Connecticut CT-1040 Line by Line Guide
Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, are exempt from this extra bill. Furthermore, 7 other states simply enforce a flat tax rate. So what's the moral to the story? People who live in these states are able to buy more stuff and pay less tax. If that sounds like a sweet deal, it is.
But for the rest of us, residential income tax is a necessary evil, one that takes a serious bite out of our disposable income. And while the forms are essentially designed to collect the same data, they are all constructed differently. What follows is a breakdown of Form CT-1040, entitled Connecticut Resident Income Tax Return. If you don't live in Connecticut, not to worry, we'll be tackling the other 34 states soon enough.
Connecticut's resident income tax is a tricky one that consists of 6 Parts and 5 Schedules. For your convenience I've separated all the schedules from the main form. When you need a particular schedule, simply click on the appropriate link to bring up the text.
The form begins with the standard question regarding your filing status. Just check the appropriate box if you're a single, joint filer, head of household, or a qualifying widower. If you're married and filing separately, be sure to include your spouse's name and social security in the big pink box. From there the data collection is simple: your name, social security, and address are all required.
Line 1 requests your Federal adjusted gross income (AGI) from federal Form 1040 Line 37 (Line 21 from Form 1040A or Line 4 from Form 1040EZ). Line 2 requires you to include any additions to your income, to figure this out you'll need to fill out a Schedule 1. Now, add lines 1 and 2 and enter the total on Line 3. On Line 4 you have the opportunity to include any reductions to your federal AGI, but again, you'll need to refer to Schedule 1 to figure this out. Subtract line 4 from 3 to get your Connecticut AGI and enter it on Line 5.
Now enter your total income tax on Line 6; just see the tax table on Page 18 of the booklet to figure how much. Line 7 is a credit for any income taxes you paid to a different qualifying jurisdiction. You'll get this number as you move through Schedule 2. Now subtract Line 7 from 6 and enter the total on Line 8. If the Alternative Minimum Tax applies to you, you will have to attach Form CT-6251, if not, simply enter zero on Line 9. Now add lines 8 and 9 and enter the total on Line 10.
Line 11 requires the completion of Schedule 3, important because it's a credit for any property taxes you've paid on your car, house, or both. Once you're done with some data gathering, subtract Line 11 from Line 10 and enter the total on Line 12. Line 13 is an adjusted minimum tax credit from Form CT-8801 (see the booklet for instructions on how to fill that out). Now subtract Line 13 from Line 12 and enter it on Line 14. Line 15 needs data from Schedule 4 Line 69. Now add Lines 14 and 15, enter the total on Line 16, then carry that number forward to Line 17 on the second page.
Line 18 is looking for withholdings from all your employers. Line 19 is for estimated tax payments and any overpayments from a different year. Line 20 is for payments made from an extension request. Line 20a allows you to claim and Earned Income Tax Credit with Schedule CT-EITC. When you're ready add Lines 18 through 20a to get your total payments.
If you've overpaid, enter the amount on Line 22. Just be aware that Line 23 is trying to pull a fast one when it asks you the amount of Line 22 you want applied to your return. Once you figure your contributions from Schedule 5 (Line 70), enter the total on Line 24. To get your refund, subtract Lines 23 and 24 from Line 22. Please be sure to give a checking account and routing number so you can get your money directly deposited into your account. You want your money as quickly as possible, don't you?
While part 4 is allocated for a refund, part 5 is attempting to determine whether you still have a liability. Line 26 is the amount of tax you still owe. To figure it, you need to subtract Line 21 from Line 17. If your return is late, expect to get hit with a rather unpleasant double whammy. The penalty is 10% of what you owe, while the interest fees equal Line 26, times the number of months late, times 1%. Line 29 is any interest on the underpayment of your estimated tax (just see Page 17 in the booklet for instructions). To finish up, add lines 26 through 29 to get the total amount of tax you still owe.
Mercifully that's it. All that's left is to sign, date, and insert a telephone number. If you had an accountant prepare your return, they will have to fill in the same information and add the address of their place of business. If you want the IRS to contact someone other than you about your return, make sure they fill out the third party designee at the bottom of the page.
While these state forms are brutal, what you don't want to do is knowingly send in a false return. True, the monetary punishment is only $5,000, but the state has the right to put you in jail for a period of up to five years. So don't play games with the numbers, file all your forms, and pay your taxes. When you're done, feel free to plan a move to one of those seven states that don't have to pay income tax.
Schedule 1 Modifications to Federal Adjusted Gross Income
So Connecticut wants you pay tax on all the funds you've made outside the state. The first half of Schedule A has to do with any additions to your AGI; the second half allows you to make subtractions.
On line 31 record any interest on state and local government obligations (aka bonds) other than Connecticut. Line 32 is for Mutual-Fund-exempt interest dividends from non-Connecticut (or municipal) notes. Line 33 is for any sort of cancellation of debt income. Line 34 is a taxable amount of lump-sum distributions from qualified IRA's that have not been included in your Federal AGI.
If you were awarded a fiduciary adjustment enter the amount on Line 35. If you lost money on Connecticut bonds, enter the total on Line 36. If you had a domestic production deduction from Line 35 off your 1040, enter it on line 37, while Line 38 is simply labeled other. To finish up the schedule, add lines 31 through 38, entering the total on line 39. Now you can carry forward that number to Line 2 of the main form.
Line 40 wants the total interest from government bonds and line 41 the exempt dividends from mutual funds that get their cash from government bonds. Line 42 is a Social Security benefit adjustment; just check page 20 to see how you figure it. Line 43 is for any refund of a state income tax, while Line 42 is slotted for a railroad retirement benefits.
Line 45 is looking for half of your military retirement benefit, while Line 46 is for a fiduciary adjustment. Line 47 is for any gains on Connecticut bond sales, Line 48 is for Connecticut Higher Education Trust contributions, and Line 49 is slated for anything else. Now add up lines 40 through 49 to get your total subtractions, entering the total on Line 50 of this Schedule and Line 4 of the main form.
Schedule 2 Credit for Income Taxes paid to Qualifying Jurisdictions
Please know that it would behoove you to fill it out Schedule 2. In fact, any credits that you claim will be disallowed if you fail to move through this part of the return.
How to find your modified Connecticut AGI, a qualifying jurisdiction name, and non-Connecticut income can all be found on page 24 of the booklet. Once you've done a bit of research, divide Line 53 by Line 51 (which can't exceed 1.000) and enter it on Line 54. Now, subtract Line 11 from 6 (on the main form) and enter your income tax liability on Line 55. Now multiply Line 54 by Line 55, entering the total Line 56. Then enter any income tax you paid to any other qualifying jurisdiction on Line 57. Line 58 is looking for the lesser of Line 56 or 57. Finally, mercifully, Line 59 yields your total credit; enter it here and on Line 7 of the main form.
Schedule 3 Property Tax Credit
This schedule gives you the opportunity to declare and claim all the taxes you paid on your primary residence and a car. As with Schedule 2, if you don't include this Schedule with your return, you will not be allowed the credit.
To start, fill in the name of Connecticut Tax Town or District for your Primary Residence. Then label it with a property address and the dates you've paid its tax. Now do the same thing for your car and your spouse's car if you are filing jointly. On Line 63 add up the total tax you've paid from lines 60 through 62. In Connecticut, the maximum property tax credit allowed is only $500 (found on Line 64). For Line 65, simply take the lesser of Line 63 or Line 64.
Now enter the decimal amount for your filing status from the Property Tax Credit Table on Page 27 of the booklet. If it happens to be zero, just enter the amount from Line 65 on Line 68. Otherwise, multiply Line 65 by Line 66 to yield Line 67. Then subtract Line 67 from Line 65 and enter it on Line 68 of this schedule and also Line 11 of the main form.
Schedule 4 Individual Use Tax
Schedule 4 is a tricky little liability. Basically, it's trying to track all the stuff you've bought outside the state. Be prepared with how much tax you've paid on said good or service. You will also have to compare that amount to what you would have paid if you had bought in Connecticut. And guess what, Connecticut then taxes you on the difference. For full instructions, see page 28 of the booklet.
In Column A, B, C, D expect to enter basic types of information. It asks for your date of purchase, a description of what you bought, the retailer, and the price. Column E is the Connecticut tax due based on that price (just multiply the total by 6% to figure it). Column F is the tax you've already paid on the item and Column G is the difference. Repeat this process for as many things as you've purchased (that are above $300) and enter the total on Line 69 of this schedule and Line 15 of the main form.
Schedule 5 Contributions to Designated Charities
If you are a charitable fellow, Connecticut's Schedule 5 allows you a deduction for all the good will you've spread across the state. Designated charities include: AIDS or Breast Cancer Research, endangered species, the Military Family Relief fund, and safety-net services. There's even a line for Organ Transplant, so if you've given up a kidney, now's the time to let the world know about it. When you're ready, just add up all these contributions and enter the amount on Line 70 and Line 24 of the main form.