 Income tax 2021-2022 tax software interest income. Get ready to get refunds to the max. Dive it in to income tax 2021-2022. Here we are in our LASERT tax software. You don't need access to the LASERT tax software or any software to follow along, but you might want to have the Form 1040, which you can find on the IRS website, irs.gov, irs.gov. The tax software makes it much easier for us to run different scenarios as we do different data input and jump on over to the end result, that being the Form 1040. So we've got our scenario here, that being the single filer Adam Smith and he's living in Beverly Hills 90210 and we have the starting point of the 100,000 for the wages that we're going to start out at. The standard deduction we're going to say is the 12,550. If we mirror that in our tax worksheet, we got the 100,000. We got the standard deduction, which we're going to say is the 12,550. That means the taxable income 87,450, 87,450 here. And then if we calculate the tax, we're at the 15,15. If we bring that on over and say there's the 15,15, that's our starting point. So now we've got the interest income we're going to be considering adding that on. Now oftentimes the interest income is going to be fairly small in relation to other income sources unless there's a lot of money that's going to be invested in interest and you're usually going to get it straight from the financial institution. So you'll have the information necessary to do the data input. So let's say we've got the 1099. It's going to look something like this. Now this is a 1099 remember like the full 1099. If you get it from a financial institution they might only give you kind of like the boxes that are relevant. So it might look a little bit different but relevant boxes often being the box number one. If it's normal kind of interest possibly then box number eight or some of the more common kind of things that you're going to see. Now if it's under the like $1,500 then it'll just be reported basically on the first page of the 1040. So let's check that out going back on over and let's say we go to income and let's say we have some interest income. Let's say this was from bank number one. Bank number one and we had interest income $300. $300 back on over and so there's the $300 that's going to be on B2. Notice no new form has been filled out here for Schedule B because we don't need Schedule B because the IRS is saying hey that's a little bit of interest. We're not too concerned with it so whatever and so we're not going to add another schedule there. Now when I go over to my tax worksheet I'm not going to do the same thing and that I'm not going to say like expand on the summary page. I am going to use the separate schedule which is Schedule B even though it's not being populated on the tax return because I want my front page my summary page to be as basically summarized as possible. So I'm going to go to Schedule B and say there's the $300 that's going to pull back on over to the first page. Now I'm at the $100,300 the standard deduction at the $12,550 bringing the taxable income down to the $87,750 so if I go back to the first page here we're at the $87,750 tax now calculated based on that slightly increased $15,87 $15,87 pulling that back over on $50,87 so there's going to be the standard scenario now if the interest goes above the $1,500 so we could have multiple institutions for example I could go back on over here and say what if I add another one bank number two bank number two is let's say $2,000 of interest well that's getting significant and the IRS is like we need more detail we need more detail so if I go to the forms now you've got Schedule B being required it's populated in Lassert by adding it in bold over here so now we got the more detail for bank number one bank number two the $300 the $2,000 now adding up to the $2,300 that tying out into the Form 1040 pulling over all of its taxable because both of the of the 1099's were imagining was in box number one if I was going to pull that into my schedule over here I would go to the Schedule B and say we got another one for $2,000 $3,000 or $300 plus the $2,000 pulling that over to the first page we're at the $1023 standard deduction $12,550 still there's the $87,750 $87,750 is down here wait a second hold on a second it was the $89,750 and then the tax calculated I just said it wrong but I did it right and so $15,567 $15,567 $15,567 $15,567 so there we have that so those two scenarios now the other common box that you're going to be seeing will often be an exempt so it's tax exempt okay we're going to go back on over in some way it's going to be tax exempt so if I go into my form over here it might be for example tax exempt interest box number eight so then I'd say okay well it's not going to be taxable let's delete it and just have tax exempt I'm going to put it over here and let's say it's going to be tax exempt total municipal bonds let's say $1,000 $1,000 going back on over to the forms then we don't have the schedule B because the IRS is small again I'm not too worried about the added schedule so it's over here and then I've got it on to A instead of to B so it's a reporting requirement of the $1,000 here but it's not being included in my income down below so notice it's not over here so if I was to report this on my my other schedule on my income I might I might make another column for basically tax exempt over here if I wanted to so it's going to be a tax exempt but it's not being included and pulled over in essence to page one and adding it in on top of my W2 income it's not having that tax impact so I'm back down to the $100,000 the $12,550 the $12,550 bringing us down to the $187,450 the $187,450 the tax then being calculated depending on the software to do it at the $15,15 again back to the $15,15 $15,015 and then of course we could have all of those things happening so if I go back on over I've got bank one and then I've got another 300 over here we might have multiple interests because we're like a savvy super investor and we've got we've got interest coming from everywhere bank number three and we'll say this was this was the 2000 so now you've got some more stuff going on it can get quite complex over here but we can go back and also note interest could be pulled in from others like a K1 or something like that could have stuff that's going to be pulled out for interest that you want to be careful of because it might be flowing through from another flow through entity like a partnership or an S corporation or something like that possibly but in any case we're going to go back on over back to the first page of the $10,40 now we've got the $2,300 on 2B but $1,000 on 2A 2A not being calculated or added up as we pull it down to the total if I was to look at the schedule B now I've got this information returned for the $300 and the $2,000 up top so let's go back on to the $10,40 if I was going to put that into my forms over here I'd say okay schedule B now I've got the $1,000 exempt and then I have the $2,000 and the $1,300 so the amount that we're actually including is going to be that $2,300 not the $1,000 that is exempt that's pulling over to the first page of the $10,40 that we're actually going to be including and paying tax on the $10,300 standard deductions at the $12,550 and that gives us our taxable income at the $89,750 I could double check to the tax return is that right $89,750 looks good tax calculated page 2 depending on the tax return to do it $15,567 $15,567 is that what they said I think it is that's what I said I said it and typed it correctly this time I did both things correct I said it right and I typed it right so that's the general idea with the interest so you just want to be aware that you got the schedule B be aware that basically the schedule B will not populate if the interest is below a certain threshold also be aware that some other flow through things could be flowing through confused on your off a little bit on the interest you might say well was there a schedule K or something that came through that might be included you could check it on the schedule B to see if if something like that is is going on and then it's going to pull through and just be careful of noting that you've got this reporting requirement for the tax exempt stuff and so what is a reporting requirement versus what's going to be added into the taxable income that's actually going to have tax calculation on it and then you can basically explain kind of that situation hopefully to a client this is tax exempt that's what box 8 means here's what box 1 is it's a reporting requirement still but it's exempt because the government gave you some kind of exemption because they want you to give them money and they're able to not charge the taxes because they're the ones that charge taxes and they're the ones that want the money so they're able to stop that so in any case that's the general idea