Daniel is a self-employed, calendar year taxpayer. He reports on the cash basis.
ID: 2384596 • Letter: D
Question
Daniel is a self-employed, calendar year taxpayer. He reports on the cash basis. Daniel made the following estimated state income tax payments:Date Amount
January 15, 2010 $1,200 (4th payment for 2009)
April 15, 2010 1,500 (1st payment for 2010)
June 15, 2010 1,500 (2nd payment for 2010)
September 15, 2010 1,500 (3rd payment for 2010)
January 18, 2011 1,500 (4th payment for 2010)
Daniel had a tax overpayment of $800 on his 2009 state income tax return and, rather than requesting a refund, had the overpayment applied to his 2010 state income taxes. What is the amount of Daniel’s state income tax itemized deduction for his 2010 Federal income tax return?
Explanation / Answer
Answer: $6,300 Amount paid: $800 - refund from 2009 return applied to 2010 $1,200 - paid 1/15/2010 $1,500 - paid 4/15/2010 $1,500 - paid 6/15/2010 $1,500 - paid 9/15/2010 ($200) - substract $200 -- the state refund of $800 will be pro rated - 75% ($600)will go as income on line 10. The other 25% ($200) will reduce state tax deducted on schedule A. Total Amount: 800 + 1200 + 1500 + 1500 + 1500 - 200 = $6300. The amount paid in 2011 for 2010 state tax is not deductible for 2010 federal taxes. It will be deductible in 2011.
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