Congress required the IRS to develop a tax form for seniors in the Bipartisan Budget Act of 2018. The idea was to make it easier for seniors with simple tax situations to file their tax returns.
As a result, the IRS created a version of Form 1040 that uses larger print and includes a standard deduction table directly on the for so that seniors can quickly look up their standard deduction amounts. Form 1040-SR uses the same line items and instructions as the standard Form 1040.
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Who can file using Form 1040-SR?
Anyone age 65 or older can opt to use Form 1040-SR instead of Form 1040. There aren't any other caveats that come with using this form. For example, you are not forced to take the standard deduction if you choose to file with Form 1040-SR.
Since these forms are virtually identical in function, the main reason to use Form 1040-SR is if you're filling out your tax return by hand rather than online. Form 1040-SR has larger type and larger boxes to write numbers in, making it slightly easier for seniors to read and fill out.
Items that can be reported on a Form 1040-SR tax return
Since Form 1040-SR is functionally the same as Form 1040, you can report all the same types of income, deductions, credits, and other items that you can on Form 1040. This includes items such as:
- Wages, salaries, tips, taxable scholarships, and taxable fellowship grants
- Tax-exempt interest
- Taxable interest
- Qualified dividends
- Ordinary dividends
- IRA distributions and their taxable amounts
- Pensions and annuities and their taxable amounts
- Social Security benefits and their taxable amounts
- Total capital gains or losses
- Other income from Schedule 1, including unemployment compensation
- Adjustments to income from Schedule 1
- Above-the-line charitable contributions deduction
- Adjusted gross income
- Total standard deduction or itemized deductions
- Qualified business income deduction
- Taxable income
- Certain figures from Schedule 2 and Schedule 3
- Child tax credit or credit for other dependents
- Other taxes, including self-employment tax
- Federal income tax withheld from Form W-2, Form 1099, and other forms
- Estimated tax payments and amount applied from the previous year's return
- Earned income credit
- Additional child tax credit
- American Opportunity tax credit
- Recovery Rebate credit
- Refund amount or amount owed now
- Estimated tax penalty
You can also use other IRS schedules (additional forms) with Form 1040-SR, such as Schedules 1, 2, and 3, to report information not directly reported on Form 1040-SR.
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Significant Form 1040-SR changes from 2019 to 2020
Like Form 1040, Form 1040-SR has undergone a few changes from 2019 to 2020. Except for the standard deduction table moving to Page 4, the line item changes on Form 1040-SR mimic the line item changes implemented on Form 1040.
Some of the changes were a reorganization of line numbers, moving where different tax items were reported. Here are highlights of the major changes you should know about.
Additional question about virtual currency transactions
One new question added to Form 1040-SR concerns cryptocurrency options: "At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?" The IRS is trying to make sure virtual currency transactions, such as Bitcoin purchases, are being reported. Their goal is to collect the taxes due on these transactions by requiring you to disclose if you made any.
Additional above-the-line charitable contributions deduction
In 2020, you can claim up to $300 of charitable cash contributions without itemizing your deductions. This new deduction can be found on line 10b.
Detailed federal withholding and estimated tax payment reporting
In previous years, federal income tax withholding was input as a single line item on Form 1040-SR. This year, it is broken down into three parts:
- Withholding from Form W-2
- Withholding from Form 1099
- Withholding from other forms
A line specifically for estimated tax payments, line 26, has also been added.
The Recovery Rebate Credit
The Recovery Rebate Credit is new to Form 1040-SR in 2020 and can be found on line 30. This credit is related to the stimulus checks sent to many citizens in early 2020 and 2021 due to the coronavirus pandemic.
Altered wording for the tax you owe with your return
Line 37 usually details the amount of tax you owe for the year. This year's Form 1040-SR states this is the amount you owe now. Certain taxes may be deferred under coronavirus relief, so the line item was updated to explain this is the amount you must pay with your return and that you may still owe additional tax from 2020 in future years due to tax deferrals.
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