Individual Income Tax

Form 40 Individual Income Tax Return

Corporate Income Tax 

Form 41 Idaho Corporation Income Tax Return

Idaho Income Tax Forms: Understanding the Process

Taxes are a necessary part of life, and filing taxes is a requirement for every working citizen in the United States. Each state has its own income tax regulations and procedures, and in Idaho, taxpayers must file State income tax returns by April 15th every year. Being aware of Idaho income tax forms and the procedures involved in filing them can help individuals save money, time, and hassle, and it also helps them avoid legal issues down the road.

In this article, we’ll discuss Idaho income tax forms, including the history of Idaho income tax laws, tax brackets and rates, and how to file Idaho income taxes. We’ll also touch on updates and changes to Idaho income tax laws. Let’s get started.

The History of Idaho Income Tax Laws

The history of Idaho income tax laws dates back to 1913 when the state first imposed income taxes on its citizens. From that point on, numerous changes and reforms have been made to the law to reflect changes in economic circumstances and tax regulations. In the early years, the tax rate was low, but over time, it has increased, as has the complexity of the tax system.

In 1965, the Idaho Legislature passed the Idaho Income Tax Act, which established the current system of individual income taxation. Under this act, the Idaho State Tax Commission was established as Idaho’s tax authority to administer the tax system and collect taxes.

Since then, several significant changes have been made to the tax system. In 1980, Idaho put a ceiling on the long-term capital gains tax rate, which was then put on par with its maximum ordinary tax rate. In 2015, Governor Butch Otter signed into law an update to Idaho’s tax code, which resulted in significant cuts to corporate and individual income tax rates. The law created a new top tax bracket for individuals earning over $25,000 a year, among other changes.

Over the years, the Idaho tax law has been designed to be fair, to promote economic development, and to help the state’s government raise the necessary funds to pay for schools, public safety, and other public services.

Tax Brackets and Rates

The Idaho income tax rate depends on the amount of taxable income earned by an individual. Idaho uses a graduated tax system with four tax brackets, with the lowest rate being 1.125% and the highest rate being 6.925%. The tax rate and bracket depend on the taxpayer’s income and filing status.

For instance, as of 2021, taxpayers filing with single incomes over $11,971 and household incomes greater than $23,950, fall under the highest tax bracket. Married citizens filing jointly with a taxable income of over $25,194 and those who file as Head of Household with a taxable income above $23,970 also fall in this bracket.

The tax brackets and rates for Idaho income tax are as follows:

– 1.125% for the first $1,550 of taxable income
– 3.125% on income between $1,551 and $3,100
– 4.125% on income between $3,101 and $4,651
– 6.925% on income over $4,651

Filing Idaho Income Taxes: The Forms You Need

Filing Idaho income tax returns isn’t easy, and you will need a range of forms to complete the process successfully. The forms required to file Idaho income taxes include:

– Idaho State Tax Form 43 – Personal Income Tax Return
– Idaho Form 43 Instructions – Personal Income Tax Instructional Guide
– The Idaho Form 39R (if you owe use tax) – Use Tax Worksheet
– W-2 Forms – One copy for the taxpayer and one for the Idaho State Tax Commission
– 1099 Forms – Any 1099 that states one or more of the following:

i) Gross proceeds of over $600 paid to an individual as a contractor.

ii) Full or partial payments from an IRA or pension plan.

iii) Interest or dividends totaling more than $10 paid by a financial institution.

Other forms that may be needed include:

– Form 8379 – Injured Spouse Allocation (to allocate joint refunds)
– Form FD-10 – Fraud Referral Form
– Form AFF – Affidavit of Non-Residence
– Form 46 – Power of Attorney

Each form is essential and explains how to fill out the others. For instance, Form 43 details what information should be provided, the laws regarding Idaho income tax, and the guides for each of the various tax brackets. It is worth noting that these forms may come with many different schedules depending on your filing status.

To access Idaho tax forms, you can visit the Idaho State Tax Commission website. All forms and instructions can either be filed electronically or mailed to the Idaho State Tax Commission.

Electronic filing is the easiest and quickest way to file, particularly if you have a refund coming your way. Refunds can be issued via direct deposit to your bank account, saving you time and money. The website is available 24/7, so you can file at your convenience.

Updates and Changes to Idaho Income Tax Laws

Idaho Income Tax laws undergo constant updates and changes as a result of adjustments and reforms to federal tax laws and state budgetary needs. Here are some important updates and changes that have been impacting Idaho income tax laws recently:

A. Tax Cuts and Jobs Act

Idaho taxpayers were impacted by the Tax Cuts and Jobs Act (TCJA) passed by Congress in 2017. Idaho State law automatically adopts all provisions of the Internal Revenue Code that were in effect on January 1, 2018, unless specifically rejected by the legislature. As a result, TCJA changes affecting federal income tax computations translate to Idaho income tax computations.

B. Tax conformity

The Idaho Legislature updates the state’s tax code every year to ensure conformity with federal tax law provisions. In 2020, Idaho conformed its tax law to various provisions of the CARES Act. This conformity addressed pandemic-related federal tax changes, including provisions on recovery rebates and loan forgiveness.

C. Property tax relief

The Idaho Legislature created a new Property Tax Reduction (Circuit Breaker) Program in 2020 for eligible taxpayers, which provides them with tax relief on their primary residence. The law also increased the current maximum property tax reduction from $1,320 to $1,560, and it increased the maximum income threshold of qualified homeowners by roughly $6,500, based on inflation.

D. Tax rate changes

In 2021, Idaho reduced the top personal income tax rate from 6.925% to 6.5%. This rate reduction means that the taxpayers in this bracket will pay $20 less per $1,000 of taxable income.

Conclusion

In summary, it is crucial to understand Idaho tax laws and income tax forms if you are an Idaho taxpayer. While the tax system may seem complicated, knowing which forms to file, how to file them, and understanding the tax brackets and rates that apply can save you time and hassle.

Idaho is also mindful of its taxpayers, and the State Tax Commission provides online services to make the filing process more convenient. Additionally, the state regularly updates and modernizes its tax laws to reflect changes in both the national fiscal climate and state budget needs, making it necessary to keep up to date with the changes.

Remember, if you are not sure about how best to approach Idaho income taxes, do not hesitate to seek professional advice. With this knowledge, you can file your Idaho income tax returns with confidence and avoid any penalties or legal consequences that might arise from mistakes in your returns.