HOW TO PRORATE

Taxpayers using filing status 3 or 4 may be required to prorate (divide) certain entries on the IA1040, such as taxable Social Security benefits, Federal income tax refunds, estimated Federal tax payments, itemized deductions, etc.

Example 1: How a husband and wife would prorate a Federal refund:

2002 Federal refund received in 2003 from a jointly-filed return: $1,000
Husband has net income of $15,000 on the 2002 IA 1040.
Wife has net income of $30,000 on the 2002 IA 1040.
Total net income: $45,000 on the 2002 IA 1040.

Divide wife’s net income by total income.
The result is the percent of total income earned by the wife.
(Wife’s net income) $30,000 = 66.7%
(Total of husband’s and wife’s net income) $45,000

Then take $1,000 X 66.7% = $667. This is the wife’s portion of the refund, reported on line 27 in her column.
The husband’s portion is
$1,000 - $667 = $333, which is entered on line 27 in the other column.
These two amounts are entered on line 27 of the 2003 IA 1040.

Note: Round to the nearest one-tenth of a percent. For example, 66.74% becomes 66.7% and 66.75% becomes 66.8%

Example 2: How to prorate Social Security

Husband receives Social Security benefits of $30,000
Wife receives Social Security benefits of $20,000
Total benefits are $50,000

Divide the husband’s benefits - $30,000 - by the total benefits - $50,000.
The result - 60% - is the percent of total benefits earned by the husband.

Complete the Iowa Social Security worksheet to determine what amount is taxable to Iowa. In this example, the total taxable Social Security benefits is $8,000. Now prorate the $8,000 between husband and wife.

Multiply $8,000 by 60%, which equals $4,800. This is the husband’s portion of taxable Social Security benefits to be entered on line 13.
The wife’s portion is $8,000 - $4,800 = $3,200 which is entered on line 13 in the other column.

Example 3. Federal estimated tax payment proration

Husband has income of $75,000 that is not subject to Federal withholding.
Wife has income of $8,000 that is not subject to Federal withholding.
Their total income not subject to Federal withholding is $83,000.
The estimated Federal tax payments for this year totaled $18,000.

Divide the husband’s income by the total. The result is the percent of income earned by the husband.

Husband's income not subject to Federal withholding = $75,000 = 90.36% (90.4%)
[Total of husband and wife’s income not subject to Federal withholding = $83,000]

Multiply $18,000 by 90.4% = $16,272. This is husband’s portion to be entered on line 32.
The wife’s portion is $18,000 - $16,272 = $1,728, which is entered on line 32 in the other column.