What’s new on IRS Schedule 2?

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In a Nutshell

The IRS added Schedule 2 (along with five other new schedules) when it revised the 1040 tax return for the 2018 tax year. The schedule is getting updated — and longer — for 2019 as the IRS retires three other schedules and moves some of the information from them onto the proposed Schedule 2.
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This article was fact-checked by our editors and a member of the Credit Karma Tax® product specialist team, led by Senior Manager of Operations Christina Taylor.

Chances are good that if you filed a federal income tax return for 2018 it wasn’t a “one-and-done” scenario for you.

As of May 23, 2019, 68% of all individual tax returns filed for 2018 included Schedule A for itemizing deductions or one or more of six schedules the IRS rolled out for the 2018 tax year along with a shorter 1040 tax return, according to IRS data.

Schedule 2 was one of the new schedules added to help simplify the 1040 in the wake of the 2017 tax reform law. In 2018, Schedule 2 had just four lines used to report certain tax information.

But for 2019, the IRS has proposed consolidating those six schedules into three, with the draft of Schedule 2 incorporating its original lines plus lines initially included in Schedule 4.

The IRS says the draft of Schedule 2 could change at least slightly before it’s finalized.

What is IRS Schedule 2?

For the 2018 tax year, the IRS shortened the 1040 tax return, eliminated the 1040EZ and 1040A versions, and added six new schedules to handle the information that moved off the main tax return form.

When introduced, IRS Schedule 2 included just four lines:

  • Reserved lines: Listed as one line on the form, several line numbers were reserved for future use and were unnecessary for filing a 2018 tax return.
  • Alternative minimum tax: If you owed alternative minimum tax, this line is where you recorded the amount. You also had to complete Form 6251 to calculate your AMT and attach the form along with Schedule 2 to your 1040.
  • Excess advance premium tax credit repayment: Filers who received an advance premium tax credit for health insurance purchased through the health insurance marketplace had to file Form 8962, premium tax credit, to reconcile how much they received with how much of the refundable credit they qualified for. If they received too much, they entered the excess amount on Line 29 of that form and then brought the amount over to Line 46 of IRS Schedule 2.

On the final line, you entered the sum of amounts from the other lines. Then that amount went on Line 11 on your Form 1040.

Learn about four refundable tax credits

What is likely changing?

The draft form of Schedule 2 for 2019 is much longer than the original form.

The reserved lines have been removed, but the alternative minimum tax and excess advance premium tax credit repayment remain on the draft for the 2019 IRS Schedule 2. But it now lists Line 12b on Form 1040 as the matching line for the total amount of tax you owe from this section of the form, instead of Line 11.

Additionally, there’s a new part of the form that incorporates other taxes that were initially included on Schedule 4, including …

  • Self-employment tax: If you’re self-employed and filling out Schedule SE, this line represents the amount you owe in self-employment tax based on your completion of that form. This tax is the amount you owe in Social Security and Medicare taxes as a self-employed individual.
  • Unreported Social Security and Medicare tax: If you earned unreported tips or were paid by an employer who didn’t withhold Social Security or Medicare taxes, you may owe money. You’ll need to file Form 4137 (unreported tips) or Form 8919 (uncollected taxes) and include the unreported amount on IRS Schedule 2.
  • Additional tax on IRAs, other qualified retirement plans or other tax-favored accounts: If you owe taxes on certain tax-favored accounts because of early distributions, excess contributions or another reason, you’ll report it on Form 5329 and also include it on Schedule 2.
  • Household employment taxes: If you paid cash wages to a household employee and the wages were subject to Social Security, Medicare or Federal Unemployment Tax Act taxes, or if you withheld federal income tax, you’ll fill out Schedule H and include the amount owed on Schedule 2.
  • Repayment of first-time homebuyer credit: If you received the first-time homebuyer credit in 2008 and are still repaying it, you’ll fill out Form 5405 and include the current year’s repayment amount on Schedule 2.
  • Additional Medicare tax and net investment income tax: If you’re required to fill out Forms 8959 and/or 8960 for these taxes, you’ll include the amount you owe for one or both on the same line on Schedule 2, including any necessary instructions.
  • Section 965 net tax liability installment: If you’ve accumulated post-1986 deferred foreign income from certain foreign corporations, you may need to include an amount as additional income on your tax return. You’ll report that amount on Form 965-A and also include it on Schedule 2.

On the final line of Part 2, you’ll add up all of the tax amounts listed in the section for your total other taxes then enter them onto your Form 1040 or 1040-SR (a new form in 2019 for senior taxpayers).

It’s worth noting that on both the old version of Schedule 2 and the new proposed version, there are additional forms you’ll need to complete and/or attach for every line of information on the schedule.

Learn more about household employment taxes

Why is the IRS proposing changes?

Before the 2018 tax year, there were three federal tax forms: Form 1040, Form 1040EZ and Form 1040A. To simplify the federal tax return process, the IRS created a single form, moving information onto six new schedules.

The idea was to allow taxpayers to file only the schedules they needed and not have to deal with information that didn’t apply to them on a longer 1040 form. When the IRS initially announced the shorter 1040 and new schedules, it noted that many people would be able to file just the 1040 and no additional schedules.

But less than a third of 2018 tax returns were actually that easy, according to the IRS. During one IRS Nationwide Tax Forum in 2019, the audience cheered when an IRS presenter said the service was streamlining the number of new schedules in response to tax industry feedback.

When will the form be final?

IRS Schedule 2 is still in draft form for 2019. Draft forms are not meant for filing your tax return. According to the IRS, it’s likely that there will be at least some minor changes to the form before it’s officially released.

The IRS says it expects to post a second draft in the second half of 2019.

Bottom line

If you still need to file your 2018 return, or want to amend your 2018 return, you’ll still use the 2018 version of Schedule 2. By the time you’re ready to file your 2019 federal income tax return in 2020, the new form should be finalized and ready for filing your 2019 return.

Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She codeveloped an online DIY tax-preparation product, serving as chief operating officer for seven years. She is an Enrolled Agent and the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s degree in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.

About the author: Ben Luthi is a personal finance freelance writer and credit cards expert. He holds a bachelor’s degree in business management and finance from Brigham Young University. In addition to Credit Karma, you can find his wo… Read more.