Fill in a Valid Oklahoma State Tax Template

E F OR E OU E GI N

You must complete your Federal income tax return before you begin your 1997 Oklahoma income tax return. You will use the informa- tion entered on your Federal return to com-

plete your Oklahoma return.

Remember, when completing your Oklahoma return, round all amounts to the nearest dollar.

Example:

$2.01 to $2.49 - round down to $2.00 $2.50 to $2.99 - round up to $3.00

Be sure and read all instructions before you begin. To ensure you use the correct form, please read the section entitled “Which Form Should I Use?” on page 3 which outlines the qualifications for each type of Oklahoma income tax return form.

If you pay someone to prepare your return, be sure you take them this entire packet. The use of the label and envelope in the center of this packet is designed to speed up the process- ing of your return.

E L P F U L I N T S

¥File your return by April 15, 1998. If you need to file for an extension, use Form 504 and then later, file via Form 511.

¥Be sure you enclose copies of your Form(s) W-2 or 1099 with your return, otherwise your return cannot be processed.

¥Be sure to sign and date the return. If you are filing a joint return, both you and your spouse need to sign.

¥If you are interested in paying the tax due by Discover¨ Card, please see page 9 for the Form 540.

¥After filing, if you have questions regarding the status of your refund, please call (405) 521-3146. If you are calling from outside the Oklahoma City area, but within Oklahoma, please call (800) 522-8165, extension 1-3146.

¥If you have any questions, please do not hesitate to contact us in one of the ways listed on the back cover of this booklet.

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E S I D E N CE E F I N E D

H O U S T I L E

E S I D E N T

An Oklahomaresident is a person domiciled in this state for the entire tax year. ÒDomicileÓ is the place establish- ed as a personÕs true, fixed, and permanent home. A domicile, once established, remains until a new one is adopted.

A R T E A R E S I D E N T

PA part-year resident isan individual whose domicile was in Oklahoma for a period of less than 12 months during the tax year.

O N E S I D E N T

NA non-residentis an individual whose domicile was not in Oklahoma for any portion of the tax year.

E M B E R S O F T H E R M E D O R CE S

MResidency is established accordingto military domicile as established by the SoldiersÕ and SailorsÕ Civil Relief Act.

If you were an Oklahoma resident at the time you entered military service, assignment to duty outside Oklahoma does not of itself change your state of resi- dence. You must file your return as a resident of Okla- homa until such time as you establish a permanent residence in another state and change your military records. See the specific instructions for line 28 - Partial Military Pay Exclusion.

When the spouse of a military member is a civilian, most states, Oklahoma included, allow the spouse to retain the same legal residency as the military member. They file a joint resident tax return in the military membersÕ State of Legal Residency (if required) and are taxed jointly under non-resident rules as they move from state to state. If the non-military spouse does not wish to choose the allowed residency of the military member, then the same residency rules apply as would apply to any other civilian. The spouse would then comply with all residency rules where living.

If both the military member and spouse are Oklahoma residents, they shall file Form 511 residency return. In this case, you should include income of both spouses and take credit for tax paid another state, if applicable. If either spouse is a part-year or non-resident, they shall use Form 511NR.

H AT S E S I D E N T N COME

An Oklahoma resident individual is taxed on all income reported on the federal return, except income from real and tangible personal property located in another state, income from business activities in another state, or the gains/losses from the sales or exchange of real property in another state.

Note: Residents are taxed on all income from interest, dividends, salaries, commissions and other pay for personal services regardless of where earned. Wages earned outside of Oklahoma must be included in your Oklahoma return, and credit for taxes paid other states claimed on Oklahoma Schedule E. (See line 46.)

E S I D E N T

Every Oklahoma resident who has sufficient gross income to require them to file a Federal income tax return is required to file an Oklahoma return, regardless of the source of income. An Oklahoma return is also required if no Federal return is due because income

Every part-year resident, during the period of residency, has the same filing requirements as a resident. During the period of non-residency, an Oklahoma return is also required if the Oklahoma part-year resident has gross income from Oklahoma sources of $1,000 or more. Use Form 511NR.

O N R E S I D E N T

NTo usethe 511EZ form found in this booklet, you must meet all of the following requirements:

Every non-resident with gross income from Oklahoma sources of $1,000 or more is required to file an Okla- homa income tax return. Use Form 511NR.

OR MS E

¥ You were an Oklahoma resident for the entire year.

¥ You have no adjustments to Federal Adjusted Gross Income such as Federal Bond Interest, exempt income under statute, etc.

¥ You do not claim any credits.

There are two exceptions to this requirement: ¥¥ low income sales tax relief, and/or ¥¥ child care credit.

¥You are not filing after April 15, 1998.

¥You did not make individual estimated tax payments for 1997.

If you do not meet the above qualifications, and you are a resi- dent of Oklahoma, you need to file a Form 511, also available in this booklet.

If you do not meet the above qualifications because you are a part-year or non-resident, please request a 1997 Oklahoma Non-Residents and Part-Year Residents booklet.

If you are in need of a form other than those you already have, need additional copies of this booklet, or other types of assis- tance, please see the section entitled “Need Assistance? How to Reach Us” on the back panel of this booklet.

S T I MAT E D N COME AX

If you can reasonably expect your tax liability to exceed the amount withheld by $100 or more for 1997 or $500 or more for 1998, you are required to file a declaration of estimated tax and make quarterly estimate payments. Taxpayers who fail to file a declaration and pay esti- mated tax are subject to penalty and interest on under- payment. Form OW-8-ES, for filing an estimate, will be supplied on request. If at least 66-2/3% of your gross income is from farming, estimate payments are not required. If claiming this exception, see line 53a.

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H AT S AN X T E N S I ON

A valid extension of time in which to file your Federal return automatically extends the due date of your Oklahoma return if no Oklahoma liability is owed. A copy of the Federal extension must be enclosed with your Oklahoma return. If your Federal return is not extended or an Oklahoma liability is owed, an extension of time to file your Oklahoma return can be granted on Form 504.

90% of the tax liability must be paid by the original due date of the return to avoid penalty charges for late payment. Interest will be charged from the original due date of the return.

L L B OU T E F U N D S

Remember, your return must be signed. Once your return is filed, if you have any questions regarding your refund, please call (405) 521-3146. If you are calling from outside the Oklahoma City area, but within Okla- homa, please call (800) 522-8165, extension 1-3146.

When your original return is timely filed, you may have any amount of overpayment applied to your next yearÕs estimate. Refunds applied to the following yearÕs Oklahoma Estimated Income Tax (at the taxpayerÕs request) may not be adjusted after the original due date of the return.

If you are receiving a refund and you are using the Form 511EZ, be sure to check out the new option of having your refund deposited directly into your checking or savings account. This new option is not available to those who file via Form 511 at this time.

E T P E R AT I N G OS S

Oklahoma NOLs shall be separately determined by reference to Section 172 of the Internal Revenue Code as modified by the Oklahoma Income Tax Act and shall be allowed without regard to the existence of a Federal NOL. Enclose a detailed schedule showing the origin and NOL computation. Residents may use Oklahoma NOL Schedules A, B & C. Also enclose a copy of the Federal NOL computation.

Effective for all tax years beginning after 12/31/95 Oklahoma Net Operating Losses may not be carried back. A Net Operating Loss may be carried forward for a period of time not to exceed 15 years. Title 68 O.S. Supp. 1993 Section 2358 (A) (3).

The Oklahoma NOL allowed/absorbed in the current tax year shall be subtracted on Oklahoma Form 511, line 6 (other subtractions) or Oklahoma Form 511X, line 2.

The Federal NOL allowed/absorbed in the current tax year shall be added on Oklahoma Form 511, line 13 (other additions) or Oklahoma Form 511X, line 6.

If your net income for any year is changed by the IRS, an amended return shall be filed within 1 year. Request and file Form 511X and enclose a copy of the Federal Form 1040X or 1045. Beginning on January 1, 1994, part-year and non-residents shall use Form 511NR. Please enclose a copy of IRS refund or payment, if available, prior to expiration of Statute of Limitations.

1Federal Adjusted Gross Income

Enter your Federal Adjusted Gross Income from your Federal return. This can be from any one of the following forms: 1040, 1040A, 1040EZ, or Telefile Tax Report.

2Interest on U.S. Government Obligations

If you report interest on bonds, notes and other obliga- tions of the U.S. on your Federal return, this income may be excluded from your Oklahoma Adjusted Gross Income if a detailed schedule is furnished, accompanied with 1099s showing the amount of interest income and the name of the obligation from which the interest is earned. If the interest is from a mutual fund which invests in government obligations, enclose a detailed schedule from the mutual fund showing the amount of monies received from each government obligation or the percentage of funds received from each obligation. Interest from entities such as FNMA & GNMA does not qualify.

3Social Security

Social Security benefits that are included in the Federal Adjusted Gross Income shall be subtracted.

4Oklahoma Government or Federal Retirement

¥You, and/or your spouse, may exclude Retirement benefits, up to $5,500, but not to exceed the amount included in your Federal Adjusted Gross Income. If you retired on disability and the payments you receive are taxed as ordinary income (not retirement benefits) until you reach minimum retirement age, the income taxed as ordinary income does not qualify for this exclusion. The total exclusion from all retirement benefit plans may not exceed $5,500 per taxpayer.

The retirement benefits must be received from the following: the Civil Service of the United States, any component of the Armed Forces of the United States, the Oklahoma Public Employees Retirement System of Oklahoma, the Oklahoma TeacherÕs Retirement System, the Oklahoma Law Enforcement Retirement System, the Oklahoma Firefighters Pension and Retirement System, the Oklahoma Police Pension and Retirement System, the Employee retirement systems created by counties pursuant to Sections 951 et seq. of Title 19 of the Oklahoma Statutes, the Uniform Retirement System for Justices and Judges, the Oklahoma Wildlife Conserva- tion Department Retirement Fund, the Oklahoma Em- ployment Security Commission Retirement Plan, or the Employee retirement systems created by municipalities pursuant to Sections 48 - 101 et seq. of Title 11 of the Oklahoma Statutes. Enclose a copy of Form 1099R.

¥U.S. Railroad Retirement Board benefits that are included in the Federal Adjusted Gross Income may be excluded.

5Other Retirement Income

You, and/or your spouse, if you are 65 years of age or older and your income does not exceed the limits in the worksheet (at right), may exclude retirement benefits, up to $1,100, but not to exceed the amount included in your

Federal Adjusted Gross Income. If you retired on disability and the payments you receive are taxed as ordinary income (not retirement benefits) until you reach minimum retirement age, the income taxed as ordinary income does not qualify for this exclusion. The total exclusion from all retirement benefit plans may not exceed $1,100 per taxpayer. Any individual who claims the exclusion for government retirees on line 4 may not claim a combined total exclusion for both lines 4 and 5 in an amount exceeding $5,500.

The retirement benefits must be received from the following and satisfy the requirements of the Internal Revenue Code (IRC): an employee pension benefit plan under IRC section 401, an eligible deferred compensation plan under IRC section 457, an individual retirement account, annuity or trust or simplified employee pension under IRC section 408, an employee annuity under IRC section 403 (a) or (b), United States Retirement Bonds under IRC section 86, or lump-sum distributions from a retirement plan under IRC section 402 (e). Enclose a copy of Form 1099 or other documentation.

The worksheet below should be retained for your records.

Please complete the following worksheet to find if you are eligible for the retirement exclusion. Before you begin, you must complete lines 7-13 of your Form 511, if they apply to you. Upon completing these lines, you then fill in the section below. Please retain this worksheet for your records.

1. Add the amounts on lines 1, 11,12 and 13 from your Form 511.

-

2.Add the amounts, if any, on lines 2, 3, 4, 6 and 9

3.Subtract the amount on line 2 (above) from line 1

If this total is $25,000 or less and you are at least 65 years of age with a filing status of single, head of household or married filing separately, then you qualify for the up to $1,100 exclusion.

If this total is $50,000 or less and you are at least 65 years of age with a filing status of married filing jointly or qualify- ing widow, then you qualify for the up to $1,100 exclusion.

If you do not meet either of the above described circum- stances, you do not qualify.

Remember, the amount of the exclusion is up to $1,100, but it cannot exceed the amount included in your Federal Adjusted Gross Income.

(instructions continued on page 6)

Other Additions ¥ continued from page 6...

B.Federal Net Operating Loss: Enter carryover(s) included on Federal Form 1040. See preceding net operating loss section on page 4. Also see line 6.

C.Enter depletion claimed on a lease bonus if no income is received as a result of non-producing proper- ties. Such depletion must be restored in the year the lease expires. A complete schedule by property must be furnished.

15Deductions

To claim itemized deductions on your Oklahoma return, you must have claimed itemized deductions on your Federal return. Otherwise, enter your Oklahoma standard deduction which is determined as follows:

If you are married filing separate, enter the larger of $500 or 15% of line 14, not to exceed $1,000.

All other filing statuses:

¥If line 14 is $6,666 or less, enter $1,000.

¥If line 14 is $13,333 or more, enter $2,000.

¥If line 14 is between $6,666 and $13,333, multiply line 14 by 15% and enter that result.

16Exemptions and Dependents

Oklahoma allows $1,000 for each exemption and dependent.

18Proration of Exemptions and Deductions

If you have income from out of state, your exemptions and deductions must be prorated on the ratio of Okla- homa Adjusted Gross Income to Federal Adjusted Gross Income reduced by allowable adjustments other than out of state income.

20Federal Tax Deduction

Compute Federal Income Tax deduction as follows:

On Federal Telefile Tax record: Line J.

Do not use the amount reported on your Form(s) W-2.

21Proration of Federal Taxes

Federal income taxes are deductible only to the extent they relate to income subject to taxation in Oklahoma. Federal Income Tax as computed for line 20 must be prorated on the ratio of Oklahoma Adjusted Gross Income to the Federal Adjusted Gross Income.

23Child Care Credit

If you are allowed a credit for child care expenses on your Fed- eral return, there shall be allowed a credit against the Okla- homa tax equal to 20% of the credit for child care expenses al- lowed by the IRS code. The Federal credit cannot exceed the amount of your Federal Tax. The credit determined on line 23 must be prorated on the ratio of Oklahoma AGI to Federal AGI and the credit cannot exceed your tax. Enclose a copy of Fed- eral Form 2441 and page 2 of Form 1040 or Form 1040A, in- cluding Schedule 2.

28Partial Military Pay Exclusion

Members of any component of the Armed Forces, except retired, may exclude the first $1,500 of active pay including Reserve and National Guard pay. Retired military see instructions for line 4.

29Qualifying Disability Deduction

If you have a physical disability constituting a substan- tial handicap to employment, you may deduct the expense incurred to modify a motor vehicle, home, or work place necessary to compensate for the disability. Please enclose a schedule detailing the expenses incurred and a description of the physical disability with documentation regarding the Social Security Administra- tion recognition and/or allowance of this expense.

30Political Contribution

If you contributed money to a political party or candidate for political office, you may deduct the amount contrib- uted up to a maximum of $100 ($200 if a joint return is filed).

31Interest Qualifying for Exclusion

You may partially exclude interest received from a bank, credit union or savings and loan association located in Oklahoma. The total exclusion for interest claimed on your State return cannot exceed $100 ($200 if filing jointly even if only one spouse received interest in- come).

32Qualified Medical Savings Account Contributions made to and interest earned from an Oklahoma medical savings account established, pursu- ant to O.S. Title 63, Sections 2621 through 2623, shall be exempt from taxable income. In order to be eligible for this deduction, contributions must be made to a medical savings account program approved by either the State Department of Health or the Insurance Commis- sioner. A statement of the contributions made to and interest earned on the account must be provided by the trustee of the plan, and enclosed as part of the filed return. This is not on your W-2.

33Qualified Adoption Expense

An Oklahoma resident may deduct ÒNonrecurring adoption expensesÓ not to exceed $10,000 per calendar year (O.S. Title 68, Section 2358). Expenses are to be deducted in the year incurred. ÒNonrecurring adoption expensesÓ means adoption fees, court costs, medical expenses, attorney fees and expenses which are directly related to the legal process of adoption of a child. Enclose a schedule describing the expenses claimed.

34Agricultural Commodity Processing Facility Exclusion

Owners of agricultural commodity processing facilities may exclude 15% of their investment in a new or ex- panded agricultural commodity processing facility located within Oklahoma (O.S. Title 68 Section 2358). Agricultural commodity processing facility means building, structures, fixtures and improvements used or operated primarily for the processing or production of agricultural commodities to marketable products. The

Agriculural Commodity Processing

Facility Exclusion • continued from page 7 investment is deemed made when the property is placed in service. Under no circumstances shall th s exclusion lower your taxable income below zero. In the eve t the exclusion does exceed income, any unused portion may be carried over for a period not to exceed 6 years.

A schedule must be enclosed showing the type of investment(s), the date placed in service, and the cost. If the total exclusion available is not used, a copy of the schedule must be enclosed in the carryover year and show the total exclusion available, the amount previ- ously used and amount available in the carryover year. If the exclusion is through a Partnership or Subchapter S Corporation, the schedule must also include the partnershipÕs or Subchapter S CorporationÕs name and ID number and your pro-rata share of the exclusion.

35Depreciation Adjustment for Swine or Poultry Producers

Individuals who are swine or poultry producers may deduct depreciation on an accelerated basis for new construction or expansion costs for assets placed in service after December 31, 1996. The same deprecia- tion method elected for Federal income tax purposes will be used, except the assets will be deemed to have a 7 year life. Any depreciation deduction allowable is the amount so computed minus the Federal depreciation claimed. Enclose a copy of the Federal depreciation schedule and a computation of the accelerated Okla- homa depreciation.

40Tax Method I

Using line 39, find your tax in Tax Table 1 (pages A-F). Enter the result here.

43Tax Method II

Using line 42, find your tax in Tax Table 2 (pages G-L). Enter the result here.

44Oklahoma Income Tax

Your Oklahoma income tax liability is the lower of Method I or Method II. Enter the lower of line 40 or line 43. This is your Oklahoma Income Tax.

46Credit for Tax Paid to Another State

If you receive income for personal services from another state, you must report the full amount of such income on your Oklahoma return. If the other state also taxes the income, a credit is allowed on Form 511. Complete Oklahoma Schedule E and furnish a copy of the other state(s) return.

47Oklahoma Investment/New Jobs Credit Individuals engaged in manufacturing or processing (including partnership or Sub-S pass through) who are entitled to Oklahoma Investment/New Jobs credit, see Form 506. (This has no relationship to your Federal Targeted Jobs credits).

48Oklahoma Agricultural Producers Credit Oklahoma agricultural producers who invest in Okla- homa producer-owned agricultural processing coopera- tives, ventures or marketing associations and are entitled to the Oklahoma agricultural credit, see Form 520.

49Other Credits

Please review Form 511CR for other available credits.

AOklahoma Estimated Tax Payments Enter any payments you made on your estimated Oklahoma income tax for 1997. Include any overpay- ment from your 1996 return that you applied to your 1997 estimated tax.

If at least 66-2/3% of your gross income is from farming, estimate payments are not required. If claiming this exception, you must mark the box on this line and enclose a complete copy of your Federal return.

BPayments with Extension

If you filed Oklahoma extension Form 504 for 1997, enter any amount you paid with that form.

54Health Insurance Credit

This is for employers only. Please enclose Form 534.

55Credit for Property Tax Relief

Any person 65 years of age or older or any totally disabled person who is head of a household, a resident of and domiciled in this state during the entire preceding calendar year, and whose gross household income for such year does not exceed $12,000, may file a claim for property tax relief on the amount of property taxes paid on the household occupied by such person during the preceding calendar year. The credit may not exceed

$200. Claim must be made on Form 538-H.

56Sales Tax Relief/Credit

Any resident individual who is domiciled and lives in this state for the entire calendar year and whose gross household income for such year does not exceed

$12,000 may file a claim for sales tax relief. Fill out and enclose Form 538-S if you qualify for this credit.

The Oklahoma Department of Human Services will make the sales tax refund to persons who have continuously received aid to the aged, blind, disabled or Medicaid payments for nursing home care from January 1, 1997 to December 31, 1997. Persons who have received tempo- rary assistance for needy families (T.A.N.F.) for any month in the year of 1997 are not eligible for the sales tax refund.

A person convicted of a felony shall not be permitted to file a claim for sales tax relief for any year for which that person is an inmate in the custody of the Department of Corrections for any part of that year.

(instructions continued on page 9)

60Oklahoma Wildlife Diversity Program,

61 Low Income Health Care Fund,

62Veterans Affairs Capital Improvement Program,

and Oklahoma Breast Cancer Program

63 If you wish to donate from your refund, you must check and enter the amount on these lines. Please note that this reduces your refund if you choose to donate. The donation will be forwarded to the appropriate agency.

¥¥ The Oklahoma Wildlife Diversity Program (formerly Nongame Wildlife Program) is funded primarily by concerned Oklahomans. All donations provide for a variety of projects, including research on Texas horned lizards and other rare wildlife, wildlife observation activities such as winter Bald Eagle Tours and spring Watchable Wildlife Weekends, statewide educational workshops, informational brochures and posters, and management of a bat cave purchased with previous program donations. If you are not receiving a refund, you may still support Oklahoma wildlife by sending a donation to:

Wildlife Diversity Program

1801 N. Lincoln

Oklahoma City, OK 73105.

¥¥ Oklahomans helping each other is what the Indigent (Low Income) Health Care Fund is all about. Donations made to the fund are used to help provide medical and dental care for needy children and families. Every dollar you donate goes directly for health care costs. If you are not receiving a refund, you may contribute toward indigent health care by sending a donation to:

Oklahoma Department of Human Services Revenue Processing Unit

Re: Indigent Health Care Revolving Fund P.O. Box 25352, Oklahoma City, OK 73125.

¥¥ You may donate from your tax refund to help the Department of Veterans Affairs to purchase equipment and develop capital improve- ment projects and to acquire properties for expanding or improving existing projects.

¥¥ If you wish to donate from your tax refund for Oklahoma Breast Cancer Research, enter the amount on line 63. The donation will be forwarded to the Advancement of Science and Technology for Breast Cancer Research.

67Estimated Tax Penalty and Interest

To avoid the Estimated Tax Penalty and Interest, estimated tax payments, timely filed, and withholdings are required to be equal to 70% of the current year tax liability or equal or exceed 100% of your prior year tax liability. If you do not meet one of the above exceptions, you may complete Form OW-8-P, or the Oklahoma Tax Commission will figure the penalty and interest for you, and send you a bill.

68Delinquent Penalty and Interest

After the original due date of the return compute 5% penalty on the tax due (line 66). Compute interest on the tax due at 1 1/4% per month from original due date of the return. An extension does not extend the date for payment of tax.

Title 68, Oklahoma Statutes, provides that any term used in this Act shall have the same meaning as when used in a comparable context in the Internal Revenue Code, except when specifically provided for in the Oklahoma Statutes or rules.

N CE OU AV E OMP L E T E D OU R E T U R N

}When you~havecompleted€ your form,~ please see‚‚‚the section entitled, “When You Are Finished” on page 11 of this booklet. This section contains information about enclosing the correct documents in the included envelope.

If you are receiving a refund, also read the above mentioned section, but also read the section entitled, “All About Refunds” on page 4.

I understand that in addition to the tax balance due, there will be a handling fee of 1.70% charged to my Discover¨ Card, as authorized by O.S. 1994 Title 68, Section 218.

Must be signed only by Card Member.

Total Payment