Schedule A or Standard Deduction


Q

quickcur

I filed tax return extensions in April for both my Fed Tax
Return and California Tax Return. I paid about $9000 for
California Tax at that time. Now I am working on filing the
return and found out that I need to pay about $11000 for
California Tax.

In this case, for 1040, should I use the Standard Deduction or
Itermized deduction? In Schedue A of 1040, for the state tax item,
should I put $9000, or $11000?

Thank you very much.

qq
 
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D

Dick Adams

I filed tax return extensions in April for both my Fed Tax
Return and California Tax Return. I paid about $9000 for
California Tax at that time. Now I am working on filing the
return and found out that I need to pay about $11000 for
California Tax.

In this case, for 1040, should I use the Standard Deduction or
Itermized deduction?
Maybe I don't understand your question, but I would think that you
would use whichever gave you the best tax result (greater amount of
deductions). Should be a no-brainer.
In Schedue A of 1040, for the state tax item,
should I put $9000, or $11000?
You can only claim the actual amount of state tax or
withholding that you paid in 2005, regardless of your state
tax liability.
 
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N

Nan, EA in LA

If I understand you correctly - neither - since all the
payments FOR 2005 were paid in 2006. Schedule A is purely
calendar basis. Not accrual. You deduct on Schedule A only
those state taxes PAID IN 2005, no matter what year they
were for.

We run into problems with clients who pay their 4 estimates
according to the date on the vouchers, and don't understand
why we use what they paid to California in January 2005 FOR
THE FOURTH PAYMENT FOR 2004, and don't use the 4th payment
for 2005 made in January 2006.

Withholding, on the other hand, is always paid within the
calendar year.

Nan, EA in LA
 
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B

Bill Brown

I filed tax return extensions in April for both my Fed Tax
Return and California Tax Return. I paid about $9000 for
California Tax at that time. Now I am working on filing the
return and found out that I need to pay about $11000 for
California Tax.

In this case, for 1040, should I use the Standard Deduction or
Itermized deduction? In Schedue A of 1040, for the state tax item,
should I put $9000, or $11000?
Neither. California income taxes paid in 2006 are deducted
on your federal 2006 return, not your 2005.

When you finally file your 2005 federal return you can
deduct state income taxes paid in 2005 if your 2005 itemized
deductions exceed your standard deduction.
 
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B

Bob Sandler

I filed tax return extensions in April for both my Fed Tax
Return and California Tax Return. I paid about $9000 for
California Tax at that time. Now I am working on filing the
return and found out that I need to pay about $11000 for
California Tax.

In this case, for 1040, should I use the Standard Deduction or
Itermized deduction? In Schedue A of 1040, for the state tax item,
should I put $9000, or $11000?
Neither. You don't put any of that California tax on your
federal return because you are filing your federal return
for 2005, but you paid the California tax in 2006. You will
be able to deduct it on Schedule A of your federal return
for 2006, which you will file in 2007. It doesn't matter
that the California tax was FOR 2005. You take the deduction
in the year that you PAID it, not the year it is FOR.

The way you decide whether to use the standard deduction or
itemized deductions is to see which is higher. If the total
itemized deductions on the last line of Schedule A are
higher than your standard deduction, then take the itemized
deductions. If the itemized deductions are less than the
standard deduction, then take the standard deduction. (There
are a few unusual situations where the rules require that
you itemize, or require that you take the standard
deduction. One such situation occurs if your filing status
is married filing separately.)

Bob Sandler
 
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B

Barry Margolin

quickcur@yahoo.com said:
I filed tax return extensions in April for both my Fed Tax
Return and California Tax Return. I paid about $9000 for
California Tax at that time. Now I am working on filing the
return and found out that I need to pay about $11000 for
California Tax.

In this case, for 1040, should I use the Standard Deduction or
For most people, it's best to use whichever deduction is
larger. There was a thread sometime last year discussing
some exceptional cases.
Itermized deduction? In Schedue A of 1040, for the state tax item,
should I put $9000, or $11000?
When you're filling in your federal tax return for 2005, you
deduct the amount of state tax you paid IN 2005, not the
amount you paid FOR 2005. That would be the amount you had
withheld last year plus the amount you sent in last year
with your 2004 state tax return. If you find that you have
to pay more now, it will be deducted on your 2006 return,
which you'll fill out next year.
 
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B

Bob Sandler

We run into problems with clients who pay their 4 estimates
according to the date on the vouchers, and don't understand
why we use what they paid to California in January 2005 FOR
THE FOURTH PAYMENT FOR 2004, and don't use the 4th payment
for 2005 made in January 2006.
One preparer told me that she tells all her clients to pay the
4th installment in December, to avoid having to try to explain
this.

Bob Sandler
 
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A

Arthur Kamlet

We run into problems with clients who pay their 4 estimates
One preparer told me that she tells all her clients to pay the
4th installment in December, to avoid having to try to explain
this.

Bob Sandler
UltraTax includes a 1040ES package and allows a check
the box option of printing a December date on the 4th
voucher.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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D

D. Stussy

Nan said:
If I understand you correctly - neither - since all the
payments FOR 2005 were paid in 2006. Schedule A is purely
calendar basis. Not accrual. You deduct on Schedule A only
those state taxes PAID IN 2005, no matter what year they
were for.
As to the accounting method used on schedule A, I must
disagree. It is whatever method the taxpayer has chosen
within the meaning of IRC 446. Although 446(d) allows a
taxpayer to have a differing method for each trade or
business from each other and/or his MAIN METHOD, there is
absolutely nothing in the IRC itself that mandates itemized
deductions as a whole to be cash basis only. I shall grant
that there are certain itemized deductions that seem as if
they are "cash basis" (e.g. contributions - requiring a
completed gift), but there are others that have no such
requirement (e.g. taxes, especially real estate property
tax).
We run into problems with clients who pay their 4 estimates
according to the date on the vouchers, and don't understand
why we use what they paid to California in January 2005 FOR
THE FOURTH PAYMENT FOR 2004, and don't use the 4th payment
for 2005 made in January 2006.

Withholding, on the other hand, is always paid within the
calendar year.
True only because all your individual clients are cash basis
for their non-business affairs (as is 99% of the population,
but there are a few who are not).
 
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