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The IRS has made several changes to tax preparation forms, including some that are not related to Tax Code adjustments. Alterations to IRS forms are common when required to address new tax laws. In addition, sometimes the focus is improvement in assuring taxpayer compliance with the tax rules.

Schedules C and F now have lines for separate reporting of income from credit and debit cards. That permits the IRS to match income reported on the new 1099-K, which credit card agencies will issue beginning for the 2011 tax year. This step is implemented in addition to the checkboxes for Schedules C and F requiring tax return preparers to report whether taxpayers should issue any 1099s and have done so.

But even more changes are found on Schedule E. Page 1 of this form has an entirely new look for 2011 tax returns. The schedule’s first page is familiar in tax preparer training as the location of information about rental and royalty income and expenses. Separate columns list the details for each property. Only three properties fit on one schedule. Taxpayers with more properties submit multiple schedules.

The new Schedule E expands the information obtained in tax return preparer work. The form requests a full property address in the description section. In addition, properties are now identified by standardized types, such as single family, multi-family, raw land, or royalty.

Taxpayers must also supply their paid tax preparers with some other factors never before needed about rental properties. In the past, taxpayers were only asked if they met the rules about percentage of days for personal use compared to rental days. Schedule E now demands reporting the exact number of personal use days and rental days.

The same checkboxes about 1099s as Schedules C and F are also on Schedule E. Property owners are required in some instances to issue 1099s. Payments of more than $600 to any individual for services regarding a rental activity are reported on a 1099. Therefore, tax preparer duties necessitate explaining that a 1099 requirement might occur with contractors used for maintenance or repair expenses on rental properties.

In addition, Schedule E has a location for stating any income collected from credit or debit cards. The section is confusing because, unlike Schedules C and F, the new Schedule E adjusts the credit/debit card reporting from a 1099-K for any sales tax or cash back. Fortunately, the complexity of using the correct lines on the tax return is somewhat relieved by tax preparer software.

The final look of a completed Schedule E is entirely different than past years. The column of property totals on the right side is eliminated. Instead, dedicated lines for totals are at the bottom of the form, which may take some time for tax preparers to develop familiarity.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.