1040-SR: The New Tax Return Form for Seniors

Here's what senior citizens should know about the new tax form.

Mature couple doing paperwork using laptop
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Lawmakers have been trying for years to cut seniors a bit of a break at tax time, and the Bipartisan Budget Act of 2018 finally took a solid step in that direction by simplifying tax filing for individuals aged 65 and older. They'll now have their own tax form, the 1040-SR.

It’s said to be similar to the 1040-EZ in several ways and much easier to negotiate than Form 1040. The tax form was first proposed in 2013 as part of the Seniors Tax Reconciliation Act. The AARP, the National Taxpayers Union, and the Association of Mature Americans all supported the bill. Alas, it never won the approval of the Senate.

Then, on February 9, 2018, the Bipartisan Budget Act was signed into law by President Donald Trump. The BBA required that the Internal Revenue Service create and publish Form 1040-SR.

Why the New Form Is Better…

Many older Americans were previously forced to file the longer, more complicated Form 1040, which takes about twice as long to complete, because they couldn’t meet the requirements for filing Form 1040-EZ.

The 1040-EZ is limited to those with income deriving from wages, salaries, tips, unemployment compensation, taxable scholarships, and fellowship grants. Dividend income is restricted to Alaska Permanent Fund payments. Most important, taxpayers age 65 and older are not permitted to file the 1040-EZ.

Notice what’s missing from this list of types of income: Social Security retirement benefits and income from qualified retirement plans or annuities. The 1040-EZ doesn’t accommodate these types of income. Most retired taxpayers are no longer earning a lot in the way of wages, salaries, or tips, and they're not receiving scholarships.

Many seniors were forced to file the far more complicated Form 1040 simply by virtue of the nature of their retirement incomes and their ages.

Form 1040-EZ also limits overall income to $100,000 and interest income to $1,500 annually. The 1040-SR doesn't put a limit on interest, dividends, or capital gains, nor does it cap overall income. 

…And Why It’s Not Better

Unfortunately, some older Americans will still find themselves left out in the cold, faced with tackling the formidable Form 1040 at tax time. Those who are not yet 65 and who have Social Security income, pension income, or other forms of retirement income can’t use Form 1040-SR because of the age requirement; and because Form 1040-EZ doesn't include Social Security and pension income, they can't use that, either. 

These taxpayers do have the option of filing Form 1040-A, but this return doesn't allow for itemized deductions. It also caps total income at $100,000 just as the 1040-EZ does, although it imposes no limit on interest income and it doesn’t close the door on income from retirement benefits and Social Security.

Requirements for Filing Form 1040-SR

Taxpayers can reach their 65th birthday at any time during the tax year—even Dec. 31—to qualify for using the 1040-SR. But the tax form imposes a few other qualifying restrictions in addition to the age rule.

The tax form for seniors also disallows itemized deductions. You must claim the standard deduction for your filing status if you choose Form 1040-SR, but the Tax Cuts and Jobs Act has pretty much doubled the standard deductions for all filing statuses so this shouldn’t be much of a hardship. And seniors age 65 or older are also entitled to an extra standard deduction of $1,300.

Filers do not have to be retired yet to qualify.

The Jury Is Still Out

Only time will tell if the new Form 1040-SR really is easier or if it just complicates already complex filing options. The language included in the BBA obligates the IRS to make the new tax form available for “tax years beginning after the date of enactment.”

The law was enacted in 2018 so this means that the IRS won’t have to scramble to make the form available until the next tax year begins on January 1, 2019. But knowing that it’s soon to be an option can help many seniors determine their best filing options in advance and do a little tax planning all the same.

Some tax professionals believe that both seniors and the IRS will need every bit of this time. Those who have seen the 1040-SR prototype are concerned that it really isn’t less complicated and that it still isn’t capable of handling all the diverse types of income a retiree might have. Additionally, all the qualifying rules aren't really firm yet.