# Proposed Collection; Comment Request for Form 1040 and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE, Form 1040A and Schedules 1, 2, and 3, and Form 1040EZ, and All Attachments to These Forms

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URL: https://www.frixlaw.com/law-library/documents/fr%3A05-13593

## Record

- **Collection:** Federal Register
- **Document type:** Notice
- **Published:** July 8, 2005
- **Citation:** 70 FR 39550

## Text

DEPARTMENT OF THE TREASURY
Internal Revenue Service
Proposed Collection; Comment Request for Form 1040 and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE, Form 1040A and Schedules 1, 2, and 3, and Form 1040EZ, and All Attachments to These Forms

AGENCY:

Internal Revenue Service (IRS), Treasury.

ACTION:

Notice and request for comments.

SUMMARY:

The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and continuing information collections, as required by the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). This notice requests comments on all forms used by individual taxpayers: Form 1040, U.S. Individual Income Tax Return, and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE; Form 1040A and Schedules 1, 2, and 3; Form 1040EZ;

and all attachments to these forms (see the Appendix to this notice). With this notice, the IRS is also announcing significant changes to (1) the manner in which tax forms used by individual taxpayers will be approved under the PRA and (2) its method of estimating the paperwork burden imposed on all individual taxpayers.

DATES:

Written comments should be received on or before September 6, 2005 to be assured of consideration.

ADDRESSES:

Direct all written comments to The OMB Unit, SE:W:CAR:MP:T:T:SP, Internal Revenue Service, Room 6406, 1111 Constitution Avenue, NW., Washington, DC 20224.

FOR FURTHER INFORMATION CONTACT:

Requests for additional information or copies of the form and instructions should be directed to Chief, RAS:R:TSBR, NCA 7th Floor, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC 20224, or through the internet at
ChiefTSBR@irs.gov.

SUPPLEMENTARY INFORMATION:

Change in PRA Approval of Forms Used by Individual Taxpayers

Under the PRA, OMB assigns a control number to each “collection of information” that it reviews and approves for use by an agency. A single information collection may consist of one or more forms, recordkeeping requirements, and/or third-party disclosure requirements. Under the PRA and OMB regulations, agencies have the discretion to seek separate OMB approvals for individual forms, recordkeeping requirements, and third-party reporting requirements or to combine any number of forms, recordkeeping requirements, and/or third-party disclosure requirements (usually related in subject matter) under one OMB Control Number. Agency decisions on whether to group individual requirements under a single OMB Control Number or to disaggregate them and request separate OMB Control Numbers are based largely on considerations of administrative practicality.

The PRA also requires agencies to estimate the burden for each collection of information. Accordingly, each OMB Control Number has an associated burden estimate. The burden estimates for each control number are displayed in (1) the PRA notices that accompany collections of information, (2)
Federal Register
notices such as this one, and (3) in OMB's database of approved information collections. If more than one form, recordkeeping requirement, and/or third-party disclosure requirement is approved under a single control number, then the burden estimate for that control number reflects the burden associated with all of the approved forms, recordkeeping requirements, and/or third-party disclosure requirements.

As described below under the heading “New Burden Model,” the IRS” new Individual Taxpayer Burden Model (ITBM) estimates of taxpayer burden are based on taxpayer characteristics and activities, taking into account, among other things, the forms and schedules generally used by those groups of individual taxpayers and the recordkeeping and other activities needed to complete those forms. The ITBM represents the first phase of a long-term effort to improve the ability of IRS to measure the burden imposed on various groups of taxpayers by the Federal tax system. While the new methodology provides a more accurate and comprehensive description of individual taxpayer burden, it does not estimate burden on a form-by-form basis, as has been done under the previous methodology. When the prior model was developed in the mid-1980s, almost all tax returns were prepared manually, either by the taxpayer or a paid provider. In this context, it was determined that estimating burden on a form-by-form basis was an appropriate methodology. Today, about 85 percent of all individual tax returns are prepared utilizing computer software (either by the taxpayer or a paid provider), and about 15 percent are prepared manually. In this environment, in which many taxpayers' activities are no longer as directly associated with particular forms, estimating burden on a form-by-form basis is not an appropriate measurement of taxpayer burden. The new model, which takes into account broader and more comprehensive taxpayer characteristics and activities, provides a much more accurate and useful estimate of taxpayer burden.

Currently, there are 121 forms used by individual taxpayers. These include Forms 1040, 1040A, 1040 EZ, and their schedules and all the forms individual taxpayers attach to their tax returns (see the Appendix to this notice). For most of these forms, IRS has in the past obtained separate OMB approvals under unique OMB Control Numbers and separate burden estimates.

Since the ITBM does not estimate burden on a form-by-form basis, IRS is no longer able to provide burden estimates for each tax form used by individuals. The ITBM estimates the aggregate burden imposed on individual taxpayers, based upon their tax-related characteristics and activities. IRS therefore will seek OMB approval of all 121 individual tax forms as a single “collection of information.” The aggregate burden of these tax forms will be accounted for under OMB Control Number 1545-0074, which is currently assigned to Form 1040 and its schedules. OMB Control Number 1545-0074 will be displayed on all individual tax forms and other information collections. As a result of this change, burden estimates for individual taxpayers will now be displayed differently in PRA Notices on tax forms and other information collections, and in Federal Register notices. This new way of displaying burden is presented below under the heading “Proposed PRA Submission to OMB.” Since 74 of the 121 forms used by individual taxpayers are also used by corporations, partnerships, and other kinds of taxpayers, there will be a transition period during which IRS will report different burden estimates for individual taxpayers and for other taxpayers using the same forms. For those forms used by both individual and other taxpayers, IRS will display two OMB Control Numbers (1545-0074 and the OMB Control Numbers currently assigned to these forms) and provide two burden estimates. The burden estimates for individual taxpayers will be reported and accounted for as described in this notice. The burden estimates for other users of these forms will be determined under existing methodology based on form length and complexity.

New Burden Model

Data from the new ITBM revises the estimates of the levels of burden experienced by individual taxpayers when complying with the Federal tax laws. It replaces the earlier burden measurement developed in the mid-1980s. Since that time, improved technology and modeling sophistication have enabled the IRS to improve the burden estimates. The new model provides taxpayers and the IRS with a more comprehensive understanding of the current levels of taxpayer burden. It reflects major changes over the past two decades in the way taxpayers prepare and file their returns. The new ITBM also represents a substantial step forward in the IRS' ability to assess likely impacts of administrative and legislative changes on individual taxpayers.

The ITBM's approach to measuring burden focuses on the characteristics and activities of individual taxpayers

rather than the forms they use.
1

Key determinants of taxpayer burden in the model are the way the taxpayer prepares the return (
e.g.
, with software or paid preparer) and the taxpayer's activities, such as recordkeeping and tax planning. In contrast, the previous estimates primarily focused on the length and complexity of each tax form. The changes between the old and new burden estimates are due to the improved ability of the new methodology to measure burden and the expanded scope of what is measured. These changes create a one-time shift in the estimate of burden levels that reflects the better measurement of the new model. The differences in estimates between the models do not reflect any change in the actual burden experienced by taxpayers. Comparisons should not be made between these and the earlier published estimates, because the models measure burden in different ways.

1
As IRS continues to develop the new burden model, the new method of estimating burden will be expanded to cover other groups of taxpayers (corporations, partnerships, tax-exempt entities, etc.).

Methodology

Burden is defined as the time and out-of-pocket costs incurred by taxpayers to comply with the Federal tax system. For the first time, the time expended and the out-of-pocket costs are estimated separately. The new methodology distinguishes among preparation methods, taxpayer activities, types of individual taxpayer, filing methods, and income levels. Indicators of complexity in tax laws as reflected in tax forms and instructions are incorporated in the model.

The new model follows IRS' classification of taxpayer types: individual taxpayers are taxpayers who file any type of Form 1040. “Self-Employed” taxpayers are individual taxpayers who file a Form 1040 and a Schedule C, C-EZ, E, or F, or Form 2106. All other individual taxpayers using a Form 1040 are “Wage and Investment” taxpayers. The taxpayer's choice of preparation method is identified as a major factor influencing burden levels. The preparation methods are:

• Self-prepared without software

• Self-prepared with software

• Used a paid tax preparer

The separate types of taxpayer activities measured in the model are:

• Recordkeeping

• Form completion

• Form submission (electronic and paper)

• Tax planning

• Use of services (IRS and paid professional)

• Gathering tax materials

Taxpayer Burden Estimates

Tables 1, 2, and 3 show the burden model estimates. In tax year 2003 the burden of all individual taxpayers filing Forms 1040, 1040A or 1040EZ averaged about 23 hours per return filed, or a total of more than 3 billion hours. Similarly, the average out-of-pocket taxpayer costs were estimated to be $179 per return filed or a total of $23.4 billion. Including associated forms and schedules, taxpayers filing Form 1040 had an average burden of about 30 hours, taxpayers filing Form 1040A averaged about 9 hours, and those filing 1040 EZ averaged about 7 hours.

The data shown are the best estimates from tax returns filed for 2003 currently available as of June 27, 2005. The estimates are subject to change as new forms and data become available. Estimates for combinations of major forms and schedules commonly used will be available and the most up-to-date estimates and supplementary information can be found on the IRS Web site:
http://www.irs.gov.

Proposed PRA Submission to OMB

Title:
U.S. Individual Income Tax Return.

OMB Number:
1545-0074.

Form Numbers:
Form 1040 and Schedules A, B, C, C-EZ, D, D-1, E, EIC, F, H, J, R, and SE; Form 1040A and Schedules 1, 2 and 3; Form 1040EZ; and all attachments to these forms (see the Appendix to this notice).

Abstract:
These forms are used by individuals to report their income tax liability. The data is used to verify that the items reported on the forms are correct, and also for general statistics use.

Current Actions:
Changes are being made to the forms and the method of burden computation.

Type of Review:
Extension of currently approved collections.

Affected Public:
Individuals or households.

Estimated Number of Respondents:
130,200,000.

Total Estimated Time:
3.0 billion hours.

Estimated Time Per Respondent:
23.3 hours.

Total Estimated Out-of-Pocket Costs:
$23.4 billion.

Estimated Out-of-Pocket Cost Per Respondent:
$179.

Table 1.—Taxpayer Burden for Individual Taxpayers Who Filed Form 1040, by Preparation Method

Major form filed or type of
taxpayer

Number of returns (millions)
Average burden
Average for all preparation methods
Hours
Costs (dollars)
Self-prepared without tax software
Hours
Costs (dollars)
Self-prepared with tax software
Hours
Costs (dollars)
Prepared by paid professional
Hours
Costs (dollars)

All Taxpayers Filing Form 1040, 1040A and 1040EZ
130.2
23.3
$179
16.4
$17
27.9
$44
22.9
$268

Major Form Filed:

Taxpayers Filing Form 1040 (and associated forms)
88.2
30.5
242
26.9
$21
36.6
52
28.7
338

Taxpayers Filing Form 1040A (and associated forms)
23.3
9.1
62
10.8
29
11.5
44
7.4
82

Taxpayers Filing Form 1040EZ
18.7
7.2
29
7.0
1
10.1
9
5.5
60

Type of Taxpayer *:

Wage and Investment
94.6
11.8
93
11.5
14
17.8
35
9.0
142

Self-Employed
35.6
53.9
410
48.5
31
68.4
81
53.9
522

Note:
Detail may not add to total due to rounding.

* You are a “Wage and Investment” taxpayer (as defined by IRS) if you did not file a Schedule C, Schedule C-EZ, Schedule E, Schedule F, or Form 2106. If you filed a Schedule C, Schedule C-EZ, E, or F, or Form 2106, you are a “Self-Employed” taxpayer.

Table 2.—Taxpayer Burden for Taxpayers Who Filed Form 1040, by Preparation Method

Type of taxpayer * and common combinations of forms filed
Average burden
Average for all preparation methods
Hours
Costs (dollars)
Self-prepared without tax software
Hours
Costs (dollars)
Self-prepared with tax software
Hours
Costs (dollars)
Prepared by paid professional
Hours
Costs (dollars)

Common Filing Combinations of Wage & Investment Taxpayers

Wage and Investment Taxpayers
11.8
$93
11.5
$14
17.8
$35
9.0
$142

Form 1040 and other forms and schedules, but not Schedules A and D
9.2
88
12.2
17
15.8
34
6.6
118

Form 1040 and Schedule A and other forms and schedules, but not Schedule D
16.3
126
19.2
17
22.6
41
11.9
198

Form 1040 and Schedule D and other forms and schedules, but not Schedule A
17.6
159
22.5
14
27.3
48
12.9
223

Form 1040 and Schedules A and D and other forms and schedules
24.6
239
32.8
13
35.4
44
18.1
365

Common Filing Combinations of Self-Employed Taxpayers

Self-Employed Taxpayers
53.9
$410
48.5
$31
68.4
$81
53.9
$522

Form 1040 and Schedule C and other forms and schedules, but not Schedules E or F or Form 2106
59.4
245
51.4
24
74.6
63
56.1
323

Form 1040 and Schedule E and other forms and schedules, but not Schedules C or F or Form 2106
44.7
591
37.5
43
57.7
100
42.8
717

Form 1040 and Schedule F and other forms and schedules, but not Schedules C or E or Form 2106
34.8
238
38.1
37
49.7
81
34.8
238

Form 1040 and Form 2106 and other forms and schedules but not Schedules C, E, or F
55.4
242
42.0
32
62.5
80
55.8
283

Form 1040 and forms and schedules including more than one of the SE forms (Schedules C, E, or F or Form 2106)
69.4
618
72.0
40
88.3
99
65.7
746

* You are a “Wage and Investment” taxpayer (as defined by IRS) if you did not file a Schedule C, Schedule C-EZ, Schedule E, Schedule F, or Form 2106. If you filed a Schedule C, Schedule C-EZ, E, or F, or Form 2106, you are a “Self-Employed” taxpayer.

Table 3.—Taxpayer Burden for Taxpayers Who Filed Form 1040, by Activity

Form or schedule
Percent of returns filed (percent)
Average time burden of taxpayer activities (hours per return)
Total time
Recordkeeping
Tax planning
Form completion
All other activities

Average costs per return
(dollars)

All Taxpayers
100%
23.3
14.1
3.2
3.2
2.8
$179

Form 1040
68
30.5
19.1
4.2
3.8
3.5
242

Form 1040A
18
9.1
4.3
1.1
1.9
1.8
63

Form 1040EZ
14
7.2
2.5
1.5
2.1
1.2
29

Type of Taxpayer *
100

Wage and Investment
73
11.8
5.0
2.3
2.7
1.8
93

Self-Employed
27
53.9
38.1
5.8
4.4
1.2
410

Note:
Detail may not add to total due to rounding.

* You are a “Wage and Investment” taxpayer (as defined by IRS) if you did not file a Schedule C, Schedule C-EZ, Schedule E, Schedule F, or Form 2106. If you filed a Schedule C, Schedule C-EZ, E, or F, or Form 2106, you are a “Self-Employed taxpayer.”

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB Control Number.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

Request for Comments

Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital

or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

Approved: July 6, 2005.
R. Joseph Durbala,
Acting IRS Reports Clearance Officer.

Appendix

OMB No.
Form
Title

0028
926
Return by a U.S. Transferor of Property to a Foreign Corporation.

0043
970
Application To Use LIFO Inventory Method.

0047
982
Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment.

0074
1040 (SCH A)
Itemized Deductions.

0074
1040 (SCH B)
Interest and Ordinary Dividends.

0074
1040 (SCH C)
Profit or Loss From Business.

0074
1040 (SCH D)
Capital Gains and Losses.

0074
1040 (SCH E)
Supplemental Income and Loss.

0074
1040 (SCH F)
Profit or Loss From Farming.

0074
1040 (SCH R)
Credit for the Elderly or the Disabled.

0074
1040 (SCH SE)
Self-Employment Tax.

0074
1040 (SCH J)
Income Averaging for Farmers and Fishermen.

0074
1040 (SCH EIC)
Earned Income Credit.

0074
1040 (SCH H)
Household Employment Taxes.

0074
1040 (SCH D-1)
Continuation Sheet for Schedule D.

0074
1040 (SCH C-EZ)
Net Profit From Business.

0121
1116
Foreign Tax Credit.

0134
1128
Application To Adopt, Change, or Retain a Tax Year.

0073
1310
Statement of Person Claiming Refund Due a Deceased Taxpayer.

0139
2106
Employee Business Expenses.

1441
2106 EZ
Unreimbursed Employee Business Expenses.

0071
2120
Multiple Support Declaration.

0140
2210
Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

0140
2210 F
Underpayment of Estimated Tax by Farmers and Fishermen.

0070
2350
Application for Extension of Time To File U.S. Income Tax Return.

0145
2439
Notice to Shareholder of Undistributed Long-Term Capital Gains.

0068
2441
Child and Dependent Care Expenses.

0067
2555
Foreign Earned Income.

1326
2555 EZ
Foreign Earned Income Exclusion.

0152
3115
Application for Change in Accounting Method.

0155
3468
Investment Credit.

0159
3520
Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.

0895
3800
General Business Credit.

0062
3903
Moving Expenses.

0162
4136
Credit for Federal Tax Paid on Fuels.

0059
4137
Social Security and Medicare Tax on Unreported Tip Income.

0166
4255
Recapture of Investment Credit.

0172
4562
Depreciation and Amortization.

0173
4563
Exclusion of Income for Bona Fide Residents of American Samoa.

0177
4684
Casualties and Thefts.

0184
4797
Sales of Business Property.

0187
4835
Farm Rental Income and Expenses.

0191
4952
Investment Interest Expense Deduction.

0192
4970
Tax on Accumulation Distribution of Trusts.

0193
4972
Tax on Lump-Sum Distributions.

0803
5074
Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands (CNMI).

0203
5329
Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts.

0704
5471
Information Return of U.S. Persons With Respect to Certain Foreign Corporations.

0216
5713
International Boycott Report.

0219
5884
Work Opportunity Credit.

0712
6198
At-Risk Limitations.

0227
6251
Alternative Minimum Tax—Individuals.

0228
6252
Installment Sale Income.

0231
6478
Credit for Alcohol Used as Fuel.

0619
6765
Credit for Increasing Research Activities.

0644
6781
Gains and Losses From Section 1256 Contracts and Straddles.

0790
8082
Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR).

0881
8271
Investor Reporting of Tax Shelter Registration Number.

0889
8275
Disclosure Statement.

0889
8275 R
Regulation Disclosure Statement.

0908
8283
Noncash Charitable Contributions.

0915
8332
Release of Claim to Exemption for Child of Divorced or Separated Parents.

1210
8379
Injured Spouse Claim and Allocation.

0930
8396
Mortgage Interest Credit.

1008
8582
Passive Activity Loss Limitations.

1034
8582 CR
Passive Activity Credit Limitations.

0984
8586
Low-Income Housing Credit.

1021
8594
Asset Acquisition Statement.

1007
8606
Nondeductible IRAs.

0988
8609 (SCH A)
Annual Statement.

1035
8611
Recapture of Low-Income Housing Credit.

0998
8615
Tax for Children Under Age 14 With Investment Income of More Than $1,600.

1002
8621
Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.

1032
8689
Allocation of Individual Income Tax to the Virgin Islands.

1031
8697
Interest Computation Under the Look-Back Method for Completed Long-Term Contracts.

1073
8801
Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts.

1620
8812
Additional Child Tax Credit.

1128
8814
Parents' Election to Report Child's Interest and Dividends.

1173
8815
Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989.

1505
8820
Orphan Drug Credit.

1190
8824
Like-Kind Exchanges.

1205
8826
Disabled Access Credit.

1288
8828
Recapture of Federal Mortgage Subsidy.

1266
8829
Expenses for Business Use of Your Home.

1282
8830
Enhanced Oil Recovery Credit.

1374
8834
Qualified Electric Vehicle Credit.

1362
8835
Renewable Electricity and Refined Coal Production Credit.

1829
8836
Qualifying Children Residency Statement.

1552
8839
Qualified Adoption Expenses.

1410
8840
Closer Connection Exception Statement for Aliens.

1411
8843
Statement for Exempt Individuals and Individuals With a Medical Condition.

1444
8844
Empowerment Zone and Renewal Community Employment Credit.

1417
8845
Indian Employment Credit.

1414
8846
Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips.

1416
8847
Credit for Contributions to Selected Community Development Corporations.

1561
8853
Archer MSAs and Long-Term Care Insurance Contracts.

1567
8854
Initial and Annual Expatriation Information Statement.

1910
8858
Information Return of U.S. Persons With Respect to Foreign Disregarded Entities.

1584
8859
District of Columbia First-Time Homebuyer Credit.

1606
8860
Qualified Zone Academy Bond Credit.

1569
8861
Welfare-to-Work Credit.

1619
8862
Information To Claim Earned Income Credit After Disallowance.

1618
8863
Education Credits.

1924
8864
Biodiesel Fuels Credit.

1668
8865
Return of U.S. Persons With Respect to Certain Foreign Partnerships.

1622
8866
Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method.

1722
8873
Extraterritorial Income Exclusion.

1804
8874
New Markets Credit.

1805
8880
Credit for Qualified Retirement Savings Contributions.

1810
8881
Credit for Small Employer Pension Plan Startup Costs.

1809
8882
Credit for Employer-Provided Childcare Facilities and Services.

1807
8885
Health Coverage Tax Credit.

1800
8886
Reportable Transaction Disclosure Statement.

1911
8889
Health Savings Accounts (HSAs).

1928
8891
U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans.

1914
8896
Low Sulfur Diesel Fuel Production Credit.

NEW
8898
Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possesion.

NEW
8900
Qualified Railroad Track Maintenance Credit.

NEW
8903
Domestic Production Activities Deduction.

NEW
8904
Marginal Wells Oil and Gas Production Credit.

0007
T (Timber)
Forest Activities Schedules.

[FR Doc. 05-13593 Filed 7-7-05; 8:45 am]
BILLING CODE 4830-01-P

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A05-13593. Public record. Not legal advice.