Okay, this is a kinda hypothetical, but a few of you will run into this sooner or later.
This is fun. Read this if you need a break, but don’t want to stop thinking about taxes entirely.
Married couple, both age 65 or older. Income consists of:
$15400 Taxpayer’s pension
$11602 Taxpayer’s social security
$4830 Spouse’s social security
No federal income tax withheld from any of these sources.
Looking at the chart on page 12 of the instructions for Form 1040, it appears that the couple is not required to file a return.
Taxpayer politely, but firmly, insists that I prepare a return. Either he just doesn’t “get it,” and cannot comprehend the idea that some individuals are simply not required to file a tax return, and that he won’t get in trouble, or…
maybe he wants to be able to provide documentation of his income in the most widely accepted format—a tax return—because he is planning to apply for an auto loan, or refinance his mortgage.
When I do the return, guess what pops up?
Form 1040EZ-T. The tax form that is used to claim the telephone tax refund by…
someone who is not required to file a tax return.
The software I use has an algorithm that forces the use of the simplest tax form that can be used. In other words, the program--
- will not generate Form 1040 if Form 1040A can be used;
- will not generate Form 1040A if Form 1040EZ can be used, and
- will not generate Form 1040EZ if Form 1040EZ-T can be used.
The logic is elegant. It's a hierarchical implementation of a principle called Ockham's Razor. (Okay, never mind.)
In my example, Form 1040A would be required in order to claim a refund of tax withheld from the pension. Last year, even with no tax withheld, the program would still have generated a 1040A to report the pension income. And I would get a warning flag telling me that they may not have to file. But last year, in this example, Form 1040A was the simplest form that could be selected to report information I had plugged into the program. This year, with no tax withheld, the program conludes that the pension doesn't have to be reported since the person doesn't have to file--except for the phone tax refund. So the 1040EZ-T becomes the simplest form available.
I’ll bet a lot of tax programs produce the same result.
The program literally will not generate a regular tax form.
Yes, I found a way to work around it. Selecting Form 8913, to claim actual phone tax paid, is one solution. But that involves fudging numbers, because no one really has all those phone bills. And if I plug in numbers for actual excise tax paid that produce an outcome that is equal to or less than the standard amount, the program kills the 8913 in favor of the standard amount, and reverts back to 1040EZ-T!
I can tell the program that they don’t qualify for the phone tax credit, and that will eliminate the whole problem, too. Then the program generates a 1040A, just like last year, reporting the pension income, with a warning message that they may not be required to file. But then they get cheated out of the phone tax refund.
This isn’t just a fantasy. This may happen to some college students who made only $4100 and had no tax withheld. The tax pro will prepare a Form 1040EZ-T ‘cause that’s what the program generated, and they’ll get the phone tax refund.
And the tax pro will get a phone call when the guy pulls out his “tax return” to try to do his financial aid application.
I can hear the conversation already:
What kinda tax form is this? Where’s my adjusted gross income?
Gonna drive the financial aid administrators nuts, too, when they request a copy of the student’s tax return…
I think it’s a hoot.
Anyone else care to try this in their program?
Burton M. Koss
This is fun. Read this if you need a break, but don’t want to stop thinking about taxes entirely.
Married couple, both age 65 or older. Income consists of:
$15400 Taxpayer’s pension
$11602 Taxpayer’s social security
$4830 Spouse’s social security
No federal income tax withheld from any of these sources.
Looking at the chart on page 12 of the instructions for Form 1040, it appears that the couple is not required to file a return.
Taxpayer politely, but firmly, insists that I prepare a return. Either he just doesn’t “get it,” and cannot comprehend the idea that some individuals are simply not required to file a tax return, and that he won’t get in trouble, or…
maybe he wants to be able to provide documentation of his income in the most widely accepted format—a tax return—because he is planning to apply for an auto loan, or refinance his mortgage.
When I do the return, guess what pops up?
Form 1040EZ-T. The tax form that is used to claim the telephone tax refund by…
someone who is not required to file a tax return.
The software I use has an algorithm that forces the use of the simplest tax form that can be used. In other words, the program--
- will not generate Form 1040 if Form 1040A can be used;
- will not generate Form 1040A if Form 1040EZ can be used, and
- will not generate Form 1040EZ if Form 1040EZ-T can be used.
The logic is elegant. It's a hierarchical implementation of a principle called Ockham's Razor. (Okay, never mind.)
In my example, Form 1040A would be required in order to claim a refund of tax withheld from the pension. Last year, even with no tax withheld, the program would still have generated a 1040A to report the pension income. And I would get a warning flag telling me that they may not have to file. But last year, in this example, Form 1040A was the simplest form that could be selected to report information I had plugged into the program. This year, with no tax withheld, the program conludes that the pension doesn't have to be reported since the person doesn't have to file--except for the phone tax refund. So the 1040EZ-T becomes the simplest form available.
I’ll bet a lot of tax programs produce the same result.
The program literally will not generate a regular tax form.
Yes, I found a way to work around it. Selecting Form 8913, to claim actual phone tax paid, is one solution. But that involves fudging numbers, because no one really has all those phone bills. And if I plug in numbers for actual excise tax paid that produce an outcome that is equal to or less than the standard amount, the program kills the 8913 in favor of the standard amount, and reverts back to 1040EZ-T!
I can tell the program that they don’t qualify for the phone tax credit, and that will eliminate the whole problem, too. Then the program generates a 1040A, just like last year, reporting the pension income, with a warning message that they may not be required to file. But then they get cheated out of the phone tax refund.
This isn’t just a fantasy. This may happen to some college students who made only $4100 and had no tax withheld. The tax pro will prepare a Form 1040EZ-T ‘cause that’s what the program generated, and they’ll get the phone tax refund.
And the tax pro will get a phone call when the guy pulls out his “tax return” to try to do his financial aid application.
I can hear the conversation already:
What kinda tax form is this? Where’s my adjusted gross income?
Gonna drive the financial aid administrators nuts, too, when they request a copy of the student’s tax return…
I think it’s a hoot.
Anyone else care to try this in their program?
Burton M. Koss
Comment