Income Taxes

By now, hope you have your 2019 Federal income tax forms in the mail or applied for an extension. Everyone got an automatic extension from April 15th to July 15th because of the Covid-19 virus.

Since 1913 and the ratification of the 16th Amendment to the United States Constitution, there has been a nation-wide income tax. Form 1040 has grown in size and length from the size of a postcard to the present day two pages. In 1913, everyone was taxed one percent. There are an estimated 800 tax forms today. This year there is the 1040-SR for seniors. How special.

If you sell stock in a company, you will receive a 1099-B, Proceeds from Broker Transactions giving you the information that you will need to fill out the Schedule D Capital Gains and Losses, but not so fast, you will also need to fill out a Form 8949 depending on how the sales were reported.

Moving right along, adding and subtracting, maybe having to use Form 6252, 4684, 6781, and maybe even 8824. Don’t forget your Capital Gain or Loss Carryover Worksheet if needed. As you continue down the page, you may be required to fill out other forms. Then, turn the page, surprise, you are almost finished or so you thought.

Are you required to fill out the Unrecaptured Section 1250 Gain Worksheet or the 28% Rate Gain Worksheet? And then line 20 asks if Line 18 and 19 are 0 (Zero) or blank and if that is true, you have to finish filling out your 1040 page one and then figure your tax not with the Tax Tables, but with Qualified Dividends and Capital Gain Worksheet. And all that if you sell one share or even less than a share of stock.

The average taxpayer spends 12.5 hours compiling their information to prepare or to seek someone to prepare their taxes where it is estimated taxpayers pay billions for that service.

For your tax entertainment, consider that taxes have been charged on closets, salt, drug dealer expenses and legal deductions for cat food bought by a junk yard owner to attract stray cats to keep down rodents, moving expenses including those incurred moving your dog, cat, bird, etc., depreciating ostriches. If you can make money doing it, then there are deductions.

One of the most interesting questions on your 1040 tax returns is “Check this block if you are blind.”