Double entry and double taxation?


M

ms

My mutual fund sent a 1099-DIV, data in box 1a and 1b are
identical. So Ordinary Dividends are exactly equal to
Qualified Dividends. The mutual fund says there has to be an
entry in box 1a to show where the 1b qualified dividends
were derived.

I previously calculated 1040 tax on Taxable Income, tax was
$7491 including data from box 1a entered in line 5 of
1040/Sched. B, and then in 1040 line 9a. So it directly adds
to taxable income.

I then entered the data from 1b in line 2 of Qualified
Dividends/Capital Gain Worksheet. Completing the worksheet,
Line 19- Tax on all taxable income, comes to $2749.

But it says to "also include this amount on 1040 line 44."
Does this mean- add it to the existing data in line 44?

This is not a computed total, this is a simple addition of
$2749 to the existing $7491 for a new total tax on line 44
of $10240.

This appears to be double entry of the same funds and
resulting double taxation.

When the 1099-DIV goes to the IRS showing an entry in 1a,
software looks on my 1040 in line 9a. If I don't show
anything in 9a, it will show up as an error.

Advice?

ms
 
Last edited by a moderator:
R

Rich Carreiro

ms said:
My mutual fund sent a 1099-DIV, data in box 1a and 1b are
identical. So Ordinary Dividends are exactly equal to
Qualified Dividends. The mutual fund says there has to be an
entry in box 1a to show where the 1b qualified dividends
were derived.

I previously calculated 1040 tax on Taxable Income, tax was
$7491 including data from box 1a entered in line 5 of
1040/Sched. B,
That's where you went wrong. When you have qualified
dividends, you do NOT compute the tax on taxable income.
Instead, you complete 1040 up to but not including the
"tax" line and then you go to the Qualified Dividends
and Capital Gain Worksheet, compute your *total* tax
there, and enter the number you get there into the
1040 "tax" line.
I then entered the data from 1b in line 2 of Qualified
Dividends/Capital Gain Worksheet. Completing the worksheet,
Line 19- Tax on all taxable income, comes to $2749.
Assuming you did the worksheet properly, $2,749 *is*
your tax. Note the line says "tax on *all* taxable income".
But it says to "also include this amount on 1040 line 44."
Does this mean- add it to the existing data in line 44?
No, because if you did the form correctly there is *no*
"existing data" on Form 1040 line 44 at this point.
This is not a computed total, this is a simple addition of
$2749 to the existing $7491 for a new total tax on line 44
of $10240.
No, because the $7,491 shouldn't have been there in
the first place.
This appears to be double entry of the same funds and
resulting double taxation.
It's not.
 
Last edited by a moderator:
M

ms

My mutual fund sent a 1099-DIV, data in box 1a and 1b are
identical. So Ordinary Dividends are exactly equal to
Qualified Dividends. The mutual fund says there has to be an
entry in box 1a to show where the 1b qualified dividends
were derived.

I previously calculated 1040 tax on Taxable Income, tax was
$7491 including data from box 1a entered in line 5 of
1040/Sched. B, and then in 1040 line 9a. So it directly adds
to taxable income.

I then entered the data from 1b in line 2 of Qualified
Dividends/Capital Gain Worksheet. Completing the worksheet,
Line 19- Tax on all taxable income, comes to $2749.

But it says to "also include this amount on 1040 line 44."
Does this mean- add it to the existing data in line 44?

This is not a computed total, this is a simple addition of
$2749 to the existing $7491 for a new total tax on line 44
of $10240.

This appears to be double entry of the same funds and
resulting double taxation.

When the 1099-DIV goes to the IRS showing an entry in 1a,
software looks on my 1040 in line 9a. If I don't show
anything in 9a, it will show up as an error.
Please note: I posted here, then realized with a moderated
ng, you may not post my message with a munged address. So I
then found ustaxes, and posted there. I certainly did not
intend to crosspost.

I believe I was answered there. To summarize: Qualified
dividends go in 9b of 1040 and then to the Qualified
dividend worksheet, the resulting tax from that worksheet is
the *only* tax on line 44 of 1040.

What continues to bother me is Vanguard sends me/IRS a
1099-DIV with the entry in box 1a. If I don't put that in 9a
of 1040, the IRS computer will see that as an error and bill
me.

Advice?

ms
 
Last edited by a moderator:
L

L K Williams

s said:
My mutual fund sent a 1099-DIV, data in box 1a and 1b are
identical. So Ordinary Dividends are exactly equal to
Qualified Dividends. The mutual fund says there has to be an
entry in box 1a to show where the 1b qualified dividends
were derived.

snip

When the 1099-DIV goes to the IRS showing an entry in 1a,
software looks on my 1040 in line 9a. If I don't show
anything in 9a, it will show up as an error.
You enter the total dividends, from box 1a, on line 9a.
Then, you enter the qualified dividends, from box 1b, on
line 9b. You do not add line 9b to other income to arrive
at your adjusted gross income. You may be creating a double
tax situation but that is not what the form calls for.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
 
Last edited by a moderator:
L

L K Williams

s said:
My mutual fund sent a 1099-DIV, data in box 1a and 1b are
identical. So Ordinary Dividends are exactly equal to
Qualified Dividends. The mutual fund says there has to be an
entry in box 1a to show where the 1b qualified dividends
were derived.

snip

When the 1099-DIV goes to the IRS showing an entry in 1a,
software looks on my 1040 in line 9a. If I don't show
anything in 9a, it will show up as an error.
You enter the total dividends, from box 1a, on line 9a.
Then, you enter the qualified dividends, from box 1b, on
line 9b. You do not add line 9b to other income to arrive
at your adjusted gross income. You may be creating a double
tax situation but that is not what the form calls for.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans
 
Last edited by a moderator:
E

Ernie Klein

I believe I was answered there. To summarize: Qualified
dividends go in 9b of 1040 and then to the Qualified
dividend worksheet, the resulting tax from that worksheet is
the *only* tax on line 44 of 1040.
Line 44 is your tax based on your taxable income on line 43,
subject to adjustments (if any) make on the line 44
worksheet.
What continues to bother me is Vanguard sends me/IRS a
1099-DIV with the entry in box 1a. If I don't put that in 9a
of 1040, the IRS computer will see that as an error and bill
me.
Maybe what you fail to understand is that you report both.
Line 1a of the 1099-DIV reflects the total dividends you
received which includes both qualified AND non-qualified
dividends. Line 1b tells you what part of line 1a are
qualified dividends and will be subject to a different tax
rate.

For simplicity--

When you do the line 44 worksheet you subtract the amount of
qualified dividends from your taxable income and eventually
figure the tax on THAT amount which means that you are only
being taxed on the non-qualified dividends or in other
words, you have removed the 1099-DIV line 1b amount from
your income and figured your tax on what is left), that goes
on line 16 of the worksheet.

Then you figure ONLY the tax at the qualified dividend rate
ONLY on the amount of qualified dividends that you had
previously subtracted out and enter those (subject to phase
out limitations).

Eventually you add the two taxes together and that becomes
your total tax. You are not taxed twice for the same
dividends. Your are only taxed at different tax rates for
different portions of the same dividend. Thus, if you have
qualified dividends it can only reduce the amount of your
tax, never increase it.

The line 44 worksheet is confusing so read it carefully. If
you miss a step (or interpret the lines instruction
incorrectly) you will end up with a totally incorrect
result.
 
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R

Rich Carreiro

ms said:
I believe I was answered there. To summarize: Qualified
dividends go in 9b of 1040 and then to the Qualified
dividend worksheet, the resulting tax from that worksheet is
the *only* tax on line 44 of 1040.
That's correct.
What continues to bother me is Vanguard sends me/IRS a
1099-DIV with the entry in box 1a. If I don't put that in 9a
of 1040, the IRS computer will see that as an error and bill
me.
Why on earth does it bother you? 1099-DIV box 1(a)
is *all* dividends, and box 1(b) is the portion of
the 1(a) dividends that are qualified. What's the
problem you have with that?

If you still think you're being double taxed, you need
to follow the qualified dividends and cap gain worksheet
more carefully.

You'll see that it subtracts out qualified divs and
net long-term cap gain from taxable income before
asking you to compute the tax on taxable income.
 
Last edited by a moderator:

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