Everything You Need to Know About IRS Form 1040 Schedule 2

IRS Form Schedule 2 is one of the most common forms that many taxpayers need to fill if they are self-employed, have household employees, or have other situations shared in this guide.

Before filling out Schedule 2 of 1040, you must clearly understand what needs to be filled in. Any error in the form may result in delayed tax returns and even penalties. But don’t worry—we have got you back!

In this guide, we have explained Schedule 2 and who needs to fill it out. We have also covered the entire form line by line so that you don’t have any confusion and know what details you must fill out accurately.

What is IRS Form 1040 Schedule 2?

IRS Form 1040 Schedule 2 is an additional form you must fill and submit along with your main 1040 form if you owe additional taxes such as Alternative Minimum Tax (AMT), household employees’ tax, etc.

It is divided into two parts and each part includes specific types of taxes that need to be reported separately:

• Part I: Additional Taxes
• Part II: Other Taxes

Also Read: Demystifying Tax Forms: Understanding the 1099-MISC and 1099-NEC Differences

Who Needs to File Schedule 2?

You have to file Schedule 2 of IRS Form 1040 if any of these tax situations apply to you:

• Owe Alternative Minimum Tax (AMT): If you fall under the high taxpayers’ category and owe AMT, you must fill out Schedule 2 with your Form 1040. AMT is an additional tax for people with higher incomes to ensure they pay at least a minimum amount of tax.
• Are Self-Employed: If you are self-employed, you must report and pay self-employment tax.
• Have Household Employees: If you hire someone to do your household chores, you must pay their employment taxes.
• Unreported Social Security and Medicare Taxes: This form is necessary if you have tips or group-term life insurance that wasn’t reported correctly.
• Other Specific Taxes: Schedule 2 is required for different types of taxes, such as additional taxes on IRAs or other retirement plans.

Also Read: What is a W-9 Form and How to Fill It?

Line by Line Details of Schedule 2 of IRS form 1040

Part 1: Tax

• Line 1: Alternative Minimum Tax (AMT): If you can pay AMT, enter the amount from Form 6251, line 11, here.
• Line 2: Excess Advance Premium Tax Credit Repayment: If you’ve received too much in advance premium tax credits for your health insurance, then enter the amount from Form 8962, line 29 here.
• Line 3: Total: Add lines 1 and 2 and enter the total here. Also, enter this amount on Form 1040, 1040-SR, or 1040-NR, line 17.

Part 2: Other taxes

• Line 4: Self-Employment Tax: If you have self-employment income, attach Schedule SE and enter the amount from Schedule SE, Section A, line 4 or Section B, line 12.
• Line 5: Social Security and Medicare Tax on Unreported Tip Income: If you have unreported tips, attach Form 4137 and enter the amount from line 12.
• Line 6: Uncollected Social Security and Medicare Tax on Wages: If you owe additional Social Security and Medicare tax on wages, attach Form 8919 and enter the amount from line 6.
• Line 7: Total Additional Social Security and Medicare Tax: Add lines 5 and 6 amounts and enter the total here.
• Line 8: Additional Tax on IRAs or Other Tax-Favored Accounts: If you owe additional tax on IRAs or other tax-favored accounts, attach Form 5329. If you are not required to file Form 5329, check the box and enter the amount.
• Line 9: Household Employment Taxes: Attach Schedule H and enter the amount from line 7 if you owe household employment taxes.
• Line 10: Repayment of First-Time Homebuyer Credit: If you need to repay the first-time homebuyer credit, attach Form 5405 and enter the amount from line 10.
• Line 11: Additional Medicare Tax: If you owe additional Medicare tax, attach Form 8959 and enter the amount from line 18.
• Line 12: Net Investment Income Tax: If you owe net investment income tax, attach Form 8960 and enter the amount from line 21.
• Line 13: Uncollected Social Security and Medicare or RRTA Tax on Tips or Group-Term Life Insurance: If you owe uncollected Social Security and Medicare tax on tips or group-term life insurance, enter the amount from Form W-2, box 12.
• Line 14: Interest on Tax Due on Installment Income: If you owe interest on tax due on installment income from the sale of sure residential lots and timeshares, enter the amount here.
• Line 15: Interest on Deferred Tax on Gain from Installment Sales: Here, you have to enter the amount if you owe interest on tax gain from specific installment sales with sales prices over $150,000.
• Line 16: Recapture of Low-Income Housing Credit: If you need to recapture the low-income housing credit, attach Form 8611 and enter the amount from line 8.
• Line 17: Other additional taxes: This line includes various additional taxes. For each type of tax, list the type, form number, and amount:
  • 17a: Recapture of other credits
  • 17b: Recapture of federal mortgage subsidy
  • 17c: Additional tax on HSA distributions (attach Form 8889)
  • 17d: Additional tax on an HSA (attach Form 8889)
  • 17e: Additional tax on Archer MSA distributions (attach Form 8853)
  • 17f: Additional tax on Medicare Advantage MSA distributions (attach Form 8853)
  • 17g: Recapture of a charitable contribution deduction
  • 17h: Income from a nonqualified deferred compensation plan
  • 17i: Compensation from a nonqualified deferred compensation plan described in section 457A
  • 17j: Section 72(m)(5) excess benefits tax
  • 17k: Golden parachute payments
  • 17l: Tax on accumulation distribution of trusts
  • 17m: Excise tax on insider stock compensation from an expatriated corporation
  • 17n: Look-back interest under section 167(g) or 460(b) from Form 8697 or 8866
  • 17o: Tax on non-effectively connected income for nonresident aliens from Form 1040-NR
  • 17p: Interest from Form 8621, line 16f
  • 17q: Interest from Form 8621, line 24
  • 17z: Any other taxes. List type and amount
• Line 18: Total Additional Taxes: Add lines 17a through 17z and enter the total here.
• Line 19: Reserved for Future Use: There is no need to fill in anything here; you should leave it blank.
• Line 20: Section 965 Net Tax Liability Installment: If applicable, enter the section 965 net tax liability installment from Form 965-A.
• Line 21: Add lines 4, 7 through, 16, and 18. Enter this total on Form 1040 or 1040-SR, line 23, or Form 1040-NR, line 23b.

Detailed Steps to Fill Out Schedule 2 Form 1040

Gather Necessary Documents

Before you sit and start filling Schedule 2 of Form 1040, you should first collect all the required documents, such as:

• W-2 forms
• 1099 forms
• Records of other income
• Records of deductions
• Previous year’s tax return

Having all your documents in one place will make filling out the 1040 Schedule 2 form easier.

Identify Applicable Sections

Look at Schedule 2 and see which parts apply to your situation. The form has two main parts:

• Part I: Taxes: This includes the Alternative Minimum Tax (AMT) and excess advance premium tax credit repayment.
• Part II: Other Taxes: This section includes self-employment tax, household employment taxes, unreported Social Security and Medicare taxes, and other specific taxes.

Fill Out Each Line Carefully

Now, enter the appropriate amounts on the lines that apply to your tax return. If you have any doubts, refer to the previous section of this blog, where we explained IRS 1040 Form Schedule 2 line by line.

Don’t assume anything while filling out the form. Make sure you understand what each line asks for. Refer to the IRS instructions or seek help from a tax professional.

Review and Submit

Before submitting your Schedule 2 form, it is best to double-check all the entries. Please note that any error in the form may lead to delays or penalties.

Once you have verified everything is correct, attach Schedule 2 to your main Form 1040 and submit your tax return.

Common Mistakes to Avoid While Filling IRS Form 1040 Schedule 2

Avoid the following mistakes while filling Schedule 2 of the 1040 Form to make your tax filing process smoother and avoid unnecessary delays:

Double-check Your Math

The IRS found around 2.5 million common math errors in tax forms filed for 2017. The most common errors identified were wrong addition, subtraction, division, and selecting the wrong number from a tax form or schedule. You can avoid these most common errors by simply double-checking all the math operations done on the Schedule 2 form.

Filing Schedule 2 Too Early

Everyone wants to file their taxes early to get their refunds on time. However, filing taxes prematurely is not ideal before receiving all the proper tax reporting documents. If anything changes in the forms, you have to amend your tax return later, which results in unnecessary delays.

Omitting Required Information

While filling out IRS Form 1040 Schedule 2, ensure you don’t miss any required information before submitting. Read every line carefully, understand what is necessary, and then fill in the correct information from your documents. In case of any confusion, it is best to consult a tax professional rather than enter the wrong details.

File Schedule 2 Only When it’s Necessary

It makes sense to file Schedule 2 only when you submit it with your main 1040. You have to fill out and submit Schedule 2 if you owe additional taxes like AMT, have household employees, or have other scenarios shared in this guide.

Tips for a Smooth Schedule 2 Tax Filing Process

Tax filing can be daunting as you have to fill out several forms, and any mistakes you make while filling them out may put all your previous efforts in vain. Here are some common and easy-to-follow tips that you can use to streamline your Schedule 2 filing process:

• Stay Organized: To simplify the process, keep all the required tax documents, such as W-2s, 1099s, and other income statements, in one place. This ensures that you do not hunt for specific details while filling out Schedule 2 of IRS 1040.
• Use Tax Software: Tax preparation software can guide you through the process and help reduce errors. With the help of tax preparation and filing software, you can reduce manual work and perform automatic tax calculations. To further enhance your tax filing experience, you can opt for tax software hosting solutions.
• Consult a Professional: If you’re unsure about any part of your taxes, it’s wise to seek advice from a tax professional. Any errors or mistakes in your calculations may delay your tax returns and penalties by the IRS.

Final Thoughts

To avoid delays in your tax returns and heavy penalties from the IRS, you must correctly fill out IRS Form 1040 Schedule 2. You can follow this guide to understand Schedule 2 better and how to fill it out accurately. However, it is best to consult a tax professional if you have doubts about your 1040 or Schedule 2 form.

Frequently Asked Questions