Form 1040 Schedule 2: Additional Taxes (2019)
What Form 1040 Schedule 2 Is For
Schedule 2 is a supplemental form that works alongside your main Form 1040 or 1040-SR tax return to report various additional taxes that don't fit directly on the main form. Think of it as a separate worksheet for special tax situations that the IRS wants to track separately from your regular income tax.
For the 2019 tax year, the IRS combined what used to be two separate schedules (the old Schedules 2 and 4 from 2018) into one streamlined Schedule 2. This form has two main parts: Part I handles two specific taxes related to the Alternative Minimum Tax and health insurance premium credits, while Part II captures a broader range of other taxes including self-employment tax, retirement account penalties, household employment taxes, and various specialized taxes.
You only need Schedule 2 if you owe at least one of these additional taxes. The form is two-sided, with clear line-by-line instructions for each tax type. Once you complete it, you'll transfer the total from Schedule 2, line 10, directly to your Form 1040 or 1040-SR, line 15. The IRS requires you to attach Schedule 2 to your return along with any supporting forms that calculate the specific taxes you owe.
When You'd Use Form 1040 Schedule 2 (Including Late or Amended Returns)
You must complete and attach Schedule 2 to your original 2019 tax return if any of the situations listed on the form apply to you. These include owing Alternative Minimum Tax, needing to repay excess advance premium tax credits from Marketplace health insurance, owing self-employment tax, having unreported tip income, taking early distributions from retirement accounts, employing household workers, or owing various other specialized taxes.
If you file your return by the standard deadline of April 15, 2020 (or later if you get an extension), you would include Schedule 2 with your initial filing package. The key point is that Schedule 2 must be filed with Form 1040 or 1040-SR whenever the additional taxes apply—you cannot file Schedule 2 by itself except in very specific circumstances noted in the instructions.
For amended returns, if you discover after filing that you owed additional taxes that should have been reported on Schedule 2, you'll need to file Form 1040-X (Amended U.S. Individual Income Tax Return). You must file the amended return within three years after the date you filed your original return or within two years after the date you paid the tax, whichever is later. When amending, you'll attach a corrected Schedule 2 showing the additional taxes you now realize you owed. Keep in mind that if an amended return results in additional tax due, interest will be charged from the original due date of the return.
Key Rules or Details for 2019
Several important rules govern Schedule 2. First, you must attach all required supporting forms—for example, Form 6251 for Alternative Minimum Tax, Form 8962 for premium tax credit repayment, Form 5329 for early retirement distributions, Schedule H for household employment taxes, and Forms 4137 or 8919 for unreported social security and Medicare taxes. The IRS will reject returns that claim these taxes without the proper documentation.
Second, certain thresholds trigger these additional taxes. For 2019, the Alternative Minimum Tax exemption amount increased to seventy-one thousand seven hundred dollars for single filers (one hundred eleven thousand seven hundred dollars for married filing jointly). Self-employment tax applies when you have net earnings of at least four hundred dollars. Household employment taxes kick in when you pay a household employee at least two thousand one hundred dollars in cash wages during the year. Understanding these thresholds helps you know whether Schedule 2 applies to you.
Third, many of these taxes have complex calculations with numerous exceptions. For instance, the early distribution penalty on retirement accounts has over a dozen exceptions including qualified medical expenses, higher education expenses, and first-time home purchases. Don't simply assume you owe a penalty—carefully review the instructions or consult the appropriate form to see if an exception applies.
Finally, timing matters significantly. The taxes reported on Schedule 2 are due with your return, and late payment triggers both penalties and interest. The failure-to-pay penalty runs at one-half percent per month of the unpaid tax, up to a maximum of twenty-five percent. Interest compounds daily based on the federal short-term rate plus three percentage points.
Step-by-Step (High Level)
Step 1: Determine Whether Schedule 2 Applies
Start by reviewing your complete tax situation to determine whether any Schedule 2 taxes apply. Go through each line on the schedule and check whether your circumstances trigger that particular tax. Common situations include being self-employed, taking money from a retirement account before age fifty-nine and a half, receiving advance payments for health insurance through the Marketplace, or employing someone in your home.
Step 2: Gather and Complete Supporting Forms
Once you've identified which taxes apply, gather or complete the required supporting forms for each situation. For Alternative Minimum Tax, complete Form 6251 or use the AMT worksheet in the instructions. For premium tax credit repayment, you'll need Form 1095-A from the Marketplace and must complete Form 8962. For self-employment tax, prepare Schedule SE. For retirement account penalties, complete Form 5329. For household employment, fill out Schedule H.
Step 3: Fill Out Schedule 2, Parts I and II
After completing all supporting forms, transfer the appropriate amounts to the corresponding lines on Schedule 2. Part I includes lines 1-3 for Alternative Minimum Tax and excess advance premium tax credit repayment. Part II includes lines 4-10 for all other taxes including self-employment tax, unreported social security and Medicare tax, additional tax on retirement accounts, household employment taxes, first-time homebuyer credit repayment, and a catch-all "other taxes" line.
Step 4: Total Your Additional Taxes and Transfer to Form 1040
Add up the totals as directed on the form: line 3 totals Part I, and line 10 totals Part II. Then transfer the line 10 amount to your Form 1040 or 1040-SR, line 15. Double-check all your math, attach Schedule 2 and all supporting forms to your return, and file by the deadline.
Common Mistakes and How to Avoid Them
Failing to File Schedule 2 When Required
One of the most frequent errors is failing to file Schedule 2 when required. Many taxpayers don't realize that taking an early distribution from an IRA or having advance premium tax credit payments means they must file additional paperwork. Review your entire tax year carefully—if you received Form 1095-A from the Marketplace, Form 1099-R showing a retirement distribution, or paid household employees, Schedule 2 likely applies to you.
Forgetting Required Supporting Forms
Another common mistake is forgetting to attach required supporting forms. Schedule 2 by itself doesn't provide enough detail—you must include Form 6251, Form 8962, Form 5329, Schedule H, or other forms as applicable. Electronic filing software usually catches this error, but paper filers sometimes send incomplete returns.
Calculation Errors
Calculation errors plague Schedule 2, particularly with self-employment tax and Alternative Minimum Tax, which involve complex multi-step computations. Use the worksheets provided in the instructions rather than attempting to calculate these taxes manually. Tax preparation software can help minimize these errors for most filers.
Overlooking Penalty Exceptions
Many taxpayers also overlook exceptions to penalties. For example, if you took an early retirement distribution to pay medical expenses exceeding ten percent of your adjusted gross income, you might not owe the ten-percent additional tax—but you must complete Form 5329 to claim the exception. Similarly, numerous exceptions exist for repaying premium tax credits. Always review the detailed instructions for your specific situation.
Misreporting “Other Taxes” and Codes
Finally, taxpayers sometimes put amounts on the wrong lines or use incorrect codes when reporting "other taxes" on line 8. This line requires you to enter specific codes identifying each tax type. Read the line 8 instructions carefully and attach a statement if you need more space.
What Happens After You File
Once you file your return with Schedule 2 attached, the IRS processes your return and applies the additional taxes to your total tax liability. If these additional taxes push your total tax owed above your withholding and estimated payments, you'll need to pay the balance by the filing deadline to avoid penalties and interest.
The IRS will send you a notice or bill if they identify any errors in your Schedule 2 calculations or if supporting forms are missing. These notices typically arrive several weeks or months after filing. Review any IRS correspondence carefully, as it will explain what they found and how to respond. You may need to provide missing forms, correct calculations, or pay additional tax.
If you can't pay the full amount immediately, you have several options. The IRS offers short-term payment plans (up to one hundred twenty days) and long-term installment agreements for balances under fifty thousand dollars. You can set up payment plans online through the IRS website. Keep in mind that interest and late-payment penalties continue to accrue until you pay the balance in full, even with a payment plan.
The additional taxes reported on Schedule 2 also factor into estimated tax requirements for future years. If you owed substantial additional taxes for 2019, you may need to increase withholding or make quarterly estimated tax payments for 2020 to avoid underpayment penalties. Use Form 1040-ES to calculate and pay estimated taxes.
If you're entitled to a refund despite owing additional taxes on Schedule 2, the IRS will process it according to their normal schedule—typically within twenty-one days for electronically filed returns. The additional taxes simply reduce your refund amount rather than resulting in a balance due.
FAQs
Do I need Schedule 2 if I'm self-employed?
Yes, if you had net earnings from self-employment of at least four hundred dollars, you must complete Schedule SE to calculate self-employment tax and report the amount on Schedule 2, line 4. This covers your social security and Medicare contributions as a self-employed person.
What is Alternative Minimum Tax and how do I know if I owe it?
Alternative Minimum Tax ensures that taxpayers with high income pay at least a minimum amount of tax. The 2019 instructions include a worksheet to help determine if you owe AMT. You're more likely to owe it if you have significant state and local tax deductions, exercised incentive stock options, have tax shelter investments, or claim certain credits. If the worksheet shows you may owe AMT, complete Form 6251.
I took money from my IRA early to pay medical bills—do I automatically owe the ten-percent penalty?
Not necessarily. Several exceptions exist to the early distribution penalty, including unreimbursed medical expenses exceeding ten percent of your adjusted gross income. You must complete Form 5329 to claim the exception, even though you don't owe the penalty. Don't skip this form just because no penalty is due.
What if I received Form 1095-A from the health insurance Marketplace?
If advance premium tax credit payments were made on your behalf to help pay for Marketplace coverage, you must file Form 8962 to reconcile those advance payments with the premium tax credit you actually qualify for based on your income. If you received too much in advance, you'll repay the excess on Schedule 2, line 2. This requirement applies even if you'd rather not claim the premium tax credit.
Can I file Schedule 2 separately from my main return?
Generally no—Schedule 2 must be attached to Form 1040 or 1040-SR. The only exceptions are if you're filing only Schedule H by itself for household employment taxes or Form 5329 by itself for retirement account penalties. These narrow exceptions apply only when that specific tax is the sole reason you need to file.
I forgot to include Schedule 2 with my original return—what should I do?
File Form 1040-X to amend your return. Include the corrected Schedule 2 showing the additional taxes you owe, along with all required supporting forms. Pay the additional tax as soon as possible to minimize interest and penalties. The sooner you file the amendment, the less interest you'll owe.
Where do I find the forms I need to complete Schedule 2?
All forms are available at IRS.gov in the Forms and Publications section. You can download current and prior-year forms as PDFs. For 2019 returns, look specifically for 2019 versions of Form 6251, Form 8962, Form 5329, Schedule H, Schedule SE, Forms 4137 and 8919, and other supporting forms referenced in the Schedule 2 instructions.
All information in this summary comes from official IRS publications available at IRS.gov, including the 2019 Form 1040 Schedule 2, Instructions for Form 1040 and 1040-SR (Publication i1040gi--2019), and related IRS guidance documents for the 2019 tax year.
