Publication 17 |
2008 Tax Year |
11.
Social Security and Equivalent Railroad Retirement Benefits
This chapter explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement
benefits. It explains the following topics.
-
How to figure whether your benefits are taxable.
-
How to use the social security benefits worksheet (with examples).
-
How to report your taxable benefits.
-
How to treat repayments that are more than the benefits you received during the year.
Social security benefits include monthly retirement, survivor, and disability benefits. They do not include supplemental security
income (SSI) payments, which are not taxable.
Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would
have been entitled to receive under the social security system. They are commonly called the social security equivalent benefit
(SSEB) portion of tier 1 benefits.
If you received these benefits during 2008, you should have received a Form SSA-1099, Social Security Benefit Statement, or
Form RRB-1099, Payments by the Railroad Retirement Board, (Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S,
Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board, if you are a nonresident alien).
These forms show the amounts received and repaid, and taxes withheld for the year. You may receive more than one of these
forms for the same year. You should add the amounts shown on all forms you receive for the year to determine the “total” amounts received and repaid, and taxes withheld for that year. See the Appendix at the end of Publication 915 for more information.
Note.
When the term “benefits” is used in this chapter, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement
benefits.
What is not covered in this chapter.
This chapter does not cover the tax rules for the following railroad retirement benefits.
For information on these benefits, see Publication 575, Pension and Annuity Income.
This chapter also does not cover the tax rules for foreign social security benefits. These benefits are taxable as
annuities, unless they are exempt from U.S. tax or treated as a U.S. social security benefit under a tax treaty.
Useful Items - You may want to see:
Publication
-
575
Pension and Annuity Income
-
590
Individual Retirement Arrangements (IRAs)
-
915
Social Security and Equivalent Railroad Retirement Benefits
Are Any of Your Benefits Taxable?
To find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of:
-
One-half of your benefits, plus
-
All your other income, including tax-exempt interest.
When making this comparison, do not reduce your other income by any exclusions for:
-
Interest from qualified U.S. savings bonds,
-
Employer-provided adoption benefits,
-
Foreign earned income or foreign housing, or
-
Income earned by bona fide residents of American Samoa or Puerto Rico.
Figuring total income.
To figure the total of one-half of your benefits plus your other income, use Worksheet 11-1 later in this discussion. If the total is more than your base amount, part of your benefits may be taxable.
If you are married and file a joint return for 2008, you and your spouse must combine your incomes and your benefits to figure
whether any of your combined benefits are taxable. Even if your spouse did not receive any benefits, you must add your spouse's
income to yours to figure whether any of your benefits are taxable.
If the only income you received during 2008 was your social security or the SSEB portion of tier 1 railroad retirement benefits,
your benefits generally are not taxable and you probably do not have to file a return. If you have income in addition to your
benefits, you may have to file a return even if none of your benefits are taxable.
Base amount.
Your base amount is:
-
$25,000 if you are single, head of household, or qualifying widow(er),
-
$25,000 if you are married filing separately and lived apart from your spouse for all of 2008,
-
$32,000 if you are married filing jointly, or
-
$-0- if you are married filing separately and lived with your spouse at any time during 2008.
Worksheet 11-1.
You can use Worksheet 11-1 to figure the amount of income to compare with your base amount. This is a quick way to
check whether some of your benefits may be taxable.
Example.
You and your spouse (both over 65) are filing a joint return for 2008 and you both received social security benefits during
the year. In January 2009, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Your spouse received a Form
SSA-1099 showing net benefits of $3,500 in box 5. You also received a taxable pension of $20,000 and interest income of $500.
You did not have any tax-exempt interest income. Your benefits are not taxable for 2008 because your income, as figured in
Worksheet 11-1 on the next page, is not more than your base amount ($32,000) for married filing jointly.
Even though none of your benefits are taxable, you must file a return for 2008 because your taxable gross income ($20,500)
exceeds the minimum filing requirement amount for your filing status.
Who is taxed.
Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right
to receive the benefits. For example, if you and your child receive benefits, but the check for your child is made out in
your name, you must use only your part of the benefits to see whether any benefits are taxable to you. One-half of the part
that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to
your child.
Repayment of benefits.
Any repayment of benefits you made during 2008 must be subtracted from the gross benefits you received in 2008. It
does not matter whether the repayment was for a benefit you received in 2008 or in an earlier year. If you repaid more than
the gross benefits you received in 2008, see Repayments More Than Gross Benefits, later.
Your gross benefits are shown in box 3 of Form SSA-1099 or RRB-1099. Your repayments are shown in box 4. The amount
in box 5 shows your net benefits for 2008 (box 3 minus box 4). Use the amount in box 5 to figure whether any of your benefits
are taxable.
Tax withholding and estimated tax.
You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your
tier 1 railroad retirement benefits. If you choose to do this, you must complete a Form W-4V. You can choose withholding at
7%, 10%, 15%, or 25% of your total benefit payment.
If you do not choose to have income tax withheld, you may have to request additional withholding from other income
or pay estimated tax during the year. For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions
for Form 1040-ES.
How To Report Your Benefits
If part of your benefits are taxable, you must use Form 1040 or Form 1040A. You cannot use Form 1040EZ.
Reporting on Form 1040.
Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable
part on line 20b. If you are married filing separately and you lived apart from your spouse for all of 2008, also enter “ D” to the right of the word “ benefits” on line 20a.
Reporting on Form 1040A.
Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable
part on line 14b. If you are married filing separately and you lived apart from your spouse for all of 2008, also enter “ D” to the right of the word “ benefits” on line 14a.
Benefits not taxable.
If you are filing Form 1040EZ, do not report any benefits on your tax return. If you are filing Form 1040 or Form
1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form
1040A, line 14a. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. If you are married filing separately and you lived
apart from your spouse for all of 2008, also enter “ D” to the right of the word “ benefits” on Form 1040, line 20a, or Form 1040A, line 14a.
If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Generally,
the higher that total amount, the greater the taxable part of your benefits.
Maximum taxable part.
Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either
of the following situations applies to you.
-
The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).
-
You are married filing separately and lived with your spouse at any time during 2008.
Which worksheet to use.
A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or Form 1040A. You can use either
that worksheet or Worksheet 1 in Publication 915, unless any of the following situations applies to you.
-
You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement
plan at work. In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits.
-
Situation (1) does not apply and you take an exclusion for interest from qualified U.S. savings bonds (Form 8815), for adoption
benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa
(Form 4563) or Puerto Rico by bona fide residents. In this situation, you must use Worksheet 1 in Publication 915 to figure
your taxable benefits.
-
You received a lump-sum payment for an earlier year. In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in
Publication 915. See Lump-sum election below.
Lump-sum election.
You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2008 in your 2008 income,
even if the payment includes benefits for an earlier year.
This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay
to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax.
Generally, you use your 2008 income to figure the taxable part of the total benefits received in 2008. However, you
may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier
year. You can elect this method if it lowers your taxable benefits.
Making the election.
If you received a lump-sum benefit payment in 2008 that includes benefits for one or more earlier years, follow the
instructions in Publication 915 under Lump-Sum Election to see whether making the election will lower your taxable benefits. That discussion also explains how to make the election.
Because the earlier year's taxable benefits are included in your 2008 income, no adjustment is made to the earlier year's
return. Do not file an amended return for the earlier year.
The following are a few examples you can use as a guide to figure the taxable part of your benefits.
Example 1.
George White is single and files Form 1040 for 2008. He received the following income in 2008:
George also received social security benefits during 2008. The Form SSA-1099 he received in January 2009 shows $5,980 in box
5. To figure his taxable benefits, George completes the worksheet shown here.
Worksheet 1. Figuring Your Taxable Benefits
1. |
Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a,
or Form 1040A, line 14a
|
$5,980 |
2. |
Enter one-half of line 1 |
2,990 |
3. |
Enter the total of the amounts from: |
|
|
Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21.
|
|
|
Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13
|
28,990 |
4. |
Enter the amount, if any, from Form 1040 or 1040A, line 8b |
-0- |
5. |
Form 1040 filers: Enter the total of any exclusions/adjustments for:
|
|
|
• Qualified U.S. savings bond interest (Form 8815, line 14),
|
|
|
• Adoption benefits (Form 8839, line 30),
|
|
|
• Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and
|
|
|
• Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico
|
|
|
Form 1040A filers: Enter the total of any exclusions for qualified U.S. savings bond interest (Form 8815, line 14) or for adoption benefits
(Form 8839, line 30).
|
-0- |
6. |
Add lines 2, 3, 4, and 5 |
31,980 |
7. |
Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to
line 36.
|
|
|
Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17
|
-0- |
8. |
Is the amount on line 7 less than the amount on line 6? |
|
|
No.
None of your social security benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.
|
|
Yes.Subtract line 7 from line 6
|
31,980 |
9. |
If you are:
-
Married filing jointly, enter $32,000
-
Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2008, enter $25,000
|
25,000 |
|
Note. If you are married filing separately and you lived with your spouse at any time in 2008, skip lines 9 through 16; multiply
line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.
|
|
10. |
Is the amount on line 9 less than the amount on line 8? |
|
|
No.
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing
separately and you lived apart from your spouse for all of 2008, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a.
|
|
|
Yes.Subtract line 9 from line 8
|
6,980 |
11. |
Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately
and you lived apart from your spouse for all of 2008
|
9,000 |
12. |
Subtract line 11 from line 10. If zero or less, enter -0- |
-0- |
13. |
Enter the smaller of line 10 or line 11
|
6,980 |
14. |
Enter one-half of line 13 |
3,490 |
15. |
Enter the smaller of line 2 or line 14
|
2,990 |
16. |
Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- |
-0- |
17. |
Add lines 15 and 16 |
2,990 |
18. |
Multiply line 1 by 85% (.85) |
5,083 |
19. |
Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b
|
$2,990 |
The amount on line 19 of George's worksheet shows that $2,990 of his social security benefits is taxable. On line 20a of his
Form 1040, George enters his net benefits of $5,980. On line 20b, he enters his taxable benefits of $2,990.
Example 2.
Ray and Alice Hopkins file a joint return on Form 1040A for 2008. Ray is retired and received a fully taxable pension of $15,500.
He also received social security benefits, and his Form SSA-1099 for 2008 shows net benefits of $5,600 in box 5. Alice worked
during the year and had wages of $14,000. She made a deductible payment to her IRA account of $1,000. Ray and Alice have two
savings accounts with a total of $250 in taxable interest income. They complete Worksheet 1 and find that none of Ray's social
security benefits are taxable. On line 3 of the worksheet, they enter $29,750 ($15,500 + $14,000 + $250). On Form 1040A, they
enter $5,600 on line 14a and -0- on line 14b.
Worksheet 1. Figuring Your Taxable Benefits
1. |
Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a,
or Form 1040A, line 14a
|
$5,600 |
2. |
Enter one-half of line 1 |
2,800 |
3. |
Enter the total of the amounts from: |
|
|
Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21.
|
|
|
Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13
|
29,750 |
4. |
Enter the amount, if any, from Form 1040 or 1040A, line 8b |
-0- |
5. |
Form 1040 filers: Enter the total of any exclusions/adjustments for:
|
|
|
• Qualified U.S. savings bond interest (Form 8815, line 14),
|
|
|
• Adoption benefits (Form 8839, line 30),
|
|
|
• Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and
|
|
|
• Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico
|
|
|
Form 1040A filers: Enter the total of any exclusion for qualified U.S. savings bond interest (Form 8815, line 14) or for adoption benefits (Form
8839, line 30)
|
-0- |
6. |
Add lines 2, 3, 4, and 5 |
32,550 |
7. |
Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to
line 36.
|
|
|
Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17
|
1,000 |
8. |
Is the amount on line 7 less than the amount on line 6? |
|
|
No.
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.
|
|
Yes.Subtract line 7 from line 6
|
31,550 |
9. |
If you are:
-
Married filing jointly, enter $32,000
-
Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2008, enter $25,000
|
32,000 |
|
Note. If you are married filing separately and you lived with your spouse at any time in 2008, skip lines 9 through 16; multiply
line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.
|
|
10. |
Is the amount on line 9 less than the amount on line 8? |
|
|
No.
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing
separately and you lived apart from your spouse for all of 2008, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a.
|
|
|
Yes.Subtract line 9 from line 8
|
|
11. |
Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately
and you lived apart from your spouse for all of 2008
|
|
12. |
Subtract line 11 from line 10. If zero or less, enter -0- |
|
13. |
Enter the smaller of line 10 or line 11
|
|
14. |
Enter one-half of line 13 |
|
15. |
Enter the smaller of line 2 or line 14
|
|
16. |
Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- |
|
17. |
Add lines 15 and 16 |
|
18. |
Multiply line 1 by 85% (.85) |
|
19. |
Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b
|
|
Example 3.
Joe and Betty Johnson file a joint return on Form 1040 for 2008. Joe is a retired railroad worker and in 2008 received the
social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Joe's Form RRB-1099 shows $10,000
in box 5. Betty is a retired government worker and receives a fully taxable pension of $38,000. They had $2,300 in taxable
interest income plus interest of $200 on a qualified U.S. savings bond. The savings bond interest qualified for the exclusion.
They figure their taxable benefits by completing Worksheet 1. On line 3 of the worksheet, they enter $40,300 ($38,000 + $2,300).
Worksheet 1. Figuring Your Taxable Benefits
1. |
Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Also enter this amount on Form 1040, line 20a,
or Form 1040A, line 14a
|
$10,000 |
2. |
Enter one-half of line 1 |
5,000 |
3. |
Enter the total of the amounts from: |
|
|
Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21.
|
|
|
Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13
|
40,300 |
4. |
Enter the amount, if any, from Form 1040 or 1040A, line 8b |
-0- |
5. |
Form 1040 filers: Enter the total of any exclusions/adjustments for:
|
|
|
• Qualified U.S. savings bond interest (Form 8815, line 14),
|
|
|
• Adoption benefits (Form 8839, line 30),
|
|
|
• Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and
|
|
|
• Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico
|
|
|
Form 1040A filers: Enter the total of any exclusions for qualified U.S. savings bond interest (Form 8815, line 14) or for adoption benefits (Form
8839, line 30)
|
200 |
6. |
Add lines 2, 3, 4, and 5 |
45,500 |
7. |
Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to
line 36.
|
|
|
Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17
|
-0- |
8. |
Is the amount on line 7 less than the amount on line 6? |
|
|
No.
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b.
|
|
Yes.Subtract line 7 from line 6
|
45,500 |
9. |
If you are:
-
Married filing jointly, enter $32,000
-
Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2008, enter $25,000
|
32,000 |
|
Note. If you are married filing separately and you lived with your spouse at any time in 2008, skip lines 9 through 16; multiply
line 8 by 85% (.85) and enter the result on line 17. Then go to line 18.
|
|
10. |
Is the amount on line 9 less than the amount on line 8? |
|
|
No.
None of your benefits are taxable. Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. If you are married filing
separately and you lived apart from your spouse for all of 2008, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a.
|
|
|
Yes.Subtract line 9 from line 8
|
13,500 |
11. |
Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately
and you lived apart from your spouse for all of 2008
|
12,000 |
12. |
Subtract line 11 from line 10. If zero or less, enter -0- |
1,500 |
13. |
Enter the smaller of line 10 or line 11
|
12,000 |
14. |
Enter one-half of line 13 |
6,000 |
15. |
Enter the smaller of line 2 or line 14
|
5,000 |
16. |
Multiply line 12 by 85% (.85). If line 12 is zero, enter -0- |
1,275 |
17. |
Add lines 15 and 16 |
6,275 |
18. |
Multiply line 1 by 85% (.85) |
8,500 |
19. |
Taxable benefits. Enter the smaller of line 17 or line 18. Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b
|
$6,275 |
More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000.
Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b.
Deductions Related to Your Benefits
You may be entitled to deduct certain amounts related to the benefits you receive.
Disability payments.
You may have received disability payments from your employer or an insurance company that you included as income on
your tax return in an earlier year. If you received a lump-sum payment from SSA or RRB, and you had to repay the employer
or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included
in gross income in the earlier year. If the amount you repay is more than $3,000, you may be able to claim a tax credit instead.
Claim the deduction or credit in the same way explained under Repayments More Than Gross Benefits, later.
Legal expenses.
You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection
with the determination, collection, or refund of any tax.
Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction
on Schedule A (Form 1040), line 23.
Repayments More Than Gross Benefits
In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than
the gross benefits (box 3) you received. If this occurred, your net benefits in box 5 will be a negative figure (a figure
in parentheses) and none of your benefits will be taxable. Do not use a worksheet in this case. If you receive more than one
form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year.
If you have any questions about this negative figure, contact your local SSA office or your local RRB field office.
Joint return.
If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but
your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. You do this
to get your net benefits when figuring if your combined benefits are taxable.
Example.
John and Mary file a joint return for 2008. John received Form SSA-1099 showing $3,000 in box 5. Mary also received Form SSA-1099
and the amount in box 5 was ($500). John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits
when figuring if any of their combined benefits are taxable.
Repayment of benefits received in an earlier year.
If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an
itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier
year.
Deduction $3,000 or less.
If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain
miscellaneous itemized deductions. Claim it on Schedule A (Form 1040), line 23.
Deduction more than $3,000.
If this deduction is more than $3,000, you should figure your tax two ways:
-
Figure your tax for 2008 with the itemized deduction included on Schedule A, line 28.
-
Figure your tax for 2008 in the following steps.
-
Figure the tax without the itemized deduction included on Schedule A, line 28.
-
For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits
as if your total benefits for the year were reduced by that part of the negative figure. Then refigure the tax for that year.
-
Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts.
-
Subtract the result in (c) from the result in (a).
Compare the tax figured in methods (1) and (2). Your tax for 2008 is the smaller of the two amounts. If method (1) results
in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. If method (2) results in less tax, claim a credit
for the amount from step 2(c) above on Form 1040, line 68, and enter “ I.R.C. 1341” in the margin to the left of line 68. If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040),
line 28.
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