Form 1040 (SP) Schedule 1 / Anexo 1: Additional Income and Adjustments to Income (2020)

What the Form Is For

Form 1040 Schedule 1 (Anexo 1 in Spanish) serves as an essential supplement to your main tax return when you have income or deductions that don't fit on the standard Form 1040. Think of it as the ""extras"" form that captures the financial details that fall outside typical wages, salaries, and standard deductions.

This two-part schedule handles two distinct categories. Part I reports Additional Income—money you earned from sources beyond your regular paycheck, such as unemployment benefits, business profits, rental income, prizes, alimony received, or gambling winnings. Part II covers Adjustments to Income—often called ""above-the-line deductions""—which reduce your adjusted gross income before you even consider taking the standard or itemized deduction. These adjustments include educator expenses, student loan interest, IRA contributions, health savings account deductions, and self-employment tax deductions.

The Spanish version (Anexo 1, Formulario 1040(SP)) is identical in function to the English version and allows Spanish-speaking taxpayers to file in their preferred language. Both versions attach to Form 1040, 1040-SR (for seniors), or 1040-NR (for nonresidents). The totals from Schedule 1 flow directly onto your main Form 1040: line 9 (total additional income) goes to Form 1040 line 8, and line 22 (total adjustments) goes to Form 1040 line 10a.

For tax year 2020, Schedule 1 became particularly important because it included unemployment compensation reporting during the COVID-19 pandemic, along with special exclusions provided under the American Rescue Plan Act.

When You'd Use It (Late/Amended)

You must file Schedule 1 with your original return whenever you have any of the qualifying types of additional income or adjustments to claim. The standard deadline for filing your 2020 tax return was April 15, 2021, though this was extended to May 17, 2021, due to pandemic relief measures.

If you missed the deadline entirely, you should file as soon as possible. The IRS will assess late-filing penalties if you owe taxes—typically 5% of unpaid taxes for each month or part of a month your return is late, up to 25% of your unpaid taxes. However, if you're owed a refund, there's no penalty for filing late, though you generally have only three years from the original due date to claim that refund.

If you need more time to file, you can request an automatic six-month extension by filing Form 4868 by the original due date. This extension gives you more time to file the paperwork but does not extend the time to pay any taxes owed. Interest accrues on unpaid taxes from the original due date.

For amended returns, you'll need Form 1040-X if you discover errors or omissions after filing your original 2020 return. Common reasons for amending include forgetting to report income shown on Schedule 1, claiming adjustments you overlooked, or correcting amounts. You must generally file Form 1040-X within three years of filing your original return or within two years of paying the tax, whichever is later. For 2020 returns, the IRS began accepting electronically filed amended returns for current and two prior tax years—a significant improvement over the previous paper-only process. Processing an amended return typically takes 8-12 weeks, possibly up to 16 weeks in complex cases. You can check your amended return status using the IRS's ""Where's My Amended Return?"" tool three weeks after filing.

Key Rules

Additional Income (Part I)

Additional Income (Part I) must be reported even if you didn't receive a formal tax document. Line 1 covers taxable state and local income tax refunds—these are only taxable if you itemized deductions in the prior year and received a tax benefit from them. Line 2a reports alimony received, but only for agreements dated on or before December 31, 2018; newer agreements are no longer taxable to the recipient under tax reform changes. Line 3 captures business income or losses from Schedule C for self-employed individuals. Line 7 reports unemployment compensation, which for 2020 had a special exclusion: if your modified adjusted gross income was less than $150,000, up to $10,200 of unemployment benefits per person could be excluded from income.

Adjustments to Income (Part II)

Adjustments to Income (Part II) reduce your taxable income dollar-for-dollar before calculating your tax. Line 10 allows eligible educators (teachers, counselors, principals) to deduct up to $250 of unreimbursed classroom expenses ($500 if married filing jointly and both spouses qualify). For 2020, this specifically included personal protective equipment and supplies for COVID-19 prevention. Line 12 covers health savings account contributions if you have a high-deductible health plan. Line 14 lets self-employed individuals deduct one-half of their self-employment tax. Lines 19 and 20 handle IRA and student loan interest deductions respectively—both have income phase-out limits that reduce or eliminate the deduction at higher income levels.

Important Income Thresholds

Important income thresholds: For student loan interest deduction, the benefit phases out between $70,000-$85,000 for single filers and $140,000-$170,000 for joint filers. IRA deduction limitations depend on whether you or your spouse are covered by a retirement plan at work and your modified adjusted gross income.

All income reported on Schedule 1 Part I increases your adjusted gross income, which affects eligibility for various credits and deductions. Conversely, adjustments in Part II decrease your AGI, potentially making you eligible for income-limited benefits.

Step-by-Step (High Level)

Step 1: Gather Your Documents

Collect all Forms 1099-G (unemployment, state tax refunds), 1099-MISC and 1099-NEC (other income), Schedule C (business income), Schedule E (rental income), Form 1098 (mortgage interest statement if it shows points), Form 1098-E (student loan interest), and receipts for deductible expenses like educator supplies or IRA contributions.

Step 2: Complete Part I – Additional Income

Work through lines 1-8 systematically. Enter amounts exactly as shown on your tax forms. For unemployment compensation on line 7, note that you may be eligible to exclude up to $10,200 per person if your modified AGI is under $150,000—use the Unemployment Compensation Exclusion Worksheet from the IRS instructions to calculate this. For line 8 (other income), you must list both the type and amount of each item. Total everything on line 9.

Step 3: Complete Part II – Adjustments to Income

Review lines 10-22 to identify which deductions apply to you. Don't skip any that you qualify for—these directly reduce your tax bill. For educator expenses (line 10), keep receipts even though you don't attach them. For self-employment tax (line 14), you'll need to complete Schedule SE first. For IRA deductions (line 19) and student loan interest (line 20), use the worksheets provided in the instructions to calculate your allowable amount, as these have income-based phase-outs. Total all adjustments on line 22.

Step 4: Transfer Totals to Form 1040

Enter the line 9 total on Form 1040 line 8, and the line 22 total on Form 1040 line 10a. These numbers flow through your return calculation automatically.

Step 5: Attach All Required Forms

Schedule 1 must be attached to Form 1040 along with any supporting schedules referenced (Schedule C, Schedule SE, Form 2106, Form 8889, etc.). Arrange them in sequence number order with Schedule 1 as sequence 01.

Common Mistakes and How to Avoid Them

Mistake #1: Forgetting to Exclude Unemployment Compensation

For 2020 only, up to $10,200 of unemployment benefits per person could be excluded if your modified AGI was under $150,000. Many taxpayers reported the full amount without taking advantage of this exclusion. Solution: Use the Unemployment Compensation Exclusion Worksheet in the IRS instructions to calculate the correct taxable amount. If married filing jointly, each spouse can exclude up to $10,200 of their own unemployment compensation.

Mistake #2: Misreporting Alimony Under New Rules

Tax reform changed alimony rules based on when your divorce agreement was executed. Solution: Only report alimony received on line 2a if your divorce or separation agreement is dated on or before December 31, 2018. For agreements dated after that, alimony is neither taxable nor deductible.

Mistake #3: Overlooking Eligible Adjustments

Many taxpayers miss valuable adjustments like educator expenses, student loan interest, or HSA deductions simply because they don't know they qualify. Solution: Review all Part II lines carefully. Even if you don't itemize deductions, you can still claim these adjustments. They reduce your AGI directly, which can help you qualify for other tax benefits.

Mistake #4: Math Errors in Calculations

Simple addition mistakes or incorrect transfers between forms are common. Solution: Double-check all totals. Use tax software or the IRS Free File program, which performs calculations automatically. If filing by paper, verify that line 9 matches what you entered on Form 1040 line 8, and line 22 matches Form 1040 line 10a.

Mistake #5: Missing or Mismatched Social Security Numbers

Entering incorrect SSNs or forgetting to include them for dependents or recipients of alimony causes processing delays. Solution: Verify that all SSNs match the actual Social Security cards exactly. For alimony, you must include your ex-spouse's SSN on line 18b if you're claiming a deduction.

Mistake #6: Failing to Attach Required Supporting Schedules

Schedule 1 references many other forms (Schedule C, Schedule SE, Form 8889, etc.). Forgetting to attach them results in rejected e-files or correspondence from the IRS. Solution: Review each line you completed and attach all forms referenced in the instructions. Arrange them in the proper sequence.

Mistake #7: Not Keeping Adequate Records

While you don't attach receipts, you must keep documentation to support all income and deductions. Solution: Maintain organized records for at least three years (the standard audit period). Keep receipts for educator expenses, documentation of business income, student loan interest statements, and IRA contribution confirmations.

What Happens After You File

Once you submit Form 1040 with Schedule 1 attached, the IRS processes your return and verifies the information against documents they receive from employers, banks, and other payers (Forms W-2, 1099, etc.). For e-filed returns, you'll receive an acceptance notification within 24-48 hours. Paper returns take much longer—four to six weeks just to enter the system.

If you're due a refund, the IRS typically issues it within 21 days of accepting your e-filed return, or six to eight weeks for paper returns. You can track your refund status using the ""Where's My Refund?"" tool on IRS.gov. Refunds may be delayed if your return requires additional review, if you claimed certain credits like the Earned Income Tax Credit, or if there are name/SSN mismatches.

If you owe taxes and didn't pay by the deadline, the IRS will send a notice showing the amount due plus interest and any applicable penalties. You should pay immediately to stop interest from accruing further. The IRS offers payment plans if you cannot pay the full amount.

The IRS may send correspondence requesting clarification or additional documentation for items reported on Schedule 1. Common triggers include large business losses, significant deductions relative to income, or unemployment compensation amounts that don't match IRS records. Respond promptly to any IRS notices—typically within 30 days—and provide the requested information.

For 2020 specifically, many taxpayers who filed early and reported the full amount of unemployment compensation later received notices that the IRS automatically recalculated their returns using the $10,200 exclusion. These taxpayers received refunds of the overpaid taxes without needing to file an amended return.

If you discover an error after the IRS processes your return, file Form 1040-X to amend. Amended returns take 8-16 weeks to process. Use ""Where's My Amended Return?"" to track the status after three weeks. The tool shows three stages: received, adjusted, and completed. When completed, you'll receive detailed information by mail explaining the outcome.

Keep your tax return, Schedule 1, and all supporting documents for at least three years from the filing date. The IRS generally has three years to audit returns, though this extends to six years if you underreported income by more than 25%, and there's no time limit for fraud or unfiled returns.

FAQs

If I only received a small amount of additional income, do I still need to file Schedule 1?

Yes. Any amount of additional income that fits the categories in Part I must be reported on Schedule 1 and included in your return. The IRS receives copies of Forms 1099 and other information returns, so they'll know if you received this income. Failing to report it can result in a notice and assessment of additional tax, plus penalties and interest. Even small amounts like $50 in jury duty pay or $100 in gambling winnings must be reported on line 8.

Can I deduct my student loan interest if my parents paid it or if it was paid with forgiven loans?

You can only deduct student loan interest if you're legally obligated to pay the interest, you actually paid it during the tax year, and you meet income requirements. If your parents paid the interest, you can deduct it only if you're legally liable for the loan and they made the payment as a gift to you. For loans discharged due to death or disability under certain programs, the IRS treats this as tax-free, so no interest deduction applies. The maximum deduction is $2,500, and it phases out at higher incomes: $70,000-$85,000 for single filers, $140,000-$170,000 for married filing jointly.

What counts as educator expenses, and do I need to be a full-time teacher?

You qualify if you worked at least 900 hours during the school year as a teacher, instructor, counselor, principal, or aide in a K-12 school. Both full-time and part-time educators who meet the hour requirement qualify. Eligible expenses include books, supplies, computer equipment, software, supplementary materials, and professional development courses. For 2020, it also includes personal protective equipment, disinfectant, and supplies for COVID-19 prevention. You can deduct up to $250 per person ($500 if married filing jointly and both are educators). Athletic supplies qualify only for health or physical education instructors. Keep receipts even though they're not attached to your return.

How does the unemployment compensation exclusion work for married couples?

Each spouse can exclude up to $10,200 of their own unemployment compensation if your combined modified AGI is less than $150,000. This means a married couple filing jointly could potentially exclude up to $20,400 total ($10,200 per spouse). The $150,000 threshold applies regardless of filing status—even single filers use this amount. To calculate the exclusion, use the Unemployment Compensation Exclusion Worksheet in the IRS instructions. The exclusion only applies to 2020 tax returns and was not available in other years.

If I work from home as a self-employed person, where do I report my income and expenses?

Self-employment income and related expenses are reported on Schedule C (Form 1040), not directly on Schedule 1. However, after completing Schedule C, you transfer your net profit or loss to Schedule 1 line 3. Schedule C allows you to deduct ordinary and necessary business expenses, including home office deductions if you meet specific requirements. You'll also need to complete Schedule SE to calculate self-employment tax, and then deduct half of that tax on Schedule 1 line 14—one of the adjustments to income.

Can I claim an IRA deduction if my employer offers a 401(k) that I don't participate in?

Yes, but with limitations. Being covered by an employer retirement plan—which includes having access to a 401(k), even if you don't contribute—affects your IRA deduction limits based on your income. For 2020, if you're covered by a workplace plan, your IRA deduction phases out between $65,000-$75,000 for single filers and $104,000-$124,000 for married filing jointly. If you're not covered but your spouse is, different phase-out ranges apply: $196,000-$206,000. Use the IRA Deduction Worksheet in the IRS instructions to calculate your allowable deduction. Note that for 2020 forward, the age 70½ limit for IRA contributions was eliminated.

What should I do if I receive a 1099 form after I've already filed my return with Schedule 1?

File Form 1040-X (Amended U.S. Individual Income Tax Return) to correct your return and report the additional income. Include the corrected Schedule 1 with your amendment. You generally have three years from the original filing date to amend, but it's best to do it as soon as you discover the error to minimize interest charges if additional tax is owed. Many tax software programs now support electronic filing of amended returns for recent tax years, which is faster than mailing paper forms. You can track your amended return status using the ""Where's My Amended Return?"" tool on IRS.gov starting three weeks after filing.

Sources: All information derived from official IRS sources:

• Form 1040 Schedule 1 (2020)
• Form 1040 Schedule 1 (SP) (2020)
• Instructions for Form 1040 (2020)
• Amended Return Frequently Asked Questions

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