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TAX-C V1.0, Early Release 11-1-91 Shareware Version ┌────────────────────────────────────────────────────────────────────────────┐ │ │ └──────────────────────────────────(C) 1991, Gary L. Bockmon─────────────────┘ TABLE OF CONTENTS INTRODUCTION .......................... 1 GENERAL INFORMATION ................... 3 GETTING STARTED ....................... 5 QUICK START ........................... 6 ADDITIONAL INFORMATION ................ 7 Windows................. 7 Report.................. 8 Worksheets.............. 11 COPYRIGHT NOTICE ..................... 12 WARRANTY ............................. 12 REGISTERING TAX-C .................... 12 page 1 INTRODUCTION TAX-C resulted from a desire for a more intuitive income tax program. Our ultimate goal is to produce an income tax program that will be as simple as possible and still provide the information you need to make tax filing easier and to help you save money on your tax bill. If it were possible to write a tax program for each individual, this goal could be easily achieved. However, economics dictates that a program serve as wide a range of taxpayers as possible, and the task becomes more difficult. To provide all the information you might possibly need for every circumstance clutters the screen as it confuses your mind. Attempts have been made to provide you with the information you need when and only if you need it, with pop-up worksheets, windows, and modular information files. TAX-C is the first version of a program that will continue to grow and serve a wider range of taxpayers. The plan is to give you as much information as you may need behind the scene and to simplify as much as possible the calculations you would ordinarily have to make. Future versions of TAX-C will contain the basic forms A,B,C,D,E,EIC,F,R, 2441,4562,8814,8815 and some others and will make more calculations for you, such as the allowable amount of your IRA deduction, taxable amount of your pension distribution, among others. Beyond that, additional forms and worksheets will be put in modular form so that you receive as much relevant information as possible only if needed. More information and tax-saving hints are included with the instructions you will receive when you register your copy of TAX-C. page 2 The key to saving money on your tax bill is in your understanding the effects various transactions have on your taxes. When you can see the big picture, you can more easily grasp the tax implications of your financial life, to see the truth behind the rumor; and with understanding comes a desire to become more personally involved in the financial aspects of your life. It is this involvement which will improve your financial picture. TAX-C can help you see that big picture with the F1 report screen. It provides you with an immediate summary of all entries any time you want to see them. A more detailed explanation of F1 report is included later in this file. Tax simplification is a worthy goal of the current IRS admin- istration and we applaud their efforts. But don't expect to see too much simplification in our tax laws without tax fairness being sacrificed. A just system will always be a compromise between fairness and simplification. You will always need complete and objective tax and financial information to structure your financial life to your advantage. This program is DESQview aware; it can be run within the DESQview environment. This project would not have been possible without the assistance of James L. Pinson in his book, "Designing Screen Interfaces in C", Yourdon Press, 1991, Prentice-Hall, and the dedication and support of my wife, Carla. page 3 GENERAL INFORMATION TAX-C is an early release version of form 1040, Sch A & B, and contains the latest released information from the IRS. Release date is November 1, 1991. To obtain the official version in January, 1992, you must register. See REGISTERING, this file. TAX-C will print a transfer version of the IRS form 1040, and prints an IRS-approved version of Schedules A & B. There are entry fields for all information required on the 1040 and the printed 1040 corresponds line-by-line to the IRS 1040 for ease of transfer. However, please note that the screen line numbers will not exactly match the 1040. That is because all line item totals have been placed behind the scene, to give you a quick-glance summary on the F1 report. For an immediate update on the status of your return, press F1 for the summary report screen. Press F1 from any screen and use it often to see how various entries affect your entire return. Becoming familiar with the tax effects of various financial transactions is the key to effective tax planning. All on-screen page number references are to the IRS instruc- tions that come with your 1040 from the IRS. Included with the registered version of TAX-C is a line-by-line instruction manual with helpful information and tax-saving hints. The income tax calculation provided with TAX-C should prove accurate up to 10,000,000 and accounts for the new special provisions, such as: 1. Maximum 28% rate on LONG TERM capital gains. 2. Phase-out of exemptions at high AGI. 3. Phase-out of itemized deductions at high AGI. page 4 If your situation calls for form 8814, "Parent's Election to Report Child's Interest and Dividends", or form 8615, "Computation of Tax for Children Under Age 14 Who Have Investment Income of More than $1,000", TAX-C will not calculate this for you. These forms will be included in future versions and may be available in the registered version this year. If you file a Schedule D for 1991, you will be calculating the tax on the Schedule D if the maximum capital gains rate applies, but TAX-C should agree with this calculation, and you may still use TAX-C. Use TAX-C with any combination of forms by entering the appropriate amounts, but TAX-C will only print 1040, A, & B. If you wish to apply your refund to 1992 taxes, or calculate a penalty, you'll have to manually apply this information to your 1040. TAX-C doesn't offer you these options. All dollar entries are automatically checked for validity and rounded to the nearest dollar. TAX-C does not add commas, and will not accept them. I apologize for not getting this feature in. I prefer the comma format. Special Features: Calculates the taxable amount of your social security benefits. Calculates the amount of any self-employed health insurance premiums allowed as an adjustment on the 1040, and applies the excess to SchA medical expenses. Calculates the standard deduction for an individual who can be claimed as a dependent by someone else. page 5 Other Features: Your standard deduction is automatically calculated and compared to your itemized deductions and the larger amount used. Error checking warns if you have checked inappropriate boxes, entered an invalid number, or entered a capital loss in excess of the amount allowed. Windows will pop up at the medical expenses field and the job expenses field to advise you of the allowable amount of your entry. Amounts are automatically totalled and brought from the SchA and SchB screens to the appropriate 1040 screen lines, and to the F1 report screen. TAX-C will print a transfer version of the 1040 and will print Schedule A and Schedule B only if they apply. For instance, if your itemized deductions are less than your standard deduction, Sch A will not print. If your dividend and interest income are both less than $400, Sch B will not print. A diagnostic report will print containing certain basic information. Additionally, certain diagnostic information will appear here only if it applies to your situation. Use the Print Scrn function to print the F1 report for additional diagnostic support. GETTING STARTED Hardware Required: PC,XT,AT IBM compatible Any monitor 256K memory 1 floppy disk drive DOS vers 3.3 or later Dot matrix or daisy wheel printer page 6 QUICK START Type TAX-C at the prompt. The first screen on your monitor is a reminder that this is shareware. Press any key to enter the 1040 program. Special keys: F1 - Summary Report F2 - Enter Sch A or B F5 - Print 1040, A, B, diagnostics ESC - Exit from A or B to 1040; also from 1040 exits program There are seven screens that make up the 1040 portion of the program. Pressing PGDN will scroll you through these 7 screens and loop back to the first screen. PGUP will scroll back and stop you at the first screen. PGUP and PGDN to get familiar with the format. The input fields work pretty much as you'd expect, with HOME, END,INSERT,BACKSPACE all operational here. The arrow down and return keys will move you to the next field. Arrow up will take you back to the previous fields. Arrow down or return at the last screen field will take you to the next screen; arrow up at the first screen field will take you back a screen. Entry fields correspond to the IRS 1040; however, if you are using the IRS instructions, you may become confused by the fact that some screen items do not match the 1040 line numbers. This is because some information has been moved behind the scene on TAX-C. You don't see totals until you press F1. See REPORT later in this file. The registered version of TAX-C comes with a full set of line-by- line instructions with helpful information and tax-saving hints. At screen 3, line8a, press F2 as indicated to enter Sch B interest income screen if your interest income is over $400. There is one screen here for entering your interest income. page 7 At screen 3, line9, press F2 to enter Sch B dividend income screen if your dividend income is over $400. There are two screens here. At screen 5, first field, press F2 to enter Sch A, itemized deductions. There are three screens for the Sch A. Using ESC from Sch A, B, and worksheets brings you back to the 1040 screen. Using ESC from the 1040 exits the program. BEe CAREFUL how you use ESC. There is no double check here. If you press ESC from a 1040 screen, all information that you have entered is lost. There is no save feature. When you are done, you have the option of printing the results. Press F5 when you're ready to print. The print function does some printer checks, then immediately prints. You can print from any screen, except the F1 report screen. ADDITIONAL INFORMATION In addition to the 1040, Sch A and B, TAX-C contains certain worksheets that may apply to you. TAX-C attempts to be intuitive by making prompts for specific information only if necessary for your situation. WINDOWS Various windows may pop up if certain conditions apply. Most have a bell attached to get your attention. If you enter an x in an inappropriate area, such as entering yes AND no, or entering TWO filing statuses, a window will alert you to this error. In calculating a capital loss, you are allowed a specified maximum amount as a deduction on the 1040, depending on your filing status. Any remaining loss must be carried over to next year. If you enter an amount that exceeds the maximum allowed, a window will alert you to adjust your entry. page 8 If you enter a capital gain, and you have income taxed in the 31% bracket, a window will prompt you with a question. If the gain you entered contains any long term capital gain (held over one year), you must enter a y (or Y) at this window prompt so we can calculate this at a maximum 28% rate, as allowed. If this condition applies to you, you must enter a y here each time you cross this field at the window prompt. Failing to do so will result in an inaccurate calculation of your tax. On Sch A, at the medical expense field, a window will appear to show you the amount of your medical expenses allowable after subtracting 7 1/2% of your AGI, as specified on Sch A. Also, if there are self-employed health insurance premiums to be added here, another window will prompt you to that fact. There is no bell on this window. Also on Sch A, at job expenses, there is a window to show you the amount of your allowable job expenses after deducting 2% of AGI. There is no bell here. REPORT The report is an integral part of TAX-C. All line item totals from the 1040, Sch A, Sch B and other totals appear in a one- screen summary report. The report is brought on screen by pressing F1. Use the F1 report often to get the big picture and see how various transactions affect your tax. Hopefully, preparing your income tax return this year will provide some insight into tax planning year-around. An explanation of each report line follows: page 9 1991 FEDERAL INCOME TAX REPORT Total Income.............This is your total income taxable as reported on 1040, line 23. Total Adustments.........This is the total of all adjustments as reported on 1040, line 30. It will include the calculated amount of any self-employed health insurance premiums if entered on the TAX-C worksheet. Adjusted Gross Income....This is Total Income less Total Adjustments as reported on 1040, line 31. Deductions...............This will be the larger of your standard deduction or itemized (Sch A) deductions. It will include calculated amounts allowed for special conditions, such as you or your spouse being over 65 or blind, and any reductions due to the new regs. Reported on 1040, line 34. Exemption Amount.........This is the amount allowed as a deduction for exemption allowances and is $2150 x number of exemptions claimed, less any reductions due to the new regs. It is 1040, line 36. Taxable Income...........Income less adjustments less deductions less exemption allowance is always taxable income. 1040, line 37. Exempt Interest Income...Reported here as a diagnostic tool only. Not included in taxable income. It is included in determining the taxable portion of social security. 1040, line 8b. Taxable Amount of SS.....Reported separately for informational purposes, it is included in taxable income, and is 1040, line 21b. INCOME TAX...............Check this often as you prepare your return to see how various entries affect your tax. 1040, line 38. Total Tax Before Credits.This is income tax plus any tax reported from form 4970 or 4972. 1040, line 40. Nonrefundable Credits....A tax credit is much more valuable than a tax deduction, as a credit is a direct reduction of your tax bill; a deduction reduces taxable income. Tax credits come in two flavors. Nonrefundable credits can reduce your tax to 0. 1040, line45. TOTAL TAX................This is income tax plus 4970/4972 taxes less nonrefundable credits plus other taxes. This is essentially your tax bill as reported on 1040, line 53. page 10 SCHEDULE A DEDUCTIONS Allowable medical........Sch A, line 4. This is the amount that is allowable as a medical deduction, and is the amount you entered as your medical expense less 7 1/2% of AGI. It includes any excess self-employed health insurance premiums not allowed as a deduction on 1040, if applicable. Taxes paid...............Sch A, line 8, total taxes entered. Interest paid............Sch A, line 16, total interest. A note worth heeding: Personal interest is no longer deductible. Charitable cont..........Sch A, line 16, total contributions. TAX-C does not calculate the limits on charitable contributions. Be aware that, if your contributions exceed 20% of your AGI, your deduction may be limited. See IRS instructions if applicable. Casualty, theft .........Sch A, line 17. Moving expenses..........Sch A, line 18. Allowable job expenses...Sch A, line 24. Total amount you entered at employee expense and other misc expenses, less 2% of AGI. Misc itemized deduct.....Sch A, line 25. Gambling losses and some other miscellaneous items not subject to the 2% AGI reduction. Total Itemized Deduct....Sch A, line 26. If you happen to be in a high AGI category, this line may appear confusing. The total itemized deductions will not be the total of the deductions listed. This is due to the new reduction rules. This line total plus the next line will give the total of all itemized deductions listed. Deductions reduced by....If AGI is over $100,000 (50,000 if married filing separately), your itemized deductions are reduced due to new regs. TAX-C calculates this amount to arrive at the correct tax. This line reflects that reduction, if applicable. Your Standard Deduction..Listed here for comparison. The deduction allowed is the larger of your standard deduction or itemized deductions. Exemption reduced by.....If AGI is over: 150,000 for married filing jointly 125,000 for head of household 100,000 for single 75,000 for married filing separately the exemption allowance is reduced. This line shows the amount of any reduction that occurred. SCHEDULE B REPORT Taxable Interest Income..Sch B, line 4. Total interest income less any excludable savings bond interest. Taxable Dividend Income..Sch B, line 10. Total dividend income less capital gain distributions included and less nontaxable distributions. page 11 WORKSHEETS. TAX-C contains three worksheets which will appear on screen to request additional information if certain conditions occur. The worksheets are self-explanatory, but if you want additional information, read the explanations that follow: 1. Taxable Amount of Social Security - line 21a. If you enter an amount at the social security benefits field, TAX-C will calculate the taxable amount using information from your return. To cover all possible situations, we request further information from you to make the calculation. Specifically, if married filing separately, whether you lived with your spouse during the year affects the way the calculation is made. Additionally, some types of income, which are ordinarily excluded from income tax, are included for purposes of making this calculation, and this information is requested. If this worksheet clearly does not apply to you, simply place an x in the indicated box, and the screen will not appear again. Details of the taxable social security calculation are printed in the diagnostics report if it applies. 2. Self-employed health insurance - line 12. Special rules allow you to deduct as an adjustment on the 1040 a specific amount of any health insurance premiums you paid as a self-employed individual. Any remaining amount is allowed as a medical deduction on Sch A. To assist you in making this calculation, and to assure that this deduction is not overlooked, a screen will appear to prompt you for this information. It will appear only if you enter self-employed earnings on the Sch C line, line 12. Enter the total amount of any self-employed health insurance premiums you paid here. If you had self-employed earnings and did not pay health insurance as a result, enter an x in the box indicated and the screen will not appear again. 3. Dependent's standard deduction - line 25b. If someone else qualifies to claim you as a dependent, you can't claim an exemption allowance for yourself. In addition, your standard deduction is limited to $500 or the amount of your earned income up to the amount of the standard deduction otherwise allowed. Since TAX-C calculates the standard deduction, we'll make this calculation for you. To do so, we need some additional information to calculate your earned income, since some items of income included in this calculation may not appear on the 1040. Some amounts received, such as disability income, are not taxed, but are included in earned income to calculate this standard deduction. If the worksheet clearly does not apply, put an x in the indicated box, and the screen will not reappear. Any amounts entered in this worksheet will be printed on the diagnostic report to document your earned income for your personal files. page 12 The Paperwork Reduction Notice Act of 1980 requires that this statement be included to users of any substitute IRS tax form: "We ask for this information to carry out the Internal Revenue laws of the United States. We need it to ensure that taxpayers are complying with these laws and to allow us to figure and collect the right amount of tax. You are required to give us this information." COPYRIGHT NOTICE TAX-C is not a public domain program. It is Copyright, 1991, by Gary L. Bockmon. You are granted the right to copy and distribute this shareware version of TAX-C, but users are expected to register their copy if they use the software. WARRANTY INFORMATION ================================================================================ DISCLAIMER ================================================================================ This application is designed to provide accurate and authoritative information with regard to the subject matter covered. It is sold with the understanding that the rendering of legal, accounting or other professional service is not the intent or purpose of this application. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. It is the user's responsibility to make an informed decision as to the applicability of this program to his purposes. No warranties are expressed or implied with this program. The author makes no representations or warranties with respect to the fitness of this program for any particular purpose and specifically disclaims any liability for financial or other losses suffered through the use of this program. The user assumes the responsibility of verifying the accuracy generated by this program. ================================================================================ REGISTERING To register your copy of TAX-C, send $45 to: BOCKMON TAX & FINANCIAL 201 Water Street Pleasanton, Tx 78064 You will receive the latest official version of TAX-C with full product manual containing helpful information and tax-saving hints.