Is Tax Form 1040-SR Right For You? If you are a Se …


If you are going to be 65 at the start of 2021, you will be able to file your taxes with Form 1040-SR. Here are some reasons why this form might be a good choice for you.

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There are perks of being a senior: discounts at restaurants and retail stores, tuition waivers at some schools, and ease of retirement communities, to name a few. While it is debatable whether a special tax form counts as a benefit, there is nonetheless a dedicated senior citizen form that might make things easier.

As long as you were born before January 2, 1956, or 65 at the start of 2021, you can report your taxes with Form 1040-SR. The 1040-SR is no longer new, but it’s still worth revisiting, especially with the tax implications of the coronavirus pandemic.

What is the 1040-SR and how does it compare to the regular 1040?

There are a few different iterations of the 1040 for special situations, but we will focus on IRS Form 1040-SR and Standard Form 1040.

Also known as the “United States Seniors Tax Return,” the Internal Revenue Service (IRS) Form 1040-SR is the result of the Biparty Budget Act of 2018. It contains text bigger and less shaded than the regular 1040 to help older people whose vision is not what it used to be.

The 1040-SR also includes a standard senior-specific deduction table on a separate page.

The standard deduction table on the Form 1040-SR is useful for seniors because it lists the largest standard deductions that people 65 and older can claim. Plus, it’s in an easier-to-read format. The regular 1040 only lists standard deductions that non-seniors can claim in a smaller text. (IRS says not to file the standard deduction table on Form 1040-SR with your tax return.)

Like the regular IRS Form 1040, the Form 1040-SR includes typical income lines for many seniors, such as IRA distributions, pensions and annuities, as well as Social Security benefits. The old 1040-EZ, which the IRS removed, did not accept these types of income.

Thus, the main advantages of Form 1040-SR are easier readability for those who file their taxes on paper and the inclusion of information on standard deductions specific to seniors.

Who can use Form 1040-SR?

People aged 65 and over don’t need to be retired to use the new form, said Nicholas Yrizarry, CEO of Align Wealth Advisors in Laguna Hills, Calif.

As long as you meet the age requirement, you can still earn money and use Form 1040-SR.

If you are below the age threshold, you will need to complete the regular Form 1040, even if you have taken early retirement, noted Elijah Kovar, partner and senior advisor at retirement planning firm Great Waters Financial in Minnesota.

How is the pandemic affecting 1040-SR?

In the instructions for both IRS Forms 1040-SR and 1040, you will notice a worksheet for a recovery refund credit.

This credit is for people who did not receive an Economic Impact Payment in 2020 – stimulus checks of up to $ 1,200 – or did not receive the full amount for which they were eligible. These economic impact payments were essentially recovery reimbursement credits granted in advance. Keep in mind that the recovery rebate credit, like the stimulus payments, gradually decreases for high income taxpayers.

The good news for older filers is that they can claim this credit on the 1040-SR and enjoy the benefits of a larger policy, less shading, and a standard senior-specific deduction table.

Consider a tax deferral strategy

Whether or not seniors use Form 1040-SR, they can avoid paying too much tax and keep more of their retirement money with a tax-deferred strategy that pays taxes only on income that have been distributed.

“The goal is to pay taxes only on the money you need and the money you spend,” Yrizarry said. “It’s a waste to pay taxes on money you don’t need. “

Ultimately, even with the 1040-SR, if you are a senior filing your taxes electronically or have a tax record for you, you may not notice much of a difference in your filing experience by. compared to normal. 1040.

But if you still complete your own taxes on paper, the IRS Form 1040-SR might make your job easier.

TD Ameritrade does not provide tax advice. We suggest that you consult a tax planning professional based on your personal situation.

Matt Whittaker is not a representative of TD Ameritrade, Inc. The materials, views and opinions expressed in this article are solely those of the author and may not reflect those owned by TD Ameritrade, Inc.

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