Overview

There are multiple reasons that a return would calculate a tax different from that on the tax tables. The return may have an alternative minimum tax rate, there may be foreign income involved, or the return may have qualified dividends or capital gains which may be taxed at a different rate.

Look for the Tax Computation Worksheet in the View/Print mode of individual returns. It shows how the tax on Form 1040 was calculated.

The tax computation could be based on any of several calculations including from the IRS tax tables, tax on capital gains, tax on recaptured education credits, or additional tax on Section 1292 elections. If more than one of these tax rates apply, Drake Tax will use the calculation that is most advantageous for the taxpayer.

This worksheet can be produced globally, for all clients, or for a single client within data entry of the return. To produce this worksheet globally, from the main page of the software, go to Setup > Options > Form & Schedule Options tab and check the box Always show tax computation worksheet.

To produce this worksheet for a single client, from data entry of the client's return, go to the PRNT screen and check Produce Tax Computation Worksheet.

In addition, in view mode of the return, look for one or more of the following worksheets for a further breakdown of how the tax was calculated:

Tax Calculation Method	Worksheet Name
Capital Gains	Wks CG Wks D
Taxable Foreign Income	Wks FI Tax

Occasionally, the tax shown on a return will be reported as 0, even when there is enough taxable income to anticipate a tax liability. For example, if there is a capital gain from an asset sale, and itemized deductions, the return will have taxable income, but no tax calculated. In this example,

• The Tax Tables (located in the back of the 1040 instructions) would indicate a tax for the amount shown, however, the tax is 0 (zero).

• The return qualifies for the capital gains tax versus regular tax in the tax tables, and worksheet Wks CG is produced. The lesser of lines 25 or 26 flows to line 27. Line 25 is zero, so line 27 is zero. That is the amount that flows the 1040.

A similar result can occur when a worksheet Wks D is produced. In a second example involving dividend income, Wks D is produced, and the lesser of lines 43 and 44 flows to line 45. Line 43 is zero, so line 45 is zero. That is the amount that flows to line the 1040. In this second example, line 20 on the Schedule D in view mode indicates when the Schedule D Worksheet is produced.