Summary (continued)

• Report any early withdrawal penalties in Form 1040's "Adjustments" section on line 30; do not subtract penalties from interest income
• If the taxpayer is not required to file Schedule D, report capital gain distributions directly on Form 1040, line 13 or Form 1040A, line 10
• State and local tax refunds are included in taxable income if the taxpayer:
  • Itemized deductions, and
  • Received a tax benefit by including the state and local tax in itemized deductions
• Alimony and separate maintenance payments:
  • Are taxable income to the recipient
  • May be subtracted as an adjustment to income for the payer

Click here to view a table summarizing which issues should be referred to a tax professional.