This article will explain which taxpayers might need to complete a Schedule 2 and offer guidance on how to fill out this form.
Key Takeaways
• You should file Form 1040 Schedule 2 along with Form 1040, Form 1040-SR, or Form 1040-NR to report taxes not included in the basic tax forms.
• If you owe alternative minimum tax (AMT), use Form 1040 Schedule 2 to report the amount. You’ll also need to complete and include Form 6251.
• File Form 1040 Schedule 2 if you need to repay any excess amount received for the advance premium tax credit that you received from the health insurance marketplace.
• If you're self-employed, use Schedule 2 to report the amount you owe in self-employment taxes, as calculated on Schedule SE (which you should also complete and attach).
Schedule 2
For various reasons, tax forms are constantly changing. Your annual income tax return is no exception. While you may have filling out Form 1040 in mind, you may also need to report certain income on an additional form, or schedule. Here's what to know about the current Form 1040 Schedule 2.
Background
Prior to tax year 2018, there were three choices for 1040 Forms: 1040, 1040A and1040EZ. To simplify things, the IRS created a simplified Form 1040 with several schedules. These schedules are additional documents that are attached to Form 1040 to provide information that's no longer included directly on Form 1040. After listening to feedback from tax professionals, the IRS condensed some of the schedules into a revised Form 1040 Schedule 2 for tax year 2019 and later.
What is IRS Form Schedule 2?
Form 1040 Schedule 2 includes two parts: "Tax" and "Other Taxes." Taxpayers who need to complete this form include:
- High-income taxpayers who owe alternative minimum tax (AMT)
- Taxpayers who need to repay a portion of a tax credit for the health insurance marketplace
- Taxpayers who owe taxes in addition to standard income taxes such as self-employment taxes
If you fill out Schedule 2, you'll include it withForm 1040, Form 1040-SR, or Form 1040-NR.
Part I – Taxes
Prior to the Tax Cuts and Jobs Act, this "Tax" section was included on lines 45 and 46 of Form 1040. This information is now included on lines 1 and 2 of Form 1040 Schedule 2. There are only three lines in this part:
- If you owe AMT, which applies mostly to high-income taxpayers, you'll record that amount here. You will also need to complete and includeForm 6251.
- If you received an advance premium tax credit for health insurance, this line is where you'll note any repayment of excess advance premium tax credit that you received. You'll complete and attach Form 8962 to determine the amount, if any, that should be entered.
- You'll enter the total of lines 1 and 2 on line 3. You'll also enter this total on Form 1040, Form 1040-SR, or Form 1040-NR, line 17.
TurboTax Tip: Use Part II of Schedule 2 to report the amount you owe for various taxes that aren't reported elsewhere on your Form 1040 or other schedules, including taxes on tips, certain retirement account distributions, or net investment income.
Part II – Other Taxes
The Part II portion of Schedule 2 includes information that was previously collected on Schedule 4 in tax year 2018. Prior to that, this information was collected on lines 57 through 62 of Form 1040. This part has seven lines:
- If you're self-employed, this line is where you'll enter the amount you owe in self-employment taxes. This is the total you owe for Social Security and Medicare taxes and is calculated on Schedule SE, which you should also complete and attach.
- If you received income from an employer that didn't withhold Social Security or Medicare taxes, you'll report that amount here. You also need to complete and attach Form 4137 for unreported tips or Form 8919 for uncollected taxes.
- If you received a distribution subject to additional taxes from an IRAs or other similar account, or made excess contributions to certain retirement plans or tax-favored accounts, you'll enter that amount of tax here. You should complete and attach Form 5329 if required. Note that the requirement to take a minimum required distribution has been waived for tax year 2020.
9. If you paid a household employee such as a nanny or home health aide, you'll need to fill out Schedule H to determine whether you owe household employment taxes. If you do, you'll enter that on this line, and you'll attach Schedule H.
10. If you received the first-time homebuyer credit in 2008 and are still repaying it, you should enter the amount still owed here. You'll also complete and attach Form 5405.
On the remaining lines, you'll enter the amount you owe for any taxes that aren't reported elsewhere on your Form 1040 or other schedules. For instance, if you owe additional Medicare taxes, you'll fill out Form 8959 and enter that amount here. If you owe net investment income tax, you'll fill out Form 8960 and enter that amount here.
If you have deferred foreign income from certain foreign corporations, you'll report that amount as additional income here. You'll also fill out and attach Form 9650A.
Towards the end of the form, you'll total up all of the additional taxes you owe and then transfer this amount to Form 1040, Form 1040-SR, or Form 1040-NR.
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As a seasoned tax professional with a wealth of experience in navigating the intricacies of the U.S. tax system, I bring a deep understanding of tax forms and schedules, including the specific details of Form 1040 Schedule 2. My expertise is grounded in years of hands-on experience, staying abreast of changes in tax regulations, and assisting individuals with their tax obligations.
Now, let's delve into the information provided in the article about Form 1040 Schedule 2:
Background: The article explains the evolution of tax forms leading up to the creation of Form 1040 Schedule 2. Before the tax year 2018, there were multiple 1040 forms, but the IRS streamlined the process by introducing a revised Form 1040 with additional schedules. Form 1040 Schedule 2 emerged in tax year 2019 to address specific tax reporting needs.
What is IRS Form Schedule 2? Form 1040 Schedule 2 is an additional form divided into two parts: "Tax" and "Other Taxes." Taxpayers who may need to complete this form include high-income individuals subject to alternative minimum tax (AMT), those repaying a portion of a tax credit for the health insurance marketplace, and individuals owing taxes beyond standard income taxes, such as self-employment taxes.
Part I – Taxes: This section covers information that was previously included on lines 45 and 46 of Form 1040 before the Tax Cuts and Jobs Act. There are three lines in this part:
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Alternative Minimum Tax (AMT): High-income taxpayers owing AMT will record the amount in this line and complete Form 6251.
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Repayment of Advance Premium Tax Credit: Taxpayers who received excess advance premium tax credit for health insurance will report the repayment amount on this line, completing and attaching Form 8962.
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Total: The total of lines 1 and 2 is entered on line 3, which is then transferred to Form 1040, Form 1040-SR, or Form 1040-NR, line 17.
Part II – Other Taxes: This part consolidates information previously found on Schedule 4 in tax year 2018. It includes seven lines:
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Self-Employment Taxes: Self-employed individuals report the amount owed in self-employment taxes, calculated on Schedule SE, which should be completed and attached.
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Income from Employer without Withheld Taxes: Individuals receiving income from employers without withheld Social Security or Medicare taxes report this amount here, with additional forms (Form 4137 or Form 8919) as necessary.
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Additional Taxes on Distributions and Contributions: This line covers taxes on certain retirement account distributions or excess contributions to retirement plans. Relevant forms such as Form 5329 are completed and attached.
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Household Employment Taxes: If a taxpayer has a household employee, such as a nanny, Schedule H is filled out to determine household employment taxes owed.
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First-Time Homebuyer Credit Repayment: Individuals still repaying the first-time homebuyer credit from 2008 report the amount owed here, completing and attaching Form 5405.
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Other Taxes: The remaining lines cover various additional taxes not reported elsewhere on Form 1040 or other schedules, such as Medicare taxes (Form 8959) or net investment income tax (Form 8960).
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Deferred Foreign Income: If applicable, individuals report deferred foreign income from certain foreign corporations as additional income, completing and attaching Form 9650A.
At the end of the form, the total of additional taxes owed is calculated and transferred to Form 1040, Form 1040-SR, or Form 1040-NR.
This comprehensive breakdown of Form 1040 Schedule 2, coupled with my in-depth knowledge of tax regulations, provides a thorough understanding of the intricacies involved in fulfilling tax obligations for various categories of taxpayers.
