IRS Schedule J Form 1040

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IRS Schedule J Form 1040

In most cases, you have roughly the same income every year. You can get a promotion or change jobs, but in general, the average is stable from period to period. This is true for most Americans, but not all.

There is a significant group of taxpayers whose income depends on many factors beyond their control. These are fishermen and farmers. Thanks to these people, we have fresh and tasty products on our table, but they cannot always count on the same taxes.

To make the taxation process fairer, Schedule J was introduced for these groups. After all, one year can turn out to be very meager for harvest or fishing, and the next one can turn out to be unprecedentedly successful. Higher profits are subject to more taxes, which is undoubtedly very annoying if you lost in the previous year or years. Therefore, this document is used to calculate the average income for the previous three tax years.

When Should This Document Be Completed?

It is worth mentioning that you should not use this document if, based on its data, you will have to pay a larger amount of tax than without this document. Its use must be reasonable. If you cannot figure out the issue on your own, we strongly recommend that you seek the advice of a specialist. They will help you not only to determine the filling but also to enter all the data correctly. You can also use our website and the form-building software located on it.

What Kind of Farming Business Can Qualify for Income Averaging?

It could be a growing and harvesting company. It could also be a farmland lease company, but only if payments are based on a percentage of the profit.

Farmers do not include businesses:

  • on the purchase or resale of crops not grown independently;
  • to collect someone else’s harvest.

What Fishing Business Can Qualify for Income Averaging?

You must either be involved in fishing, marine plants, shellfish, or have a business whose profit depends on the share of the catch. These may include:

  • crews of fishing vessels;
  • renting out the vessel.

The main argument is that your profit should depend on the level of catches of fish and other seafood and not be fixed.

Please note: To use this document, you did not have to do the same thing in previous years. You could arrange it even if you were doing some other business in other spheres.

Other IRS Forms for Individuals

There might be some other schedules to IRS forms you need to get familiar with before you file your tax return.

How to Fill Out the Form

Filling out the document can seem complicated and confusing to you. This is really not the easiest document, and you cannot complete it without preparing.

First, you need to collect copies of your reports from the past three years, as you will have to transfer information from them.

Identify yourself

As with most documents, you need to start by writing your name and number of Social Security.

step 1 identify yourself filling out irs schedule j form 1040

Transfer the value

Just put the number from the specified documents in paragraph 1.

step 2 transfer the value filling out irs schedule j form 1040

Enter the value of your profit

Carefully read the instructions included with this document before filling it out.

If you are involved in several businesses (which are discussed in the document), then you need to add their indicators to get only one number.

This paragraph also says that you should not enter an indicator more than was indicated in paragraph 1.

step 3 enter the value of your profit filling out irs schedule j form 1040

Perform the calculation

Just subtract one metric from the other.

step 4 perform the calculation filling out irs schedule j form 1040

Enter indicators

To complete items 4 and 5, you will have to carefully study the instructions. Their filling depends on what documents you have already submitted and the income tax for which year you are using. If the instructions seem too confusing to you, it is best to ask your tax professional for clarification.

step 5 enter indicators filling out irs schedule j form 1040

Perform calculations

Use either a calculator or a form-filling program. In the second case, you do not have to count yourself, and the program will perform all the necessary operations.

step 6 perform calculations filling out irs schedule j form 1040

Figure the tax

If you got zero in the previous paragraph, then put the same thing here.

If you indicated a positive number, then use the tables from the documents and indicate the tax rate according to your situation.

step 7 figure the tax filling out irs schedule j form 1040

Enter indicators

You will have to study the instructions carefully again to enter the indicators that apply to you and use the additional Taxable income table.

step 8 enter indicators filling out irs schedule j form 1040


This form is a repetition of the same actions. Likewise, in the next two points, you need to perform simple mathematical calculations again.

step 9 calculate filling out irs schedule j form 1040

Do the same with points 12-15

You need to review the instructions again and apply them to your situation. Fill in points 12 and 13, and then do the calculations. Only the year to which the indicators relate changes.

step 10 do the same with points 12 15 filling out irs schedule j form 1040

Use 2019 tax rates

If in the previous paragraph you got zero or negative indicator, then put zero here again. If not, use the table from the instructions to enter the required metric.

In step 17, add the named lines.

step 11 use 2019 tax rates filling out irs schedule j form 1040

Transfer the indicator

Just write in this paragraph the number that you got in the previous paragraph.

step 12 transfer the indicator filling out irs schedule j form 1040

Transfer the numbers

Transfer all indicators according to the instructions in paragraphs 19 to 21. Be careful.

step 13 transfer the numbers filling out irs schedule j form 1040

Get the required number

First, add up the numbers from the previous three points, and then subtract the number from point 18.

Do not forget that you will also need to transfer the obtained result to other documents for filing with the tax office.

step 14 get the required number filling out irs schedule j form 1040

As you can see, completing this document requires special training and knowledge, and it will be difficult for an unprepared person to cope on their own. But using it correctly, you can save a lot of money. Therefore, we advise you to either pay special attention to studying all the instructions or use the help of professionals.