What to know before filing Form 1040 in 2022

Tax season is approaching! As you gear up for the busiest time of year as a tax accountant, it’s important to stay updated on any changes to forms or laws.

There are several changes to Form 1040 this year and many tax provisions related to COVID-19 are no longer applicable. This article will summarize key highlights from the 2022 draft instructions for Form 1040 – basically, everything you need to know about Form 1040 before filing for the 2022 tax year.

Important changes to Form 1040 in 2022

Here are 10 important considerations for Form 1040 in the upcoming tax year.

1. Due date. Form 1040 will be due on April 18 instead of April 15. This is because of the Emancipation Day holiday in Washington, D.C. and applies to all taxpayers—regardless of whether they live in Washington, D.C.

2. Filing status name change. The filing status ‘Qualifying Widow(er)’ no longer exists. It is now referred to as ‘Qualifying Surviving Spouse.’ Note that the rules related to this filing status haven’t changed, just the name. This filing status allows the qualifying surviving spouse to use the joint return rates and standard deduction amount for two years following the death of a spouse, as long as the taxpayer (1) doesn’t remarry, and (2) maintains a household for a dependent child for the entire taxable year.

3. Expanded line 1 and additions to Schedule 1. The earned income that is typically reported on line 1 has been expanded and there are new lines 1a through 1z. There are also amounts that previously were reported on Form 1040 under Line 1 that are now reported on Schedule 1 instead.

• Scholarship and fellowship grants are now reported on Schedule 1, line 8r.
• Pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan are now reported on Schedule 1, line 8t.
• Wages earned while incarcerated are now reported on Schedule 1, line 8u.

4. New checkbox for lump sum distributions of Social Security. A checkbox has been added on Line 6c for taxpayers who elect to use the lump-sum election method for their social security benefits.

5. Nontaxable Medicare waiver payments on Schedule 1. In 2021, the nontaxable amount of Medicaid waiver payments was reported on Schedule 1, line 8z. In 2022, these amounts will be reported on Schedule 1, line 8s.

6. Nontaxable combat pay election. In 2021, the amount of your nontaxable combat pay was reported on Form 1040, line 27b. In 2022, these amounts will be reported on Form 1040, line 1i.

7. Student loan debt forgiveness not taxable. Student loan debt cancelled by the U.S. Department of Education pursuant to the one-time Student Debt Relief Plan announced on August 24, 2022, is not taxable for federal income tax purposes. The Student Debt Relief Plan provides up to $20,000 in debt cancellation to eligible Pell Grant recipients and up to $10,000 in debt cancellation to eligible non–Pell Grant recipients.

8. Digital assets. The virtual currency question on Page 1 has been modified to instead ask about digital assets. Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal income tax purposes. Do not leave this field blank. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving digital assets.

9. Several changes implemented by the American Rescue Plan Act of 2021 (ARPA) were not extended:

• Credits for sick and family leave for certain self-employed individuals are not available. The credit for sick and family leave for certain self-employed individuals were not extended and you can no longer claim these credits.
• Health coverage tax credit is not available. The health coverage tax credit was not extended. The credit is not available after 2021.
• The changes to the credit for child and dependent care expenses were not extended. For 2022, the credit for the child and dependent care expenses is nonrefundable.

• Several changes to the child tax credit (CTC) were not extended. Those changes include:
  • For 2022, the initial credit amount of the CTC is $2,000 for each qualifying child.
  • The amount of CTC that can be claimed as a refundable credit is limited as it was in 2020, except the maximum additional child tax credit (ACTC) amount has increased to $1,500 for each qualifying child.
  • A child must be under age 17 at the end of 2022 to be a qualifying child.
  • Bona fide residents of Puerto Rico are no longer required to have three or more qualifying children to be eligible to claim the ACTC. Bona fide residents of Puerto Rico may be eligible to claim the ACTC if they have one or more qualifying children.
  • For more information, see the Instructions for Schedule 8812 (Form 1040).

10. Changes to the earned income credit (EIC). The enhancements for taxpayers without a qualifying child implemented by ARPA don't apply for 2022. This means, to claim the EIC without a qualifying child in 2022, you must be at least age 25 but under age 65 at the end of 2022. If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2022. It doesn't matter which spouse meets the age requirement, as long as one of the spouses does.

11. Tax brackets. For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly). The other rates are:

• 35%, for incomes over $215,950 ($431,900 for married couples filing jointly)
• 32% for incomes over $170,050 ($340,100 for married couples filing jointly)
• 24% for incomes over $89,075 ($178,150 for married couples filing jointly)
• 22% for incomes over $41,775 ($83,550 for married couples filing jointly)
• 12% for incomes over $10,275 ($20,550 for married couples filing jointly)
• The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).

Tax season is called “busy season” for a reason. The best to stay ahead of this time is to keep informed on changes. That’s where Becker comes in. Stay informed on all things tax with a Becker CPE tax course.  

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Tara Fisher has been practicing tax for over 20 years. Her professional background includes working for the U.S. Congress Joint Committee on Taxation, the national tax practice of PricewaterhouseCoopers, the University of Pittsburgh, and American University in Washington D.C. She is a licensed CPA and holds both an undergraduate and graduate degree in accounting from the University of Virginia.

The content contained in this article is for informational purposes only and is not tax advice. You should consult a tax advisor for advice applicable to your situation.