| Form 1040 - U. S. Individual Income Tax Return 2006, Page 1 written by Grady Campbell (I hope you're ready for this!) April 15 (16 this year) has arrived. It is now time to file our reports to Federal and State governing bodies and pay the balance of what we might owe them for income we received the past year, plus numerous other taxes, fees, levies, penalties, etc. Fortunately, we may be able take several credits to reduce the balance. There are many different requirements for many diverse taxpayers; consequently, this treatise(a formal, systematic written analysis of a subject) does not apply to everyone in the same way or to the same extent. It applies to this taxpayer's situation only, with a few side comments. Because my spouse and I are retired seniors, with no paying jobs and simple income sources, our tax form should be simple to fill out. At the top of page 1 of Form 1040 we enter our names, address, and social security numbers. If we have forgotten any of this data we can find them on the previous year's return. Next comes a political pitch -$3.00 from each of us for the Presidential Election Campaign. Which Country's Presidential campaign is not stated. We assume that it means the United States of America. Whatever, it is irrelevant, as we are not designating any monies to it. (Maybe I could campaign for the Office, and get some of the money myself; not a chance.) Filing Status. There is a Head of Household option--being a married man, I can forget it. We choose "Filing Jointly." Exemptions - do not be misled by the word, being legal citizens we are not exempt. It means only that we might get some credit against the income we report; how much, we will have to wait until we get to page 2 to find out. For now, we check 6a and 6b and skip line 6c where we would list dependents, their social security numbers and relationships to us. We have none, so we ignore the line. Thus we add 1 to 1, enter 2 in the block to the right and re-enter it on line 6d. Now to report our income--but which income? Total Income, line 22 (although it is really not the total, as line 8b income is not included, nor is some or all of social security payments being refunded.) Adjusted Gross Income, line 37. We can wonder why "Total" becomes "Gross." MAGI (Modified Gross Income), noted on page 33 of our booklet. Taxable Income, line 43 on Form 1040. Several lines in the "Income" section do not apply to us --This is a break, because we do not have to file several of the possible attachments. For many of the income items there are Schedules to be attached, starting with Schedule B on line 9a. Do not wonder why the first Schedule to be listed is not Schedule A - You will find Schedule A on page 2. " The first will be last," as in Matthew 20, verse 16. We go to line 9b, "Qualified Dividends." Beware of the word "Qualified," often it means trouble. If one has trouble, there are three options - Ignore the word, assume all dividends are qualified, or go through the exercise of determining what amount to put here. Instructions for determining the correct amount are provided. Be careful, there are exceptions: "Some dividends are not qualified. These include... dividends you received on any share of stock you held for less than 61 days during the 121-day period that began 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock but not the day you acquired it...Also, when counting the number of days you held the stock, you cannot count certain days during which your risk was diminished. See Pub. 550 for more details....Dividends attributable to periods totaling more than 366 days that you received on any share of preferred stock held for less than 91 days during the 181-day period that began 90 days before the ex-dividend date.....Oh how our DAYS are numbered! Capital Gains are a subject unto themselves. In olden days the tax consequences were simple to compute. One deducted the excluded portion of long term gains and entered only the remainder on page 1. Now one enters all the gains, does some calculating and gets back the capital gain exclusion later. The present method is more complicated, but it sometimes provides more tax for the Government; so expect to live with it. Farm Income - Schedule F: We do not have to file this Schedule, for which we are thankful. An acquaintance received slightly over $100.00 for some farm benefits she knows nothing about. As a consequence, the booklet she received for 2006 weighs twelve (12) ounces--3/4 of a pound. It consists of 172 numbered pages, several Forms, and a few pictures of missing people. Wonder what missing persons have to do with Income Tax! It may be for a worthy cause, but what does it have to do with tax forms already confusing and complicated. The next problem is determining how much of the refund of social security payments we made while working must be reported and tax paid thereon.. It is of interest only to seniors and somewhat difficult to figure, and so discouraging we bypass it for now. Finally, we come to the last income line -- other income. Here is where one reports that Lottery prize money he (or she) got, just for gambling. Other possible income includes, but are not all inclusive... ESA, QTP, HSA, Archer MSA, etc. Not enough space? Attach a Statement. So we come to the "Total Income" amount, line 22. Then come the adjustments from Total Income to Adjusted Gross Income. Thirteen (13) lines are provided plus a dotted line on which several deductions, described on page 34 of our booklet, may be entered. Enter these, add all 14 lines and subtract the sum from line 22. There you have it, your Adjusted Gross Income. Simple, but wait until you see page 2 of Form 1040, wherein there are other taxes, some credits, and several ways to pay up -- Plus a final line for Estimated Tax Penalty. Too much time required to finish the Return by April 16th? Do as we are doing, send a few hundred dollars to tide the Government over for a while, and apply for an extension of time for filing. I think you can get six months more time. In our case we will not need the entire six months. I believe we can get our Income Tax Return completed in five months if we devote all our time to it, maybe in four months if we work at it on Sundays. Caveat: From an 87 year old codger with no guarantee as to accuracy. Grady Campbell |
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