Do I Have To File Long Form For Tax Credit?

<div class='quotetop'>QUOTE(John6012 @ Oct 12 2007, 03:59 PM) [snapback]524788[/snapback]</div>

Filing the long form has nothing directly to do with having enough deductions. A long form can be filed while taking the standard deduction.

Tom

 

I just got through filing my 2006 taxes that included the Prius credit. I know, April 15 is when you're supposed to file, but you really have until October 15 to send them all the forms. I paid before April 15, and then just filed an extension request so I could figure out the extra forms for the Prius credit. Actually, I also had to figure out how to describe the solar array credit that I earned back in 2002 but still hadn't applied for California.

Rather than using any tax preparation software, I just used the forms directly. I've used accountants and TurboTax in the past, but I find the forms are perfectly adequate. An accountant is useful for advice, and as a consultant for questions that you just can't figure out from the instructions. The tax forms and instructions can all be downloaded from the IRS website. The California forms that I used were also available at the state website. Just google for something like "IRS tax forms". The forms are all PDF files that you can type into and save for future use.

Interesting side note is that I showed my printed PDF forms to an accountant. Even though all the numbers were just calculated by me and filled in, he treated them as if some tax preparation software had calculated them. The laser printing established credibility that hand written numbers would not. It must be right, the computer said so.

The forms that I used were the 1040, schedule B (interest/stock income), 8910 (Alternative Motor Vehicle Credit) and several others that are probably not relevant for you. The instructions for the 8910 provide everything you need to know about the Prius credit. The end result of the 8910 is a number that you put on line 55 of the 1040.

Note that a credit is entirely different than a deduction. Whether you use the standard deduction or itemize is irrelevant to the Prius credit.

Since I'm retired, the problem I had with the credit was that I didn't have enough taxes due to utilize the full credit. The solution was to convert enough standard IRA money into a Roth IRA. That made taxes due on the IRA, and I calculated it as just enough to use up the Prius credit.

Roth is a really good deal if you can use it. You pay taxes on the money when you create the Roth, but thereafter all money earned in the Roth is tax free. If you just move enough to not quite reach the point where you actually owe taxes on it, then you've insulated the money from ever being taxed. One of the rules about a Roth is that you have to create it by the end of the tax year. That means the end of December, NOT April 15. So if you haven't nailed down all the numbers by the end of December, then you don't know exactly how much to convert to a Roth. Never fear, you just overcontribute to the Roth, and then recharacterize (undo) the overshoot when you've got it all figured out (April 15 or whenever you actually file).

Never thought I'd be giving tax advice...

 

<div class='quotetop'>QUOTE(John6012 @ Oct 12 2007, 03:59 PM) [snapback]524788[/snapback]</div>

John, you will need to file the 1040 & two other forms. www.taxact.com provides good, free software.