So we left you yesterday hanging in suspense about what that little box you see to the left is all about.  The instructions provided by the IRS state the following

“This fund helps pay for Presidential election campaigns.  The fund reduces candidates’ dependence on large contributions from individuals and groups and places candidates on an equal financial footing in the general elections.”

Checking this box is not going to increase or reduce your tax.  It simply takes $3 from your total tax and deposits it into the Presidential Election Campaign Fund.  Congress setup this fund in 1971 as an alternative way for Presidential elections to be funded.  This chart shows how much the fund has collected each year and how much has been paid out to candidates.  At the bottom of the chart it’s interesting to note that early on after it’s implementation the number of returns that included a a checked box was in the mid 20% range.  That has declined dramatically over the past 20 years to where now the average number of returns containing a checked box is around 6%.

So if your feeling extra patriotic the next time you file your tax return check the box.  It’s not going to take any money out of your pocket that hasn’t already been taken.  If you’re still curious and want to review some additional information related to The $3 Tax Checkoff, check out the FEC’s quick answers here.

Go Beyond!

Thanks for checking back in and following along.  I’m quite certain many of you were unable to sleep last night due to your excitement for what today’s post might hold….ok I guess that was just me (more likely though it was because of the nacho’s I ate around 9:30pm)

So before we even get to Line 1, which we’ll talk about on Saturday (I know you’re bummed already, right) we need to discuss some vital information that must be present on all Form 1040’s filed.  At the top of the Form you’ll need to include your First Name, Middle Initial and Last Name.  Just to the right of your name you’ll also need to provide your Social Security Number.  The same information will need to be included for your spouse if your intention is to file a joint return (don’t worry we’ll get to what this means when we talk about Line 2).

This section is more important than it appears at a glance.  When you file your return the IRS matches the Name and  Social Security Number you’ve entered with the Name and Social Security Number they have in their records.  If it doesn’t match the IRS will reject your return and you will need to correct the error prior to resubmitting the return.  Typically this happens with a newly married couple where the spouse has not yet updated her new last name with the IRS.  This will cause an unexpected delay in your refund.  So while it may seem like a no brainer a few extra seconds to ensure the correct name and social security number may save some headaches.

Once you have your Name and Social Security Number completed next you’ll need to provide your Current Address.  Note that this is the current address as of the time of filing and not as of the end of the tax year.  Once you’ve done that you’re almost ready to move on to Line 1. 

Not so fast though.  There’s still that weird little box with the heading “Presidential Election Campaign.”  The instructions in the box read “check here if you, or your spouse if filing jointly, want $3 to go to this fund.  Checking a box below will not change your tax or refund.”  What the heck is that all about?  Check back tomorrow to find out.  Hopefully the suspense doesn’t keep you up tonight!

Go Beyond!

So with all this tax talk of late it got me thinking, which is always a dangerous thing, how many folks really truly understand what Form 1040 U.S. Individual Income Tax Return is comprised of?  I know who cares right.  You only care about Line 74a which is the amount to be refunded to you.  But what about the prior 73 Lines you had to go through to get to that point?

This Isn’t Complex At All:  On Form 1040 there are 77 Lines of possible information to be filled in.  In addition to those 77 Lines there 29 possible Schedules and Forms that may be needed in various circumstances and there are 19 different Forms that may be needed in order to claim various available credits.  I hope you caught the sarcasm.

Most of It You Can Ignore:  Lets face it though the average taxpayer is only going to use a very very small percentage of the Lines, Schedules and Forms.  Even so wouldn’t it be nice to have a basic understanding of what each of those Lines, Schedules and Forms were for?  I saw you just roll your eyes there.

5 Minutes a Day Might Save You:  For 2013 we are going to look at Form 1040 line by line then jump over to some of the more common Schedules and Forms.  The goal is not to overwhelm you with information but to give you just enough of a description about each Line, Schedule and Form to help you know if it’s applicable to you.  My hope is that you’ll find something buried in the Form somewhere that will save you some money this year.

Come along and join me on this roller coaster ride that will be 1040 in 365.

Please note If you find something applicable to your situation as you read, please contact us or your tax advisor to discuss how it may apply specifically to your situation.

photo credit: AJC1 via photopin cc

Special Edition Tax Tip 2012-13: Dont Fall for Phony IRS Websites.

Great Article from Michael

This is definitely something every business owner should know and understand.  It’s our job as the accountant to teach them and help them understand their break even point and it’s importance to the survival of their organization.