Montana Tax Form 2 - Individual Income Tax Return Instructions

General Informations

What’s New For 2008

Federal Economic Stimulus Package Rebate. The economic stimulus payment you received from the Internal Revenue Service in 2008 is not taxable for either federal or state income tax purposes. However, if you itemize deductions on your 2008 Montana income tax return, your “federal income taxes paid” deduction may be reduced because of this rebate. Please see the instructions for Schedule III, line 7e on page 33 for more information.

Direct Electronic Filing – At No Cost to You. We continue to expand the options available to you for direct electronic filing and payment. Using our direct electronic filing option, you can file your tax return, as well as make an electronic payment or direct-deposit your tax refund. Please note that this service only applies to your Montana tax forms; you may still have a filing obligation for federal purposes.

At the time this booklet went to print, we were working hard to make Form 2 available for direct electronic filing as early in the tax season as possible. To check the availability this service, please visit our website at mt.gov/revenue during the regular tax season. For your convenience, we’ve designed this Form 2 booklet to guide you in completing your tax return electronically, if you choose to use our direct electronic service.

If you claim the elderly homeowner/renter tax credit, you’ll find that Form 2EC continues to be available for direct electronic filing at mt.gov/revenue.

Voluntary Check-Off Contribution for Montana Military Family Relief Fund. Please consider helping Montana military families by making a voluntary contribution to this fund as you file your tax return. The relief fund provides grants that aid Montana families in defraying the costs of food, housing, utilities, medical services, and other expenses when a wage earner has been called to active military duty. As always, we encourage you to consider all the worthy programs included in the voluntary check-off contributions on page 3 of Form 2.

Redesigned Form and Instructions for the Elderly Homeowner/Renter Tax Credit. The Form 2EC and instructions are now easier to understand and complete. We have reduced the number of lines on the form and included additional information to help you calculate the credit. Please see page 47 for more information.

Montana Mineral Royalty Tax Withholding. Effective January 1, 2008, royalty payments made to owners of Montana mineral rights are subject to state income tax withholding if certain thresholds are met. This amount should not be confused with the production taxes that are also subtracted from your royalty payments. If the mineral rights are held by a partnership or S corporation and you have an ownership interest in that entity, enter the amount reported to you as your share of the withholding. Please see the complete instructions for line 55 on page 18.

Temporary Emergency Lodging Credit. For tax years beginning on or after January 1, 2008, there is a refundable credit available for licensed establishments that provide short-term emergency lodging under the Temporary Emergency Lodging Program. The program helps provide lodging for individuals or families who have been displaced from their residence and have been referred to the establishment by a charitable organization approved by the Montana Department of Public Health and Human Services. The credit is equal to $30 for each day of lodging provided in Montana and is limited to a maximum of five nights’ lodging for each individual. Complete instructions for this credit are located on Schedule V, line 29, on page 45.

Interest on Unpaid Individual Income Tax Liabilities. The current interest rate of 8% will continue to be in effect through December 31, 2009. Under Montana law, the daily accrual interest rate for all unpaid individual income taxes depends on the rate set by the Internal Revenue Service and may fluctuate each year, but will not be less than 8%.

Married Taxpayers Filing Separately on the Same Form – Allocation of Estimated Payments and State Tax Refunds. If you are married filing separately on the same form, we encourage you to consider how you and your spouse should allocate any estimated payments.

If you have made estimated payments, you might consider allocating the payments claimed by each spouse so that you don’t encounter the situation where one spouse owes tax and the other is due a refund. You may wish to contact us before fi ling your tax return to verify that estimated payments are being applied to the intended spouse. Please note that only estimated payments can be allocated; withholding must be reported by the spouse whose name appears on the Form W-2 or Form 1099.
In past years, the net refund issued to married taxpayers filing separately on the same form may have been different than the amount reported to the Internal Revenue Service. This situation occurs because federal law treats these individuals as separate taxpayers even though they have received a single state refund check. To help ensure that the most appropriate amount is reported on federal Form 1099-G for each spouse, please allocate the payments in relationship to each spouse’s separate tax liability. Additional information regarding this issue is included on page 18 with the instructions for lines 56, 62 and 63. 2008 Montana Individual Income Tax Form 2 Instructions Page 2

Amended Tax Return. Based on your feedback, we have you can show any payment you made with your original added two new lines on Form 2 to assist you when filing return or any refunds previously issued to you. Please an amended return. These lines have been added so that see the instructions for lines 59 and 60 on page 19.

Getting Started General Information These simple steps will help you complete and fi le your Montana individual income tax return.

Complete your federal income tax return.
Determine if you are a Montana resident, nonresident or part-year resident. See page 3.
If you are a nonresident, complete the income tax return for your state of residency, if required. See page 3.
Determine which Montana tax form is right for you. See below.
Decide if you will file electronically or use a paper tax return. This booklet is designed to help you fi le by whichever method you choose.
File your Montana income tax return or request an extension (include your payment, if taxes are due) by April 15, 2009. See page 3 for information on fi ling an extension.
Remember to sign your tax return.
When finished, please accept our thanks for a job well done!

Am I required to file a Montana individual income tax return?

If you are a resident, nonresident, or a part-year resident, you have to file a Montana individual income tax return when you have Montana source income and your federal gross income, excluding unemployment compensation, is equal to or greater than the corresponding amounts that are identified in the chart below.

IF your filing status is…	AND at the end of 2008 you were…	THEN you should file a return if your federal gross income, excluding unemployment compensation was at least…
Single, or married filing separately	Under 65	$3,920
Single, or married filing separately	65 or older	$6,060
Head of household	Under 65	$5,700
Head of household	65 or older	$7,840
Married filing jointly with your spouse	Both under 65	$7,840
	One spouse 65 or older	$9,980
	Both spouses 65 or older	$12,120
You are entitled to an additional exemption if you are blind or your spouse is blind. Increase your federal gross income by $2,140 to determine if you are required to file.

I am required to file a Montana individual income tax return. Which form is appropriate for me and my situation?

To use Montana Form 2EZ, you should be able to answer yes to all of the following:

I was a Montana resident for all of 2008.
I am filing as a single person or as a married person filing a joint return.
My spouse and I were under 65 and not blind at the end of 2008.
I am claiming no dependents.
My only income is from wages, interest, dividends, or unemployment.
I am claiming the standard deduction rather than itemizing deductions

To use Montana Form 2M, you should be able to answer yes to all of the following:

I was a Montana resident for all of 2008.
I am filing as a single person, head of household, or as a married person filing a joint return.
My only income is from wages, interest, dividends, capital gains, IRA distributions, pensions, annuities, unemployment, social security benefits or refunds.
The only tax credit that I may be claiming is one (or more) of the following:
- Adoption Credit
- Elderly Homeowner/Renter Credit (Form 2EC)
- College Contribution Credit (Form CC)
- Energy Conservation Installation Credit (Form ENRG-C)
- Elderly Care Credit (Form ECC)
- Alternative Energy Systems Credit (Form ENRG-B)

You will have to use the Montana Form 2 if you answer yes to any of the following:

I was a resident of Montana for only part of 2008.
I am a nonresident of Montana with Montana source income.
I am married, filing a separate Montana income tax return.
My income includes income from a business or profession, farm or ranch, rents, royalties, partnerships, S corporation or trust.
My tax year ended on a date other than December 31, 2008.
I am claiming the tax withheld from my Montana mineral royalty payments.

How do I determine whether I am a full-year resident, nonresident, or a part-year resident of Montana for individual income tax purposes?

You are a resident of Montana for individual income tax purposes if you live in Montana or if you maintain a permanent home in Montana. You will not lose your Montana residency if you left the state temporarily with the intention of returning. Your Montana residency is lost, or changed, when you establish a permanent residence outside of Montana with no intention of returning. Unless there is a specific statutory exception, if you establish Montana residency for any other purpose, you are considered a Montana resident for income tax purposes.

You are a nonresident of Montana if you did not consider Montana your home at any time during the tax year even though you may have lived and worked in Montana temporarily during the tax year.

You are a part-year resident of Montana if you moved into or out of Montana during the tax year with the intention of establishing a permanent residence in your new state.

Please note: A nonresident or part-year resident required to file a Montana tax return must use Form 2.

How do I determine my legal residence for Montana income tax purposes?

Your legal residence is generally the place where you maintain your most important family, social, economic, political and religious ties. It is a place where you remain when you are not called elsewhere for work or for other temporary purposes. Your change in residency is not accomplished by being away from your home temporarily or for a prolonged period of time. Your change of residency is established when you leave your home and do not intend to return, but instead, intend to establish a new home elsewhere.

When do I have to file my Montana income tax return?

Your 2008 Form 2 tax return has to be filed by April 15, 2009. If you operate on a fiscal year, your return has to be filed by the 15th day of the 4th month following the close of your fiscal year. If you file after this date, you may have to pay penalties and interest.

How can I get an extension of time to file my Montana income tax return?

First of all, it should be clear that any extension of time to file your Montana income tax return is not an extension of time to pay your income tax liability. If you have a valid Montana extension but have not paid your complete income tax liability by April 15, 2009, you are relieved of late file penalties but you are not relieved of late payment penalties and interest on your outstanding Montana income tax liability.

You can be granted an extension of time for fi ling your Montana income tax return if you meet both of the following requirements:

By April 15, 2009, you have applied to the Internal Revenue Service by filing federal Form 4868 for an automatic six-month extension to file your federal income tax return.
You have paid 90% of your 2008 Montana income tax liability or 100% of your 2007 Montana income tax liability through your estimated tax payments, your withholding tax, or a combination of both your estimated and withholding tax payments.

Even though you have applied for an automatic six-month federal extension, this does not guarantee that you have a Montana extension unless you have met one of the requirements listed in number 2 above on or before April 15, 2009. You should examine and use the Montana EXT-08, which is the Extension Payment Worksheet, in order to determine whether you have a Montana extension payment requirement. You can get a copy of this form by visiting our website at mt.gov/revenue or calling us toll free at (866) 859-2254 (in Helena, 444-6900).

If you are required to make an extension payment, please use the tax payment coupon found on this worksheet.

In order to complete your Montana extension, you have to check the extension indicator box found on the bottom right hand corner of Form 2, page 2 and attach a copy of your federal Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to your Montana income tax return. If you file electronically, you do not have to send the federal Form 4868 to us but you should keep a copy for your records. Please do not send us a copy of your federal Form 4868 prior to filing your Montana income tax return.

It is important that you follow the requirements stated above, or your extension will not be accepted and a late file penalty will be applied.

I am on active duty in the regular armed forces and currently serving in an area designated as a “combat zone” or “contingency operation.” I am unable to file my Montana individual income tax return by April 15, 2009. Can I (and my spouse) obtain an extension to file my 2008 Montana individual income tax return?

Yes, you can. Montana state law conforms to federal law and references the Servicemembers Civil Relief Act, which provides for the same extension of time for you to file your Montana individual income tax return that is provided on your federal income tax return. If you are serving in a combat zone or in a contingency operation, you (and/or your spouse) can extend the filing of your Montana income tax return for up to 180 days after the time you (and/or your spouse) are discharged from service.

If you are filing a return under the Servicemembers Civil Relief Act, clearly write on the top of Montana Form 2, using red ink, “combat zone or contingency operations extension,” and file your return within 180 days after being discharged from service. In addition, if you file within 180 days of being discharged you are not assessed any penalties or interest.

What happens if I’m late in filing my Montana individual income tax return?

If you file your return late, you will be assessed a late file penalty of $50 or the amount of tax due, whichever is less. If you file a late return for which you are receiving a refund, you will not be charged a late fee.

What happens if my payment is late?

If you do not pay the full amount of your tax liability on or before April 15, 2009, you will be charged a late payment penalty. This penalty is 1.2% per month or fraction of a calendar month on the unpaid tax. This penalty cannot exceed 12% of the tax due.

If you do not pay your tax liability by April 15, 2009, you will also be charged interest at a rate of 8% per year accrued daily. If you can’t pay your tax in full, you should file your return by the due date and pay as much as possible with your return. If you wish to set up a payment plan with us, please call us toll free at (866) 859-2254 (in Helena, 444-6900) to discuss payment options and make arrangements to pay.

When you fi le as married fi ling separately on the same form or on separate forms and both spouses owe tax, penalties and interest need to be calculated separately for each spouse.

Penalties and interest are set at a higher rate than the rates noted above if you purposely and knowingly do not file a return timely or pay your Montana income tax liability timely.

If you pay your tax late or have established a payment plan with us, be sure to report clearly on your payment your name, social security number and the tax year for which the payment is to be applied. If you intend to have one payment applied to more than one social security number or tax year, please include a statement with your payment that indicates how you want your payment to be allocated.

Where do I mail my Montana individual income tax return?

If you choose not to file electronically, we have two different addresses for individual income tax returns. We do this so that if you are asking for a refund, we can get your refund processed and to you more quickly and efficiently.

If you are filing a return that includes no payment or if you are due a refund, mail your return to: Montana Department of Revenue, PO Box 6577, Helena, MT 59604-6577.

If you are filing a tax return that includes a payment, mail your return and check to: Montana Department of Revenue, PO Box 6308, Helena, MT 59604-6308.

Can I file my Montana individual income tax return electronically?

Yes, you can—and we encourage you to do so.

Electronically filing your tax return is simple, secure, and convenient. Some filing options may be free or low-cost to use. Montana has several e-fi le options.

File select tax forms through our website, at no cost to you. For further information on this direct electronic filing option, please visit mt.gov/revenue. This option allows you to file your Montana forms only; you may still have a filing obligation for federal purposes.
File online through the federal/state electronic filing program, a cooperative effort between the Internal Revenue Service (IRS) and state tax revenue agencies at www.irs.gov. You can also fi nd information regarding online fi ling at mt.gov/revenue. This option allows you to electronically file your federal and state tax return at the same time. Some of the services offered may be free or low-cost to use.
Purchase software to prepare and e-file your federal and state tax return at the same time. Some of the services offered may be free or low-cost to use.

E-filing your return has many benefits.

Quicker refund—for the fastest refund use Direct Deposit.
Increased accuracy—most software includes math edits and up-to-date tax law changes.
Proof or acknowledgement and/or confi rmation your e-filed return was received. Page 5 2008 Montana Individual Income Tax Form 2 Instructions
Nothing to mail—e-file at your convenience, 24 hours a day, seven days a week.
Ability to file now and pay later—if you are using the joint federal/state e-file program you can indicate your payment when e-filing and use an electronic funds withdrawal scheduled for a future date. To avoid penalties, please pay by April 15th.
Environmentally friendly—uses less paper.

If I file electronically, do I have to send to the department a copy of my income tax return, supporting schedules, copies of my federal Forms W-2 and 1099 or signature verification?

No, you do not. If you file electronically, you don’t have to mail in a paper copy of your return, any accompanying federal Forms W-2 and 1099, or any Montana supplemental forms. When you file your return electronically, you represent that you have kept all the documents required as your tax record and that you will provide copies of these to the department if we ask for them.

You also don’t have to sign a copy of your tax return and submit it to the department. The act of completing and filing your income tax return electronically is considered an authorized signature.

How can I check on my refund?

If you are expecting a refund, you can check the status of this refund by calling our 24-hour service at (406) 4449840. We will be glad to tell you the status of your refund once it has been entered into the department’s computer system.

You can also check the status of your refund online. Visit our website at mt.gov/revenue under Online Services and go to the Where’s My Refund? section.

To check the status of your refund either by phone or online, you will need to provide the following information:

The social security number of the first taxpayer listed on your tax return
The amount of the refund requested as shown on your tax return

What do I do if I made an error on my income tax return and I now want to correct it?

If you discover that your income tax return was incorrect, you have five years from the due date of the original return to file an amended Montana income tax return and to correct any mistake on your previous return. When you file this amended return, you will need to complete a new Montana form that reflects the corrections that you are making to your previously filed return. For tax years 2004 and earlier, you will also need to clearly write the words “Amended Return” on the face of your return. For tax years 2005 and later you should check the “Amended Return” box found in the upper left hand corner of your Montana forms. Include copies of any schedules submitted with the original filing even if none of the amounts previously reported have changed.

If you are amending your return to carry back a net operating loss, please check the “NOL” box found in the upper left hand corner of your Form 2.

Montana Form AMD is available to assist you in reconciling the amendments to the original return. This form is for your information and records. You do not need to send this to the department. The Form AMD can be found on our website at mt.gov/revenue under “Downloadable Forms.” Please note that forms 2M and 2EZ cannot be used to amend years prior to tax year 2006.

We have added two new lines on Form 2 to assist you when filing an amended tax return. These lines have been added so that you can show any payment you made with your original tax return or any refunds previously issued to you.

Please Note: If you file an amended return that reflects an increased tax liability, you may have the late payment penalty waived. Simply check the “Amended Return” box on the top left-hand corner of the tax form and pay the tax and applicable interest in full. By checking this box, you are requesting a waiver of the late payment penalty.

I have filed an amended federal income tax return with the Internal Revenue Service, or the Internal Revenue Service has adjusted my federal income tax return. What do I need to do to report this change on my Montana income tax return?

If the Internal Revenue Service changes your federal taxable income or if you voluntarily change your federal taxable income, you will need to file an amended Montana income tax return within 90 days of receiving notification of the change from the Internal Revenue Service or when you have filed your amended federal income tax return. If you do not notify us within 90 days of the change to your federal taxable income, we have five years from the date that the changes become final on your federal return to adjust your Montana income tax return to reflect the changes made on your federal income tax return.

My return is prepared by a tax professional. If the department has any questions concerning my return, can I give you authorization to talk to my tax professional about my tax return?

Yes, you can. We have included a place on your return for you to authorize this. Place an “X” in the box marked “Yes” next to “May the DOR discuss this return with your tax preparer?” It appears at the bottom of all forms near the signature block on the return. If you check this box, we may contact your tax preparer or you for additional information for this tax year only. You, not the preparer, will be informed of any formal tax adjustments that we make. This authorizes the department to discuss this year’s tax return only. It does not authorize the department to discuss any other tax return or tax issue with your preparer.

How do I file if I’ve earned wages in North Dakota and I am a Montana resident?

Montana has a reciprocity agreement with North Dakota that exempts a Montana resident who earns wages in North Dakota from paying North Dakota income tax on these wages. However, this agreement does not extend to other types of income earned in North Dakota and you may have to file an income tax return and pay an income tax to North Dakota on this other income. If you are earning wages in North Dakota and you are a Montana resident, you can be exempt from North Dakota withholding tax on these wages. Complete North Dakota Form NDW-R and submit it to your North Dakota employer to be exempt from North Dakota withholding. You can get this form from your employer, on the Office of State Tax Commissioner’s website at nd.gov/tax or from the Office of State Tax Commissioner, State Capitol, Bismarck, ND 58505.

I am a North Dakota resident earning wages in Montana. How do I file a Montana income tax return?

Montana has a reciprocity agreement with North Dakota that exempts a North Dakota resident who earns wages in Montana from paying Montana income tax on these wages. However, this agreement does not extend to other types of income earned in Montana and you may have to file an income tax return and pay an income tax to the State of Montana on this other income. If you are earning wages in Montana and you are a North Dakota resident, you can be exempt from Montana withholding on these wages. To be exempt from Montana withholding, complete Montana Form NR-2 annually, submit it to your employer and provide a copy to the Montana Department of Revenue. You can get this form from your employer, the Montana Department of Revenue, PO Box 5805, Helena, MT 59604-5805, or visit our website at mt.gov/ revenue to download it.

If your Montana employer has withheld Montana income tax from your wages and you wish to get a refund for it, you should file a Montana Form 2, attaching Montana Form NR-1, North Dakota Reciprocal Affidavit, along with a copy of your North Dakota income tax return and mail these to the Montana Department of Revenue by April 15, 2009.

My spouse has a past child support obligation and I don’t want my refund to be applied to this obligation. What can I do?

You are considered an “injured spouse” if you are a taxpayer who does not owe a child support obligation but who has reported income on a joint return with a taxpayer who does owe a past due child support obligation. If you do not want your refund to be applied against your spouse’s child support obligation, you will have to fi le your Montana income tax return using filing status 3b, which is “married filing separately on separate forms.” When filing under this filing status, each spouse claims his or her own income/loss, deductions, expenses and exemptions.

If you have filed a joint return with your spouse and you are considered an injured spouse, as defined above, you need to contact us within 30 days after you and/or your spouse have received notice of the offset. We will then work with you to have the correct tax return(s) filed.

A mental or physical disability prevents me from completing and submitting a tax return. What can I do?

If you have a filing obligation but are unable to complete and submit a tax return because of a mental or physical disability, the return can be prepared by your authorized agent, guardian or person responsible for your care and property.

How do I file for a deceased person?

If you are responsible for the financial affairs of a deceased person, you’ll have to file a return for that person if his or her income exceeds the minimum filing requirements found on page 2 of these instructions. If you and the deceased person were married, you can fi le a joint return. If you are filing a joint return, or are married filing separately on the same form, and you are the surviving spouse, that is all that is required. All other filers requesting the deceased taxpayer’s refund must fi le the return and attach a Federal Form 1310 as well any court documents appointing a personal representative.

This tax return has to include the income of that deceased spouse from the beginning of the year to the date of death in addition to the income of the surviving spouse for the entire year. A deceased taxpayer’s information should not be included on an individual tax return after the year of death.

How long do I need to maintain my tax records after I have filed my state income tax return?

You should keep all your records for at least fi ve years from the date that you filed your Montana income tax return. This is called the statute of limitations. The statute of limitations for Montana income tax purposes is five years, and the statute of limitations for federal income tax purposes is three years. You should keep your property records and carryover information even longer.

Direct electronic filers: Please remember to save your tax information often.

Residents, part-year residents, or nonresidents of Montana can fi le Montana Form 2. You can use Form 2 if: you are married fi ling separately with your spouse, you claim itemized deductions or the standard deduction, you claim a nonrefundable Montana tax credit, you made estimated tax payments, or you are applying your 2007 refund to your 2008 income tax liability.

Part-Year Resident and Nonresident. If you are a part-year resident or a nonresident you will complete lines 7 through 48, as if you were a resident using the instructions for Montana Form 2. After you have completed your return through line 48 you will then determine your part-year resident or nonresident tax after capital gains tax credit by completing Form 2, Schedule IV.

When you file your part-year resident or nonresident Form 2, you will have to attach to your Montana return the following items:

A copy of your federal income tax return including all federal forms and schedules.
W-2s issued for all wages reported on Form 2, line 7. This includes your W-2s for wages earned in Montana and for wages earned outside of Montana.
Montana Form 2, Schedule IV.
Other Montana schedules, as applicable.
A copy of your income tax returns fi led with your home state and any other state.

Heading – Print your name, address and social security number in the spaces provided. If you are married filing a joint return or married filing separately on the same form, enter your spouse’s name and social security number. If your filing status is married filing separately on separate forms or married filing separately and your spouse is not filing a return, do not include your spouse’s information in the heading. You will need to include your spouse’s social security number when you select your filing status.

If either the primary taxpayer or the spouse died during the tax year, enter the date of death in the field next to his or her name. Please attach a copy of federal Form 1310.

Filing Status

(Check only one box). Montana law does not require you to claim the same filing status that you claimed on your federal income tax return. For example, if you are married and you filed your federal income tax return jointly, you and your spouse have the option to file your Montana income tax return either jointly or separately. See the explanation below about the filing status available to you on your Montana individual income tax return.

Box 1 – Single.

You can claim this filing status if on December 31, 2008 you:

were single,
were legally separated according to your state law under a decree of divorce or separate maintenance, or
were widowed before January 1, 2008 and you did not remarry in 2008.

If your filing status is single, report your income and deductions in column A only.

Box 2 – Married Filing Jointly.

You can claim this filing status if:

you were married as of December 31, 2008, even if you did not live with your spouse at the end of 2008; or
your spouse died in 2008 and you did not remarry in 2008; or
you were married as of December 31, 2008 and your spouse died in 2009 before filing a 2008 return.

You and your spouse can file a joint return even though one of you has no income or deductions, but please note that both spouses have to sign the return. If you fi led your federal income tax return jointly with your spouse, you are not required to file your Montana income tax return jointly with your spouse. Generally, if you both have taxable income, you can benefi t by filing your return separately using filing status 3a or 3b.

If your filing status is married filing jointly, report your combined income and deductions in column A.

Box 3a – Married Filing Separately on the Same Form.

If both you and your spouse have income, you can file your Montana income tax returns separately, even if you filed your federal income tax return jointly. But, if you and your spouse file separately, you will each need to report your own adjusted gross income. You cannot arbitrarily assign income between the two of you.

Your income from salaries, wages, bonuses, commissions and other income from providing personal services either as an employee or an independent contractor should be reported by the spouse who earned it. Any other income that you earned from rents, royalties, dividends, etc., from property that is owned by only one spouse, has to be reported by that spouse. If any income is earned from property that is jointly owned by both spouses, that income should be split equally, unless you and your spouse can show a different proportional ownership. When you file separately, both spouses must either claim the standard deduction or itemize their deductions. You cannot file separately on the same form when one spouse is a resident and the other spouse is a nonresident. In this case, you should use either filing status 3b or 3c.

When you file separately on the same form, you should report your income and deductions for one spouse in column A and the other spouse in column B.

Please note: Although submitted on the same form, married taxpayers electing to file using this status are submitting two returns. If both taxpayers are entitled to refunds, two separate checks or direct deposits will be issued. In the event both spouses owe additional tax, penalties or interest, we will mail separate Statements of Account. If you are entitled to a refund and your spouse owes, and you file separate returns on the same form, you are directing the Department of Revenue to apply your refund to the amount owed by your spouse.

Box 3b – Married Filing Separately on Separate Forms.

You and your spouse should use fi ling status 3b if both of you have Montana source income and one spouse is a resident of Montana and the other spouse is a nonresident. You can also use filing status 3b if you want to receive your own refund or pay your own tax. When you select this fiSTEP 1 ling status, you will have to include your spouse’s social security number in the space provided on Montana Form 2. The rules for the assignment of income and expenses (as explained in Box 3a) also apply when you use filing status 3b. When you file separately on separate forms, you should report your income and deductions in column A.

Box 3c – Married Filing Separately and Spouse Not Filing.

You can use filing status 3c when:

both you and your spouse are nonresidents and one spouse has no Montana source income
you are a resident and your spouse is a nonresident who has no Montana source income, or
another taxpayer claims your spouse as a dependent.

When you select this filing status, you have to include your spouse’s social security number in the space provided on Montana Form 2. Please note that when you use this filing status, you cannot claim your spouse as an exemption on your return.

When you file separate returns and your spouse does not file, you should report your income and deductions in column A.

Box 4 – Head of Household.

You can qualify to fi le as head of household on your Montana income tax return if you qualify for filing head of household for federal income tax purposes. When you use this filing status, attach your federal Form 1040 or 1040A, pages 1 and 2 to your Montana income tax return.

When you file as head of household, report your income and deductions in column A.

Boxes 5a through 5c – Residency Status.

Check the appropriate box that describes your residency status. To determine your residency status, refer to the residency determination questions found on page 3 of the instructions. If you are married and one of you is a resident of Montana and the other is a nonresident of Montana, you cannot claim two residency statuses on the same return. You will have to file separate Montana income tax returns and use filing status 3b or 3c described above.

Line 6a – Yourself.

Since you are allowed one exemption for yourself, we have placed an “X” in the first box on line 6a for you. Even if you are claimed as a dependent on another person’s income tax return, you are still entitled to your one personal exemption. You are also entitled to an additional exemption if you are age 65 or older at the end of the tax year, and an additional exemption if you are blind.

Line 6b – Spouse.

If you are married and are filing jointly with your spouse, or if you file separately on the same form, your spouse is entitled to one exemption. Your spouse is also entitled to an additional exemption if he or she is age 65 or older at the end of the tax year, and an additional exemption if he or she is blind. You are not entitled to your spouse’s exemption if you file separately on separate forms or if you file separately and your spouse does not file a Montana income tax return.

Line 6c – Dependents.

You can claim a dependent exemption for each person who qualifies as your dependent. Please complete the table on line 6c, listing each dependent’s first name, last name, social security number and his or her relationship to you. If you have more than four dependents, you will need to attach a separate list of these additional dependents and then include these additional dependents in the total on line 6c, columns A or B.

A person who meets the following requirements is considered your dependent for Montana income tax purposes. Since Montana’s dependency requirements are different from the federal dependency requirements, you will need to meet all of the following requirements in order to claim a dependent on your Montana income tax return.

Your dependent is a person:

for whom you have provided over half of his or her support during the tax year, and
who does not have gross income of more than $800,
- unless the dependent who is your child
  - has not reached the age of 19 at the close of your tax year, or
  - is a full-time student during five calendar months during your tax year at an educational institution or is pursuing a supervised on-farm training institutional program, and
who is not filing a joint return with his or her spouse during the same tax year.

In addition to the requirements above, your dependent should be:

a relative to you (or your spouse if you are filing a joint return) in one of the following ways:

Child Mother Aunt Stepchild Grandparent Son-in-law Grandchild Stepfather Daughter-in-law Brother Stepmother Father-in-law Sister Nephew Mother-in-law Stepbrother Niece Brother-in-law Stepsister Uncle Sister-in-law Father

an individual who for the tax year has shared your home as his or her principal home, and has been considered a member of your household.
an individual who is a descendant of your uncle or aunt, or
an individual who is receiving institutional care as a result of a physical or mental disability.

Disabled Dependent Child Exemption

In addition to the dependent exemption above, you are entitled to an additional exemption for a child who is disabled. If your child is disabled and you qualify for this additional exemption, place an “X” in the “disabled” column in the row that you list your disabled child, and add an additional exemption to your total on line 6c, columns A or B.

You are allowed this disabled child exemption if you meet all of the following requirements:

You provide more than half the disabled child’s support.
Your home is the disabled child’s principal home.
The disabled child has a permanent disability constituting 50% or more of the body as a whole. Deafness and blindness do not meet this requirement.
A licensed physician has certified the child’s disability.

If you meet all the requirements above and this is the first year that you are claiming the additional exemption for this child, you will need to file a physician’s certification of this qualifying disability with your income tax return.

This physician’s certification filed with us during the first year of eligibility remains in effect in subsequent years and we do not require you to file it annually unless the circumstances of your disabled child change.

Line 6d

Add lines 6a through 6c and enter the total on this line. If you are married filing separately on the same form, use columns A and B. If you are claiming dependent exemptions, you can allocate these exemptions to either spouse. If your child is disabled and you are claiming an additional exemption for this disabled child, the spouse claiming that dependent will also have to claim the additional exemption.

Lines 7 through 37a

Your income on your Montana individual income tax return begins with your federal adjusted gross income. On lines 7 through 37, enter the amount corresponding to your federal individual income tax return Form 1040, 1040A, or 1040EZ. If you are married and if you have filed your federal income tax return jointly with your spouse, and if you are now filing your Montana income tax return separately with your spouse, you should apply the following rules as you allocate the income and deductions between you and your spouse:

If you are married and filing separately with your spouse on the same form or on separate forms, you should each report your own adjusted gross income. You cannot arbitrarily assign income from one spouse to another.
Income from wages, salaries, bonuses, commissions and other income that is earned in the act of providing personal services as an employee or as an independent contractor should be reported by the spouse who earned it.
Income such as rents, royalties, dividends and interest should be reported by the spouse who owns the property from which the income was earned. If you and your spouse jointly hold the property, you should split the income equally between both spouses unless you and your spouse can show a different proportional ownership.
Income from you or your spouse’s ownership in a sole proprietorship (federal Schedules C or F), partnership, S corporation or trust should be reported by the spouse who is the owner.

If you were required to complete and attach a federal schedule for any of the items on these lines, you should also attach those schedules when you submit your Montana return.

Detailed instructions for lines 7 through 37a are not provided for all lines. You will need to refer to your federal income tax instructions for detailed information on lines 7 through 37. Selected lines have been identifi ed and further defi ned below for specific Montana tax details.

Last fall, new federal legislation extended several tax provisions that had previously expired. As of the printing of this tax booklet in early October, the Internal Revenue Service had not released its fi nal tax forms incorporating the legislation. Due to our printing deadline, we made changes based on preliminary IRS information. The changes, on lines 23 and 34 of Form 2, should closely refl ect the fi nal federal tax forms. Please visit our website at mt.gov/revenue during the tax season for updated information on this situation.

Line 9a -Ordinary Dividends.

Enter the total ordinary dividends that you reported on your federal Form 1040, line 9a or Form 1040A, line 9a. Montana taxes all dividends as ordinary dividends and does not have a specifi c qualified dividend tax rate.

Line 9b – Qualifi ed Dividends.

Enter the total qualified dividends that you reported on your federal Form 1040, line 9b, or on your Form 1040A, line 9b. Because the qualified dividends that you reported on line 9b are also included in the ordinary dividends that you reported on line 9a, you do not have to add this amount on line 9b to your total income.

Line 10 – Taxable Refunds, Credits or Offsets of State and Local Income Taxes.

Enter here the same amount that you reported on your federal income tax return. Your state refund is not taxable on your Montana tax return but you will need to include that state tax refund here and then report it as a subtraction from income on Form 2, Schedule II, line 6, to calculate your Montana adjusted gross income.

Line 12 – Business Income or (Loss).

Enter in the box labeled “NAICS,” your North American Industry Classification System principal business or professional activity code. This code is located in Box B on your federal Schedule C or C-EZ. If you are reporting your income or loss from more than one Schedule C or C-EZ on line 12, enter the NAICS code for the sole proprietorship that recorded the greatest amount of gross income from sales.

Line 13 – Capital Gain or (Loss).

Enter here the same amount of your capital gain or loss that you reported on your federal income tax return. For married taxpayers filing separate Montana tax returns, the amount of gain or loss is reported by the spouse to whom it is attributable. If the gain or loss is not clearly attributable to one spouse, the amount is split equally.

Lines 15a and 15b – IRA Distribution.

Enter here the same amount of your IRA distribution that you reported on your federal income tax return. If your Montana basis for your IRA is different from your federal basis, you should adjust your taxable amount on Form 2, Schedule I, line 16 or Form 2, Schedule II, line 34.

Lines 16a and 16b – Pensions and Annuities. Enter here the same amount of your pension and annuity income that you reported on your federal income tax return. However, a portion may be exempt from Montana tax. Complete Form 2, Worksheet IV to determine if you are entitled to a partial exemption.

Line 17 – Rental Real Estate, Royalties, Partnerships, S Corporations, Trusts.

Enter here the same amount of your income or loss that you reported on your federal Schedule E. For married taxpayers filing separate Montana returns, the amount of gain or loss is reported by the spouse to whom it is attributable. If the gain or loss is not clearly attributable to one spouse, the amount is split equally.

Line 19 – Unemployment Compensation.

Enter here the same amount of the unemployment compensation that you reported on your federal income tax return. Unemployment compensation is not taxable in Montana; therefore, you should exclude this amount by reporting it on Form 2, Schedule II, line 3.

Line 20b – Taxable Social Security Benefits

Enter here the same amount of the taxable social security benefits that you reported on your federal income tax return. Montana taxable social security benefits may be different from your federal taxable social security benefits. You will need to complete Worksheet VIII on page 55 in order to determine your Montana taxable social security benefits. If your taxable benefits are higher or lower than your federal taxable benefits, you should either include or exclude the difference on Form 2, Schedule I, line 5, or Form 2, Schedule II, line 22.

Please Note: Lines 23 through 37a. Before completing this section, please make sure you have read the instructions on the bottom of page 12 in the highlighted box.

Line 25- Health Savings Account Deduction.

Enter here the same amount of federal health savings account contributions that you reported on your federal return. Be careful not to confuse this deduction with the Montana Medical Care Savings Account exemption that you might report on Form 2, Schedule II, line 18.

Line 32 – IRA Deduction.

Enter here the same IRA deduction that you reported on your federal income tax return. For tax years beginning after December 31, 2006, you are no longer required to recompute the allowable deduction if you filed a joint federal tax return but are filing separate Montana tax returns.

Line 33 – Student Loan Interest Deduction.

Enter here the same amount of the student loan interest deduction that you reported on your federal income tax return. For tax years beginning after December 31, 2006, you are allowed this deduction if you filed a joint federal return but are filing separate Montana returns.

Line 34 - Tuition and Fees Deduction.

Enter here the same amount of tuition and fees deduction that you reported on your federal income tax return. If you claimed an education credit and did not take this deduction on your federal return, you cannot take this deduction on your Montana tax return.

Line 36

Add lines 23 through 35 and enter the result on this line. Include in your total any write-in adjustments that you made on your federal income tax return. Refer to your federal instructions for a description of the allowable federal write-in adjustments.

Federal Write-Ins Checkbox – Check this box if either spouse included federal write-in adjustments in the total on line 36.

Nonresident Aliens: If you are a nonresident alien who has earned income in Montana and you have filed a federal nonresident alien income tax return (Form 1040NR or 1040NR-EZ) and you are now filing a Montana income tax return in which your income is exempt under a federal tax treaty, exclude your income on line 36, to the extent it was included as wages in line 7, and write on the dotted line next to line 36 “nonresident alien tax treaty.”

Line 37a – Federal Adjusted Gross Income.

If you are filing single (filing status 1), married filing jointly (filing status 2), or head of household (filing status 4), enter the amount from line 37 in line 37a. If you are using the same filing status on your federal income tax return, this amount should correspond to the amount of the federal adjusted gross income that you reported on your federal income tax return Form 1040, 1040A, or 1040EZ.

If you are filing married filing separately on separate forms (filing status 3b), or married filing separately and spouse is not filing (filing status 3c), enter the amount from line 37, column A on line 37a. Depending on what filing status you elected on your federal income tax return, this amount may correspond to the amount of federal adjusted gross income that you reported on your federal income tax return. In any circumstance, your federal adjusted gross income reported on your Montana income tax return plus your spouse’s federal adjusted gross income reported on a separate Montana income tax return, or that is not reported, should correspond to the amount of your combined federal adjusted gross income that you reported for federal income tax purposes.

If you are fi ling married fi ling separately on the same form (fi ling status 3a), combine the amounts on line 37, columns A and B and enter the result on line 37a. This combined amount should correspond to the amount of federal adjusted gross income that you reported on your federal income tax return Form 1040, 1040A, or 1040EZ.

Line 38 – Montana Additions to Federal Adjusted Gross Income.

You may need to add additional items of income to your federal adjusted gross income in order to arrive at your Montana adjusted gross income. Complete Form 2, Schedule I to determine the amount of additions to enter on this line. Refer to the section of instructions on Montana additions to federal adjusted gross income beginning on page 23 for a detailed explanation of these additions.

Line 39 – Montana Subtractions from Federal Adjusted Gross Income.

You may be eligible to subtract items of income from your federal adjusted gross income in order to arrive at your Montana adjusted gross income. Complete Form 2, Schedule II to determine the amount of your subtractions that you need to enter on this line. Refer to the section of instructions on Montana subtractions from federal adjusted gross income beginning on page 25 for a detailed explanation of these subtractions.

Line 40 – Montana Adjusted Gross Income.

Add lines 37 and 38, then subtract line 39; enter the result on this line. This is your Montana adjusted gross income. Transfer this amount to Form 2, page 2, line 41.

Caution: Do not include in your calculation the amount that you reported on line 37a.

Direct electronic filers: We recommend saving the tax information that you have entered so far.

Are You Ready?.For the second part of Step 3, you will be calculating your “taxable income,” which will involve either subtracting the standard deduction or your itemized deductions from your Montana adjusted gross income, as well as subtracting your number of exemptions multiplied by $2,140. You will need receipts and supporting documents for deductible expenses, such as property tax statements and receipts for medical expenses, if completing Schedule III, Montana Itemized Deductions.

Line 42 – Standard or Itemized Deductions.

In most cases, your state income tax will be less if you take the larger of either your itemized deductions or the standard deduction.

When you claim your standard deduction or itemized deductions, remember to check the box on line 42 that identifies which method you are using. If you do not check the appropriate box, this will delay the processing of your return.

When you and your spouse file separately on the same form or on separate forms, you will both have to use the standard deduction or itemize your deductions. You cannot use two different methods.

Standard Deduction. To calculate your standard deduction, complete Worksheet V on page 53.
Itemized Deductions. To figure your itemized deductions, complete Form 2, Schedule III. You can find the instructions for Form 2, Schedule III on page 32 of this instruction booklet.

Line 44 – Exemption.

You are entitled to at least one exemption (your own). Multiply $2,140 times the number of exemptions that you have claimed on Form 2, line 6d and enter the result on this line.

Line 45 – Taxable Income.

To compute your taxable income, subtract line 44 from line 43 and enter the result on this line.

Direct electronic filers: We recommend saving the tax information that you have entered so far.

Are You Ready?.For Step 4, you will be calculating your “tax liability.” If you are a nonresident, this will involve completing Schedule IV, Nonresident/Part-Year Resident Tax. In addition, please review Schedule V to determine if you are entitled to any nonrefundable credits.

Line 46 – Compute your tax using the tax table below.

2008 Tax Brackets and Table

If your taxable income on Form 2, line 45 is:
More than	But not more than	Then your tax is	Less:
$0	$2,600	1%of your taxable income	($0)
$2,600	$4,600	2% of your taxable income	($26)
$4,600	$7,000	3% of your taxable income	($72)
$7,000	$9,500	4% of your taxable income	($142)
$9,500	$12,200	5% of your taxable income	($237)
$12,200	$15,600	6% of your taxable income	($359)
$15,600 or more		6.9% of your taxable income	($499)

For Example: Taxable Income $6,800 X 3% (0.03) = $204; $204 Minus $72 = $132 Tax.

Line 47 – Capital Gains Tax Credit.

You can claim a capital gains credit against your Montana income tax of up to 2% of your net capital gains. Your net capital gains is the amount you reported on Form 2, line 13 less any amounts reported on Schedule II, line 25 or line 28. This credit is nonrefundable and it cannot reduce this liability below zero. This credit is applied before any other credits and cannot be carried back or carried forward.

If you are a nonresident or a part-year resident, you must apply this credit to your Montana income tax that you computed on line 46 as though you were a resident.

If you are married and you and your spouse are filing separate returns on the same form or on separate forms, you each will need to calculate your capital gains tax credit.

Line 48 – Resident Tax After Capital Gains Tax Credit.

Complete line 48 if you are a resident, nonresident or a part-year resident.

If you are a resident, this is your resident tax after capital gains tax credit. Skip line 48a and go to line 49.

If you are a nonresident or a part-year resident, go to line 48a.

Line 48a – Nonresident, Part-Year Resident Tax After Capital Gains Tax Credit.

If you are a nonresident STEP 4 or a part-year resident, you will need to go to Form 2, Schedule IV, to calculate your nonresident, part-year resident tax after capital gains credit. Enter the result of this calculation on this line. See the instructions for Form 2, Schedule IV on page 36.

Line 49 – Tax on Lump-Sum Distributions.

If you qualify on your federal return for special averaging of your lump-sum distribution and have not included it as ordinary pension income in federal adjusted gross income, you must pay Montana income tax on this distribution. Your Montana tax liability on the lump-sum distribution is 10% of the federal tax calculated on federal Form 4972. Part-year residents must calculate the tax on all lump sum distributions received while residing in Montana. Attach a copy of federal Form 4972.

Line 50

If you are a resident, add lines 48 and 49; enter the result on this line. If you are a nonresident or part-year resident, add lines 48a and 49; enter the result here.

Line 51 – Total Nonrefundable Credits.

Enter the amount from Schedule V, line 24, but do not enter an amount larger than the amount on line 50. This is your total nonrefundable credits.

Recapture Taxes

Line 52

Some deductions and tax credits have provisions requiring a recapture of the tax benefi t you received in an earlier tax year (if you do not meet certain requirements in subsequent tax years). If you are required to report a recapture, report the appropriate two-letter code and amount on this line. The three possible recapture taxes are the following:

FE – Family Education Savings Account Recapture Tax. If you have a recapturable withdrawal from your family education savings account, you will have to pay a 6.9% recapture tax on this withdrawal instead of including this withdrawal in your Montana adjusted gross income.

Your recapturable withdrawal is a withdrawal that is not used to pay for qualified higher education expenses or for a withdrawal from your family education savings account within three years from the date you opened the account.

Multiply your recapturable withdrawal by 6.9%, enter the result on this line, and enter the code ‘FE’ in the space indicated. This is your family education savings account recapture tax.

EC – Endowment Credit Recapture Tax. If you previously claimed an endowment credit and you have also taken a charitable deduction for a gift that you contributed to a qualified endowment and you now have received the gift back, you are required to recapture that previous credit to the extent it reduced your income tax liability in a previous year and to include in your income any amounts that were previously deducted as an itemized deduction.

On this line, enter the amount of your endowment credit recapture tax and enter the code ‘EC’ in the space indicated. If, in addition to your recapture tax, part of the amount that is recaptured was claimed as a charitable contribution in a prior year, you will have to include in your income on Form 2, Schedule I, line 4 any recoveries of this prior year deduction that reduced your tax liability in the year of that deduction. Complete Worksheet IX to determine if you will have to recapture any amount of your prior year deduction. You can download Worksheet IX from our website at mt.gov/revenue or call us toll free at (866) 859-2254 (in Helena, 444-6900)

RP – Rural Physician’s Credit Recapture Tax. If you have previously claimed the rural physician’s tax credit and have subsequently ended your practice within four years following the year that you claimed the credit in this rural area, you are required to pay back your previous credit(s) claimed.

For example, if you claimed four consecutive $5,000 rural physician’s credits for a total of $20,000 in years 2002, 2003, 2004 and 2005 and then in 2008 you ended your practice in the rural area that qualified you for that credit, you are required to pay back $10,000 of your previous credits that you claimed in 2004 and 2005. You are entitled to the 2002 and 2003 credits since you maintained your practice in the rural area for at least four additional years after becoming eligible for this credit.

On this line, enter the amount of your rural physician’s credit recapture tax and enter the code ‘RP’ in the space indicated.

If you are married filing separately on the same form and one recapture in one column, enter the total recapture each spouse has a recapture, enter the amount and code amount for both and the code for the higher recapture. in the appropriate column. If you are reporting more than one recapture in one column, enter the total recapture amount for both and the code for the higher recapture.

Direct electronic filers: Remember to save the tax information that you have entered.

Are You Ready?.For Step 5, you will be reporting any “payments” that were withheld from you or previously paid by you. Please have your Form W-2 and other withholding and payment information available. In addition, please review Schedule V to determine if you are entitled to any refundable credits. If you are filing an amended tax return, you will need a copy of your original tax return.

Line 54 – Montana Income Tax Withheld.

Enter the amount of the Montana income tax withheld from your income and reported in Box 17 of your federal Form W-2, or in Box 10 of your federal Form 1099-R. When you claim Montana income tax withheld, you are required to attach to your return a copy of your withholding statement(s) (federal Forms W-2 or 1099-R). Do not report amounts that are reported to you on Montana Form PT-WH or Montana Mineral Royalty Withholding on this line.

Line 55 – Montana Mineral Royalty Tax Withheld.

Effective January 1, 2008, royalty payments made to owners of Montana mineral rights are subject to state income tax withholding if certain thresholds are met. This amount should not be confused with the production taxes that are also subtracted from your royalty payments. Enter the amount of the Montana income tax withheld from royalty payments received during the year. This is generally reported to you on federal Form 1099. If the mineral rights are held by a partnership, S corporation, estate or trust for which you have an ownership interest or from which you receive a distribution, enter the amount reported to you as your share of the withholding. Attach a copy of the Form 1099 issued to the partnership, S corporation, estate or trust and a schedule detailing the calculation of your portion of the withholding. For more information, please visit the “Mineral Royalty Withholding” icon at mt.gov/revenue.

Line 56 – Estimated Tax Payments.

If you have made estimated income tax payments for tax year 2008, enter the amount of these estimated tax payments. Include in this amount the 2007 refund that you requested us to apply to your 2008 estimated income tax payments and any amounts that are reported to you on Montana Form PT-WH from your ownership in an S corporation, partnership or disregarded entity. Do not include in this total any income taxes paid for a previous year since these are not estimated taxes paid for tax year 2008.

Important: If you are married fiSTEP 5ling separately on the same form and have made estimated payments, you might consider allocating the payments claimed by each spouse so that one spouse does not owe tax and the other is due a refund. You may wish to contact the department before filing your return to verify that estimated payments are applied to the intended spouse. Only estimated payments can be allocated. Withholding must be reported by the spouse whose name appears on the federal Forms W-2 or 1099.

Line 57 – Extension Payment.

If you paid an extension payment on or before April 15, 2009 in order to qualify for an automatic six-month extension to file your income tax return, enter that amount on this line. To determine whether you need to make an extension payment, complete the Extension Payment Worksheet, Montana Form EXT-08.

Line 58 – Refundable Credits.

You may be eligible for one or more of the five refundable credits that are available on your Montana income tax return. Complete Form 2, Schedule V, lines 25 through 30 to determine the amount of the refundable credits to enter on this line. Refer to the section of instructions on Montana tax credits found on page 45 for a detailed explanation of these refundable credits.

Amended Return. Use lines 59 and 60 only when filing an amended tax return. If you are filing an original tax return, proceed to line 61.

Line 59 – Payments with Original Return.

Enter any payments made when you filed your original return and any subsequent payments that were applied to your 2008 tax liability.

Line 60 – Previously Issued Refunds.

Enter any refunds previously issued to you. This includes refunds that may have been applied to another debt such as a prior tax year or child support debt. Do not include the overpayment amount you requested to be applied to your 2009 estimated tax payments.

Line 61 – Total Payments and Refundable Credits.

Add lines 54 through 59, and then subtract line 60. Enter the result on this line. This is your total payments and refundable credits.

Line 62 – Tax Due.

If line 53 is greater than line 61, subtract line 61 from line 53. This is your tax due.

Line 63 – Tax Overpaid.

If line 61 is greater than line 53, subtract line 53 from line 61. This is your tax overpaid.

Please note: For married taxpayers filing separately in situations where both taxpayers have an overpayment, the amount of each overpayment will be reported to the Internal Revenue Service. In situations where one spouse owes and the other has an overpayment, the amount reported to the Internal Revenue Service will be the gross overpayment amount for the spouse with the overpayment before netting the two columns. For example, if spouse A has an overpayment of $600 and spouse B owes $200, the amount reported for spouse A on federal Form 1099-G will be $600 even though the net refund check issued is $400.

Many taxpayers will not find this result acceptable because it may affect their federal taxable income for the following year. To try to minimize the difference between the amount reported on the 1099-G and the net state income tax refund received, please see the instructions for line 56 for reallocating the estimated payments.

Direct electronic filers: Remember to save the tax information that you have entered.

Are You Ready?. For the first part of Step 6, you will need to calculate any “penalties and interest” if applicable. In addition, you will be reporting any “contributions” to the fi ve voluntary check-off programs.

Line 64 – Interest on Underpayment of Estimated Taxes.

You are required to pay your income tax liability throughout the year. You can make your payments through employer withholding, installment payments of estimated taxes, or a combination of both.

If you did not pay in advance at least 90% of your 2008 income tax liability (after applying your credits) or 100% of your 2007 income tax liability (after applying your credits), you may have to pay interest on the underpayment of your estimated tax.

To calculate your interest, please complete either Worksheet VII, or Form EST-I, 2008 Underpayment of Estimated Tax by Individuals and Fiduciaries. You can access this form by visiting our website at mt.gov/revenue or by calling us toll free at (866) 859-2254 (in Helena, 444-6900).

Line 65 – Late File Penalty, Late Payment Penalty and Interest.

Please note: If you and your spouse are fi ling on separate returns, penalties and interest are based on the amount that each spouse owes. In order to simplify calculations for the form, married taxpayers filing separately on the same form will compute penalties and interest on the combined tax due. In the event that both spouses owe additional tax, penalties or interest, they will receive individual Statements of Account for the amount they owe. When one spouse owes tax but the other is overpaid, penalties and interest are based on the unpaid tax after applying the overpayment from the other spouse.

Late File Penalty. If you file your return after April 15, 2009—or October 15, 2009 if you have a valid extension—you will be assessed a late file penalty if there is tax due on line 62. The penalty is equal to the lesser of $50 or the amount of tax you owe. If you are filing your return late and you have a refund, you are not assessed a late fi le penalty.

To calculate your late file penalty, compare the amount on line 62 to $50. Your late file penalty is the lesser of these amounts. If you and your spouse elect the filing status “married filing separately on the same form” and both of you owe tax and do not have a valid extension, the late file penalty will be assessed to both of you.

Late Payment Penalty. If you have not paid 100% of your income tax liability by April 15, 2009, you are liable for a late payment penalty. Your late payment penalty is equal to 1.2% per month or fraction of a calendar month on the unpaid balance from April 15, 2009 until it is paid. For example, if you do not pay your tax due until May 10, 2009, your late payment penalty will be 2.4% (two months or fractions of a month X 1.2%) of the unpaid tax. Please remember that an extension to file your return does not give you an extension to pay your tax.

To calculate your late payment penalty, multiply the amount on line 62 by 1.2% per month or fraction of a calendar month your payment is late. In no instance will your late payment penalty exceed 12% (10 months X 1.2%) of the unpaid tax.

Interest. If you have not paid 100% of your income tax liability by April 15, 2009, you will have to pay 8% annual interest, computed daily, on your unpaid balance. As with the late payment penalty, an extension of time to file your return does not extend the due date for paying your income tax. Interest accrues from the original due date.

To calculate your interest, multiply the amount on line 62 by 0.002192% (0.0002192) times the number of days after April 15, 2009 your tax is paid.

If you owe more than one of the items listed above, enter each applicable amount in the following worksheet.

Type	Amount
Late file penalty
Late payment penalty
Interest
Total

Enter the total on line 65. You may wish to keep this information as part of your records for future reference.

Line 66 – Other Penalties.

Include on this line any of the following other penalties if they apply to your situation. Your can get a copy of any of these forms by visiting our website at mt.gov/revenue or by calling us toll free at (866) 859-2254 (in Helena, 444-6900)

First-Time Home Buyer Savings Account 10% Penalty. If you withdrew funds from your first-time home buyer savings account for purposes other than to pay for eligible costs for the purchase of a single- family residence, you are required to pay a 10% penalty on this withdrawal unless this withdrawal is on the last business day of your business year, which is the last weekday in December. Complete Montana Form FTB-P, 2008 First-Time Home Buyers Savings Account Penalty Calculation. Enter the amount of the penalty on this line and attach a copy of Form FTB-P to your income tax return.
Medical Care Savings Account 10% Penalty. If you withdrew funds from your medical care savings account for purposes other than to pay for eligible medical costs, you are required to pay a 10% penalty on this withdrawal unless you made this withdrawal on the last business day of your business year, which is the last weekday in December. Complete Form MSA-P, 2008 Medical Care Savings Account Penalty Calculation. Enter the amount of the penalty on this line and attach a copy of Form MSA-P to your income tax return.
Farm and Ranch Risk Management Account 10% Penalty. If you have not distributed your deposits and income from your farm and ranch risk management account within five years, they are considered distributed. You are required to pay a 10% penalty on the amount of tax due on this amount that is considered distributed. On this line, enter the amount of your farm and ranch risk management account 10% penalty.

If you are required to pay more than one of the penalties listed above, enter on line 66 the sum of your other penalties.

Line 67 – Montana Voluntary Check-Off Contribution Programs.

Montana law provides you with the opportunity to contribute, via your income tax return, to STEP 6 the following programs. You can contribute any amount to any one of these five programs. Your contribution will increase the amount you owe or reduce the amount of your refund.

Nongame Wildlife Program. Your contributions to this program are used to ensure the well-being of Montana’s watchable wildlife species, such as eagles, herons, bluebirds, great horned owls, loons, chipmunks, pikas, fl ying squirrels and painted turtles.
Child Abuse Prevention Program. Your contributions to this program fund services and activities related to the prevention of child abuse and neglect. In addition, if you enclose a separate check with your timely filed return, you are allowed to take an itemized deduction for the amount of the contribution on the return you are fi ling with this contribution.
Agriculture in Montana Schools Program. Your contributions to this program fund the development and presentation of educational programs. This program ensures Montana’s young people have a better understanding of agriculture in our state and how it relates to the rest of the world.
End-Stage Renal Disease Program. Your contributions fund a program for persons suffering from end-stage renal disease. This program assists persons suffering from chronic renal disease in obtaining the medical, nursing, pharmaceutical and technical services necessary to care for the disease.
Montana Military Family Relief Fund. Your contributions to this program help provide funding for grants that aid Montana families in defraying the costs of food, housing, utilities, medical services, and other expenses when a wage earner has been called to active military duty.

Line 68 – Total Penalties, Interest and Contributions.

Add the amounts on lines 64 through 67, and then enter the result on this line. This is your total penalties, interest and voluntary check-off program contributions.

Direct electronic filers: Remember to save the tax information that you have entered.

Are You Ready? For the second part of Step 6, you will determine the “amount you owe” or “your refund.” If you will be receiving a refund and would like the money to be direct-deposited into your checking or savings account, you will need to have information available about your bank or financial institution. Be sure to sign your tax return. If you are married filing a joint return or filing separately on the same form, your spouse must also sign the return.

Line 69 – Amount You Owe.

If you have tax due (amount on line 62), add lines 62 and 68 OR, if you have a tax overpayment (amount on line 63) and it is less than line 68, subtract line 63 from line 68. Enter the result here.

Married taxpayers filing separately on the same form should determine the amount to report on this line as follows:

If both taxpayers have tax due (line 62) Add both spouses’ tax due amounts to the total on line 68, and enter the result on this line.

If one taxpayer has tax due (line 62) and the other has a tax overpayment (line 63) Compare the two amounts and:

If the tax due is larger than the tax overpaid, subtract line 63 from line 62, add the result to the amount on line 68, and enter the total on this line.
If the tax overpaid is larger than the tax due, subtract line 62 from line 63 and compare the result to the amount on line 68. If the remaining overpayment is less than the amount on line 68, subtract the overpayment from line 68 and enter the result on this line. Otherwise, proceed to line 70.

If both taxpayers have a tax overpayment (line 63) Add both spouses’ tax overpayment amounts and compare the total to line 68.

If the combined overpayment of tax is smaller than the amount on line 68, subtract the overpayment from line 68 and enter the result on this line.
If the combined tax overpayment is larger than the amount on line 68, proceed to line 70.

You can pay the amount you owe by:

Electronic funds withdrawal when e-filing your joint federal/state tax return.
E-check or credit card—if you wish to pay the amount that you owe by e-check or credit card, please visit our website at mt.gov/revenue under Online Services for Individuals, File and Pay Taxes. There is no fee for an e-check payment; a small fee is applied for a credit card payment.
Personal check, money order, or cashier’s check— please use the voucher that we have provided with this income tax booklet. Make your check payable to the Montana Department of Revenue. Please sign your check, and write your social security number and “Tax Year 2008” on the memo line.

If you cannot pay the entire amount that you owe with your tax return, we encourage you to file your return timely and pay as much as possible. By filing and paying as much as you can by April 15, 2009, you will not be assessed a late file penalty and you can reduce the amount of your late payment penalty and interest that is assessed against your outstanding balance. If you need to establish a payment plan, please call us toll free at (866) 859-2254 (in Helena, 444-6900) as soon as possible to discuss your options and make payment arrangements.

Line 70 – Your Overpayment.

If there is a tax overpayment (amount on line 63) and it is greater than the amount on line 68, subtract line 68 from line 63 and enter the result on this line.

Married couples filing separately may have a combined overpayment. This results when either both spouses report a tax overpayment (line 63), or one spouse reports a tax overpayment (line 63) that is greater than the other spouse’s tax due (line 62). If this is true for you, and the combined overpayment is greater than the amount on line 68, subtract line 68 from line 63 and enter the result on this line.

Line 71

Enter the amount of your overpayment from line 70, that you want to be applied to your 2009 estimated taxes.

Line 72 – Your Refund.

Subtract line 71 from line 70 and enter the result on this line. This is the amount of your refund. Only refunds more than $1.00 will be issued.

If you wish to use direct deposit, enter your financial institution’s routing number (RTN#) and your account number (ACCT#) in the space provided, and indicate whether this account is your checking or savings account. Your routing number will be nine digits and your account can be up to 17 characters (both numeric and alpha). A sample of a personal check is provided for your convenience. If your financial institution is unable to accept the direct deposit, we will mail you a refund check.

Please note that if both spouses are due a refund, each will be mailed a check or two deposits will be made if you are electing to have your refund directly deposited.

Montana Tax Help Links