Seniors Get a New Simplified Tax Form for 2019

If you are 65 or older (or turn 65 anytime in 2019), you will have the option to use a new simple tax form for seniors, known as the 1040SR, when you file your 2019 taxes in April 2020. The new form is provided for in section 41106 of the Bipartisan Budget Act of 2018 (BBA), a two-year budget agreement passed by Congress and signed by President Donald Trump on Feb. 9, 2018.

The provision creating Form 1040SR was one of several retirement-related changes to tax policy included in the BBA, which should not be confused with the Tax Cuts and Jobs Act passed on Dec. 22, 2017. (For more on the latter, see How the GOP Tax Bill Affects You.) 

Form 1040SR will be designed to be “as similar as practicable” to Form 1040EZ and will serve as a simplified tax form for seniors with uncomplicated finances. While Form 1040EZ only allows you to report income from wages, salaries and tips, Form 1040SR will allow income from certain other sources, as well. Additional differences between 1040EZ and 1040SR are described below, including age requirements and total income allowed. 

One major difference between 1040EZ and 1040SR has to do with your age. Form 1040EZ is available to any taxpayer under the age of 65 who otherwise meets income and filing requirements. To use 1040SR you must be 65 or older by Dec. 31, 2019, or by the end of the tax year for which you will be filing. For example, if you turn 65 on Dec. 31, 2019, you can use 1040SR when you file your 2019 taxes in April 2020. If you are 65 anytime in 2020, you can use 1040SR to file your 2020 taxes in 2021. Being retired isn’t necessary. If you are still working at age 65 and otherwise qualify to file 1040SR, you may do so. On the other hand, early retirees (younger than 65) cannot use 1040SR. 

According to the BBA, “The form [1040SR] shall be available without regard to the amount of any item of taxable income or the total amount of taxable income for the taxable year.” Unlike 1040EZ, which limits interest income to $1,500 and total income to $100,000 or less, 1040SR has no limit on the amount of your total income for a given taxable year. 

Furthermore, IRS Form 1040SR lets you include several types of income in addition to those allowed by 1040EZ (wages, salaries, tips, taxable scholarship or fellowship grants and unemployment compensation or Alaska Permanent Fund dividends). Specifically, 1040SR allows you to include Social Security benefits, and distributions from qualified retirement plans, annuities or similar deferred-payment arrangements. You may also include unlimited interest and dividends, as well as capital gains and losses.

According to John Bunyan, CPA (inactive), “Section 41106 of the new Bipartisan Budget Act of 2018 (BBA) calls for the Internal Revenue Service to make the 1040SR available for taxable years beginning after the date of the enactment of the BBA. The BBA was enacted just this month, so it would apply to years beginning after that, effectively 2019.” This was confirmed by Jon R. Heischman of Heischman Financial Services, who said, “This [1040SR] will start for tax year 2019, not this year.” So seniors won't actually be filling out these forms until 2020.

Seniors who fill out Form 1040SR must take the standard deduction. Remember that if you're 65 or over, you are entitled to an additional $1,300. For an individual, that would raise the standard deduction to $13,300 for tax year 2019, the first year you can use the form. For a married couple, if one is 65 or over the deduction would rise to $25,300. And if both are: $26,600.

The legislation that resulted in the creation of IRS Form 1040SR began March 5, 2013, with the introduction of the Seniors Tax Simplification Act by Senators Marco Rubio (R-FL) and Bill Nelson (D-FL), joined by Senators Mike Lee (R-UT) and Tom Carper (D-DE). Following several failed attempts to turn the act into law – and despite endorsements by the AARP, the Association of Mature American Citizens and the National Taxpayers Union – 1040SR language was adopted as part of the emergency spending bill signed by President Trump on Feb. 9, 2018. 

Form 1040SR not only simplifies tax-filing requirements for seniors; it also fills an important gap for older citizens who are not permitted to use the standard Form 1040EZ. That said, the legislation isn’t perfect.

If you are a retiree under the age of 65 whose income sources include Social Security, pensions and investment income, you can’t use 1040SR and are also prohibited from using 1040EZ, leaving you with 1040A as your best option short of filing the full Form 1040. Nevertheless, the birth of 1040SR is a big step in the right direction when it comes to the simplification of tax-filing requirements. (For more, see You Made It! 6 Ways to Ensure a Long-lasting Retirement)