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Tax Calculation from Qualified Dividends

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?

ms

Reply to
ms
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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.

Reply to
Arthur Kamlet

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.

-Mark Bole

Reply to
Mark Bole

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.

ed

Reply to
ed

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 I want.

Bob Hofmann.

Reply to
hrhofmann

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