Other Income
Form 1040 – Line 21
Pub 4012 – Pages D-3 and D-4
Pub 4491 – Part 3 – Lesson 16
TAX-AIDE
TAX-AIDE
Intake/Interview
TAX-AIDE
NTTC Training – TY2015
2
Form 1040 – Line 21
TAX-AIDE
NTTC Training – TY2015
3
Examples:
Pub 17, pg 94
● Gambling winnings including lotteries and raffles
● Reported on 1099-MISC, Box 3
● Reported on 1099-MISC, Box 7 (but “not a
business”)
● 1099-LTC
● Jury duty pay and Poll Worker Pay (not on W-2)
● Other:
 Prizes and awards
 Medical study subject pay
 Cancellation of credit card debt
TAX-AIDE
NTTC Training – TY2015
4
National Mortgage Settlement
● Taxpayers may receive a settlement
payment
● Relates to a home lost in foreclosure
2008 – 2012
● No tax form (1099) issued
● Out-of-scope
TAX-AIDE
NTTC Training – TY2015
5
Other Income
● Generally does NOT include 1099-MISC
non-employee compensation (Box 7)
which is business income – Sch C
● Does NOT include rent or royalty income
which are reported on Sch E
● DOES include income not reported on
other lines and schedules
TAX-AIDE
NTTC Training – TY2015
6
Line 21 in TaxWise
Link to Wkt 7 Other
Income Worksheet, if not
already on tree.
TAX-AIDE
NTTC Training – TY2015
7
Gambling income
Link to W-2G
If no W-2G, use L 16
TAX-AIDE
NTTC Training – TY2015
8
TAX-AIDE
NTTC Training – TY2015
9
Bottom of W-2G
Check if not taxable by state
Losses automatically transfer to Schedule A limited by amount of winnings.
If no W-2G, ensure losses are entered on Schedule A, but do not exceed winnings.
TAX-AIDE
NTTC Training – TY2015
10
Other Income
If 1099-MISC received
TAX-AIDE
If NO 1099-MISC received
NTTC Training – TY2015
11
Long Term Care Payments
1099-LTC
● LTC Insurance Contracts –

Generally reimbursements not taxable

Per diem costs up to an aggregate limit
of $330/day are non-taxable
● Reported to taxpayer on 1099-LTC
● Complete Form 8853, Section C (Sections
A and B remain out-of-scope)
TAX-AIDE
NTTC Training – TY2015
12
Long Term Care Payments
1099-LTC
XX
TAX-AIDE
NTTC Training – TY2015
13
Accelerated Death Benefits
1099-LTC
● Insured has been certified by a physician
as terminally ill

Fully excludible
● Certified as chronically ill

Treated the same as paid under a
qualified long-term care insurance
contract
TAX-AIDE
NTTC Training – TY2015
14
Long Term Care Payments
1099-LTC
● If there are multiple payees under the
insurance contract, refer the taxpayer to
a paid preparer
TAX-AIDE
NTTC Training – TY2015
15
Long Term Care Payments
1099-LTC
● Complete Form 8853 Pg 2

Either add or link from Wkt 7
● TaxWise will carry taxable amount, if
any, to 1040 Wkt 7 L 11
● Unreimbursed medical expenses can be
deducted on A Detail, if itemizing
TAX-AIDE
NTTC Training – TY2015
16
F
o
r
m
8
8
5
3
NTTC Training – TY2015
17
Cancellation of Debt
Pub 4012 – pg D-32
● Nonbusiness credit card debt only
● Taxpayer must be solvent immediately
before debt cancelled

Value of assets exceeds value of
liabilities

Not in bankruptcy
● Otherwise out-of-scope
TAX-AIDE
NTTC Training – TY2015
18
Cancellation of Debt
● Lenders must issue Form 1099-C if cancel
$600 or more of debt

Less than $600 must also be reported as
income by taxpayer
● Cancelled debt included on Form 1040,
Line 21
TAX-AIDE
NTTC Training – TY2015
19
Form 1099-C
OOS
OOS
Nonbusiness credit card
debt only
TAX-AIDE
NTTC Training – TY2015
20
Income – Quality Review
The final question with respect to income:
Did you have any other income?
TAX-AIDE
NTTC Training – TY2015
21
Other Income
Questions?
Comments…
TAX-AIDE
NTTC Training – TY2015
22
Medicaid Waiver
Payments
Difficulty of Care Payments
4491 – Part 3 – Lesson 16
TAX-AIDE
TAX-AIDE
Entire
Lesson
Medicaid Waiver Payments
● Paid by state or county
● Paid to caregiver to provide nonmedical
support services to an individual in
caregiver’s home
● Frequently paid to care recipients own
family
TAX-AIDE
NTTC Training – TY2015
24
Difficulty of Care Payments
● IRS Notice 2014-7

Treats “qualified Medicaid waiver
payments” as difficulty of care payments

MUST be excluded from Income
TAX-AIDE
NTTC Training – TY2015
25
Income Documents
● Each state reports payments according
to its own rules

1099-MISC Box 7

1099-MISC Box 3

W-2

Not reported

Other…
TAX-AIDE
NTTC Training – TY2015
26
Tax Return
● Enter income from W-2 on Line 16 of Wkt
7 as negative number
OR
● Enter income from 1099-MISC on Line 21
(using Wkt7 Line 2)
● Enter same amount as a negative number
on Line 21 (using a blank line on Wkt7)
labeled “Notice 2014-7”
TAX-AIDE
NTTC Training – TY2015
27
In TaxWise
● Worksheet 7
TAX-AIDE
NTTC Training – TY2015
28
Reported on W-2
● Payments entered on a W-2 and then
excluded are automatically deducted by
TWO from earned income for

EIC

ACTC

Dependent care credit
TAX-AIDE
NTTC Training – TY2015
29
Schedule C
● Report payments on Schedule C if
taxpayer is in the business of providing
care
● Enter exclusion as an other expense on
Schedule C
● Do not exclude income if care is for
more than 5 adults or more than 10
children
TAX-AIDE
NTTC Training – TY2015
30
Excluding Payment from Return
● Taxpayer must exclude income from
return.

Will likely receive a notice of omission
from IRS

Should answer with “Notice 2014-7”
TAX-AIDE
NTTC Training – TY2015
31
Quality Review
● Verify if amount has been excluded from
all applicable worksheets/forms, (EIC,
ACTC, & Dependent Care Credit)
● Verify the dollar amount on Wkt7
TAX-AIDE
NTTC Training – TY2015
32
Medicaid Waiver Payments
Questions?
Comments?
TAX-AIDE
NTTC Training – TY2015
33