 Income tax 2022-2023, tax line 16. Let's do some wealth preservation with some tax preparation. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need then can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Most of this information comes from the form 1040 Instructions Tax Year 2022. You can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused down here on tax before credits and other taxes. Now remember the first half of the income tax formula is in essence an income statement although a strange one where we have income minus the adjustments to income which you can think of as the above the line deductions getting us to the subtotal of adjusted gross income minus the greater of the standard or itemized deductions to get us to the taxable income which is similar to net income in a normal income statement structure. We're going to take that net income as you would expect in an income tax system and apply the tax rates to it. However, that's more complicated than you would think at first because it's not a flat tax that we will be using. We have a progressive tax system which means that we might have multiple taxes tax rates that are applied to the same income level. So we talked a little bit about a progressive tax system versus a flat tax system and prior presentations but just note that it can get somewhat complicated to try to figure out what the actual tax is without the use of you can use tables for example to kind of figure out the tax and of course we can use software to help us to figure out the tax as well and also realize that once we figure the tax we're not done there that's not it because we also have the credits that we have to deal with down here the credits that are going to be the non refundable credits that we'll deal with. We also have other taxes we might have to deal with such as the self-employment tax and then we could have the refundable credits that we have to deal with as well as the payments that we have already made through withholdings or estimated tax payments to get down to the bottom line. Alright so that said we're moving on to the tax calculation line 16 this is the second page of the form 1040 we're focused then on this tax calculation we often rely heavily on tax software to help us with that tax calculation because we'll be using at minimum that progressive tax structure to do the calculation plus we might have certain items of income that are being taxed at other in other formats such as qualified dividends might have a more favorable rate as opposed to ordinary income rates capital gains for example might be taxed at more favorable rates than the ordinary income rates so the actual tax calculation on the net income that we got to can get quite complicated. Alright line 16 tax so include in the total on the entry space on line 16 all the following taxes that apply tax on your taxable income figure the tax using one of the methods described later tax from form 8184 relating to the election to report child's interest or dividends check the appropriate box tax from form 4972 relating to lump some distributions check the appropriate box tax with respect to a section 962 election election made by a domestic shareholder of a controlled foreign corporation to be taxed at corporate rates reduced by the amount of any foreign tax credits claimed on form 1118 C section 962 for details check box 3 and enter the amount and 962 in the space next to the box that's a more unusual situation on that one so recapture of an election credit you may owe this tax if you claim an education credit in an earlier year and either tax free educational assistance or a refund of qualified expenses was received in 2022 for the student so once again these are somewhat more unusual situation C form 8863 for more details obviously of tax work and help us with some of these situations as well so any tax from form 8621 line 16e relating to a section 1291 fund check box 3 and enter the amount of the tax and 1291 tax in the space next to the box tax from form 8978 line 14 relating to partners audit liability under section 6226 check box 3 and enter the amount of the liability and quote form 8978 in the space next to the box net tax liability deferred under section 965 I so if you had a net 965 inclusion and made an election to defer your net 965 tax liability under section 965 I check box 3 and enter as a march as a negative number so triggering event under section 965 I if you had a triggering event triggering event under section 965 I during the year and did not enter your transfer agreement check box 3 and enter the amount of the triggered deferred net 965 tax liability and enter quote 965 I NC end quote on the line next to that box okay so do you want the IRS to figure the tax on your taxable income for you if you can say yes C chapter 13 of publication 17 for details including who is eligible and what to do if you have paid too much we will send you a refund if you don't pay enough we will send you a bill no use one of the following methods to figure your tax now usually you're gonna say no these days because hopefully you got tax software to help you to be calculating the tax so that's so you can usually gonna be using the tax software to calculate the tax and then you want to be able to understand the calculation so that you can explain it to others and feel that you understand what's going on yourself even though as we can see it can get somewhat complicated to do the tax calculation due to the progressive tax system and these other kind of taxes that could be applied in the different tax systems that could be applied to different kinds of taxes alright so we got the tax table or tax computation worksheet so if you're if your taxable income is less than 100,000 you must use the tax table later in these instructions to figure your tax so you can actually look at the instructions for the form 1040 and look at the tax tables if your income is under the 100,000 and that will give you the tax calculation the tables are a little bit deceiving because basically what they did is they've they've done the calculation kind of already and then they've put it into a table format so you can you can look at your income and the related tax for that income threshold kind of is is the idea but you lose from using the table the whole concept of the progressive tax because it's like okay well what's my tax rate that you gave me I can try to I can try to look at the tax calculation from the table divided by my taxable income to figure the rate but that would only give me the average rate what really they are doing here is a progressive tax rate your income being taxed at multiple rates for different levels of the income in a step kind of format so be sure to use the correct column if your taxable income is 100,000 or more use the tax computation worksheet right after the tax table so the tax computation worksheet if you have to use that gives you a better idea of of the fact that you're using a progressive kind of tax system although they'll still try to simplify the calculation by by saying by giving you like the bottom line number and then only making you calculate the tax on the highest on your highest tax bracket you're on your marginal tax rate so they can still simplify it a little bit in that way then a little bit easier than if you had to calculate the whole progressive tax system for every tier of tax rates however don't use the tax table or tax computation worksheet to figure your tax if any of the following applies form 8615 form 8615 must generally be used to figure the tax on your unearned income over 2300 if you are under age 18 and in certain situations if you are older so you must file form 8615 if you meet all the following conditions one you had more than $2300 of unearned income such as taxable interest ordinary dividends or capital gains including capital gain distributions two you are required to file a tax return three you are either a under age 18 at the end of 2022 this becomes a problem because you might be able to be claimed as a dependent and whatnot in that case be age 18 at the end of 2022 and didn't have earned income that was more than half of your support see a full time student at at least age 19 but under 24 at the end of 2022 and didn't have earned income that was more than half your support so you can see how these kind of mirror the dependent some of the dependent dependency requirements to be a dependent of someone else so four at least one of your parents was alive at the end of 2022 five you didn't file a joint return in 2022 so you which would indicate you weren't married so a child born on January 1st 2000 five is considered to be age 18 at the end of 2022 a child born January 1st 2000 2004 is considered to be age 19 at the end of 2022 and a child born in Jen on January 1st 1999 is considered to be age 24 at the end of 2022 so sometimes you have those cutoff issues when people are born right on the cutoff so schedule D tax worksheet so use the schedule D tax worksheet in the instructions for schedule D to figure the amount to enter on form 1040 or 1040 SR line 16 if you did you did file a schedule D and line 18 or 19 of the schedule is more than zero why would this be the case because the schedule D has to do with capital gains and losses usually with the sale of stocks for example and that means you might have long-term capital gains long-term capital gains as we discussed before could have more favorable tax rates than your ordinary income tax rates so now the income from schedule D is still going to be flowing in to your taxable income but they're not going to be taxed at the same progressive tax rates because they're not going to be ordinary income you've got to break that income out separate to be taxing it at the other income rate for the capital gain rates so you have to file form 4952 and you have an amount on line 4g even if you don't need to file schedule D so but if you are filing form 2555 you must use the foreign earned income tax worksheet instead so then we got the qualified dividends and capital gain tax worksheet so use the qualified dividends and capital gains tax worksheet later to figure your tax if you don't have to use the schedule D tax worksheet and if any of the following applies you report qualified dividends on form 1040 or 1040 SR line 3a now why does this the case because if you have qualified dividends you might get a favorable tax treatment in terms of the tax rate applied to the qualified dividends so the qualified dividends are still going to be income included in taxable income but you just can't apply the normal progressive crazy tax tables to them because you might get a favorable tax rate and therefore you got to break out the qualified dividends so that you can multiply that part times the progressive tax structure related to the qualified dividends themselves as opposed to the ordinary income qualified progressive tax stuff okay so any case you don't have to file schedule D and report capital gain distributions on form 1040 or 1040 SR line 7 you are filing schedule D and schedule D lines 15 and 16 are both more than zero but if you are filing form 2555 you must use the earned income worksheet tax worksheet instead the foreign earned income because you have foreign earned income in that case all right schedule J if you had income from farming or fishing here we go with the farming and fishing again special industry so if you're in the area of farming and fishing you can be a specialist oftentimes in those cases because there's a lot of differences including certain amounts received in connection with the Exxon Valdez litigation your tax may be less if you choose to figure it using income averaging on schedule J foreign earned income tax worksheet if you claim the foreign earned income exclusion housing exclusion or housing deduction on form 2555 you must figure your tax using the foreign earned income tax worksheet so there you have it clears the snow that's been driven snow