In misc.taxes.moderated, gypman wrote:

- quote -

Are these Qualified Dividends? And if so, did you enter the
dividend amount onto the 1099-DIV at Box 1b?

At least in some cases, I think that qualified dividends
cause a 5% or 15% calculation after a tax table amount, and
so would not have the granularity of the table.

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Lanny Williams wrote:
- quote -

I normally don't read my own posts but I happened to pick this
one up and discovered that the body of my reply got lost
somewhere. This is what the post should have said:

That's because of the way the tax tables are constructed. If
you will study the tables, you will see that they are based on
$50 increments in income. You can also prove that the tax for
each step is computed on the mid-point of the step. So, if
the $10 put into the next increment in the tax table, it is as
though you had reported $50 more income. Either way, the
result is the same.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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"gypman" <ggreen1[at]san.rr.com> wrote:

- quote -

The rate shown is an overall rate not the rate for an
individual item such as the 10 dividend. The amount also
probably fliped you into a different bracket.

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gypman wrote:

- quote -

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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ggreen1[at]san.rr.com (gypman) wrote:

- quote -

That's exactly what happens, if you're unlucky enough to be
on the bubble, as the brackets change.

For example, if you're single and your AGI is $35,000, the
standard deducton ($4850) plus the personal exemption
($3100) would bring your net taxable income down to $27,050.
Assuming the actual number was $27,045, the "Tax-Table" tax
would be $3696. But, if you add $10 to the AGI, the number
would rise to $27,055 and the "Tax-Table" tax would increase
to $3704.

That's the reason for your "80%" rate on the $10 dividend.
Of course, the same kind of thing can apply in reverse -- by
"finding" an extra $10 deduction on a itemization or
adjustment.

That's the trouble with "brackets"; convenience comes at a
price.

Bill

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"gypman" <ggreen1[at]san.rr.com> wrote:

- quote -

You have to remember that the number at the bottom of the
page is meaningless until the return is complete. The
additional $10 put you into the next box on the tax table.
You'll find a similar bump at every $50 multiple on the tax
table.

--
Phil Marti
Clarksburg, MD

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Turbo Tax shows the amount you owe, or refund at the bottom
of the page. I was showing a small refund amount, when I
entered a dividend of $10. The refund amount was reduced
by $8. My AGI at the time was about 35K. How can it come
up with and 80% !!!!! tax rate on that $10 dividend?

george in sunny san diego

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