Double entry and Double Taxation

Discussion in 'US Taxes' started by ms, Mar 13, 2007.

  1. ms

    ms Guest

    My mutual fund sent a 1099-DIV, data in box 1a and 1b are identical.
    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

    PS I had posted to a moderated ng with the same question but since my
    address is munged, I doubt the moderator will post it, just in case,
    there is no intent to crosspost, I just need an answer soon.
     
    ms, Mar 13, 2007
    #1
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  2. ms

    Phil Marti Guest

    This is correct.
    When you have qualified dividends you don't do whatever it is you did. When
    you get to line 44 of the 1040 you go to the worksheet to compute your tax.
    See the instructions for line 44.
    As noted before, there is no existing data in line 44. Line 19 of the
    worksheet is your tax that goes on line 44 of the 1040.
     
    Phil Marti, Mar 14, 2007
    #2
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  3. ms

    ms Guest

    Thanks for the reply.

    Your reply is IMO the right way to handle the data.

    But the standard data on the back of the 1099-DIV, Vanguard advice, and Pub
    564 all say the same thing, if you have 1a data, go to line 5 of
    1040/Sched. B, and if you have 1b data, go to the Qualified
    Dividends/Capital Gain Worksheet.

    That double entry results in a higher tax, of course if I pay too much tax,
    I never hear about that from the IRS.

    Comment?

    ms
     
    ms, Mar 14, 2007
    #3
  4. ms

    Phil Marti Guest

    I can't speak to the Vanguard verbiage, but everything I find in Pub 564
    tells you, when Schedule D is not required, to use the worksheet TO FIGURE
    YOUR TAX. I don't see anything that tells you to compute tax from the tax
    tables, then go to the worksheet. And the 1040 instructions for line 44
    explicitly tell you to compute your tax on the worksheet.
    You don't get double taxed if you do the calculations right.
     
    Phil Marti, Mar 14, 2007
    #4
  5. ms

    ms Guest

    Sorry, I had not included that I have sale proceeds that go on Sched D,
    so it is required. That of course goes on line 13/1040, adds to taxable
    income, but then I would still go to the worksheet.

    I don't see anything that tells you to compute
    Do you agree with my comment above?

    Thanks again,

    ms
     
    ms, Mar 14, 2007
    #5
  6. ms

    Phil Marti Guest

    I don't know which comment you mean. If it's the one about Schedule D, yes.
    If it's the one about double taxation, no.
     
    Phil Marti, Mar 14, 2007
    #6
  7. ms

    ms Guest

    Thanks for the help,

    ms
     
    ms, Mar 14, 2007
    #7
  8. ms

    Jim Kingdon Guest

    You don't get double taxed if you do the calculations right.

    Right.

    If you are using the worksheet on page 38, the last line (line 19) is
    "enter the smaller of [what your tax is based on all this dividend
    stuff] or [what your tax would be if there were no special rate for
    dividends]". If you are using the worksheet on page D-10, the upshot
    is the same.

    In the normal case, the first amount will be a bit smaller (but not a
    lot smaller, unless you have a *lot* of qualified dividend income)
    than the second amount.
     
    Jim Kingdon, Mar 15, 2007
    #8
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