Schedule 1-A: Tips, Overtime, and Vehicle Loan Interest

Categories: IRS ORL FL
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About Course

This course is a practice-focused, four-module program on preparing Schedule 1-A (Form 1040) for clients claiming the qualified tips, qualified overtime compensation, and qualified passenger vehicle loan interest (QPVLI) deductions created by the One, Big, Beautiful Bill Act (Public Law 119-21). It goes beyond an overview of these new deductions to build the practical skills a preparer needs at the desk: verifying eligibility fact by fact, reconstructing the correct dollar amount from imperfect source documents across both the 2025 transition-relief year and the 2026 first year of separate reporting, and completing Schedule 1-A itself line by line, including the coordination and rounding conventions that differ across its Parts.

This course assumes working knowledge of general individual federal income tax preparation and the basic Schedule 1-A overview already covered in the AFTR annual refresher course; it does not repeat that overview-level material. Course content is grounded in IRC §§224, 225, and 163(h)(4); IRS Notice 2025-69; IRS Notice 2025-57; IRS Fact Sheet FS-2026-13; Treasury Decision 10044 (final regulations under §1.224-1); proposed regulations REG-113515-25 (§§1.163-16 and 1.6050AA-1); and the 2025 Schedule 1-A and its instructions. Where authority remains proposed or sub-regulatory rather than final, the course says so explicitly and states the applicable reliance standard.

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What Will You Learn?

  • Determine whether a client's tips meet the statutory definition of qualified tips under IRC §224(d) and the final regulations at §1.224-1, and correctly apply the 2025 transition documentation methods versus the bright-line reporting rules for tax years 2026-2028 under current law.
  • Determine FLSA overtime-eligible status, reconstruct the premium-only qualified overtime amount from an employee's actual pay, and apply the correct §207(a)/(k)/(j)/(o) computation regime and reporting rule for the applicable tax year.
  • Apply the six-part applicable passenger vehicle test, the original-use and first-lien requirements, and the personal-use and financed-debt-composition rules that determine qualified passenger vehicle loan interest under proposed §1.163-16.
  • Complete Schedule 1-A, Parts I through IV, for a client claiming some or all three deductions, applying the correct MAGI-based phaseout and rounding convention for each Part.
  • Assemble a client documentation file, drawing on the eligibility and substantiation standards for tips, overtime, and vehicle loan interest, sufficient to support every entry made on Schedule 1-A.
  • Correctly state the current reliance status of each area of law covered — final regulation, proposed regulation, or sub-regulatory guidance — and avoid presenting any provisional rule as settled.

Course Content

Module 1 — Qualified Tips: Eligibility and Documentation
This module teaches you to determine whether a client's tips meet the statutory definition of qualified tips under IRC §224(d) and the final regulations at §1.224-1. You will learn the arm's-length/voluntary test, the permitted cash media, the final occupation-eligibility list, the 2025 transition-relief calculation method under Notice 2025-69 versus the 2026+ bright-line standard, and the employee-versus-self-employed documentation distinction. By the end of this module, you will be able to assemble and evaluate the evidentiary documentation needed to defend a qualified-tips deduction under examination.

  • Qualified Tips: Eligibility and Documentation

Module 2 — Qualified Overtime Compensation: FLSA Premium Reconstruction
This module covers determining FLSA overtime-eligible status and reconstructing the premium-only qualified overtime amount required by IRC §225. You will learn to distinguish the FLSA-required one-half premium from voluntary, state-law, or CBA-driven overtime that does not qualify, recognize the special §207(k)/(j)/(o) computation regimes, and apply the correct tax-year-specific reporting rule. By the end of this module, you will be able to apply the SSN and joint-filing requirements of §225(d)-(e) and correctly state the limited authority of the IRS FAQ guidance this area relies on.

Module 3 — Qualified Passenger Vehicle Loan Interest: Eligibility, Vehicle, and Lien Documentation
This module covers the qualified passenger vehicle loan interest (QPVLI) deduction under proposed §1.163-16. You will learn the six-part applicable passenger vehicle test, the final-assembly-in-the-United-States requirement, the original-use and first-lien requirements, and how to allocate interest on a mixed-purpose loan. By the end of this module, you will be able to apply the more-than-50-percent personal-use test and correctly state the reliance status of the proposed regulations.

Module 4 — Schedule 1-A Preparation and File Documentation
This module completes the course by walking through Schedule 1-A, Parts I through IV, line by line for a client claiming some or all three deductions from Modules 1 through 3. You will learn the single-MAGI computation in Part I, the differing rounding conventions across Parts, and how to route Part IV's VIN and interest-allocation table without double-claiming interest already deducted elsewhere. By the end of this module, you will be able to assemble a complete client documentation file supporting every entry on Schedule 1-A.

Final Assessment – Schedule 1-A: Tips, Overtime, and Vehicle Loan Interest
You have completed a comprehensive review of the topics presented throughout this course and are now prepared to demonstrate your understanding of the key concepts. The following final examination assesses your knowledge of the material covered in all four modules. A passing score of 70% is required to successfully complete the course.

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