BASIC
WORKSHOP
2
VOLUNTEER INCOME TAX ASSISTANCE (VITA)
TRAINING
11/17/14 REV
RECAP
What we covered last week
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•
•
•
•
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CAP Riverside/VITA History
Volunteer Process
Standards of Conduct
Interview/Intake Process
Exemptions, Standard, or Itemized deductions
Tax Preparation, inputting income
TOPICS FOR TODAY
We will cover remaining basic concepts:
•
Inputting Income
•
•
Social Security
•
Distributions from IRA or Retirement Plans
•
Gambling Income
•
Other Income
•
Alimony
Schedule C
•
Schedule A Itemizations
•
Education expenses
•
•
Student Loan Interest
•
Tuition and Fees
•
American Opportunity and Lifetime Learning Credits
Dependent Care Expenses
•
Earned Income Tax Credit
•
Child Tax Credit
•
CA State
•
ACA
TAX PREPARATION
This is a social
security annual
benefit statement.
The important
numbers are in
box 5 and 6.
You will need to
know Medicare
part B payments
as well, especially
if taxpayer is
itemizing.
TAX PREPARATION
Social Security Income
• Remember to input Medicare payments and Federal withheld
TAX PREPARATION
TAX PREPARATION
Check for address
on 1099-R
Input required fields,
skip Name Code,
input Payer’s Name
and Address as well
as Zip code.
Don’t forget Lines 1,
2, 4, and 7. These
are very important in
this form. CA
information, if
available, input on
Lines 12 and 13.
TAX PREPARATION
General rule for Gambling, anything over $1,999 must be
claimed as income.
TAX PREPARATION
Specific Gambling Rules
• Bingo or slot machine $1,200
• Keno Machine $1,500
• Poker Tournament $5,000
TAX PREPARATION
Input information according to the form
TAX PREPARATION
Schedule C Income
Compensation not subject
to SS wages
Move out incentives
Day Care subsidy
Honorariums and Executor
Fees
Box 3
Always in box 7
Contract employees to
avoid employment HR
issues
Some Stipends
Remember use Schedule
C 1099, and not one
associated with 1040 Line
21
TAX PREPARATION
Business Expenses (add cash via scratchpad)
TAX PREPARATION
Schedule A – Inputting Itemizations
TAX PREPARATION
Schedule A Detail– Inputting Itemizations
Input
qualifying
Medical
expenses
here
TAX PREPARATION
Schedule A Detail – Inputting Itemizations
Qualifying
donations to
qualified
organizations
TAX PREPARATION
Schedule A – Inputting Itemizations
TAX PREPARATION
Education Expenses/Credits
Student loan interest deduction
•
You may be able to deduct interest you pay on a qualified student loan.
Generally, the amount you may deduct is the lesser of $2,500 or the
amount of interest you actually paid. The deduction is claimed as an
adjustment to income so you do not need to itemize your deductions on
Form 1040, Schedule A
You can claim the deduction if all of the following apply:
•
You paid interest on a qualified student loan in tax year 2013
•
You are legally obligated to pay interest on a qualified student loan
•
Your filing status is not married filing separately
•
Your modified adjusted gross income is less than a specified amount
which is set annually, and
•
You and your spouse, if filing jointly, cannot be claimed as dependents on
someone else's return
TAX PREPARATION
Education Expenses/Credits
Tuition and fees deduction
Generally, you can claim the tuition and fees deduction if all three of the
following requirements are met.
•
You pay qualified education expenses of higher education.
•
You pay the education expenses for an eligible student.
•
The eligible student is yourself, your spouse, or your dependent for whom
you claim an exemption on your tax return.
•
The tuition and fees deduction can reduce the amount of your income
subject to tax by up to $4,000.
•
This deduction is taken as an adjustment to income. This means you can
claim this deduction even if you do not itemize deductions on Schedule A
(Form 1040). This deduction may be beneficial to you if you do not qualify
for the American opportunity or lifetime learning credits.
TAX PREPARATION
Education Expenses/Credits
American Opportunity Credit
Added required course materials to the list of qualifying expenses
and allows the credit to be claimed for four post-secondary
education years instead of two. Many of those eligible will qualify
for the maximum annual credit of $2,500 per student. $1,000 of
credit is refundable.
The full credit is available to individuals whose modified adjusted
gross income is $80,000 or less, or $160,000 or less for married
couples filing a joint return. The credit is phased out for taxpayers
with incomes above these levels.
TAX PREPARATION
Education Expenses/Credits
American Opportunity Credit
you may be able to claim a lifetime learning credit of up to $2,000 for
qualified education expenses paid for all eligible students. There is
no limit on the number of years the lifetime learning credit can be
claimed for each student.
A tax credit reduces the amount of income tax you may have to pay.
Unlike a deduction, which reduces the amount of income subject to
tax, a credit directly reduces the tax itself. The lifetime learning credit
is a nonrefundable credit. This means that it can reduce your tax to
zero, but if the credit is more than your tax the excess will not be
refunded to you.
Your allowable lifetime learning credit may be limited by the amount
of your income and the amount of your tax.
TAX PREPARATION
Education Expenses/Credits Tips
A taxpayer has to choose one of the 3 options when it comes to
Tuition and Fees deduction, American Opportunity Credit, or
Lifetime Learning Credit. Cannot claim any two, only one.
In some cases, the taxpayer must see which is most beneficial.
Tuition and Fees is an adjustment to income, which can reduce
tax liability, while American Opportunity Credit is only available in
first 4 years of post-secondary. Lifetime learning has a different
focus, targeting courses to acquire or improve job skills, while
being limited to amounts paid for required books that must be paid
to the educational instituion.
TAX PREPARATION
Student Loan Interest and Tuition and Fees deduction
TAX PREPARATION
Student Loan Interest and Tuition and Fees deduction
TAX PREPARATION
American Opportunity Credit and Lifetime Learning Credit
(1040 Pg. 2)
TAX PREPARATION
American Opportunity Credit and Lifetime Learning Credit
TAX PREPARATION
American Opportunity Credit and Lifetime Learning Credit
TAX PREPARATION
Dependent Care Expenses
To be able to claim the credit for child and dependent care expenses, you must file Form 1040, Form 1040A, or Form
1040NR, not Form 1040EZ or Form 1040NR-EZ, and meet all the following tests.
The care must be for one or more qualifying persons who are identified on Form 2441. (See Qualifying Person Test.)
You (and your spouse if filing jointly) must have earned income during the year. (However, see Rule for student-spouse
or spouse not able to care for self under Earned Income Test, later.)
You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work.
(See Work-Related Expense Test, later.)
You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a
dependent. If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the
end of the year. You cannot make payments to:
Your spouse, or
The parent of your qualifying person if your qualifying person is your child and under age 13.
See Payments to Relatives or Dependents under Work-Related Expense Test, later.
Your filing status may be single, head of household, or qualifying widow(er) with dependent child. If you are married, you
must file a joint return, unless an exception applies to you. See Joint Return Test, later.
You must identify the care provider on your tax return. (See Provider Identification Test, later.)
If you exclude or deduct dependent care benefits provided by a dependent care benefit plan, the total amount you
exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person
was cared for or $6,000 if two or more qualifying persons were cared for). (If two or more qualifying persons were cared
for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or
deduct is limited to $5,000. See Reduced Dollar Limitunder How To Figure the Credit, later.)
TAX PREPARATION
Dependent Care Expenses (1040 Pg. 2)
TAX PREPARATION
Dependent Care Expenses
Input information of care provider, SSN or Employer Identification
can be used, and place full amount paid for care.
TAX PREPARATION
Dependent Care Expenses
List expenses per each qualifying child with qualifying expenses.
TAX PREPARATION
Earned Income Tax Credit
To qualify for Earned Income Tax Credit or EITC, you, and your spouse if married and filing a
joint return, must meet all of the following rules:
Have a Social Security Number that is valid for employment
Have earned income from working for someone, running or owning a business or farm or
another source
Cannot file as married filing separate
Must be:
• a U.S. citizen or resident alien all year or
• a nonresident alien married to a U.S. citizen or resident alien, file a joint return and
choose to be treated as a resident alien (for more information on making this choice,
see Publication 519, U.S. Tax Guide for Aliens)
Cannot be the qualifying child of another person
Cannot file Form 2555 or 2555-EZ (related to foreign earned income)
Your Adjusted Gross Income and earned income must meet the limits shown on the Income
Limits, Maximum Credit Amounts and Tax Law Updates Page
Your investment income must meet or be less than the amount listed on the Income Limits,
Maximum Credit Amounts and Tax Law Updates Page
TAX PREPARATION
Earned Income Tax Credit
Earned Income and adjusted gross income (AGI) must each be less than:
•
$46,227 ($51,567 married filing jointly) with three or more qualifying
children
•
$43,038 ($48,378 married filing jointly) with two qualifying children
•
$37,870 ($43,210 married filing jointly) with one qualifying child
•
$14,340 ($19,680 married filing jointly) with no qualifying children
Tax Year 2013 maximum credit:
•
$6,044 with three or more qualifying children
•
$5,372 with two qualifying children
•
$3,250 with one qualifying child
•
$487 with no qualifying children
TAX PREPARATION
Earned Income Tax Credit Test
1.
2.
A taxpayer has interest income of $3,500. His job
pays him $7,000 annually. He is 30, single, has a
valid social security number and is not the qualifying
child of anyone else, does he qualify?
Starting in February of the tax year, Sam has cared
for Lisa in his home. She is the 10 year old daughter
of his stepson who also lives with him and is
unemployed. Does Lisa meet the EITC requirements
for a qualifying child?
TAX PREPARATION
Earned Income Tax Credit
Read the directions, if you answer 4a with a yes, then move to
Line 5.
TAX PREPARATION
Earned Income Tax Credit
• Answer each question carefully and accurately.
TAX PREPARATION
Earned Income Tax Credit
This is the tricky portion to the
EIC worksheet, be sure to
read each line and answer
accordingly.
Complete each column where
a qualifying child is listed.
TAX PREPARATION
Earned Income Tax
Credit
Ask taxpayer if they have
ever been disallowed for
the tax credit.
Most questions are prefilled, but Question 13
asks about residency. If
taxpayer has lived in
United States for more
than half the year,
answer, Yes.
TAX PREPARATION
The Child Tax Credit is a credit that may reduce your tax by as much as $1,000 for each
of your qualifying children.
The additional child tax credit is a credit you may be able to take if you are not able to
claim the full amount of the child tax credit.
A qualifying child for purposes of the child tax credit is a child who:
•
Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister,
or a descendant of any of them (for example, your grandchild, niece, or nephew),
•
Was under age 17 at the end of 2013,
•
Did not provide over half of his or her own support for 2013,
•
Lived with you for more than half of 2013 (see Exceptions to time lived with you ,
later),
•
Is claimed as a dependent on your return, Does not file a joint return for the year (or
files it only as a claim for refund), and
•
Was a U.S. citizen, a U.S. national, or a resident of the United States. If the child was
adopted, see Adopted child , later.
For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c.
TAX PREPARATION
CA State Forms
Most common issue seen is filling in the
Deceased Taxpayer or Spouse Information.
Follow the form.
TAX PREPARATION
Taxpayers with multiple Federal W2, will need to
have multiple CA W2
• This is completed by putting the cursor over the
W2 and clicking the “+” sign. You will press this sign
as many times as needed. You will then verify the
amounts as shown above.
TAX PREPARATION
Custom
er needs
landlord
info. or
cannot
claim
AFFORDABLE CARE
ACT
The individual shared responsibility provision of the Health
Care Law requires you and each member of your family to:
• have qualified health insurance, also called minimum essential
coverage,
• have an exemption, or
• make a shared responsibility payment when filing your federal
income tax return.
Many people already have qualifying health insurance
coverage and don’t need to do anything more than maintain
that coverage.
AFFORDABLE CARE
ACT
Exemptions and Where to Request:
•
Members of Certain Religious sects – Marketplace
•
Short Coverage Gap – IRS
•
Certain Noncitizens – IRS
•
Coverage is Considered Unaffordable – IRS
•
Household Income Below the Return Filing Threshold – IRS
•
Members of Federally-recognized Indian Tribes Marketplace or
IRS
•
Members of Health Care Sharing Ministries Marketplace or IRS
•
Incarceration Marketplace or IRS
•
Hardships Marketplace or IRS - depending which hardship
exemption you claim
EXIT INTERVIEW
Meet with taxpayer
Taxpayer should verify all information
• Social Security (ALL), Name Spelling, Address, etc.
Review refund or amount owed with taxpayer
• Instruct on what credits they’re receiving
• Instruct on why they owe
• Failure to pay Federal Witholding (W9)
• Self Employment tax if they’re self-employed
Taxpayer must sign 1040 PG 2
Return ALL documents to taxpayer
Taxpayer complete online survey either at site or at home
• Available on CAP Riverside webpage
EXIT INTERVIEW
Now that you’ve received your return, have you thought
about savings?
• Bank Accounts
• Savings
• IDA (Individual Development Account)
• CAP Riverside
• Match Savings Program
• Workshops
RECAP
Don’t prepare returns beyond your level
Due Diligence
W-2’s must match SSN (not ITIN)
Driver License
Don’t prepare fraudulent returns
• Watch for fake SSN
• Last Names are important
• ITIN
• Used in lieu of Social Security number for filing taxes
• Must paper file to get one
Confidentiality is a MUST
RECAP
Personal Exemption
• Unless claimed as a dependent by another
• Teens and college students
Head of Household
• Tricky, use 4012
• Assess situation, do not use previous filing status
Widow(er) with Dependent – 2 tax years after
Enjoy the rewards of volunteering!
WHAT’S NEXT?
Certify/Live Scan by January 24th, 2014
• Once certified, print three (3) Volunteer Agreement and
sign
• Give one to Site Coordinator, Submit one to Program
Manager via e-mail, keep one for yourself
Software Training
• Visit capriverside.org for training schedule
• You may sign-up for as many software trainings as necessary