AARP FOUNDATION TAX-AIDE
CALIFORNIA
COUNSELOR REFERENCE MANUAL
(CRM)
For TaxWise Desktop and Online
TAX YEAR 2012
ERRATA
AS OF JANUARY 25, 2013
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
Page 1: The table should be as follows – changes are highlighted and underlined:
What
IRS
IRS (form 1040V)
Electronic filing and balance due
P.O. Box 7704
(mail payment & voucher ONLY)
San Francisco 94120-7704
1040: IRS, P.O. Box 7704
Paper filing (including amended)
San Francisco, CA 94120-7704
and balance due
1040X: IRS, Fresno, CA 93888(mail signed return)
0422
Paper filing (including amended)
1040: IRS, Fresno 93888-0002
and nothing due OR refund
1040X: IRS, Fresno 93888-0422
(mail signed return)
IRS (form 1040ES)
Estimated payments
P.O. Box 510000
(mail payment and voucher)
San Francisco 94151-5100
Automatic six month extension no
IRS (form 4868)
payment (mail just form)
Fresno 93888-0045
IRS (form 4868)
Automatic six month extension- with
P.O. Box 7122
payment (mail form with check)
San Francisco 94120-7122
CA FTB
FTB (form 3582)
P.O. Box 942867
Sacramento 94267-0008
FTB
P.O. Box 942867
Sacramento 94267-0001
FTB
P.O. Box 942840
Sacramento 94240-0001
FTB (form 540ES)
P.O. Box 942867
Sacramento 94267-0008
Nothing to file
FTB (form 3519)
P.O. Box 942867
Sacramento 94267-0008
Page 1: Update FTB Volunteer Coordinator telephone number to 916-845-6237
Page 3: Federal forms we can prepare - refer to App H on Sharenet for detail list
1040 Sch C delete two parentheticals and replace with:
(C-EZ rules: up to $5,000 expenses, no loss, one per proprietor only)
Page 3: Federal forms we can prepare, add:
8606…… Nondeductible IRAs (Part I only)
Page 3: Form 5695 Residential Energy: delete “[Expired]”
Page 3: Form 8917 Tuition & Fees adjustment: delete “[Expired]”
Page 4 out-of-scope:
7th item should read:
Rental Income, except rents reported on 1099-Misc without expenses
(delete “or K-1”)
11th item should read:
Business income with a net loss, expenses over $5,000, any time Form 4562 is required, employees,
or payments requiring 1099 to be filed
th
13 item should read:
IRA or Pension Distributions and Contributions requiring form 8606 Parts II, III or IV
Page 5 Start of Shift 3rd bullet after Truecrypt, add “, if applicable”
Page 5 Shutdown Procedures 2nd bullet, 2nd sentence after flash drive, insert: “(shut down TrueCrypt, if
applicable)”
Page 6 Menu Bar 1st bullet 1st sentence, revise to read: “… open returns; print returns or forms, including blank
forms. …”
Page 17 Tax Preparation Sites, add:
List of qualified charities
IRS.gov/charities or Pub 78
Page 18 Organizing Your Work, revise:
Page 1
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
1099-MISC box 3 – if non-business income
W-2G Gambling Winnings
add:
K-1 capital gain or loss
Link from Line 21, Wkt7 to 1099-Misc
Link from Line 21, Wkt7 to W-2G
Sch D, line 5 (short-term) or line12 (longterm)
Enter on Sch E line 3
K-1 royalty income
Page 19 Comments/notes may also be now recorded in the Taxpayer Diary in TWO
Page 23 Preparer Use Form, delete “Field 15…” (SIDN is no longer required)
Page 24 W-2 Top Section, insert an additional bullet item:
• “Check if employer contacted to verify W-2” box lights up when withholding is greater than IRS expects - if
due diligence with client reveals no suspected problems, F3 to clear the red
Page 25 1st bullet after table, add “ – must be HSA-certified”
Page 27 Household Employee Income, revise threshold amount from $1,700 to $1,800
Page 28 5th bullet, CA note re HSA, add “ – must be HSA-certified”
Page 28 Add at the bottom of the page:
CA Note: Enter any CA withholding shown in Box 13 on Form 540, Line 71 scratchpad and “INT” in
the field immediately below line 71
Page 29 and 30 California exemption rule, 2nd bullet revise to read:
• The general rule is:
ο If less than 50% of the assets are federal and/or CA obligations, ALL is taxed by CA
ο If 50% or more of the assets are federal or CA obligations, only the income from those obligations is
exempt from CA tax;…
Page 31 Qualified dividends should read: enter the qualified dividends shown on the 1099-DIV
Page 31 Exempt Int. Div. – add:
• CA Note: Enter an adjustment for interest that is not exempt for CA in the “State Adj” column
Page 31 Liquidation Dividends in box 8 are out of scope
Page 31 Insert before the examples:
• CA Note: Enter any CA withholding shown in Box 14 on Form 540, Line 71 scratchpad and “DIV” in the
field immediately below line 71
Page 31 and 32 revise example 3 to read:
• Example 3 – State exempt interest dividends from direct Federal Government obligations
Assume that the Government Secured Fund includes investments in federal government & agency bonds
and that such bonds represent more than 50% of its assets. The fund reports that 53.3% of the dividend
income is from federal bonds
ο Manually calculate the amount based on information from the mutual fund/broker provided by the
taxpayer (53.3% x $1,500 = $800)
Page 33 Line 12 – Business Income:
2nd bullet, delete “, except for expenses up to $10,000,”
4th bullet, revise to read “No more than one Schedule C per taxpayer is allowed (one each per spouse if
MFJ)
Page 34 Business Income CA Note: only one Sch C is in scope (one for each spouse if MFJ)
Page 34 Capital Gain or Loss: revise the last line on the page and add as follows:
ο Two copies of Form 8949, the attachment and 8453 shall be given to the ERO for transmittal to the IRS
ο The LC/ERO must ensure confidential purging of any scanned documents
Page 2
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
Page 35 Completing the worksheet: the adjustment code/amount are in columns (f) and (g) for 2012
Revise the 3rd bullet to read:
• Adjustments
ο If a transaction was reported on a 1099-B with basis reported to IRS, BUT the basis is incorrect
▪ Enter a code and the amount of adjustment in the adjustment column
ο If an incorrect basis is shown in box 3 of 1099-B but basis was NOT reported to IRS, enter the
correct basis in the cost column, and in the adjustment column enter Code B and -0- amount.
ο The Tax-Aide list of codes that are in scope or out of scope are attached to this errata
Page 36 Sale of Main Home, sub-bullet before CA Note: the adjustments are in columns (f) and (g) for 2012
Page 37 Sale of Main Home, first line on page: the adjustments are in columns (f) and (g) for 2012
Page 35 Add at the bottom of the page:
• CA Note: Enter any CA withholding shown in Box 15 on Form 540, Line 71 scratchpad and “B” in the field
immediately below line 71
Page 37 1099-R Dollar Value Boxes, Box 2: certain Box 7 codes may also make the distribution not taxable
Page 39 1099-R Exclusion Worksheet, Line 2 should read (provision extended):
• Line 2- Qualified Charitable Distributions (QCD)
ο Enter the qualified amount paid directly to a charity
▪ This makes the distribution non-taxable and the TP does not get a charitable deduction
ο The TP must have been at least 70-1/2 when the donation was made; max in any single year is $100,000
ο Special rules for TY2012
▪ The TP can elect to treat a QCD made 1/1/13 to 1/31/13 as having been made on 12/31/12
▪ The TP can elect to treat any portion of a distribution from an IRA to the TP 12/1/12 to 12/31/12 as
a QCD to the extent that it was transferred to a qualified charity before 2/1/13
Page 44 Line 21 – Other Income,
2nd, 3rd, and 4th bullets, replace with: “New Wkt 7 should be used to report other income and can be linked
to forms W-2G or 1099-MISC”
4th major bullet under Gambling Winnings, revise to read: “If the taxpayer has winnings not reported on a
W-2G, enter the sum these of gambling winnings on a blank line of Wkt 7 and describe appropriately”
Page 45 1099-MISC,
3rd bullet, revise to read: “…other than 1, 2, and 7 is reported using new Wkt 7 and linking to Form 1099MISC”
Table:
Rental income is now on Line 3 of Sch E
Royalty income is on Line 4 of Sch E
Hobby income, prizes or Indian Tribal income in Box 3: link 1099-MISC from Line 2 of Wkt 7
Jury Duty pay: link 1099-MISC, if any, from Line 14 of Wkt 7
Box 7 Non-Employee Compensation or notary fees is now on Line 1 (not 1b) of Sch C
Page 45 Other Income Without a Supporting IRS Form, delete all three bullets and replace with:
“Go to Wkt 7 and enter on appropriate line, describe source if necessary”
Page 46 HSA Distributions, 4th bullet, revise to read:
“If used for other than qualified medical expense, the taxable payment transfers to Wkt 7 Line 12 and to
Form 1040 Line 21”
CA Note: all federal to CA differences should be cross checked as 2012 has new Wkt 7
Page 46 Cancellation of debt, 2nd bullet, replace “Line 21” with “Wkt 7”
Page 47 Entering Multiple Types of Other Income (The TYPE Field): delete entire section and replace with:
• All types of Other Income are now entered on Wkt 7
Page 3
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
•
•
•
If a preprinted line is used, the first such used line description will carry to 1040 Line 21
“TYPE” field
If no preprinted line is used, manually enter an appropriate description in Line 21 TYPE
field
Be sure to verify that the total shown on Line 21 is correct and all other income amounts
have been reported
Page 47 Line 23 EDUCATOR EXPENSE (extended 1/2/13), add:
Go to Wkt2 Student Loan, Education Worksheet
• Each educator can deduct up to $250 of class related expenses paid even if they do not itemize deductions
• Expenses above that amount can be included in miscellaneous deductions subject to the 2% haircut
• CA Note: This adjustment is NOT allowed by CA and TaxWise adjusts the CA return
Page 48 LINE 32 IRA DEDUCTION, form 8606 Part I is in scope. Replace the 4th bullet with:
• Non-deductible contributions require completion of form 8606 Part I
ο Enter the basis amount from the prior year’s form 8606 on Line 2 of form 8606
Page 48 Line 34 TUITION AND FEES DEDUCTION (extended 1/2/13), add:
Go to Wkt2 Student Loan, Education Worksheet
• Form 8917 is added to the return after a Qualified expense is entered in the Tuition and Fees section of
Wkt2
• See instructions under Line 49 Education Credits for entering education expenses
• CA Note: This adjustment is NOT allowed by CA and TaxWise adjusts the CA return
Page 49 Line 5 State and Local Taxes Paid, 1st bullet (extended 1/2/13), replace with:
• Taxpayers can elect to deduct the LARGER of state income taxes OR state sales taxes (which come from a
table based on the amount of the taxpayer’s income) on their federal return
Go to the Sales Tax Worksheet
ο TaxWise computes lines 1, 2, and 4 in the upper portion
▪ Enter any non-taxable income such as child support and gifts, SSI, SSDI on line 3
ο Line 1 should be defaulted to CA in the lower portion
▪ Line 2 of the lower section is defaulted to NO for California (other than Los Angeles County)
• Check the box if the taxpayer lived in Los Angeles County and enter the code
▪ Line 3 of the lower section should be defaulted to Yes (or No if there is no local sales tax) and your
local rate should be entered
• If Line 3 is Yes, enter the blended General State Sales Tax rate of 7.25 on Line 4
▪ Line 8 of the lower section should be completed with any additional sales tax on a motor vehicle,
aircraft, mobile home, or building materials
• TaxWise will use the better of income tax or sales tax for federal Sch A
Page 50 Line 13 Total Mortgage Insurance Premium (extended 1/2/13), add:
• Premiums (“PMI”) paid and/or accrued for qualified mortgage insurance (reported on the 1098), after 2006
in connection with home acquisition debt on a qualified home are deductible
ο The home must have been purchased after 2006
• Report total qualified mortgage insurance premiums and TaxWise will determine the allowed amount
• CA Note: This deduction is not allowed on the California return and is automatically adjusted by TaxWise
Page 51 Line 21-23 Miscellaneous deductions subject to 2% of AGI reduction, 2nd main bullet, delete “unless
the Counselor and Reviewer are certified n Military” (Military returns are out of scope)
Page 52 Gambling Losses, beginning of last bullet should read: “If Wkt 7 Lines 15-21 are used (no W-2G),
enter gambling…”
Pages 53 and 54 Education Credits: Line 34 Tuition and Fees adjustment was extended and may be an
alternative to either of the two education credits – on a “per-student” basis.
In testing for optimal result, start with the Tuition and Fees adjustment on Wkt 2 and not results.
Page 4
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
Page 54 Education Credits, 2nd main bullet, 3rd sub-bullet: The box to be checked if TP is under 24 etc. is on
Page 1 of Form 8863 below Line 7.
Page 54 Residential Energy Credits (extended 1/2/13) add:
Go to Form 5695
• A 10% credit is allowed for new energy efficient property installed in or on a main home ONLY
• There is lifetime limit for back to 2006
• Data from prior year 5695’s are required
• Part II, Residential Energy Efficient Property Credit is out of scope
Page 55 Self Employment Tax, insert:
• If SE income is from notary business, self-employment tax does not apply
Go to Sch SE and enter the net profit from the notary business on line 3
Go to 1040 Page 2 Line 56 and check the notary box
Page 58 Filing Status – Head of Household, add:
• Caution when entering age of qualifying person
ο If 1 year of age or older, enter years ONLY
ο If less than 1 year old, enter months ONLY
Page 58 Income Excludible for CA
7th bullet: replace “California” with “any”
Last bullet: replace reference to “Line 25” with “Line 21”
Page 58 Income Includible for CA – IRA Basis Difference, revise first bullet to read:
• Note: IRA basis recovery is on Form 8606 Part I for federal (Part I is in scope)
Page 59 Deductions Not Allowed by CA, delete the three instances of “[expired on Fed 2011]”
Page 59 State Tax Withheld, add:
• Verify CA amounts withheld from all forms 1099-B, 1099-INT, 1099-DIV are properly reflected in line 71,
as there is no input form for these
Page 5
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
Form 8949 Adjustment Codes
IN SCOPE
IF . . .
THEN enter
this code in
column
(f) . . .
• If box B is checked at the top of Part I or II, enter the correct
basis in column (e), and enter -0- in column (g).
You received a Form 1099-B (or
substitute statement) and the
basis shown in box 3 is incorrect
. . . . . . . . . . . . . . . . . . . . ...
B
You received a Form 1099-B or
1099-S (or substitute statement)
for a transaction and there are
selling expenses or option
premiums that are not reflected
on the form or statement by an
adjustment to either the
proceeds or basis shown . . . .
.. . . . . . .
You received a Form 1099-B (or
substitute statement) and the
type of gain or loss (short term or
long term) shown in box 1c is
incorrect . . . . . . . . . . . . . . .
You sold or exchanged your main
home at a gain, must report the
sale or exchange on Part II of
Form 8949 (as explained in Sale
of Your Home in the Instructions
for Schedule D (Form 1040)), and
can exclude some or all of the
gain . . . . . . . . . . . . . . . .
You have a nondeductible loss
other than a loss indicated by
code W . . . . . . . . . . .
AND. . .
E
• If box A is checked at the top of Part I or II, enter the basis
shown on Form 1099-B (or substitute statement) in column (e),
even though that basis is incorrect. Correct the error by entering
an adjustment in column (g). To figure the adjustment needed,
see the Worksheet for Basis Adjustments in Column (g). Also see
Example 4—adjustment for incorrect basis in the
instructions for column (h).
Enter in column (d) the proceeds shown on the form or statement
you received. Enter in column (e) any cost or other basis shown on
Form 1099-B (or substitute statement). In column (g), enter as a
negative number (in parentheses) any selling expenses and option
premium that you paid (and that are not reflected on the form or
statement you received) and enter as a positive number any option
premium that you received (and that is not reflected on the form or
statement you received). For more information about option
premiums, see Gain or Loss
From Options in the Instructions for Schedule D (Form 1040).
Enter -0- in column (g). Report the gain or loss on the correct Part of
Form 8949.
T
H
Report the sale or exchange on Form 8949 as you would if you
were not taking the exclusion. Then enter the amount of excluded
(nontaxable) gain as a negative number (in parentheses) in column
(g). See the example in the instructions for column (g).
L
Report the sale or exchange on Form 8949 and enter the amount
of the nondeductible loss as a positive number in column (g). See
Nondeductible Losses in the Instructions for Schedule D (Form
1040).
You report multiple transactions
on a single row as described in
Exception to reporting each
transaction on a separate row .
M
See Exception to reporting each transaction on a separate row.
Enter -0- in column (g) unless an adjustment is required because
of another code.
You have an adjustment not
explained earlier in this column . .
O
Enter the appropriate adjustment amount in column (g). See the
instructions for column (g).
None of the other statements in
this column apply . . . . . . . . . . .
Leave columns (f) and (g) blank.
Page 6
AARP FOUNDATION TAX-AIDE
CALIFORNIA COUNSELOR REFERENCE MANUAL – TY2012
ERRATA AS OF JANUARY 25, 2013
Form 8949 Adjustment Codes (cont.)
THEN enter
OUT OF SCOPE
IF . . .
You received a Form 1099-B
or 1099-S (or substitute
statement) as a nominee for
the actual owner of the
property . . . . . . . .
You sold or exchanged
qualified small business
stock and can exclude part of
the gain . . . . . . . . . . . . .
...........
You can exclude all or part of
your gain under the rules
explained in the Schedule D
instructions for DC Zone
assets or qualified
community assets . . . . . .
You are electing to postpone
all or part of your gain under
the rules explained in the
Schedule D instructions for
any rollover of gain (for
example, rollover of gain from
QSB stock or publicly traded
securities) . .
You have a nondeductible
loss from a wash sale . . . .
. .......... .....
this code in
column
(f) . . .
AND. . .
N
Report the transaction on Form 8949 as you would if you
were the actual owner, but enter any resulting gain as a
negative adjustment (in parentheses) in column (g) or any
resulting loss as a positive adjustment in column (g).
However, if you received capital gain distributions as a
nominee, report them instead as described under Capital
Gain Distributions in the Instructions for Schedule D (Form
1040).
Q
Report the sale or exchange on Form 8949 as you would if
you were not taking the exclusion and enter the amount of
the exclusion as a negative number (in parentheses) in
column (g). However, if the transaction is reported as an
installment sale, see Gain from an installment sale of QSB
stock in the Instructions for Schedule D (Form 1040).
X
R
W
You had a loss from the sale,
exchange, or worthlessness
of small business (section
1244) stock and the total loss
is more than the maximum
amount that can be treated as
an ordinary loss . . . . . . . .
S
You disposed of collectibles
(see the Schedule D
instructions) . . . . . . . . . .
C
Report the sale or exchange on Form 8949 as you would if
you were not taking the exclusion. Then enter the amount of
the exclusion as a negative number (in parentheses) in
column (g).
Report the sale or exchange on Form 8949 as you would if
you were not making the election. Then enter the amount of
postponed gain as a negative number (in parentheses) in
column (g).
Report the sale or exchange on Form 8949 and enter the
amount of the nondeductible loss as a positive number in
column (g). See the Schedule D instructions for more
information about wash sales.
See Small Business (Section 1244) Stock in the Schedule
D (Form 1040) instructions.
Enter -0- in column (g). Report the disposition on Form
8949 as you would report any sale or exchange.
Page 7