

GET INVOLVED

SUPPORT US