Form 1040 Schedule 1: Additional Income and Adjustments to Income (2019)
What Form 1040 Schedule 1 Is For
Schedule 1 is a supplemental form that attaches to your main Form 1040 or 1040-SR tax return. Think of it as an extension of your main tax form that captures income and deductions that don't fit on the primary form. The IRS redesigned Form 1040 in recent years to make it simpler, and Schedule 1 now handles the ""overflow"" items.
The form has two main parts. Part I captures additional types of income beyond your regular wages, salaries, and investment earnings—things like business income, unemployment compensation, prize winnings, and rental property income. Part II handles adjustments to income, sometimes called ""above-the-line deductions"" because they reduce your income before you calculate your adjusted gross income (AGI). These adjustments include educator expenses, student loan interest, IRA contributions, and self-employment deductions.
The amounts you report on Schedule 1 flow directly to your main Form 1040. Line 9 of Schedule 1 (your total additional income) goes to Form 1040 line 7a, while line 22 (your total adjustments) goes to Form 1040 line 8a. This integration means Schedule 1 isn't optional if you have any of these income types or adjustments—it's a required part of your complete tax return.
Starting in 2019, Schedule 1 also includes a yes-or-no question about virtual currency transactions at the top of the form. If you bought, sold, exchanged, or otherwise dealt with cryptocurrency or other virtual currency during the year, you must check ""Yes"" and report any related income appropriately.
When You’d Use Form 1040 Schedule 1 (Including Late or Amended Filings)
You need to file Schedule 1 whenever you have income or adjustments that don't belong on the main Form 1040. Common situations include running a side business, receiving unemployment benefits, earning rental income, paying student loan interest, contributing to a traditional IRA, or being a teacher who purchased classroom supplies with your own money.
The normal deadline for filing Schedule 1 along with your Form 1040 is April 15 of the year following the tax year—so April 15, 2020, for your 2019 return. If you miss this deadline and need to file late, Schedule 1 must accompany your late Form 1040 submission. You may owe penalties and interest for late filing, particularly if you owe taxes.
If you discover errors or omissions after filing your original return, you'll need to file an amended return using Form 1040-X (Amended U.S. Individual Income Tax Return). When amending, you must include a corrected Schedule 1 if your changes involve additional income or adjustments to income. For example, if you forgot to claim your student loan interest deduction or failed to report business income from a late-arriving Form 1099, you'd file Form 1040-X with a revised Schedule 1 attached. Generally, you have three years from the date you filed your original return to file an amendment claiming a refund. The IRS extended certain 2019 tax benefits retroactively, such as the tuition and fees deduction, which meant some taxpayers needed to file amended 2019 returns to claim these benefits.
Key Rules or Details for the 2019 Tax Year
Reporting Requirements: You must file Schedule 1 if you have any entries for lines 1 through 8 (additional income) or lines 10 through 22 (adjustments to income). Many taxpayers mistakenly think they can skip the form, but failing to attach required schedules delays processing.
Virtual Currency Question: Beginning in 2019, you must answer the virtual currency question honestly. Even if you only received cryptocurrency as a gift or through an airdrop, or if you exchanged one cryptocurrency for another, you must check ""Yes."" This requirement surprised many taxpayers who didn't realize certain crypto activities qualified as reportable transactions.
Whole Dollar Amounts: Round all amounts to the nearest dollar. Drop cents under 50; round up for 50 cents or more. This seemingly small rule prevents math errors.
Specific Income Limits and Phaseouts: Several adjustments to income have eligibility requirements or income-based phaseouts. For instance, the student loan interest deduction phases out at higher income levels and isn't available at all if you're married filing separately. The IRA deduction may be reduced or eliminated if you or your spouse participates in an employer retirement plan and your income exceeds certain thresholds.
Documentation Requirements: Keep records supporting all entries. For business income, maintain receipts, invoices, and mileage logs. For adjustments, save forms like 1099-INT (showing early withdrawal penalties), Form 8889 (for HSA contributions), and receipts for educator expenses. The IRS can audit your return for up to three years in most cases, and you'll need documentation to substantiate your claims.
Alimony Rules Changed: Only alimony from divorce agreements executed on or before December 31, 2018, qualifies for deduction by the payer and must be reported as income by the recipient. Agreements after that date follow different rules, and alimony is neither deductible nor taxable. This frequently confuses taxpayers going through divorce.
Step-by-Step (High Level)
Step 1: Gather Your Documents
Collect all income statements (Forms 1099-G for unemployment, 1099-MISC for business income, W-2G for gambling winnings) and documentation for deductions (receipts for educator expenses, Form 1098-E for student loan interest, records of IRA contributions).
Step 2: Complete Part I—Additional Income
Work through lines 1 through 8 systematically. If you received a state tax refund, use the worksheet to determine if it's taxable. Report business income from Schedule C, rental income from Schedule E, unemployment from Form 1099-G, and any other income items. Total these on line 9.
Step 3: Complete Part II—Adjustments to Income
Claim eligible deductions on lines 10 through 22. Educators can deduct up to $250 for classroom supplies. Self-employed individuals complete the relevant sections for self-employment tax, health insurance, and retirement contributions. Calculate your IRA deduction using the worksheet if you or your spouse had retirement plan coverage. Don't forget to total all adjustments on line 22.
Step 4: Transfer Totals to Form 1040
Enter the amount from Schedule 1, line 9, on Form 1040 line 7a. Enter the amount from Schedule 1, line 22, on Form 1040 line 8a. These entries integrate your additional income and adjustments into your overall tax calculation.
Step 5: Attach Required Supporting Forms
Many Schedule 1 entries require additional forms. Business income requires Schedule C, rental income requires Schedule E, self-employment tax requires Schedule SE, HSA deductions require Form 8889, and so on. Arrange all schedules and forms in sequence number order before filing.
Common Mistakes and How to Avoid Them
Forgetting to File Schedule 1
Many taxpayers enter amounts directly on Form 1040 without realizing they need to complete Schedule 1 first. This delays processing. E-filing software usually prevents this error by automatically generating required schedules.
Misreporting Alimony
Taxpayers frequently confuse pre-2019 and post-2018 alimony rules. Always check the date of your divorce decree. Only alimony from agreements executed by December 31, 2018 (and not modified after that date to exclude alimony) gets reported on Schedule 1. Include the required information: recipient's SSN and the date of the original agreement.
Claiming Ineligible Deductions
Not everyone qualifies for every adjustment. For example, the moving expense deduction is now limited to active-duty military members with permanent change of station orders. Similarly, only qualifying educators can claim the educator expense deduction, and there are specific requirements about employment status and the types of expenses allowed.
Including Nontaxable Income
Schedule 1 line 8 is for ""Other Income,"" but taxpayers sometimes report nontaxable items like child support payments, life insurance proceeds, or gifts. These don't belong on your tax return at all.
Math Errors
Adding incorrectly or failing to transfer amounts properly causes processing delays. Double-check all calculations, especially if filing by paper. E-filing dramatically reduces math errors because the software calculates totals automatically.
Missing the Virtual Currency Question
Leaving the virtual currency question blank or answering incorrectly invites IRS scrutiny. Answer honestly—""Yes"" if you engaged in any virtual currency transaction during 2019, ""No"" if you didn't.
Inadequate Documentation
Claiming deductions without maintaining records creates problems during audits. Keep all supporting documents for at least three years. For educator expenses, save receipts showing what you purchased and when. For student loan interest, keep Form 1098-E from your lender.
What Happens After You File
After you submit your return with Schedule 1 attached, the IRS processes it alongside your Form 1040. Processing times vary—e-filed returns typically process within 21 days, while paper returns take six to eight weeks or longer.
The IRS computer systems check your return for errors, verify your math, and compare information against documents employers and financial institutions filed (like Forms W-2, 1099-G, and 1098-E). If discrepancies appear, you may receive a notice asking for clarification or proposing changes.
If you claimed refundable credits or you're due a refund because your withholding and payments exceeded your tax liability, the IRS will issue your refund. Choose direct deposit for the fastest refund—typically within 21 days of e-filing. Paper check refunds take longer.
If you owe additional tax, you'll receive a bill showing the amount due, including any penalties and interest. Pay as quickly as possible to minimize interest charges. The IRS offers payment plans if you can't pay the full amount immediately.
Sometimes the IRS conducts audits or examinations. Schedule 1 items—particularly business income, rental losses, and certain deductions—may attract closer scrutiny. If selected for audit, you'll receive a notice explaining what information the IRS needs. Having organized records makes audits much less stressful.
The IRS typically has three years from your filing date to audit your return, though this period extends to six years if you underreported income by more than 25 percent. Keep your tax records, including Schedule 1 and all supporting documentation, for at least three years, and preferably seven years for greater protection.
FAQs
Do I need Schedule 1 if I only have W-2 income and take the standard deduction?
Probably not. Schedule 1 is only required if you have additional income (like business income, unemployment, or gambling winnings) or adjustments to income (like student loan interest, IRA deductions, or educator expenses). W-2 wages go directly on Form 1040, so if that's your only income and you have no adjustments, you don't need Schedule 1.
Can I claim both an IRA deduction and an HSA deduction on the same return?
Yes, these are separate benefits. If you're eligible for both—contributing to a traditional IRA (line 19) and a health savings account (line 12)—you can claim both deductions. Each has its own rules and limits, and qualifying for one doesn't affect the other.
What happens if I forget to include Schedule 1 with my original return?
The IRS will likely send you a notice asking for the missing schedule or adjusting your return based on the information they have. If the missing schedule would have reduced your tax (by reporting deductions), file an amended return using Form 1040-X as soon as possible. Include the Schedule 1 you should have filed originally. You have three years to claim refunds through amendment.
I received unemployment compensation for the first time in 2019. Where does this go?
Unemployment compensation is reported on Schedule 1, line 7. You should receive Form 1099-G from your state unemployment office showing the total amount paid. This is taxable income, so you must report it even though you may not have had taxes withheld. Many first-time unemployment recipients don't realize it's taxable, leading to surprise tax bills.
How do I know if my state tax refund is taxable?
Your state refund is taxable only if you itemized deductions on your prior year return and deducted state income taxes. If you took the standard deduction in the prior year, your refund isn't taxable. If you itemized, use the State and Local Income Tax Refund Worksheet in the Form 1040 instructions to calculate how much, if any, is taxable. Report the taxable amount on Schedule 1, line 1.
Can I deduct student loan interest if my parents paid my loan?
Generally, yes, but with conditions. If you're legally obligated to pay the loan and your parents made payments as a gift to you, you can deduct the interest (up to $2,500) if you meet all other requirements. However, if your parents refinanced the loan in their name, or if you're claimed as a dependent on their return, you cannot claim the deduction. The student loan interest deduction also phases out at higher income levels and isn't available for married taxpayers filing separately.
What's the difference between Schedule 1 adjustments and itemized deductions?
Schedule 1 adjustments (sometimes called ""above-the-line"" deductions) reduce your adjusted gross income (AGI) before you choose between itemizing or taking the standard deduction. This makes them particularly valuable because they reduce your AGI, which can increase eligibility for other tax benefits. Itemized deductions (Schedule A) only help if their total exceeds your standard deduction, and you must choose one or the other. You can always claim Schedule 1 adjustments in addition to your standard deduction.
Source: IRS Form 1040 Schedule 1 (2019) and Instructions for Forms 1040 and 1040-SR (2019)
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