I'm not a tax expert, hope I can explain this adequately. I prepare my
return manually, no comments please, I prefer it. We are retired, so income
is from pensions and social security.
In 2007 return, my wife and I independently calculated the tax based upon
our qualified dividends, using the tax booklet worksheet. Now in preparing
our 2008 return, same calculation, our 2008 tax is lower than 2007, but our
taxable income is about $1000 higher, which is a puzzle.
IMO the qualified dividend worksheet to determine tax is a straight
mathmatical calculation. We have not had any comment from the IRS on our
2007 return, yet.
If I had made a mistake in this calculation, doesn't the IRS computer
detect this math error quickly, and I get a letter in about 3 months after
the return is submitted?
If you were in the 5% tax bracket for qualified dividends in 2007, then
for 2008 you would likely be in the 0% (as in zero) bracket for those
same qualified dividends. That tends to lower your overall tax.
Not necessarily. For example, suppose you didn't file a return at all,
and the IRS eventually sends you a letter proposing the amount of tax
you owe, based on information documents they received from third
parties. Even though they know the amount of qualified dividends you
received, they do not apply the favorable capital gains rate to this
income when calculating your proposed tax.
I aipreciate your independence in doing your own taxes, but there are
so many FREE tax sites that will estimate your tax, actually compute
your tax, prepare your tax return, and even file your tax return.
Certainly there is one that you can at least *check* your independent
research and warn you when new things happen. 2009 will be a bononza
for certain taxpayers who are hip to the Obama tax cuts.
I have never been able to get any of the electronic programs to handle
a fairly complex set of inputs for my son-in-law and daughter
satisfactorily. Salary, two rental properties, teaching music at two
private schools and teaching music out of two dedicated rooms in their
home, plus bank accounts and invertment income and SEPs and IRA's,
charitable contributions, etc. Maybe I'm too picky, but I want
certain expnses to be in certain lines and the software won't do what