Picnic’s Tax Blog

Tax Return Schedules and Forms Explained

Tax Return Schedules and Forms Explained
Ryan McInnis
pile of papers

If it seems like the IRS has enough forms and tax return schedules to wallpaper your house, it’s because they probably do. Wading through them can feel overwhelming, but they are all important and serve unique purposes.

If it seems like the IRS has enough forms and tax return schedules to wallpaper your house, it’s because they probably do. Wading through them can feel overwhelming, but they are all important and serve unique purposes.

Forgetting to file a certain form or schedule could delay your refund, so it’s important that you know what paperwork you need. We’re here to help with an explainer detailing some of the most commonly encountered forms and schedules. We’ve even made it easy to skim so you can quickly search for just the forms you need to understand.

What are Tax Return Schedules?

Tax return schedules are tax forms you complete in addition to your return when you file. These forms essentially serve two purposes. The first is to help you. When filling out tax returns, you sometimes have to calculate the amounts found on the tax form. 

For example, let’s say you’ve decided to itemize your deductions. Filling out a Schedule A walks you through the process, telling you what deductions you can take and helping you add them all up. It then tells you exactly where to write your deductions on the actual tax return.

This is especially helpful when you’re making more complicated calculations. A Schedule SE, for example, can help you calculate the amount of self employment tax you owe even if you don’t know the tax rate or formula off the top of your head.

Tax return schedules also help the IRS to better understand the numbers you report on your return. When you file your taxes, you don’t get a chance to sit down with a tax agent and explain why and how you made the decisions you did. The schedules do this for you, providing some extra background information to help justify and explain your return. That’s certainly easier than having to explain yourself during an audit!

Most Common Schedules Summarized

As helpful as we try to be, it would be impossible for us to explain every available federal tax schedule here today. And let’s be honest, it would make for a pretty boring read if we did. Instead, we’ll cover some of the most commonly used tax schedules, focusing on those that you’re the most likely to need or use.

Schedule A

The Schedule A is where taxpayers itemize their deductions if desired. If you choose to take the standard deduction, you won’t need to use this form. If you instead choose to itemize your deductions, this form accompanies your 1040 and outlines which deductions you took and the amount of each.

Schedule B

Schedule B is an income schedule that details your sources of interest and dividend income. If your dividends and interest amount to less than $1,500 in 2020, you don’t need to file Schedule B. If you earned more than $1,500 in interest and dividends, you’ll file this schedule to explain where your earnings came from.

Schedule C

Self-employed taxpayers use Schedule C to report their business income (or loss). This schedule details receipts and income as well as expenses. This gives the IRS a detailed outline of your business income and expenses, essentially proving that you’re accurately reporting the amount of money you made or lost. If your business expenses were less than $5,000 and you meet other criteria, you may be able to file the simpler form Schedule C-EZ instead.

Schedule D

Schedule D details a taxpayer’s capital gains and losses. This schedule is often used to report the sale of stocks, but you may also need to file it if you sold your car or, in some cases, your house. Be aware that short-term assets (those held for less than one year) are taxed at a different rate than long-term assets. If you sold capital assets this year, be prepared to report both the date you acquired them and the date you sold them.

Schedule EIC

When you claim the earned income credit (EIC) on your taxes, the amount of your credit is largely based on the number of qualifying children you have. The Schedule EIC is where you report each of your qualifying children and record their Social Security numbers. The EIC is one of the most abused and error-prone tax credits, so you want to make sure you get it right and remember to include your Schedule EIC to avoid problems with your return.

Schedule SE

Self-employed filers must detail their business income on a Schedule C, but they also need to file a Schedule SE. This schedule is where business owners can calculate the amount of self employment tax they must pay – and calculate how much of a deduction they can take for it. Most taxpayers can deduct half of their self-employment tax.

Schedule 1

If you have income to report but can’t figure out where on your Form 1040 to put it, you probably need to file a Schedule 1. This schedule lets you report income from alimony, farming, tax refunds and other sources that aren’t specifically listed on Form 1040. You can also use this schedule to deduct certain expenses, including student loan interest and educator expenses.

Schedule 2

Just as you may not find a space on your 1040 to report certain income and expenses, you may also struggle to figure out where to report certain taxes you pay. Schedule 2 solves this problem. This is where you report your alternative minimum tax, household employment taxes and other tax liabilities.

Schedule 3

When the government shortened the Form 1040, certain types of income and tax payments were removed. So were certain tax credits and payments. They moved to Schedule 3, which is now where you report education, residential energy, health coverage and other tax credits. The credit for child care and dependent expenses has also moved to this schedule, so be sure you don’t overlook it.

Most Common Tax forms Summarized

Schedules are an important part of your tax return, but they’re usually filed to support the information on your tax forms. As was true of the schedules, there are far too many forms for us to cover them all here, but it’s important that you understand a few of the basics.

Forms 1040 and 1040X

The Form 1040 is probably one you’re very familiar with. This is the standard tax return that almost every taxpayer uses. It lists all your income and tracks all your deductions and credits. It then tallies your tax payments, including estimated tax payments and those withheld from your pay. All of this information is then used to determine the amount of your tax refund or figure out how much you owe.

If you make mistake on your Form 1040 and don’t realize it until after you file, you need to file a Form 1040X. This is simply a corrected version of your tax return. It compares what your return actually said with what it should have said so you can correct any errors.

Form W-2

You’re likely very familiar with the Form W-2, as well. This is a form your employer sends you every year. It details how much money you made and how much tax your employer withheld from your paychecks. It also details any other relevant information about your wages and taxes that you need to know.

Form 1099

Businesses are required to send W-2’s to their employees, but only to their employees. If you worked as an independent contractor or owned your own business, the companies you worked with will send you a Form 1099 rather than a W-2. You’ll only get this form, however, if you earned more than $600 from the company and you’re not incorporated.

Form 1098-E

In most cases, taxpayers may deduct any amounts they paid for student loan interest. If you’ve paid eligible student loan interest throughout the year, your lender will send you a Form 1098-E at tax time. This will tell you exactly how much student loan interest you paid.

Form 1098-T

In addition to taking a deduction for student loan interest, many taxpayers can deduct amounts they paid for tuition and fees while going to college. Your university or educational institution will send you a Form 1098-T outlining the amount you paid. This makes calculating any available credits much easier.

Although it’s good to try and learn some of the basics that apply to you, you don’t have to understand every single tax form and schedule that’s been created since the dawn of time. You see, we’re into that sort of thing here at Picnic Tax Solutions. We understand all the forms so you don’t have to. If you find yourself stuck or confused, give us a call. Our accountants will be happy to help you find and complete whatever forms and schedules you need to get your taxes finished and off your to-do list.