You must be 65 or older to use the senior-specific form
Form 1040-SR uses a larger font and less shading than the regular 1040
The 1040-SR doesn’t have an income limit compared to the old 1040-EZ
There are perks to being a senior—discounts at restaurants and retail, tuition waivers at some schools, and the ease of retirement communities, to name a few. Although it’s debatable whether a special tax form counts as a perk, there’s nevertheless a form dedicated to seniors that might make things easier.
As long as you were born before January 2, 1956—making you 65 at the beginning of 2021—you can file 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 with the Regular 1040?
There are a few different iterations of the 1040 for special situations, but we’ll focus on IRS Form 1040-SR and the regular Form 1040.
Also known as “U.S. Tax Return for Seniors,” Internal Revenue Service (IRS) Form 1040-SR is a result of the Bipartisan Budget Act of 2018. It has larger text and less shading than the regular 1040 to help older folks whose vision isn’t what it used to be.
The 1040-SR also includes a senior-specific standard deduction chart on a separate page.
The standard deduction chart on Form 1040-SR is useful for seniors because it lists the bigger standard deductions people 65 and older are eligible to claim. Plus, it’s in an easier-to-read format. The regular 1040 lists only the standard deductions non-seniors can claim in smaller text. (The IRS says not to file the standard deduction chart in Form 1040-SR with your tax return.)
Like the regular IRS Form 1040, Form 1040-SR includes lines for income typical for many seniors, such as IRA distributions, pensions, and annuities, as well as Social Security benefits. The old 1040-EZ, which the IRS has done away with, didn’t accommodate those types of income.
So, the main advantages of the Form 1040-SR are easier readability for those filling out their taxes on paper and the inclusion of senior-specific standard deduction information.
Who Can Use Form 1040-SR?
Seniors 65 and older don’t have to be retired to use the new form, said Nicholas Yrizarry, CEO of Align Wealth Advisors in Laguna Hills, CA.
As long as you meet the age requirement, you can still earn money and use Form 1040-SR.
If you’re below the age threshold, you’ll have to fill out the regular 1040, even if you’ve retired early, noted Elijah Kovar, partner and lead advisor with Minnesota-based retirement planning firm Great Waters Financial.
How Does the Pandemic Affect the 1040-SR?
In the instructions for both IRS forms 1040-SR and 1040, you’ll notice a worksheet for a recovery rebate credit.
This credit is for people who didn’t receive an economic impact payment in 2020—the stimulus checks of up to $1,200—or didn’t get the full amount they qualified for. Those economic impact payments were essentially the recovery rebate credits given out in advance. Keep in mind that the recovery rebate credit, just like the stimulus payouts, phases down for higher-income taxpayers.
The good news for older filers is they can claim this credit on the 1040-SR and get the benefits of the larger font, less shading, and senior-specific standard deduction chart.
Consider a Tax-Deferred Strategy
Whether or not seniors use Form 1040-SR, they can avoid overpaying on taxes and keep more of their retirement money with a tax-deferred strategy that pays taxes only on income that has been distributed.
“The goal is to pay taxes only on money you need and money you’re spending,” Yrizarry said. “It’s wasteful to pay taxes on money you don’t need.”
At the end of the day, even with the 1040-SR, if you’re a senior filing your taxes electronically or having a tax professional file for you, you might not notice much of a difference in your filing experience as compared to the regular 1040.
But if you’re still filling out your own taxes on paper, the IRS Form 1040-SR might make things easier.
TD Ameritrade does not provide tax advice. We suggest you consult with a tax-planning professional with regard to your personal circumstance.
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