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Tax Computation Menu

Tax - The software will figure out the right method for calculating tax on the tax return. You cannot adjust the tax from this menu. One of the following methods is used for calculation on the tax return: 


Income Averaging for Farmers and Fisherman (Sch J) - In case, in the present year, the farm income is high and had been low for the past three years, a farmer may be eligible for lower tax by income averaging  Schedule J, Form 1040 to compute the tax. Taxpayers involved in farming as a business have the ability to use income averaging in determining tax. No minimum farm income is required for income averaging. However, in the event that a farmer has low farm income compared to the total income, they may get little benefit from the income averaging calculation. 

Tax for Children Under Age 18 (8615) - Tax on unearned income that exceeds $2,100 by children can be determined using this from. This is regardless of whether the child is a dependent. This also applies to both step-children and adopted ones. The following requirements must be met for the form to be filed: 

  1. The child had an amount exceeding $2,100 of unearned income. 
  2. It was a requirement that the child file a tax return 
  3. The child was either: 
  • Under 18 by the end of the year 
  • 18 years old by the end of the year and either half or less that half of their support was was from earned income 
  • 19 to 23 years of age by the end of the year, a full-time student, and at least half of their support or less was from earned income. 
  1. The child had at least one parent alive by the end of the tax year
  2. The child doesn’t file a joint return for the tax year. 

Check out Form 8814 from more information on unearned income and support. 

Do not use Form 8615 in  the event that the child files a joint return, or in case neither of the parents of the child were alive by the end of the year. 

Parents may choose to include their child’s income from dividends, interest, and capital gains with their return. In the event that the parent makes this choice, it will not be required of the child to file Form 8615. Should this election be made, note that the income of the child, including qualified dividends and capital gain distributions, may be higher. 

Child’s Interest and Dividends (8814) - Parents may decide to report the income of their child on their return. Certain qualifications must be met by both the parent and the child for the parent to make the election. For more information, check out Form 8814 instructions. 

The election is made by filing Form 8814 with the return of the parents’ by the deadline (including extensions). For every child, a different Form 8814 must be filed. 


Tax on Lump-Sum Distribution (4972) - When you want to determine the tax on a qualified lump-sum distribution you got in the tax year by using either the 20% capital gain election, or the 10-year tax option, or both, use Form 4972. These formulas are special in that they are used to determine a different tax on the distribution that may end up in a smaller tax than the one resulting from you reporting the taxable amount of the distribution as ordinary income. The tax is only paid once, for the year in which you received the distribution, not over the following 10 years. The separate tax is summed with the regular tax determined on your other income. For more information, check out the following publications: 



Tax from Recapture of an Education Credit - in the event that you had claimed an education credit in a previous year, and either the taxpayer or their spouse or even the dependent got tax free educational help or a refund of qualified expenses during the present year, you may owe this tax for the student. For more information check out  Form 8863 instructions. 

Starting 2018, the following items were added: 

Tax due to Making a Section 962 Election - US taxpayers owning interest in a foreign business and those who earn taxed in both the US and in the foreign location, regardless of whether they received a dividend, are eligible for the section 962 election. Based on the situation of the taxpayer, double taxation may be reduced or eliminated. Check out the  Internal Revenue Bulletin 2019-09 for more information. 


Tax From Form 8621 Relating to a Section 1291 Fund - Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) may be filed by those taxpayers who are shareholders of a passive foreign investment company (PFIC). Section 1291 fund refers to an investment in which the taxpayer has not chosen for the investment to be regarded as a Qualifying Election Fund (QEF). The tax that is computed on Part V Line 16e of Form 8621 will be entered here. For more information, check out the  Internal Revenue Bulletin 2017-4. 


Net Tax Liability Deferred from Section 965(i) - Key in the net tax liability deferred under IRC Section 965(i) as a negative number. 


Triggered Deferred Net 965 Tax Liability - In the event that the taxpayer, under IRC Section 965(i), had a triggering event within the year and failed to enter into an agreement for transfer, enter the amount of the triggered deferred net 965 tax liability.