Should I have a tax liability of $1219 on a 1099-DIV with the following: $3,409.20 in Box 1a, $1416.90 in Box 1b and $3759.08 in Box 2a. Am I doing something wrong?

[BobinCT]

are you collecting Social Security.  How about Earned Income Credit?

[palopata]

No, neither

[BobinCT]

Is the $1219 the amount the Federal Income tax went up when you entered these figures?

[palopata]

Yes.  The 1099-DIV was the last form in the income section that I entered.  I was getting a $25 refund prior to that. Thanks.

[VolvoGirl]

When you enter one taxable transaction, you can't just watch the monitor.  You increased your overall adjusted gross income and with that come many other changes in your return, not just the incremental tax on the one transaction.

Like for example it increased your AGI and that would decrease some deductions if you itemized on Schedule A.  And by increasing your AGI it might reduce some credits you were getting like EIC.

[BobinCT · Accepted solution]

Actually, it looks very believable.  If you are in the 25% bracket then we would expect taxes of .25*(3409-1417) + .15*(1417+3759)

[palopata]

Thank you very much.  This happened to me last year and I increased my federal withholding from my pension check.  How do I avoid this happening to me again next year?  I don't want to take anymore out of my pension check.

[BobinCT]

One way to do it is to pay quarterly estimated tax installments based on the dividends paid, and from those.  You had a bit over 7100 of dividends.  If you sent in around 15% of your dividends each quarter that would more or less do it.

[palopata]

Thanks very much!