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 IT-201, the New York Individual Income Tax Return. If you don't live in New York, not to worry, we'll be tackling the other 34 states soon enough.
I'm warning you right now, the IT-201 is a long form and could take you a month of Sundays to complete. And that's a shame, because your time is valuable, and a state tax form doesn't need to be constructed this way. The New York Department of Revenue could cut out an entire section of this form, replace it with one line, and not skip a beat. Look, day in and day out New Yorkers deal with some of the worst traffic in this world. Don't they deserve a break in some way, shape, or form?
Therefore, we're going to give the Form IT-201 a 5 of 10 on our user-friendly meter. It's long, arduous, and repetitive. So let's get to it, before we lose all motivation and start honking our horns.
Begin by filling in your name, address, Social Security number, filing status, and residency status at the top of the form. Some folks tend to miss the school district name and the school district code number at the top of the page. Also be sure to declare whether you itemize in Box B or can be claimed as someone else's dependent in Box C. The rest of this section is straight forward and shouldn't cause you much trouble.
On Line 1 enter any wages, tips, salaries etc. that you earned last year. Let's move through this income section quickly shall we? Taxable interest goes on Line 2, ordinary dividends on Line 3, taxable credits on Line 4, and alimony received on Line 5. If you had a business income or loss, enter that amount on Line 6, capital gains on Line 7, other gains (or losses) on Line 8, and the taxable amount from an IRA distribution on Line 9. If you received a distribution from a pension or annuity, that amount goes on Line 10, rental real estate income on Line 11, farm income on Line 12, and unemployment compensation on Line 13.
On Line 14 record the taxable amount of your Social Security benefits, and on Line 15 the amount of any other income, just be sure to specify the source. Now add Lines 1 through 15 on Line 16. If you had to make any federal adjustments to your income, record it on Line 17. Subtract Line 17 from Line 16 to get your federal adjusted gross income, which goes on Line 18 on Page 1 and Line 19 on Page 2.
Here's the rub. You've already figured this amount when you filed your federal form. So really, there isn't any reason to do it again on a state form. Most states allow you to just record your federal income and make any necessary adjustments. Sadly that's not the case in New York.
Now you get to make additions and subtractions to your federal income. On Line 20 enter any interest income on state and local bonds outside of New York. Line 21 is for public employee retirement contributions, Line 22 for 529 college distributions, and Line 23 is for anything else. Add Lines 19 through 23 on Line 24 to finish the section.
On Line 25 enter any taxable refunds or credits and on Line 26, any pensions of NYS and other local governments. Line 27 if a taxable amount on Social Security benefits, Line 28 for interest income on government bonds, Line 29 is for a pension/annuity exclusion, and Line 30 is for a 529 college savings program deduction.
All other subtractions go on Line 31, just specify what they are on the space provided. Now add Lines 25 through 31 to get your total subtractions, which goes on Line 32. Next subtract Line 32 from Line 24 to get your New York adjusted gross income, which goes on Line 33.
If you're going to use the standard deduction, just know it's $7,500 as a single, $15,000 if you're married. If you're okay with that, record it on Line 34. But if you need to itemize, work through the itemized deduction worksheet at the bottom of this page. When you've decided which is best for you, subtract Line 34 from Line 33 and put the balance on Line 35.
If you have dependent exemptions, look up page 76 of the instruction booklet and enter the amount on Line 36. Now subtract Line 36 from Line 35 to yield your taxable income, which goes on Line 37 of page 2 and Line 38 at the top of page 3.
Look up the tax computation on page 50 and 51 to see your tax goes on Line 39. Line 40 is for a household credit, Line 41 for a resident credit, and Line 42 for other nonrefundable credits, just be sure to attach the necessary paperwork for each. Now add Lines 40 through 42 on Line 43 and subtract Line 43 from Line 39 on Line 44. If other New York State taxes apply, enter them on Line 45 before adding Lines 44 and 45 to get your total taxes, which goes on Line 46.
Lines 47 through 58 will only apply if you live in New York City or Yonkers. Lots of people live there, so we're going to take the time to move through these lines. Look up page 78 of the instruction booklet to get your New York City resident tax, which goes on Line 47. This will be a portion what you declared on Line 38. On Line 48, you may be entitled to a household credit. Subtract Line 48 from Line 47 on Line 49 before continuing with other city taxes on Line 50 and 51. Now add Lines 49 through 51 on Line 52.
Line 53 is for other nonrefundable city credits; just subtract them from Line 52 if any apply. Yonkers residents need to pay special attention to Lines 55 through 57 before finishing the section on Line 58. If you bought stuff out of state (like on the Internet) and didn't pay tax on it, see the instructions on page 81 and record the amount on Line 59. The form specifically says not to leave this line blank, so enter a zero if it doesn't apply.
If you're feeling generous, please donate to a bunch of great causes on Line 60. Remember it's small donations like yours that keep these organizations running. Now add Lines 46, 58, 59, and 60 on Line 61 to yield your tax and contributions, just carry forward this amount onto Line 62 at the top of page 4.
Lines 63 through 71 are slotted for credits, which come in all shapes and sizes. Simply record the amounts on the appropriate lines if any apply to you. On Line 72 record your New York withholdings, on Line 73 your New York City withholdings, and on Line 74 your Yonkers withholdings. In case you didn't know, depending on where you live, you could be taxed twice. On Line 75 record any estimated tax payments before adding Lines 63 through 75 to get your total payments on Line 76.
If Line 76 is more than Line 62, enter the difference of your overpayment on Line 77. Then on Line 78 record the amount of Line 77 you want refunded, just be sure to specify whether you want it by paper check or directly deposited. If you want a portion of your refund to be applied to next year, record that amount on Line 79. But if Line 76 is less than Line 62, enter that difference on Line 80. If you've incurred any tax penalties, record it on Line 81. On Line 82, jot down your banking account numbers for direct deposit and (if necessary) an electronic funds withdrawal.
All that's left is sign, date, state your occupation, record your phone number, and pencil in your email. If you had a tax pro help you, they will do the same. The form tells you to look up the instruction booklet to see where to mail your return. Think of it as another minor inconvenience on the long road to New York tax form hell.
And there you have it, the IT-201 in all its glory. This thing was beastly, and is definitely one of the longest in the nation. One easy fix would be to eliminate the 20 or so lines that make up the federal income and adjustment section. That's extra work residents shouldn't have to do. With traffic, extra taxes, and all the other stresses that go along with city life, taxpayers need to get a little something back. Would putting this form on a diet and slimming it down be such a bad thing?