Generating the Schedule 1-A in ProSeries

For tax year 2025 the IRS has releasing a new Schedule 1-A. This form is new and still pending final instructions. To learn about the One Big Beautiful Bill Act changes see our blog post here.

Table of contents:

Modified Adjusted Gross Income adjustments on the Schedule 1-A

To enter an amount for the Schedule 1-A line 2a:

1. Go to the Federal Information Worksheet.
2. Scroll down to Part X - Additional Federal Return Information.
3. Scroll down to the Excludable Income from Am. Samoa, Guam, Commonwealth of the N. Mariana Islands, or Puerto Rico: section.
4. Enter the amount on the Excludable income from Puerto Rico.

To enter an amount for the Schedule 1-A line 2b or 2c:

ProSeries will flow these amounts from the 2555 lines 45 and 50. For information on generating the 2555 see here.

To enter an amount for the Schedule 1-A line 2d:

1. Go to the Federal Information Worksheet.
2. Scroll down to Part X - Additional Federal Return Information.
3. Scroll down to the Excludable Income from Am. Samoa, Guam, Commonwealth of the N. Mariana Islands, or Puerto Rico: section.
4. Enter the amount on the Excludable income of bona fide residents of America Samoa, Guam, or the Commonwealth of the Northern Mariana Islands.

What is No Tax on Tips?

New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.

• “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing
• Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)

Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers. Self-employed individuals in a Specified Service Trade or Business (SSTB) under section 199A are not eligible. Employees whose employer is in an SSTB also are not eligible. Taxpayers must:

• Include their Social Security number on the return
• File jointly if married, to claim the deduction

Reporting: Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient.

Treasury and IRS provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.

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How to enter qualified tips to be included on the Schedule 1-A?

To enter an amount to show on Schedule 1-A line 4a as qualified tips received as an employee on Form W-2 Box 7:

1. Open the W-2 Worksheet.
2. Complete lines 1-14 from the W-2 received.
3. Any amount on box 7 as Social security tips will flow to the Schedule 1-A box 7.

To enter an amount to show on Schedule 1-A line 4b as Qualified tips included on Form 4137 but not included on the W-2 box 7:

1. Open the W-2 Worksheet.
2. Complete lines 1-14 from the W-2 received.
3. Scroll down to Part III - Unreported Tip Income & Tip Deduction.
4. On lines 2-6 enter the amount on the best applicable line for the tax situation.
5. On line 9 select the best description for the occupation.
6. Answer Yes or No on line 10.
7. The amount on line 11 will flow to the Schedule 1-A.

To enter an amount to show on Schedule 1-A line 5 as qualified tips from 1099-NEC:

When the qualified tips are from a 1099-NEC they will only flow to the Schedule 1-A if the 1099-NEC is linked to a Schedule C.

1. Open the 1099-NEC Worksheet.
2. In Box 1 enter the amounts from the 1099-NEC received.
3. In the Double click to link to Schedule C box double click and select the applicable Schedule C.
4. Scroll down to the Qualified Tips Worksheet for Schedule C.
5. Enter the amount as Qualified tips included in Box 1.
   • Only the amount greater than the amount of income will show on Schedule 1-A line 5.
6. Select the best description for the occupation.
7. Answer Yes or No for the uncommon situations.
8. Go to the Schedule C.
9. Review the Qualified Tips Smart Worksheet for Schedule 1-A, Part II to review the amounts flowing to the Schedule 1-A.

To enter an amount to show on Schedule 1-A line line 5 as qualified tips from 1099-MISC:

When the qualified tips are from a 1099-Misc they will only flow to the Schedule 1-A if the 1099-MISC is linked to a Schedule C.

1. Open the 1099-MISC Worksheet.
2. In Box 3 enter the amounts from the 1099-MISC received.
3. In the Double click to link to Schedule C box double click and select the applicable Schedule C.
4. Scroll down to the Qualified Tips Worksheet for Schedule C.
5. Enter the amount as Qualified tips included in Box 3.
   • Only the amount greater than the amount of income will show on Schedule 1-A line 5.
6. Select the best description for the occupation.
7. Answer Yes or No for the uncommon situations.
8. Go to the Schedule C.
9. Review the Qualified Tips Smart Worksheet for Schedule 1-A, Part II to review the amounts flowing to the Schedule 1-A.

To enter an amount to show on Schedule 1-A line line 5 as qualified tips from 1099-K:

When the qualified tips are from a 1099-K they will only flow to the Schedule 1-A if the 1099-K is linked to a Schedule C.

1. Open the 1099-K Worksheet.
2. In Box 1a enter the amounts from the 1099-K received.
3. In the Double click to link to Schedule C box double click and select the applicable Schedule C.
4. Scroll down to the Qualified Tips Worksheet for Schedule C.
5. Enter the amount as Qualified tips included in Box 1a.
   • Only the amount greater than the amount of income will show on Schedule 1-A line 5.
6. Select the best description for the occupation.
7. Answer Yes or No for the uncommon situations.
8. Go to the Schedule C.
9. Review the Qualified Tips Smart Worksheet for Schedule 1-A, Part II to review the amounts flowing to the Schedule 1-A.

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What is No Tax on Overtime?

New deduction: Effective for 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (such as the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act (FLSA) and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.

• Maximum annual deduction is $12,500 ($25,000 for joint filers).
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.

Taxpayers must:

• Include their Social Security number on the return and
• File jointly if married, to claim the deduction.

Reporting: Employers and other payors are required to file information returns with the IRS (or SSA) and furnish statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.

Guidance: The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and other payors subject to the new reporting requirements.

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How to enter qualified overtime to be included on the Schedule 1-A?

To enter the amount of overtime on a W-2 for the Schedule 1-A line 14a:

1. Open the W-2 Worksheet.
2. Complete lines 1-14 from the W-2 received.
3. Scroll down to Part VII - Deductible Overtime.
4. Complete line 14a.
5. Enter the Overtime dollar amounts on 14b in the applicable column.
6. Enter line 14c:
   • Check Yes if you want ProSeries to calculate the estimated amount of qualified overtime based on the amount entered.
   • Check No if you have the actual deductible amount for the qualified overtime and enter the deductible amount on 14d.

To enter the amount of overtime on a 1099-NEC or 1099-Misc for the Schedule 1-A line 14b:

ProSeries does not automatically calculate the amount of the deduction from a 1099-NEC or 1099-Misc. If there is qualified overtime on the 1099-NEC or 1099-MISC the deductible portion will need to be manually calculated and entered on the Schedule 1-A line 14b.

Common community discussions about the Overtime Deduction Calculation:

Why is double time only deducting 25%? See this related community discussion.

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What is No Tax on Car Loan Interest?

New deduction: Effective for 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle, provided the vehicle is purchased for personal use and meets other eligibility criteria. (Lease payments do not qualify.)

• Maximum annual deduction is $10,000.
• Deduction phases out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).

Qualified interest: To qualify for the deduction, the interest must be paid on a loan that is:

• Originated after December 31, 2024
• Used to purchase a vehicle originally used by the taxpayer (used vehicles do not qualify)
• For a personal use vehicle (not for business or commercial use)
• Secured by a lien on the vehicle

If a qualifying vehicle loan is later refinanced, interest paid on the refinanced amount is generally eligible for the deduction.

Qualified vehicle: A qualified vehicle is a car, minivan, van, SUV, pick-up truck or motorcycle, with a gross vehicle weight rating of less than 14,000 pounds, and that has undergone final assembly in the United States.

To determine if a vehicle had final assembly in the U.S., check one of these:

• The information label attached to the vehicle on a dealer's premises
• The vehicle identification number (VIN)
• The National Highway Traffic Safety Administration (NHTSA) VIN Decoder

Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers. The taxpayer must include the vehicle identification number (VIN) of the vehicle on the tax return for any year when the deduction is claimed.

Reporting: Lenders or other recipients of qualified interest must file information returns with the IRS and furnish statements to taxpayers showing the total amount of interest received during the taxable year.

Guidance: The IRS will provide transition relief for tax year 2025 for interest recipients subject to the new reporting requirements.

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How to enter qualified car loan interest to be included on the Schedule 1-A?

To enter a qualified vehicle for the No Tax on Car Loan Interest:

1. Open the Schedule 1-A.
2. Scroll down to Part IV - No Tax On Car Loan Interest.
3. Select the QuickZoom to enter button.
4. Select Create to create a new entry worksheet.
5. Complete one worksheet for each vehicle.
6. Select the QuickZoom to another Qualified Vehicle Worksheet to enter an additional vehicle.

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What is the Enhanced Deduction for Seniors?

• New deduction: Effective for 2025 through 2028, individuals who are age 65 and older may claim an additional deduction of $6,000. This new deduction is in addition to the current additional standard deduction for seniors under existing law.
  • The $6,000 senior deduction is per eligible individual (i.e., $12,000 total for a married couple where both spouses qualify).
  • Deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).
• Qualifying taxpayers: To qualify for the additional deduction, a taxpayer must attain age 65 on or before the last day of the taxable year.
• Taxpayers must include the Social Security Number of the qualifying individual(s) on the return, and file jointly if married, to claim the deduction.

How to enter the Enhanced Deduction for Seniors?

ProSeries will automatically calculate Part V of the Schedule 1-A when the taxpayer and spouse meet the requirements.

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