Double entry and Double Taxation


M

ms

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.
 
P

Phil Marti

ms said:
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.
This is correct.
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.
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.
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?
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.
 
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M

ms

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.
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
 
P

Phil Marti

ms said:
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.
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.
That double entry results in a higher tax, of course if I pay too much
tax,
I never hear about that from the IRS.
You don't get double taxed if you do the calculations right.
 
M

ms

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.
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
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.
Do you agree with my comment above?

Thanks again,

ms
 
P

Phil Marti

ms said:
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.
Correct.

Do you agree with my comment above?
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.
 
M

ms

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.
Thanks for the help,

ms
 
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J

Jim Kingdon

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.
 

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