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 TC-40, the Utah Individual Income Tax Return. If you don't live in Utah, not to worry, we'll be tackling the other 34 states soon enough.
At 2 pages and 45 lines, Utah's state tax form is quick and easy. One of the things that helps limit its size is it allows you to use your federal form as the basis for your state return. Seriously, why refigure your adjusted gross income when you already have it on your Federal 1040? Why go through and redo all your deductions?
This is great news and will save residents an enormous amount of time and energy. So we're giving props to the Utah State Tax Commission; they've created a sweet form, one that's earned an 8 of 10 on our user-friendly meter. It doesn't get much higher anywhere in the country.
Start at the top with your name, address, telephone and Social Security numbers. Then you can bang out you filing status in Box 1, your exemptions in Box 2, and a campaign donation in Box 3. I wouldn't blame you if you didn't feel like donating to a political party; just jot down an N on the line if you wish opt out.
On Line 4 enter your federal adjusted gross income, you'll get this number from your Federal 1040, 1040A, or 1040EZ Form. If you have any state specific additions to that income, include those amounts on Line 5. Now you can add Lines 4 and 5 to get your total income, which goes on Line 6.
Record your state tax refund on Line 7 and any subtractions to your income on Line 8. Now you can figure your Utah taxable income by subtracting the total of Lines 7 and 8 from Line 6, the balance of which goes on Line 9. Utah is one of those flat-tax states, so multiply Line 9 by 5% and put the total on Line 10.
Multiply the number of your exemptions by a hefty $2,775 and put the total on Line 11. Enter your federal standard or itemized deduction on Line 12. Now add Lines 11 and 12 on Line 13 to see how much you're going to reduce your taxable income by.
To avoid double counting, you have to record your state income tax as an itemized deduction on your Federal Schedule A on Line 14. Now subtract Line 14 from Line 13 on Line 15. Multiply Line 15 by 6% and put that total on Line 16. Depending on your filing status, enter the appropriate deduction on Line 17, which could be up to $25,440 if you're married filing jointly.
Subtract Line 17 from Line 9 with the balance going on Line 18. Now multiply the amount on Line 18 by 1.3% on Line 19, this is also known as the phase-out amount. Subtract Line 19 from Line 16 on Line 20 to yield your tax credit. Fill in Line 21 if it applies before moving on to your Utah income tax on Line 22. If you have any nonrefundable credits from Form TC-40A, include them on Line 23. Finish the page by subtracting Line 23 from Line 22 on Line 24.
Carry forward the amount from Line 24 at the bottom of page 1 to Line 25 at the top of page 2. If you had to fill out a Form TC-40A, record the amount of your nonrefundable credits on Line 26. Now you can subtract Line 26 from Line 25 on Line 27. If you feel like donating to a bunch of worthy causes, feel free to do so on Line 28.
If you had to fill out an amended return, record your previous refund on Line 29. If you are due a low-income housing credit, that amount goes on Line 30. On Line 31 you'll need to record your use tax for all Internet and out-of-state purchases that you haven't already paid tax on. Go ahead and add Line 27 through 31 on Line 32 to yield your total tax.
Enter your Utah withholdings on Line 33; you'll be able to get this from your W-2, 1099, etc. If you prepaid taxes, enter the amount on Line 34. If pass-through entity withholdings apply (only if you're part of an S-Corporation or the recipient of a trust), enter that amount on Line 35.
Apparently there are lots of minerals in the Utah dirt, so if a withholding tax applies from your production of those minerals, enter the amount on Line 36. If you've previously made payments on an amended return, you'll want to record it on Line 37. On Line 38 you get to record your refundable credits, before adding Lines 33 through 38 to get your total withholdings and credits on Line 39.
If Line 32 is greater than Line 39, enter the difference on Line 40, this is the amount of tax that's due. Does anybody else want to punch sad face in the face? If you've been slapped with penalties or interest, record those amounts online 41. Now add Lines 40 and 41 to yield the amount you have to pay to the state of Utah.
But if Line 39 is greater than Line 32, enter your refund next to the smiley face on Line 43. If you want a portion of your refund to be applied to next year, enter the amount on Line 44. All that's left is to record your direct deposit information, name, date, address, and telephone number at the bottom of the form. If you had a tax pro help you, they will do the same.
The bottom line is: Form TC-40 is well constructed and designed to get the information it needs without causing a boatload of hassle. And when it comes to a state tax form, you can't ask for much more than that. Feel free to give your Utah tax commissioner a big hug next time you see him.