How To Prepare Montana Taxes

The state of Montana subjects most income earned in the state to taxation. This includes wages from employment and net self-employment earnings. If you are collecting certain kinds of unearned income, such as unemployment compensation or retirement distributions, these are also taxable. For complete tax laws regarding sources of taxable income, see the Montana state tax form instructions.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-Booklet.pdf

Before you begin preparing a Montana return, however, you may want to make sure that you are required to file a state return. If you earn less than the income threshold, you will not be legally obligated to submit state taxes. However, you may still wish to do so if you are entitled to a refund. The Montana Department of Revenue explains the state filing requirements in detail.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-Booklet.pdf 

To begin preparing your Montana taxes, the first thing you need to do is assemble all of your relevant tax paperwork. This will include all of your income and some personal identification information. You will need the following to complete your Montana tax return:

1. Your Social Security number
2. Your current mailing address
3. Your spouse's full name and Social Security number, if you are filing a joint tax return
4. The total amount of earned income for the tax year - If you are an employee, this will be reported on your Form W-2 or Form 1099 as state wages. If you are self-employed, you will need to total your gross earnings and then subtract any qualified business expenses.
5. The total amount of unearned income that is subject to Montana state tax - This includes, but is not limited to, unemployment compensation, retirement distributions, and lottery winnings.
6. The total state income tax you paid in during the year - For employees, this will be shown on your Form W-2 as state taxes withheld. For self-employed individuals, this will be the total of any estimated tax payments you made.
7. A copy of your federal income tax return, if you are filing onehttp://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-Booklet.pdf 
   

If you will be filing a federal tax return, be sure to complete that form before you begin your Montana state tax forms. You will need the amount of your federal adjusted gross income, or AGI, as a starting point for your state return. If you will not be filing a federal return, you may want to consult a tax professional to help you calculate your federal AGI.http://www.irs.gov/pub/irs-pdf/f1040.pdf

Now you need to acquire the necessary tax forms. In Montana, there are three different state tax returns that can be filed. Which one you will use will depend on your individual circumstances. To file using the Form 2 EZ, the short form, or Form 2M, the intermediate form, you will have to meet certain tests regarding your income sources and residency. The directions below will be for filing Form 2, the long form, since anyone can file using this return.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-pages-1-2-and-3.pdf 

If you have access to the Internet, the Montana Department of Revenue strongly encourages filing your tax return electronically. You can do so for free through its website. If you will be using tax preparation software or a tax preparation website, you can generally include your state tax return for an additional charge.http://revenue.mt.gov/forindividuals/electronic-filing/electronicfiling.mcpx 

If you prefer filing by mail, you can download all three of the available tax returns and the form instructions from the Montana Department of Revenue website or you can pick them up from your public library during tax season. Should you decide to complete the form by hand, be sure to write clearly, and use black ink. You should also be aware that, if you file by mail and you are due a refund, it will take six to eight weeks for your return to be processed.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-Booklet.pdf 

Begin the form by entering your full name and Social Security number, as well as your spouse's, if applicable. Complete the address section, and select the appropriate filing status. Choose your residency status, and enter the names and Social Security numbers of the dependent exemptions you will be claiming.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-pages-1-2-and-3.pdf

Before you proceed, stop and read the tax form booklet to get a full understanding of what income adjustments you may need to make or what state credits you may qualify to claim. If you feel unsure about how to complete any line on the form, consult the instruction booklet.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-Booklet.pdf 

Take out your federal IRS Form 1040 and enter the information you see on page one to complete page one of your Montana return. After you arrive at your federal adjusted gross income, you will begin making income adjustments to calculate your Montana adjusted gross income. Then, subtract your deductions and exemptions to figure your taxable income.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-pages-1-2-and-3.pdf

Check the tax tables located in the form booklet to assess the amount of tax you owe on your income. Enter this figure as your tax on line 46. Add any additional taxes you will owe to this number to see your total taxes owed on line 53. Now, you will subtract your state income taxes already paid through withholding or estimated tax payments and apply any refundable credits you are eligible to claim. What is left will be either a refund or a balance due.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-pages-1-2-and-3.pdf 

If you are due a refund, you can choose to receive your payment via direct deposit or issued as a paper check. If you have a balance due, enclose a check or money order for your tax along with your return when you send it. Now, sign and date your return and have your spouse do so, too. Make a copy of the form for your records.http://revenue.mt.gov/content/formsandresources/downloadable-forms/2010/2010-2-pages-1-2-and-3.pdf

Send the form and any payment due to the address listed in the instruction booklet. Be sure to submit your return before April 18, 2011 to avoid late penalties and interest. If you need additional time to complete your Montana return, learn more at how to get a state tax extension in Montana.

Disclaimer: The content in this page is not a substitute for professional financial advice. Please contact a finance professional before using the information presented here.