The Schedule 1 tax form might be applicable to you. If it is, it will become part of the standard Form 1040 you fill out every year. You may hear the Schedule 1 form referred to as the “Additional Income and Adjustments to Income Form.” Like that name implies, the form acts as a catch all for any income and adjustments that don’t commonly apply to the majority of tax payers. That’s why the Schedule 1 isn’t commonly mentioned. Most people don’t even need to include it in their tax returns. So exactly what is a Schedule 1 tax form?
At first glance, the Schedule 1 seems to have big changes from year-to-year. The 2018 Schedule 1 had 36 different line items, while last year’s version only had 22. However, a closer inspection reveals that the two forms are basically the same. The exception is that the IRS decided to reserve a whole bunch of line items for the 2018 form that they later got rid of.
What is the Schedule 1 For and What Does It Include?
Many people can live their whole lives without needing to attach a Schedule 1. If that’s you, consider yourself lucky. Some others will need to include it every single year when they file their taxes. That’s because the standard Form 1040 already covers the basic income and adjustments that most individuals receive and qualify for. Then the Schedule 1 rounds up the rest.
The major groups of people who’ll need to attach a Schedule 1 are the following (we split it up by the two sections — Income and Adjustments).
Schedule 1 — Income Section
Divorced Individuals Receiving Alimony
This used to be the simplest on the bunch. You’d simply type in how much alimony you receive and you’re good to go. Now there’s a slight wrinkle — with big tax consequences. As a result of the Tax Cuts and Jobs Act in 2018, alimony is no longer considered for taxes if the separation was filed in 2019 or later. That means that alimony is no longer taxable for the receiver. It is also no longer tax deductible for the payer (again, if the divorced occurred in 2019 and later).
Those who’ve always entered alimony as income should keep on filing it that way. However, recent divorcees can now simply skip over the line and move on. Unless the law changes in the future, it’s expected that this line will become used less and less frequently as alimony payment from past divorces end.
Those With Business Income
This is for anyone who is self-employed or a business owner with multiple multiple employees. Self-employed individuals will attach a Schedule C with profit and loss details, while other business owners with K1s and the like will attach a Schedule E. There’s even a separate line for farmers, who will need to attach a Schedule F.
Those on Unemployment
If you received unemployed benefits during the tax year, then you’ll get a 1099-G form. It will detail the total amount of benefits you received in the tax year. For those who elected to voluntarily have their taxes withheld at the Federal level, that amount will show in Box 4 of the 1099-G. Note that the amount withheld isn’t entered in the Schedule 1 at all. Instead, you put withholding information on the Form 1040, along with all other taxes that were withheld on all types of 1099s for the year.
Schedule 1 — Adjustments Section
Special Expenses for Certain Jobs
Educator, reservists, performing artists, and fee-basis government officials all have special provisions that allow them to deduct some of the expenses they incur while on the job. Educators can deduct unreimbursed expenses such as supplies and computer equipment for up to $250 per individual. The others have even more deductions listed. Attach Form 2106 where the calculations are made.
Those who contributed any amount to an HSA can put the amount they added during the tax year to their Schedule 1. The contributions are tax deductible. Remember to include any amount that your employer contributed on your behalf. You have to attach Form 8889 to show your calculations though.
Member of the Armed Forces (on active duty) who had to permanently change where they stationed due to a military order can deduct their moving expenses. Attach Form 3903 to figure out the exact amount allowed.
Self-employed individuals have several possible deductions on the Schedule 1. Contributions to a SEP, SIMPLE, and other qualified plans such as a Solo 401(k) are all tax deductible and filed under the Schedule 1. Health insurance is deductible for them too, as well as part of the self-employment tax they pay that’s calculated via Schedule SE.
Early Withdrawal Penalties
Let’s say the bank charged you with a penalty for withdrawing your certificate of deposit early. You could at least get some of it back via a tax deduction. You should note, though, that early withdrawal penalties on a 401(k) aren’t tax deductible. That’s because the funds are taken out of the account that were never taxed, so it doesn’t make sense for the IRS to also give you a tax deduction.
Those who had to pay alimony payments used to be able to deduct taxes on them. But as discussed earlier, this is no longer the case for separations that were filed from 2019 onward.
Those who contributed to a Traditional IRA can enter the deduction here. Adjusted Gross Income (AGI) limits and other contribution limits apply. Be sure to check the rules before you make the deposit into the retirement account.
Students can claim a deduction on their Schedule 1 for student loan interest they had to pay. Certain tuition and fees they had to pay throughout the year are also deductible and calculated via Form 8917.
The Bottom Line
Schedule 1 isn’t complicated to complete. However, it’s important to not forget about it altogether. This isn’t usually a problem in the modern days of electronic tax software where you file your taxes based on a question and answers system. On the other hand, anyone still using paper forms will need to be careful. You don’t want to accidently exclude a huge section of income and adjustments. If you do, your tax return will likely be flagged for an audit.