What is IRS Form 1040 Schedule 1: Definition, Types, and Use

As per the United States tax system, Form 1040 is the primary document for individual taxpayers in which they report their annual taxable income and calculate their federal income tax liability. Schedule 1 of Form 1040 is the extended form that records the additional income of the taxpayer.

Must Read: What is IRS Form Schedule 2 and How to Fill it Correctly

Understanding the purpose of Schedule 1

Schedule 1 is also known as the "Additional Income and Adjustments to Income" add-on that turns into a companion document to Form 1040. Its primary purpose is to capture two critical elements of your tax situation:

Additional Income

It includes all kinds of income streams a taxpayer may have except for the pre-defined boxes on the main Form 1040.

These additional incomes encompass:

• Alimony received in the case of legal separation or divorce
• Unemployment compensation benefits
• Income from jury duty
• Prizes and awards, excluding certain scholarships
• Business income from a sole proprietorship
• Partnership income
• Capital gains or losses from selling investments like stocks, bonds, or real estate

Adjustments to Income

It represents the deductions that are subtracted from your gross income as authorized by the Internal Revenue Code (IRC). Common adjustments reported on Schedule 1 include:

• Teacher's tax deduction for classroom supplies
• Interest paid on qualified student loans
• Contributions made to Individual Retirement Accounts (IRAs)
• Contributions made to Health Savings Accounts (HSAs) used towards qualified medical expenses
• Alimony paid to a former spouse under a qualified divorce decree

Who Is Eligible To File Schedule 1 (Form 1040)?

Here are a few familiar cases where filing Schedule 1 may be necessary:

• If you have additional income sources apart from your typical income, such as rental income and salary
• If you have certain adjustments such as education, student loan, or HSA contribution
• If you have added tax credits, including the Additional Child Tax Credit or the Adoption Credit

Steps To Complete Schedule 1 Form 1040

You are required to report all your additional incomes and deductions in the Schedule 1 Form 1040 that are not included in the main Form 1040.

Here's a step-by-step manual on how to complete Schedule 1:

Step 1: Collect the required documents

Gather all the necessary documents, such as W-2 forms, 1099 forms, and any other income or expense documents needed to complete Schedule 1.

Step 2: Fill out individual information

Here, you have to enter your name, Social Security number (SSN), and other personal details.

Step 3: Note added income

As discussed above, you need to report all additional income, such as rental, alimony, or other, excluding all you have reported in the main Form 1040.

Step 4: Calculate adjustments to income

Individuals can save money on taxes by deducting out-of-pocket spending on classroom supplies (up to $300/$600 for joint filers). In Line 1, you need to file tax refunds or offsets, and in Line 8, you have to cover all miscellaneous untaxed income such as prized, winnings, and more.

Step 5: Report other tax credits

This section accounts for a few tax credits, including:

• In line 19, report additional child tax credit
• In line 24, file residential energy credits
• In line 25, report the credit for foreign tax

Before reporting any additional tax credits, ensure you are eligible for them.

Step 6: Report refundable credits

Calculate any additional payments and refundable credits, which should be reported on Schedule 1. Some common examples are overpayments from a previous year's return, the premium tax credit, or the net premium tax credit.

Here are a few adjustments to income you might discover on Schedule 1:

• Self-Employed SEP, SIMPLE, and Qualified Plans (Line 15): Contributions made to retirement programs, including Incentive Match Plan for Employees (SIMPLE) can be removed by self-employed individuals.
• Educator Expenses (Line 23): Eligible educators can deduct up to $250 for unreimbursed expenses related to classroom supplies.
• Certain Business Expenses (Line 24): People who run their own businesses (self-employed) or have work-related expenses (employees) can deduct certain costs from their taxes. These might include using part of their home for work, business supplies, or travel for work.
• Health Savings Account (HSA) Deduction (Line 25): An individual can claim contributions made to a Health Savings Account.
• IRA Deduction (Line 32): Contributions made to traditional individual retirement accounts (IRAs) might be deductible, subject to income limits and other criteria.
• Student Loan Interest Deduction (Line 33): Taxpayers who paid interest on qualifying student loans during the tax year may be eligible to deduct up to a certain amount.

Step 7: Review and attach Schedule 1

Please examine all the details you documented on Schedule 1 for precision. Once you are convinced that everything is valid, attach Schedule 1 to your Form 1040 when filing your tax return. Always keep duplicates of all records you submit.

Deadline For Submitting Form 1040 Schedule 1

The due date for filing your Form 1040, including Schedule 1, is typically April 15th. However, you can request an extension to file by submitting Form 4868. This extension grants you an additional six months, pushing the deadline to October 15th of that year.

The table below shows the filing deadlines with the extension option included:

Tax Year

Initial Filing Deadline

Extension Deadline

2023

April 15, 2024

October 15, 2024

2024

April 15, 2025

October 15, 2025

2025

April 15, 2026

October 15, 2026

Frequently Asked Questions (FAQs)

What is Schedule 1 on the 1040 form?

Schedule 1 is a supplementary form alongside Form 1040 for noting extra income sources and adjustments not covered on the main form. It provides a comprehensive tax review.

Do I have to file Schedule 1 with my tax return?

If you have additional income and certain adjustments, deductions, or credits, then must report all of that in Schedule 1.

What kinds of income can I report on Schedule 1?

You can report different income sources, such as freelance payments, rental revenue, or unemployment settlement on Schedule 1

Which adjustments can be reported on Schedule 1?

You have to include adjustments such as educator expenses, student loan interest, or retirement contributions on Schedule 1.

What happens if I fail to include Schedule 1 when required?

Omitting Schedule 1 when required might result in mistakes in your tax return, directing to additional taxes owed or delayed refunds.

Can omissions or inaccuracies on Schedule 1 lead to tax audits?

Discrepancies or inaccuracies on Schedule 1 may result in IRS inquiries or audits, leading to legal consequences.