Form 1040 Schedule 1 Filing Checklist for Tax Year 2021
Overview and Purpose
Schedule 1 reports additional income and adjustments to income not included on the simplified Form 1040. For 2021, Schedule 1 is mandatory whenever taxpayers report business income, rental income, farm income, unemployment compensation, or claim above-the-line deductions. The form consists of Part I for additional income and Part II for adjustments that reduce adjusted gross income before applying standard or itemized deductions.
Key 2021 Tax Provisions
The American Rescue Plan Act of 2021 expanded the earned income credit and child tax credit provisions, although these credits are routed through other schedules. For 2021, unemployment compensation is fully taxable with no exclusion available. The 2020 unemployment exclusion of $10,200 does not apply to 2021 income tax returns.
The Tax Cuts and Jobs Act alimony rules remain in effect. Alimony received under agreements dated January 1, 2019, or later is not taxable and should not be reported on your tax return on your tax return. Alimony paid under such contracts is not deductible.
Part I: Additional Income Reporting
Step 1: Report State and Local Tax Refunds
Enter taxable refunds, credits, or offsets of state and local income taxes on line 1. This applies if you received a refund in 2021 and itemized deductions in the prior year when those taxes were paid.
Step 2: Report Alimony Received
Enter alimony received on line 2a only if your divorce or separation agreement is dated December 31, 2018, or earlier. Enter the agreement date on line 2b. Do not report alimony from agreements dated January 1, 2019, or later.
Step 3: Report Business Income or Loss
Complete Schedule C showing all business revenues and expenses. Enter net profit or loss from Schedule C line 31 on Schedule 1 line 3. Attach Schedule C to your return.
Step 4: Report Gains or Losses from Business Property
Complete Form 4797 for sales of business property or depreciable business assets. Enter the net gain or loss on line 4. Attach Form 4797.
Step 5: Report Rental and Pass-Through Income
Complete Schedule E for rental properties, royalties, partnerships, S corporations, and trusts. Include all Schedule K-1 forms received. Enter combined income or loss from Schedule E line 41 on Schedule 1 line 5. Attach Schedule E and all K-1 forms.
Step 6: Report Farm Income or Loss
Complete Schedule F showing farm revenues and expenses. Enter net profit or loss from Schedule F line 34 on Schedule 1 line 6. Attach Schedule F.
Step 7: Report Unemployment Compensation
Enter total unemployment compensation from all Forms 1099-G on line 7. Report the full amount shown in box 1. The 2020 unemployment compensation exclusion does not apply to 2021. All 2021 unemployment income is fully taxable.
Enter federal income tax withheld from Form 1099-G box four on Form 1040 line 25b, not on Schedule 1.
Step 8: Report Other Income
Use lines 8a through 8z to report income not covered on lines 1 through 7. Common items include:
- Line 8c: Canceled nonbusiness debt unless an exception applies and Form 982 is filed
- Line 8l: Gambling winnings, prizes, and awards
- Line 8z: Other income with type and amount listed
Step 9: Calculate Total Additional Income
Add lines 1 through 7 and line 9 total. Enter the combined amount on line 10. Transfer this amount to Form 1040 line 8.
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Part II: Adjustments to Income
Step 10: Claim Educator Expenses
Enter up to $250 of unreimbursed educator expenses on line 11 if you are a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked at least 900 hours during the school year.
If married filing jointly and both spouses are eligible educators, the maximum combined deduction is $500, but neither spouse can claim more than $250 individually.
Qualified expenses include professional development courses, books, supplies, computer equipment, software, personal protective equipment, and disinfectants used to prevent the spread of coronavirus. Do not include costs your employer reimbursed.
Step 11: Report Certain Business Expenses
Complete Form 2106 if you are an Armed Forces reservist with travel expenses exceeding 100 miles from home, a qualified performing artist, or a fee-basis government official. Enter allowable expenses on line 12. Attach Form 2106.
Qualified performing artists must meet four criteria: performing for at least two employers, receiving $200 or more from at least two employers, incurring expenses exceeding 10 percent of performing arts income, and maintaining an AGI of $16,000 or less before the deduction.
Step 12: Claim Health Savings Account Deduction
Complete Form 8889 showing HSA contributions and high-deductible health plan coverage. Enter deductible HSA contribution from Form 8889 line 13 on Schedule 1 line 13. Attach Form 8889. You must have qualified high-deductible health plan coverage to claim this deduction.
Step 13: Report Moving Expenses for Armed Forces
Complete Form 3903 only if you are an active-duty member of the Armed Forces moving pursuant to military orders for a permanent change of station. Enter unreimbursed moving expenses from Form 3903 line 3 on line 14. Attach Form 3903.
This deduction is not available to civilian taxpayers or non-active-duty military for tax years 2018 through 2025.
Step 14: Deduct Half of Self-Employment Tax
Complete Schedule SE calculating self-employment tax. Enter one-half of the self-employment tax from Schedule SE line 6 on line 15. Attach Schedule SE.
For 2021, the Social Security wage base limit is $142,800. Self-employment tax applies to 92.35 percent of net self-employment earnings, at rates of 12.4 percent for Social Security, up to the wage base, and 2.9 percent for Medicare, with no limit.
Step 15: Report Self-Employed Retirement Contributions
Enter contributions to SEP-IRAs, SIMPLE plans, or qualified self-employed retirement plans on line 16. Use Publication 560 worksheets to calculate allowable contributions.
Step 16: Deduct Self-Employed Health Insurance
Enter premiums for medical, dental, and qualified long-term care insurance for yourself, spouse, and dependents on line 17. The deduction cannot exceed net self-employment income. You cannot claim this deduction for months when you or your spouse were eligible for employer-sponsored health coverage.
Step 17: Report Early Withdrawal Penalties
Enter penalties for early withdrawal from certificates of deposit or similar savings accounts on line 18. Financial institutions report these penalties on Form 1099-INT.
Step 18: Claim Alimony Paid
Enter alimony paid on line 19a only if your divorce or separation agreement is dated December 31, 2018, or earlier. Enter the recipient’s Social Security number on line 19b and the agreement date on line 19c.
Failure to provide the recipient’s SSN results in a $50 penalty. If paying alimony to multiple recipients, enter one SSN on line 19b and attach a statement with all recipients’ information.
Do not report alimony paid under agreements dated January 1, 2019, or later.
Step 19: Deduct IRA Contributions
Enter traditional IRA contributions on line 20. Deduction eligibility and amount depend on whether an employer retirement plan and your modified adjusted gross income cover you or your spouse. Use the worksheet in Schedule 1 instructions to calculate allowable deductions if you are subject to phaseout.
Step 20: Deduct Student Loan Interest
Enter up to $2,500 of qualified student loan interest paid on line 21. The deduction is the lesser of $2,500 or the actual interest paid.
The deduction phases out for 2021 between $70,000 and $85,000 modified AGI for single or head of household filers and between $140,000 and $170,000 for married filing jointly. The deduction is not available if you are married and filing separately.
Lenders report interest of $600 or more on Form 1098-E. Only interest on loans for your own education or your dependent’s education qualifies.
Step 21: Reserved for Future Use
Line 22 is reserved for future use and contains no entry for 2021.
Step 22: Report Archer MSA Deduction
Enter Archer MSA deduction on line 23 if applicable.
Step 23: Report Other Adjustments
Lines 24a through 24z cover various other adjustments, including jury duty pay returned to the employer, rental expenses for personal property, Olympic medal income adjustments, reforestation expenses, attorney fees for specific actions, and housing deductions from Form 2555.
Step 24: Calculate Total Adjustments
Total all other adjustments on line 25. Add lines 11 through 23 and line 25 to get total adjustments on line 26. Transfer this amount to Form 1040 line 10.
Final Assembly and Filing
Required Attachments
Verify all required forms are attached based on your Schedule 1 entries:
- Schedule C for line 3 business income
- Form 4797 for line 4 gains or losses
- Schedule E for line 5 rental and pass-through income
- Schedule F for line 6 farm income
- Form 2106 for line 12 business expenses
- Form 8889 for line 13 HSA deduction
- Form 3903 for line 14 moving expenses
- Schedule SE for line 15 self-employment tax
- Form 982 for line 8c canceled debt exceptions
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
Verification Steps
Confirm that the name and Social Security number on Schedule 1 match precisely with the information on Form 1040. Verify that line 10's total transfers are correctly reflected on Form 1040, line 8. Verify that line 26's total transfers are correctly reflected on Form 1040, line 10. Ensure the recipient’s SSN is entered on line 19b if claiming alimony paid deduction.
Filing Requirements
Attach Schedule 1 directly behind Form 1040 or Form 1040-SR. Schedule 1 cannot be filed independently of the other schedules. Sign and date Form 1040 in the declaration section. File by the April 15, 2022, deadline or request an extension. Retain all supporting documentation for at least three years.
Important Reminders
Nonresident aliens filing Form 1040-NR may have different requirements and limitations. Some adjustments available to residents may not be available to nonresidents. Married filing separately filers cannot claim certain deductions, including student loan interest. All amounts must be supported by proper documentation, including Forms 1099, W-2, K-1, and receipts as applicable.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
