Monday, April 17, 2006

Tax Day

I knew there was a reason to be home early. Taxes. It would not have been good to ask for an extension (as I thought I might do while continuing to travel in South America.) That would have subjected me to stiff penalties as I had no idea of my tax liabilities. It seems the buy-out of Mondavi and the separation process complicated my finances this past year.

Taxes in previous years were an exercise I could easily finish in less than an hour. Not so this year. For the first time, I was required to file a "Form 1040" versus the simpler "1040A" or "1040EZ" versions. So there, was much to read, many publications to review and interpret. (I stubbornly refuse to have a tax professional prepare my returns. But this year I think I'll go to one to have them check my work!)

Particularly amusing were the instructions for completing Schedule D:

Schedule D Tax Worksheet - Keep for Your Records

Complete this worksheet only if line 18 or line 19 of Schedule D is more than zero. Otherwise, complete the Qualified Dividends and Capital Gain Tax Worksheet on page 38 of the Instructions for Form 1040 to figure your tax.

Exception: Do not use the Qualified Dividends and Capital Gain Tax Worksheet or this worksheet to figure your tax if:

• Line 15 or line 16 of Schedule D is zero or less and you have no qualified dividends on Form 1040, line 9b, or
• Form 1040, line 43, is zero or less.

Instead, see the instructions for Form 1040, line 44.

1. Enter your taxable income from Form 1040, line 43
2. Enter your qualified dividends from Form 1040, line 9b
3. Enter the amount from Form 4952, line 4g
4. Enter the amount from Form 4952, line 4e*
5. Subtract line 4 from line 3. If zero or less, enter -0-
6. Subtract line 5 from line 2. If zero or less, enter -0-
7. Enter the smaller of line 15 or line 16 of Schedule D
8. Enter the smaller of line 3 or line 4
9. Subtract line 8 from line 7. If zero or less, enter -0-
10. Add lines 6 and 9
11. Add lines 18 and 19 of Schedule D
12. Enter the smaller of line 9 or line 11
13. Subtract line 12 from line 10
14. Subtract line 13 from line 1. If zero or less, enter -0-
15. Enter the smaller of: The amount on line 1 or
$29,700 if single or married filing separately;
$59,400 if married filing jointly or qualifying widow(er); or
$39,800 if head of household
16. Enter the smaller of line 14 or line 15
17. Subtract line 10 from line 1. If zero or less, enter -0-
18. Enter the larger of line 16 or line 17
If lines 15 and 16 are the same, skip lines 19 and 20 and go to line 21. Otherwise, go to line 19.
19. Subtract line 16 from line 15
20. Multiply line 19 by 5% (.05)
If lines 1 and 15 are the same, skip lines 21 through 33 and go to line 34. Otherwise, go to line 21.
21. Enter the smaller of line 1 or line 13
22. Enter the amount from line 19 (if line 19 is blank, enter -0-)
24. Multiply line 23 by 15% (.15)
If Schedule D, line 19, is zero or blank, skip lines 25 through 30 and go to line 31. Otherwise, go to line 25.
25. Enter the smaller of line 9 above or Schedule D, line 19
26. Add lines 10 and 18
27. Enter the amount from line 1 above
28. Subtract line 27 from line 26. If zero or less, enter -0-
29. Subtract line 28 from line 25. If zero or less, enter -0-
30. Multiply line 29 by 25% (.25)
If Schedule D, line 18, is zero or blank, skip lines 31 through 33 and go to line 34. Otherwise, go to line 31.
31. Add lines 18, 19, 23, and 29.
32. Subtract line 31 from line 1.
33. Multiply line 32 by 28% (.28)
34. Figure the tax on the amount on line 18. Use the Tax Table or Tax Computation Worksheet, whichever applies
35. Add lines 20, 24, 30, 33, and 34.
36. Figure the tax on the amount on line 1. Use the Tax Table or Tax Computation Worksheet, whichever applies
37. Tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 35 or line 36. Also include this amount on Form 1040, line 44

*If applicable, enter instead the smaller amount you entered on the dotted line next to line 4e of Form 4952.

So simple even a child could fill out this form. It's we adults whose heads are spinning after trying to follow this nonsense.

At Santa Rosa's Main Post Office, employees are out in the street with baskets, collecting returns from drive-bys. I've just dropped mine off and come to A'Roma Roasters for celebratory coffee. (Any excuse will do.)

3 comments:

babycondor said...

I went through the same nonsense this year since I started investing in the stock market in 2005. Like you, I refuse to pay a preparer. The tax laws are Kafka-esque. But don't expect simplification of the tax code to be high on Congress' agenda any time soon.

timtraveler said...

Hot tip:

Invest in "myspace.com"!!!

otto said...

I just had Otto do mine, N/C

Sis Jane