When taxpayers file for income tax returns, they mention their income in Form 1040. But what to do if you have income that is not included in Form 1040, such as taxable refunds from the state, gambling money, or alimony, etc? To report that income, the IRS has another form called Form 1040 Schedule 1 tax form.
What is a Schedule 1 Tax Form?
Taxpayers who have additional incomes, credits, and payments that are not included in the main Form 1040 for reporting the year-end income attach the Schedule Forms with the income reporting form of their tax return.
Earlier before 2018, Form 1040 had several instructions and mentions in the form to inquire about other income and adjustments to income, which was a daunting task for many taxpayers.
Hence, the IRS introduced various Form 1040 Schedules to report the incomes from other sources that are unlisted in the main form Form 1040 such as retirement income, business loss, additional income, and many more.
Schedule 1 is one of the Schedule forms that need to be filled for mentioning additional income and adjusted income such as prize money, unemployment compensation, gambling winnings, etc.
The “Schedule 1 form” is also utilized to claim tax deductions on your tax returns. This type of form plays an essential role in your tax returns, ensuring that all your sources of income are reported in the tax returns and benefit from the eligible adjustments that can be deducted.
Who files the Schedule 1 Form?
According to the Department of the Treasury IRS, not every taxpayer is required to submit Form 1040 Schedule 1 with their tax returns. The agency has simplified and made some changes in the main form.
And now, taxpayers need to attach the Schedule 1 form with their tax returns only if they have additional income (income outside of your salary, interest income, or monthly wages) or adjustments (such as student loan interest deductions, or any other loan deduction) to make in the income.
What is the Part I of the Schedule 1 Form?
The Schedule 1 form is further divided into two parts – Part I & II to report the incomes and take advantage of adjustments.
The first part of the Schedule 1 form includes additional income, where taxpayers mention income such as:
- You can include your taxable refunds and credits you get from state and local income taxes.
- The alimony received in the marriage separation with the date of the original divorce needs to be mentioned in the form.
- Your loss or income in business. If you mention loss, then do not forget to attach Schedule C, which is specified to mention this income category in Form 1040. For income in business attach Form 4797 as well.
- For farm income or loss, attach Schedule F as well.
- Income comes from Rental Real estate, royalties, trusts, etc. with Schedule E.
- Unemployment compensation
- Other income such as prize money, gambling winning, etc.
You can see with some incomes mentioned you need to attach other Schedule Forms as well, so when you report your additional income, do check if you need to attach any other form with your tax returns.
What is the Part II of the Schedule 1 Form?
The adjustments part of the Schedule 1 Form helps take the above-the-line deductions from your tax returns.
The adjustments to income included in Schedule 1 Form Part II are the following:
- If you are an educator working in schools, you can include educator unreimbursed expenses up to $300.
- You can include your health savings account deduction with Form 8889.
- If you are from the armed forces, you can include your moving expenses by attaching Form 3903.
- Your unreimbursed business expenses of reservists, fee-basis government officials, and performing artists are attached to Form 2106.
- You can include your contributions to Self-employed SEP, SIMPLE, and qualified plans.
- For self-employed people, you can include your health insurance deduction.
- You can include the deductible part of self-employment tax by attaching Schedule SE.
- You can include alimony payments done by you.
- Include your student loan interest up to $2,500.
- The amount you have contributed to your IRA can also be included in this part for tax deduction.
- The taxpayer can include the money they have reserved for future use from their income.
- Archer MSA deduction.
- Last other adjustments such as housing deduction, Jury duty pay, etc.
Here, we end our quest for the IRS Schedule 1 form. Hope, you got all the information you needed on the Schedule 1 Form for filing your tax returns.