Written by: Theodore M. David, Chairman Emeritus, Tax Law Committee
Current Items: 1-A Again?
Now there is somebody at IRS with a morbid sense of humor. It could be that the agency has shrunk down 27% to just 74,000 souls. With about 175 million individual returns filed annually that’s about 2300 returns for each. So, with morale in the toilet and agents disgusted with all the cuts it is not really surprising that a nod to a new form number is designed to bring back a glimpse of the good old days. Now it was a warm day in July 1965 when about to go off to Rutgers I presented myself to my local draft board and as I recall was given the magical deferment 11-S then available for college students. The catch was simple enough: Remain a full time student with satisfactory academic progress. Until 1967 grad students were also safe from an imposed military career as well. But all bets were off when graduation came along and the 11-S turned into…1-A. “A” as in Available for military service. Now the scramble began. Many signed up for more pleasant surroundings in Viet Nam, others kissed loved ones and headed off to the welcoming woods of Canada and other places all over the planet. My roommate traded the Banks of the Ole Raritan for a post on the Delta when his grades got away from him. If you the reader are of a certain age you know how you felt when that 1-A arrived for you. I carried that card for 25 years or more as a souvenir of a very close call. But this is a tax bulletin and the filing season is under way and perhaps you have already met NEW Form1-A. This time from IRS not your draft board. So what is it for and who gets to file it? Here’s what IRS has to say: The Internal Revenue Service published, for tax year 2025, a new schedule that taxpayers will use to realize important tax benefits of the One, Big, Beautiful Bill, including no tax on tips, no tax on overtime, no tax on car loans, and no tax on seniors.
Schedule 1-A and its related instructions (included in the Form 1040 Instructions) allow taxpayers to deduct amounts for tips, overtime, car loans, and the enhanced deduction for seniors.
Part II of the new instructions explains how to determine the amount of qualified tips, how to claim the deduction, up to $25,000, and the phaseout for modified adjusted gross income greater than $150,000 ($300,000 for married taxpayers filing joint returns). Workers can claim this deduction whether they claim the standard deduction or itemize. To claim the deduction, tips must be reported, and married taxpayers must file a joint return. The new instructions also provide examples of different scenarios for tipped workers, worksheets to help tipped workers calculate their tipped income, and information on lists and categories of occupations where workers customarily and regularly receive tips, as well as definitions of qualified tips.
Part III of the new instructions explains how certain workers can claim a deduction for overtime compensation they received. Married taxpayers must file a joint return to claim this deduction. Workers can claim this deduction whether they claim the standard deduction or itemize.
The new instructions describe how taxpayers can claim a deduction of up to $12,500 ($25,000 if married filing jointly) and explain how the deduction is reduced when MAGI exceeds $150,000 ($300,000 if married filing jointly).
The instructions define qualified overtime compensation as overtime compensation that is paid as required under section 7 of the Fair Labor Standards Act of 1938, and more than the amount of the regular rate of pay. The instructions provide illustrative examples and worksheets.
Part IV of the new instructions explains how taxpayers can claim a deduction for car loan interest. Taxpayers can deduct qualified passenger vehicle loan interest whether they claim the standard deduction or itemize.
The instructions define the terms “qualified passenger vehicle loan interest,” “applicable passenger vehicle,” “final assembly in the United States,” and “personal use,” and provide an example.
Part V describes the enhanced deduction for seniors, which can be claimed whether they take the standard deduction or itemize; to claim the deduction, married couples must file jointly.
To qualify for the enhanced deduction, the taxpayer (and/or the taxpayer’s spouse, if filing a joint return) must have been born before Jan. 2, 1961. The taxpayer must have a valid Social Security number; if married filing jointly, each spouse who is claiming the enhanced deduction for seniors must have a valid SSN.
The maximum enhanced deduction for seniors is $6,000 per person. For married filing jointly, if both spouses were born before Jan. 2, 1961, and both have a valid SSN, the enhanced deduction for seniors is $12,000. The $6,000-per-person amount is reduced if the MAGI exceeds $75,000 ($150,000 for married couples filing jointly).
Nice, it’s a 1-A you don’t have to dodge.
Questions or comments should be emailed to: tdavidlawyer@gmail.com.