EKS Training
Scenario Two
Ground
Rules
o Don’t work ahead – stay on the current task
o Turn off your cell phone
o Question/Comments – raise your hand, stay in your seat
o No side conversations - don’t even ask your neighbor for help
o Returning volunteers sit next to new volunteers
o Bring your materials every day
o At least try to do your homework – bring your questions
4 Steps:
Class
Structure
1. As a class, we will review Interview Notes, Intake
& Interview Sheet (13614-C) & supporting
documents for each scenario.
2. Instructor will teach Tax Law – referencing
Publication 4012 and 13614-C
3. Instructor will show you how to enter information
into TaxWise. WATCH!
4. Now DO! Students will enter information on
TaxWise
Scenario #2
What you will learn in this scenario:
Scenario #2
1.
Head of Household Filing Status
2.
Exemptions: Dependency
3.
Business Income
4.
Adjustments – Student Loan Interest
5.
Credits:
6.
Determining Itemization
7.
Affordable Care Act – Exemptions
 Child Tax Credit, Additional Child Tax Credit, Child and Dependent Care Credit, American Opportunity
Credit and Retirement Savings Credit
What you will review in this scenario:
1.
Filing Status
2.
Personal Exemptions
3.
Income – W-2, Interest Income, and Unemployment
4.
Credits- Refundable vs Nonrefundable
5.
Itemized Deductions versus Standard Deduction
 Earned Income Tax Credit
Let’s review Cheryl’s Information:
Scenario #2
 Interview Notes
 Intake & Interview sheet - 13614-C
 Tax Documents
Interview
Notes Review
 What did you learn about Cheryl?
Deep Dive with the 13614-C
 Did they bring all the required documents?
 Everything accurate?
Intake &
Interview
 What’s missing/wrong/mismatched that needs to be
changed?
 Compare tax documents and interview notes
 Make any corrections needed on 13614-C
 Fill out greyed out boxes (dependency and ACA)
Publication 4012, Tabs K-3 and K-4
Does this taxpayer need to file their return?
Who should
Or should they?
file?
Publication 4012, Tab A
Is client eligible for VITA services?
In Scope?
What certification level is needed to prepare
this return?
Publication 4012, pages 8-10
Scope of Services Chart
Tax Law
Topic #1
Dependency Exemption:
 Review personal exemption and dependency exemption
 What is a “qualifying child” or “qualifying relative”?
Publication 4012, Tab C-3
Tax Law
Topic #1
What exemptions can Cheryl take?
Do Jeremy and Joshua qualify as “qualifying
relatives” or “qualifying children”?
Tax Law
Topic #2
Head of Household Filing Status
Publication 4012, C-3, Tab B-1, B-3 and B-4
Tax Law
Topic #2
Review 13614-C, Part II, numbers 1 & 2
Let’s review the Decision Tree
 Could Cheryl qualify for more than one status?
You Got This!:
Enter Cheryl’s:
TaxWise
 Personal information on Main Information
Sheet
 Everything on page one of 13614-C goes on
Main Info
Publication 4012, K-6 to K-11 for Main Info
You Got This!:
Enter Cheryl’s:
TaxWise
 Income documents:
W-2, 1099-G & 1099-INT
Publication 4012, D-3 to D-9 for Income
Students: WATCH instructor
TaxWise
Enter Cheryl’s dependents’ information on the Main
Information Sheet
Publication 4012, K-8
Students:
TaxWise
Enter Cheryl’s dependents’ information on the
Main Information Sheet
Publication 4012, K-8
Business Income
 Businesses with inventory, employees, depreciation, business
use of home or a net loss are out of scope (Sch C-EZ rules)
Tax Law
Topic #3
 Any Form 1099-MISC with nonemployee compensation (box
7) for a trade or business must be reported on Line 1 of the
Schedule C-EZ
 Cash Income is considered Business Income and should be
reported on a Schedule C or C-EZ
 Taxpayers can claim expenses for their trade or business and
this will reduce the amount of Gross Receipts
 Self-employment taxes will be paid on Gross Receipts
(TaxWise calculates)
Publication 4012, Tab D-13 to D-15
Business Income
Which one’s EZ?
Tax Law
Topic #3
Schedule C-EZ
Schedule C
Only one per return (if TP and SP
both have businesses won’t work)
Multiple per return possible
Simplified expenses
Must categorize expenses
(advertising, insurance, supplies,
licenses, etc.)
Has limit of $5,000 expenses
No expense limit
Publication 4012, Tab D-13 to D-15
Tax Law
Topic #3
Review 13614-C, Part III
Let’s review the 1099-MISC
 What did Cheryl receive this for?
 Did she have any expenses related to this business
income?
Students: WATCH instructor
Enter Cheryl’s 1099-MISC income on Schedule C-EZ
TaxWise
Must link 1099-MISC to line 1
Publication 4012, Tab D-13 to D-15
Students:
Enter Cheryl’s 1099-MISC income on Schedule C-EZ
TaxWise
Must link 1099-MISC to line 1
Publication 4012, Tab D-13 to D-15
Adjustments
Tax Law
Topic #4
 What are adjustments to income?
 Where are they on the 1040?
 Does Cheryl have an “adjustment to income”?
Publication 4012, Tab E-4 & Cheryl’s 13614-C
Students: WATCH instructor
Enter Cheryl’s 1098-E on 1040 Worksheet 2
TaxWise
Publication 4012, Tab E-5
Students:
TaxWise
Enter Cheryl’s 1098-E on 1040 Worksheet 2
Publication 4012, Tab E-5
Deductions:
 Deductions reduce a taxpayer’s taxable income
Tax Law
Topic #5
 Taxpayer can take Standard or Itemized Deductions (should take the
larger):
 Standard – a fixed dollar amount based on filing status
 Itemized – uses your qualified expenses like mortgage interest, medical or
dental expenses, charitable contributions
 Use Schedule A
 Have documentation
Publication 4012, Tab F & Schedule A
Itemized Deductions:
Tax Law
Topic #5
 Medical Expenses need to be more than 10% of the taxpayer’s AGI
before it will count against the deduction amount
 How much are Cheryl’s unreimbursed medical expenses?
 So many details in Publication 17
Publication 4012, Tab F, Publication 17 & Schedule A
Students: WATCH instructor
Let’s enter Cheryl’s deductions on Schedule A.
TaxWise
Interview notes & Publication 4012, Tab F-5
Students:
Enter Cheryl’s deductions on Schedule A.
TaxWise
Publication 4012, Tab F-5
Should Cheryl itemize her deductions?
TaxWise
Publication 4012, Tab F and Schedule A
Tax Credits:
Tax Law
Topic #6
 Two Types: Refundable & Nonrefundable
 Nonrefundable credits allow taxpayers to lower
their liability to zero.
 Refundable credits allow taxpayers to lower their
tax liability and receive as a payment once liability is
zero.
Nonrefundable Credits:
 Child & Dependent Care Credit*
 Lifetime Learning - Education Credit
 Retirement Savings Credit*
Tax Law
Topic #6
 Child Tax Credit*
 Less common:
 Credit for Elderly or the Disabled
 Foreign Tax Credit
Publication 4012, Tab G & J
*Let’s look at the 4012 for more details on these credits
Refundable Credits:
 Additional Child Tax Credit*
Tax Law
Topic #6
 American Opportunity Tax Credit – Education Credit*
 Earned Income Tax Credit*
Publication 4012, Tabs G, I & J
*Let’s look at the 4012 for more details on these credits
You Got This!:
TaxWise
Enter Cheryl’s Schedule EIC Worksheet
Publication 4012, Tab I-6 and I-7
Students: WATCH instructor
TaxWise
Enter Cheryl’s childcare expenses on Form 2441 for the
Child and Dependent Care Credit
Interview Notes & Publication 4012, Tab G-5
Students:
Enter Cheryl’s childcare expenses on Form 2441 for the
TaxWise
Child and Dependent Care Credit
Interview Notes & Publication 4012, Tab G-5
Students: WATCH instructor
TaxWise
Enter Cheryl’s tuition expenses on Form 8863 for the
American Opportunity Credit
1098-T & Publication 4012, Tab J-7
Students:
Enter Cheryl’s tuition expenses on Form 8863 for the
TaxWise
American Opportunity Credit
1098-T & Publication 4012, Tab J
Let’s review credits calculated on
TaxWise:
TaxWise
Did Cheryl qualify for these credits?
 Child Tax Credit
 Additional Child Tax Credit
Affordable Care Act Exemptions
 Did Cheryl and her dependents have coverage all year?
Tax Law
Topic #7
 If no, let’s review the exemptions before assessing the
Shared Responsibility Payment
Interview Notes, 13614-C, 1095-C and Publication 4012, Tab ACA
Students: WATCH instructor
TaxWise
Enter Exemption information on ACA Worksheet and
8965
Interview Notes, 13614-C, 1095-C and Publication 4012, Tab ACA
Students:
TaxWise
Enter Exemption information on ACA Worksheet and
8965
Interview Notes, 1095-C and Publication 4012, Tab ACA
Completing the
CA return
1.
Get the red out! Most information will automatically populate
from the federal return
2.
State EITC Form – 3514*
3.
If you have entered more than one W-2 on the 1040, you will
have to manually add the additional W-2’s. The first W-2 will
carry over, but the rest won’t.
4.
Make sure to complete the direct deposit or balance due portion
of the return
5.
Complete the CA Renters Credit Worksheet when applicable.
*At the time of this ppt creation, details on how TaxWise will auto-populate the 3514
were not available
 Does Cheryl want to direct deposit her refund?
 If so, is she requesting to split her refund?
 Does she want to buy a savings bond?
Refund
13614-C and Interview Notes
Ask Every Taxpayer (AET)!
 Remind Cheryl of the savings option
Savings
 Answer Questions
 Be enthusiastic and positive!
Remember:
Bank
Account
Numbers
 On the 8888, fill in both accounts, amounts,
choose checking/savings
 Best practice to check they were entered in
correctly
 On the 540, check the “different account”
option, will have to enter twice to verify
You Got This!:
TaxWise
Enter Cheryl’s Form 8888
Interview Notes & Publication 4012, Tab K-14 to K-15
THINGS YOU NEED TO KNOW ABOUT FINISHING A RETURN
Finishing the
return
1.
Ask the questions in the Prep Use Fields
2.
All returns must be Quality Reviewed (checklist on 13614-C) Tab,
K-25
3.
Run Diagnostics to check for errors
4.
Print returns (Federal and State) for Taxpayer
5.
Review return with taxpayer (Formula 1040 activity)
6.
Have Taxpayer and Spouse sign 8879s for Federal and State and
remind them they are responsible for their return and by signing,
they are agreeing it is accurate:
 One copy for the taxpayer
 One copy for the VITA Site
Publication 4012, Tab K
 Do we have matching AGI, refund?
 Let’s review entry of:
Check our
work
- W-2
- 1099-MISC
- 1098-T
- 1098-E
- Form 2441
- ACA Exemptions
- Split refund
Can an unmarried person claim “head of household” status?
Publication 4012, Tab B-1, B-3, B-4 and C-3
Yes, if they provide more than half of the cost of keeping their home and a
“qualified person” lived with them for ½ the year.
True or False: The term “dependent” means the person met all the
requirements to be “qualifying child” or “qualifying relative”.
Publication 4012, Tab C-3
Look it up!
True
A taxpayer must have this to qualify for EITC?
Publication 4012, Tab I
Earned Income
What are some examples of earned income?
Publication 4012, Tab I-1
Taxable wages, self-employment earnings
True or False: Laura’s foster son Jack is 12. He is a US citizen, he lives with
Laura and she provides his full financial support. Is Jack a qualifying child
for the child tax credit?
Publication 4012, Tab G-8
True
Look it up!
The tax credit for child and dependent care expenses allows taxpayers to
claim a credit for expenses paid for the care of children under what age?
Publication 4012, Tab G-3
13
True or False: For the CDCC, the qualifying person must live with the
taxpayer for the entire year?
Publication 4012, Tab G-3
False, the qualifying person must live with them for more than ½ the year.
What are the two deductions options?
Publication 4012, Tab F
Standard or Itemized
What is the most common big ticket item for itemizing deductions?
Publication 4012, Tab F-3 and F-4
Mortgage Interest
Name two requirements to qualify for the Child Tax Credit
Publication 4012, Tab G-8 and G-9
Qualifying Child must be under age 17, a US Citizen, US National or Resident Alien,
be claimed as a dependent and live with the taxpayer for more than half the year
Look it up!
Is the Child Tax Credit a refundable or nonrefundable credit?
Publication 4012, Tab G-8
Nonrefundable, but the client may be eligible for the Additional Child Tax Credit
which is refundable.
What should you do for every tax return to ensure the taxpayer receives EITC, if
eligible?
Publication 4012, Tab K-8
Always check the EIC box on the Main Information Sheet when entering
dependents