Older taxpayers get their own 1040 form for tax filing
Monday, July 15, 2019
Reviewed and revised Jan. 31, 2021
It's lose three, add one for the Internal Revenue Service when it comes to 2019 tax year forms.
Uncle Sam's tax collector that year proposed tweaks to the Form 1040 and elimination of three of the six schedules created to go with that annual individual return that was redesigned in the wake of the Tax Cuts and Jobs Act (TCJA) of 2017 changes. (Additional changes to the 1040 for the 2020 tax year produced a longer form that now resembles its predecessor, the long Form 1040.)
But the net result of forms available to filers for the 2019 tax year would be minus two, not three, since the IRS has developed another new 1040.
This one is Form 1040-SR, with the appended two letters standing for seniors, as in older taxpayers. It made the new forms cut a couple of years ago and is still around.
Budget, not tax bill mandate: The genesis of the new 1040-SR that would be used by taxpayers age 65 or older is not the TCJA, but the Bipartisan Budget Act (BBA) of 2018.
While the TCJA actually complicated, rather than simplified, many tax situations, the BBA that became law about a month later provided for simplified tax filing for senior citizens.
Eligible filers won't be required to use it, but if the find it is a good tax fit, they can when filing season starts next year.
Long tax form road: While the 1040-SR will finally be available in 2020 (and for tax filing years beyond), the form has been in the works for a while.
It was first proposed in 2013 as part of the Seniors Tax Reconciliation Act. The AARP, the National Taxpayers Union, and the Association of Mature Americans all supported the bill.
That measure, however, was never able to clear Congress, getting hung up in the Senate.
It was fashioned on the prior 1040EZ, but is a more bulked up version, allowing some tax moves that weren't allowed on that now defunct document.
Here's a look at the Form 1040-SR, 2020 version, below. That's just page 1 of 4. Click it for a PDF version of the full form.
And here's a look at the 1040-SR's requirements and options.
Age obviously counts: Senior taxpayers, in the eyes of the IRS, are those who are 65 or older.
That age threshold applies to the 1040-SR. It could be used by taxpayers who are 65 or older by Dec. 31, 2019, or by the end of the tax year they begin using the form.
When a married couple files jointly, only one spouse needs to meet the age requirement.
Dependents are OK: Today's families take many forms. There are many parents who are supporting adult children, as well as grandparents responsible for their grandkids.
The 1040-SR takes this into account.
Where the old 1040EZ couldn't be used by filers who claimed dependents, it's OK for 1040-SR taxpayers.
Dependent information, including the always critical Social Security numbers for each person claimed, is entered at the top of the 1040-SR.
Income, earned or from retirement plans: You don't have to be retired to use the form. Age allowing, you can still be working and report those earnings on 1040-SR.
If, however, you have decided to call it quits from the cube farm, then you can report your retirement benefits and investment income you might be tapping on 1040-SR.
Self-employment earnings also are reported on this form. For example, money from gig work you've done since leaving your traditional office space can be entered on 1040-SR after you detail the income on Schedule 1.
Standard, but larger, claims: Many older taxpayers find that as they've simplified their lives, both practical and financial, they no longer need to itemize. But the tax code has found a way to make the standard deduction amount even more appealing to older filers. The standard amounts allowed on 1040-SR could be substantially larger based on the filer's (or filers', if married) age and eyesight.
When the Form 1040-SR debuted for the 2019 tax year, those deduction amounts were $12,200 for single filers; $18,350 for heads of households; and $24,400 for joint filers. For the 2020 tax year, those amounts were increased to $12,400 for single taxpayers; $18,650 for head-of-household filers; and $24,800 for married jointly filing couples. (You can find the increases for the 2021 tax year in this post on the upcoming inflation adjustments.)
The bumps for senior taxpayers when 1040-SR was introduced for tax year 2019 pushed the standard deductions up to $13,850 for single filers; $20,000 for head-of-household taxpayers; and $25,700 for married joint filers where one spouse is 65 or older or $27,000 if both spouses are older.
For the 2020 tax year, single taxpayers 65 or older get to add an additional $1,650 to the standard amount. The add-on for married joint filers is $1,300. That means on 2020 Form 1040-SR filings, the standard deductions are $14,050 for single filers; $20,300 for heads of households; and $24,400 for joint filers. For the 2020 tax years, those amounts were $12,400 for single taxpayers; $18,650 for head-of-household filers; and $26,100 for married joint filers where one spouse is 65 or older or $27,400 if both spouses are older.
As noted, the deduction amounts could go even higher where the older filers are visually impaired. As on prior 1040s, the taxpayers must check boxes, now in the top section of the 1040-SR, that indicate they and/or their spouse qualify for the added age and/or blindness deduction amounts for their filing status. The situations are counted separately for each taxpayer, meaning an older couple where both spouses are visually impaired could add a total of $5,200 ($1,300 additional amount x 4 boxes checked) for a total standard deduction of $30,000.
Older filers will find the standard deduction amounts on the last page of the 1040-SR. That's a screen shot of the 2020 amounts below.
If after checking those numbers, you find you have more deductions by itemizing, that's fine. Regardless of your age, you should always choose the deduction method that produces a better tax result for you. And you can still use Schedule A and claim that amount even if you're older.
Tax credits, too: Your deduction amount choice goes on page 2 of the 1040-SR, which is the back of the form. This is also where you'll figure your tax amount.
This include the amounts due on other things, like self-employment on those aforementioned gigs, and which are detailed on Schedule 2.
In arriving at your final tax liability, you'll also get on 1040-SR some chances to reduce the final amount by claiming some tax credits.
The child tax credit or credit for other dependents, the Earned Income Tax Credit (EITC), additional child tax credit, the America Opportunity tax credit and, for 2020, the Recovery Rebate Credit for COVID-19 payments you qualify for but didn't receive in advance last year, are all listed directly on 1040-SR.
And other credits for which you qualify also can be claimed by filling out Schedule 3 and then transferring that amount to 1040-SR.
Finally, on page 3 you'll calculate the tax you owe or any refund you're due. As with all tax return forms, you can have that refund directly deposited to a bank account.
If you've been doing your taxes for a while, starting as a young taxpayer, then 1040-SR shouldn't pose any problems as you age into it.
You also might find these items of interest:
- 10 retirement plan RMD tax FAQ
- When Social Security benefits are taxed
- Tax help to take care of aging (and injury prone) parents
Doncha just love the combat pay notation on the second page?
Posted by: Eva Rosenberg | Tuesday, July 16, 2019 at 08:37 PM