Posted by The TaxAdvocate Group, LLC

Form 1040-SR: Definition of U.S. Income Tax Return for Seniors

Form 1040-SR: Definition of U.S. Income Tax Return for Seniors

What is Form 1040-SR: Tax Return for U.S Seniors?

If you are 65 or older (or turned 65 in 2020 or after), you will have the option of using a new, simple tax form for seniors, known as Form 1040-SR: Form Tax for seniors, when you file your taxes in April. To use this tax form, you must use the standard deduction, and the Form includes the highest standard deduction for taxpayers over 65. The standard deduction for taxpayers over 65 has been increased

Form 1040-SR is similar to the late Form 1040-EZ, designed for those with a simple tax scenario, such as taxpayers making standard deductions.

The Form is catered for in Section 41106 of the Bipartisan Budget Act 2018 (BBA), a two-year budget agreement approved by Congress and signed by former President Donald Trump on February 9, 2018. The provision creating Form 1040 -S.R. was one of many pension tax policy changes included in the BBA. This should not be confused with the TCJA.


Understanding Form 1040-SR

Form 1040-SR and Form 1040 are designed to be similar to Form 1040-EZ, which was replaced in 2018 income tax returns. Form 1040-SR has been simplified for seniors with simple financing. While Form 1040-EZ only allows reporting of earnings, wages, and tips, Form 1040-SR only allows income from other sources.

The new Form was also designed with aging eyes in mind: it has more space to enter information and larger font size than a 1040 form.


Who can complete Form 1040-SR: U.S. Tax Return for Seniors?

There are added differences between Forms 1040-EZ and 1040-SR, described below, including age requirements and total allowable income.


65 and older

An important difference between the 1040-EZ and 1040-SR Forms is related to age. Form 1040-EZ was available to all taxpayers under the age of 65 who met the income and filing requirements. To use 1040-SR, you must be at least 65 years of age at the end of the fiscal year you are filing. For example, if you were 65 on December 31, 2020, you can use Form 1040-SR when you file your taxes in April 2021. If you are 65 at any time in 2020, you can use Form 1040-SR to declare your 2020 taxes in 2021.

Note: you do not need to be retired to file. If you are still working at age 65 and are eligible to complete Form 1040-SR, you can do so. On the other hand, retirees under 65 are not allowed to use Form 1040-SR.


No income test

Unlike Form 1040-EZ, which limits interest income to $1,500 and total income to $ 100,000 or less, Form 1040-SR has no limit on the amount of total income for a given fiscal year.


Expanded income categories

Also, IRS Form 1040-SR allows you to report different income types beyond those permitted by Form 1040-EZ (wages, salaries, tips, fellowship grants or taxable scholarships, and unemployment compensation). Specifically, Form 1040-SR allows you to report Social Security benefits as well as distributions from qualified retirement plans, annuities, or similar deferred payment terms. It can also include unlimited interest and dividends and capital gains and losses.


What about tax deductions?

Seniors who complete Form 1040-SR must make the standard deduction. Remember that anyone 65 or over is entitled to a higher deduction. In 2020, if you are 65 or older and single, your standard deduction is an additional $1,650 for a total of $13,850 for the 2020 tax year. If you are married, filing jointly, and one of you is 65 years of age or older, the standard deduction increases to $1,300, and if you are both 65 and above, the deduction increases to $ 2,600. In fiscal 2020, the standard deduction for people aged 65 and above remains the same.

Form 1040-SR includes a table in table on the first page detailing standard deductions based on filing status for filing purposes.


Special Considerations When Completing Form 1040-SR

Form 1040-SR simplifies income tax reporting requirements for seniors and is much easier to complete than Form 1040, which is much longer than Forms 1040-EZ and 1040-A (now defunct). However, if you are a retiree under age 65, even though your income sources include Social Security, pensions, and investment income, you cannot use Form 1040-SR and must use Form 1040. However, Form 1040-SR is a big step in the right direction when it comes to streamlining your tax filing requirements.


Summary

  • Form 1040-SR allows a person to report income from wages, salaries, tips, and other income sources.

  • Other senior-friendly features include larger fonts and spaces to fill in the information.

  • The new Form 1040-SR is an uncomplicated tax form for low-income seniors who would otherwise have to submit Form 1040.

  • The new Form also does not contain income tests and extended income categories.

  • The new Form requires seniors to be 65 by the end of 2020 or the end of the tax year.


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