Kentucky Form 740 Line by Line Guide
Did you know 9 states do not require residents to pay a personal income tax? Folks that live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, are exempt from this bill. Furthermore, 7 other states simply enforce a flat tax rate. So what's the moral to the story? People who live in these states are able to buy more stuff because they pay less tax.
But for the rest of us, residential income tax is a necessary evil, one that takes a serious bite out of our disposable income. And while the forms are designed to collect the same data, they're all constructed differently. What follows is a breakdown of Form 740, the Kentucky Individual Income Tax Return. If you don't live in Kentucky, not to worry, we'll be tackling the other 34 states soon enough.
Kentucky's unbridled spirit, (epitomized by the logo above the tax year in the upper right corner of this page), isn't matched by the quality of this form. The Form 740 isn't the most difficult out there, but it could be much easier to complete. There are many instances where you will have to restate information before you're able to proceed.
There also isn't a place to record your banks routing and checking numbers so you can get your refund directly deposited. This inconvenience will undoubtedly delay the return of any cash that's owed to you. For this and other reasons, I have to give it a 5 out of 10 on my user-friendly meter.
Begin by filling in your name, address, social security number, and filing status at the very top of the page. Die hard political supporters may feel like giving $2 to the party of their choice, just know it's not mandatory.
On Line 5, enter your adjusted gross income from your federal 1040, 1040A, or 1040EZ form. Unless you and your spouse are filing separately, remember to do all your work in column B. If you have to make any additions your income, include a Schedule M and enter that total on Line 6. Now add Lines 5 and 6 with sum going on Line 7. On Line 8 include any subtractions to your AGI, again you'll need to attach a Schedule M for support. Then subtract Line 8 from Line 7 the balance of which goes on Line 9.
If you itemize, enter that amount on Line 10, but make sure you include a Kentucky Schedule A. If not, enter the standard deduction of $2,240 on Line 10. Next, subtract Line 10 from Line 9 to get your taxable income, which goes on Line 11. Now you can look up the tax table (in the instruction booklet) to see how much tax you should have paid, when you have it put it on Line 12. If you received either a 4972-K or a Schedule RC-R enter those taxable amounts on Line 13. When ready, put the cumulative total of Lines 12 and 13 on Line 14.
On Line 15 enter the amount from page 2 Lines 21A and 21B (I'll break down this page at the end). Then subtract Line 15 from Line 14 with the difference going on Line 16. Next enter any personal credits from page 3 Lines 4a and 4b on Line 17, (again we'll get to this before we're done.) Now you can subtract Line 17 from Line 16 with the difference going on Line 18. Finish off this section by carrying forward Line 18 to Line 19.
If you're family is larger than 4, you aren't eligible for an additional deduction, so check the appropriate box on Line 20. Once you've done that, multiply that number by the family size tax credit and enter that total on Line 21. Now subtract Line 21 from Line 19 and enter the total on Line 22. If any education credits apply, enter that amount on Line 23. Then subtract Line 23 from Line 22 with the balance going on Line 24.
If you have any child or new home tax credits include them on Line 25. Just be sure to subtract both of those lines from Line 24 if they apply. Once that's straightened out, you're left with your income tax liability, which goes on Line 26. Line 27 is a Kentucky use tax, while Line 28 is the cumulative total of Lines 26 and 27. Just be sure to record this number on Line 29 of page 2 as well.
On Line 30a record your Kentucky withholdings and on Line 30b enter any estimated tax payments you've already made for this year. Now add Lines 30a and 30b with the total going on Line 31. If Line 31 is bigger than Line 29, you've overpaid and are due a refund. The form asks you if you want to donate some of your refund to a number of worthy causes before you continue.
When ready, add lines 33 through 36 the sum of which goes on Line 37. Then enter the amount of Line 32 you want credited towards next year. Next subtract Lines 37 and 38 from Line 32 to get your actual refund. Unfortunately, there isn't any place to record your information for direct deposit, so folks will have to wait for their money to be delivered via snail mail. Bummer.
But if Line 29 is larger than Line 31 you still owe the state of Kentucky some money. Just be sure to work through Line 41 (interest and penalties) before determining your final tax liability on Line 43. If you do have to write a check make sure you include your social security number and the phrase KY income tax on said check.
In Section A, Kentucky allows for about 19 different credits which range from a certified rehabilitation credit to a clean coal incentive credit. If any of these apply, write them down on the appropriate Line, add them up, and put the total on Line 21 here and on Line 15 of the main form.
Section B is for personal tax credits, also known as credits for you and your dependents. Just be sure to include their names and social security numbers. When you got the total amount multiply them by a whopping $20 and put that total on Lines 4a and 4b here and line 17 of the main form. As I said it just doesn't pay to have kids in Kentucky.
Section C is called the family size tax credit. Here you'll list the number of qualifying children that are not qualified as dependents in Section B. The amount of this credit varies, so check the booklet to see how much applies to you.
All that's left is for you to sign and date the bottom of the form. If a tax guy or gal helped you with this form, they'll have to do the same. Due to the repetitiveness, the amount you're allowed to claim per exemption/dependent, and the lack of direct deposit, I'm not a fan of this form. Kentucky residents shouldn't be either.
