IRS releases draft form for tip, overtime, car loan, and senior deductions

The IRS on Friday released a draft of Schedule 1-A (Form 1040), Additional Deductions, which includes sections for calculating four deductions allowed under H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act, on a single form.

The form sections lay out the calculations of the deductions for tips, overtime, and car loan interest, as well as the calculation of the enhanced senior deduction. Taxpayers calculate the amount of the deductions that apply to them, add the amounts together, and include the total on line 13b of their Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Income Tax Return for Seniors; or line 13c of Form 1040-NR, U.S. Nonresident Alien Income Tax Return.

The form also includes a section for calculating the taxpayer’s modified adjusted gross income amount that is used in calculating the four deductions.

It’s an efficient way for the IRS to handle four deductions that expire after 2028, said Annette Nellen, Esq., CPA, CGMA, professor in the Department of Accounting and Finance at San José State University and a past chair of the AICPA Tax Executive Committee. 

“That just makes a little bit neater because these are temporary provisions in there for four years,” Nellen said. “Instead of creating four new forms, … they just put them all on one. From the IRS perspective, it’s not just what’s easy for us (taxpayers), but they’ve got to program their system to take all of this as well.”

While the Schedule 1-A draft seems to be designed to make filing taxes easier, the provisions of H.R. 1 regarding these deductions have restrictions and phaseouts that may cause some taxpayers who think they get the deduction to not qualify, she said. For example, taxpayers can deduct overtime required by the federal Fair Labor Standards Act only, but overtime required only by a state law could not be deducted, she said.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.