Event Started: 3/4/2013 6:00:00 PM
---------Please stand by for realtime captions.
>> [ Participants logging into the presentation. Captioner on stand by. ] .
>> To access the presentation, log in to www.ideal-group.or/watf/, c lick on #1,
then option #2.
>> If you need -- I am Francis and with the Washington access fund which is a
statewide nonprofit, dedicated to promoting access to technology and economic
opportunity for people with disabilities throughout the state. Today, it is our great
pleasure to welcome Jean Ross who is with the IRS. Jean is a Senior tax
consultant with the stakeholder partnership education and communication
division of the IRS. They are the part of the IRS that does our reach outreach to
the community and helps people with organizing free tax preparation programs.
They do a whole range of things, Dean Jean has agreed to do this webinar which
you did last year. We are glad to have him back. Assisting us today is Kathy
Gilman who is our program director at the Washington access fund. Kathy will be
helping out in many respects. Let's get started.
>> Thank you for the explanation of what SPEC is. For 28 years, beginning in
1985 and in different capacities, SPEC has been about outreach of individuals.
We coordinate the volunteer tax preparation sites where you can get returns. I
will be talking a little bit about those at the end of the presentation. Also, if you
have any questions that are not answered during the presentation, feel free to -we will take questions at the end. Taxes can be really complicated and a lot of
the information will be available. I will try to explain what publications it is then, in,
where you can find the answer. I will talk about the website as well.
>> The topics we will be covering our, the child and dependent care credit, credit
for the elderly or disabled, medical expenses, and impairment related work
expenses. These topics are of particular interest particularly the impairment
related work expenses, but I will also include information regarding per -- free tax
preparation at the end as well is a link, which will show you some access to
educational materials that you can use to learn more about taxes yourself.
>> Let us start with the earned income credit. The earned income credit, the very
first thing, it is designed as an incentive to work. It is a very long-standing
program. The program began in 1975 and has evolved over the years. It started
as a relatively small amount of money available, now it has progressed to what
can be very significant in terms of how much credit you can receive. I will talk
about how that works.
>> The major thing about the earned income credit is that it was designed
primarily as an incentive to work and to earn wages. Let's look at what earned
income includes. The number one thing is wages. There are tips for anyone in
the industry where tipping is c ustomary. Self-employment income is significant,
because many people start their own businesses. Many times, that is at the
same time they are working regular wage paying jobs. Anyone that is earning
income as a household employee is included. Also, this is complicated, certain
long-term disability benefits received prior to retirement age. What that means in
more understandable terminology is that if you retire before normal retirement
age based on the disability, you often will receive the income selling out on a W-2
is wages. You need to talk to your employer if you have questions concerning
how the income is reported or whether it was reported properly. There are
instances in which the disability income, prior to retirement, can count. That
income will normally show up on the W-2 form.
>> Earned income does not include a few things. Some common ones are Social
Security benefits, workman's comp, Virginia benefits -- VA benefits, all of those
are not included in income. They are related to your earned income credit. These
incomes for the most part are not taxable on a tax return. Let's look at the
amount of earned income credit. That depends on a lot of things the earned
income credit can run anywhere from a couple of dollars up to several thousand
dollars. It depends on your filing status, your income, there is a phased program.
It also depends on your filing status, a single person can get that your earned
income, but the amount of the credit is larger if you have dependent children. The
credit maxes out for the maximum amount received if you had up to three
dependence.
>> The publication that explains is the publication 596 which is available on the
IRS .gov website. They have the current one. Also, the amount of the earned
income credit is calculated normally if you file either electronically yourself or go
to a tax preparation sites, or even to a preparer, that is normally calculated when
you are filing the tax return. It is a very common thing. The tables are also on
paper in the 1040 or 1040 eight income tax tables.
>> The most common errors, we will look at these next. It is incorrect filing
status, if the person Ms. Marks the return of put down the wrong filing status, also
it does not include the qualifying child, for instance if someone leaves off a
dependent child or put down and incorrect security number, that is a common
error and can affect the return. Another error on this is actually not reporting
earned income. In the case of the earned income credit, you actually have to
have earned income in order to receive those credits.
>> How do you get the credit? The first thing that is important is this, in order to
get the error and income credit you must file a tax return and meet some of these
rules. The most important thing about this credit is that it is called a refundable
credit. We will talk about some other credits that are not refundable, they can
reduce tax, but that is all they can do. The earned income credit is like
withholding, in other words, let us say you do not owe any income tax at all when
you do your tax return. When you look at the it earned income credit table it
shows $1000. In a situation like that, the earned income credit would be just like
having $1000 withheld. So, in the event that you owed no tax, you would get
$1000 back, based on your earned income credit.
>> The earned income credit can be received, but you must file. Even if you
know that you are not going to owe any taxes, it is important to look at this to see
if potentially you can qualify for the earned income credit. Again, that is in the
publication when you first look at it it is a long publication, but only look at the
parts, and I will say this about any of our publications, concentrate on the parts
that affect you. It is easy to sort through those. The earned income credit
publication is 596. That is available on IRS .gov or you can order AP a paper
copy, as well.
>> We will now look at the child and dependent care credit. This is not a
refundable credit. That means that you can reduce your tax, in fact you can
reduce your tax all the way down to zero, which means you might get a larger r
efund, but it isn't like the earned income credit. You cannot get it back on its own,
it does not not act as withholding. It is a credit in the sense that it only goes
against your tax so we can reduce your tax.
>> It is based on the expenses paid for the care of the qualifying person. The
qualifying person most often issued dependent. -- most often is your dependent.
>> Let's look at the qualifications for the credit. On this one, you must have
earned income during the year. The expenses have to be paid and this is how
this originated, to allow you to work or to look for work. Also, if your spouse is a
full-time student, and this is treated as working during any month of full-time
school attendance.
>> The most common situation is for a dependent to care for a child. The form
we will look at is 2441. There is a publication about this. The public -- publication
for the childcare credit, the 2441 has complete instructions on how to calculate
the credit. Again, that is form 2441.
>> Let's look at it qualifying person. It qualifying person is a person for whom the
expenses can be paid. The most common one you will see is a child who is
under 13 when the care was provided. [ Silence ]
>> It also includes a person who is unable to care for themselves. It could also
be a spouse. Essentially, this credit is designed to offset the expenses that you
have to pay in order to work, so A percent can care for a someone who is a
spouse or a dependent.
>> To figure and claim the credit, the credit can be claimed either on the 1040 or
the 1040A, cannot be claimed on the easy form. You have too complete and
attach form 2441 in order to claim that credit. Some of these forms may look
complicated. Bear in mind that if there is some information that it is not
understood or missing, you will get notification from the IRS. It should tell you,
this is what he we are missing. You need to send it back. If you get something
back and you are thinking you're not going to get a credit, that is not necessarily
the case. In many ends this, I worked in a walk-in office for a number of years,
simply asking you to provide information or information they do not understand.
Any kind of notice to get back on any of this, be sure to read the notice carefully.
If you have a question, there should be a phone number for you to call on the no.
>> -- note.
>> The next thing we will look at is the child tax credit and the additional child tax
credit. The child tax credit is not a refundable credit. It can reduce your tax, the
credit can be up to $1000 for each qualifying child. It is a sickness again credit. I
should define the difference here between credit and deduction. A credit reduces
your tax dollar for dollar of that is why they are so important and why they can be
so beneficial. A deduction reduces your income and you can end up paying less
tax based on your tax rate, but a credit is an actual olive for dollar reduction of
the tax, not just a lowering of the income. They can be very important in the
calculation.
>> The additional child tax credit can be available, even if you have a zero tax. [
Silence ] that is calculated on form 8812, that is the additional child tax credit.
Probably the best information on that is the actual 8812 instructions which give
you line by line instructions. It will tell you to make the entry, again, if you're going
to be volunteer site or filing electronically, that is the advantage. It does all the
calculations for you based on your entries.
>> For both credit, the most common qualifying child is your child. Under 17 at
the end of the year is key. There are a few other qualifications. Normally, you will
see that these are your dependent children that can qualify you for the child tax
credit. It is important that them must have lived with you for more than the half of
year and claimed as the dependent on your tax return. [ Silence ]
>> You will see some of the instances where it does not have to be your child if
you are providing support to a brother, sister, grandchild, etc.. Claiming the credit
is pretty simple. You enter the amount of the tax credit on either the 1040 or
1040A. For the additional child tax c redit, again, that is a refundable credit, that
is claimed by filing an attaching form 8812. On that additional tax credit you do
have to have earned income to qualify. That is covered on the 8812 instructions.
>> The next credit we will look at is another credit, this again is not refundable.
This is called the credit for the elderly or disabled. You will see the qualifications
for this credit. [ Silence ] main qualifiers here is that you can take this credit if you
are 65 or older at the end of the year or retired on permanent and total disability
and have taxable disability income. If you do not owe any tax, you would be able
to claim this credit, because it would not benefit you. This credit was designed for
to give people that had taxability -- taxable disability income and relatively low
Social Security benefits a tax benefit. It is actually a credit that fewer and fewer
people can take over the years as more people have been covered under Social
Security. It does still exist.
>> In terms of taking the credit, or in terms of the credit itself, it has income
limitations that are explained on schedule R that I will talk about animate. It is
also affected by Social Security benefits. You use schedule R to determine
whether you are qualify for the credit. That would be attached to the tax return.
To take the credit, you complete schedule R and that determines the
qualifications and amount of the credit. This credit can be taken either on the
form 1040A or on form 1040. It is provided for both on the tax return. Schedule R
will give you complete instructions on where to put the entries on the tax return.
>> [ Silence ]
>> Let's look at some medical expenses. Medical expenses, everyone is
somebody with medical expenses. They are basically the cost of diagnosis,
Doctor appointment, treatment, prevention, anything affecting you medically. The
publication that gives that definition of medical expenses is publication 502. 502
is a comprehensive good publication. It probably addresses 99% of questions
about medical expenses. In any case, if you are looking at an expense and are
not quite sure, you can call the Internal Revenue Service and ask a question. For
the most part, our publications to address the questions, but there is going to be
the occasional question that does not quite fit. Publications are written for a
broad cross-section of questions, but there may be one that might present a
problem.
>> Some of the most common medical expenses our health insurance premiums.
Anytime you make a payment to a physician, medical supplies or equipment,
prescription medicines, these are included. Those are the most common of
medical expenses. We get a question occasionally regarding service animals.
You can include, this is in the publication 502, the cost of b uying, training, and
maintaining a service animal. The service animal I am is from the air with our
guide dogs. I do not have one, but I am familiar with the blind person having a
guide .-dot. There are service animals for various disabilities as well. They can
be included as medical expenses.
>> Let's look at reporting and deducting medical expenses. For medical
expenses, you have to itemize. You have to be able to use schedule . Medical
expenses are lines one through four on schedule A. They are the first thing to
jump out at two in the first thing you see. The key for medical expenses is to save
anything you think might qualify and then sort through it at the end of the year.
Medical expenses are reduced by 7.5% of your adjusted gross income. Back
calculation is right on the schedule , so you cannot miss it. If you come out with a
deduction of $5000 and your adjusted gross income you must reduce debt that
reduction by 7.5%. That may turn out to be $3000, you would do a subtraction
right on schedule A and that would leave you with a deduction of $2000 that you
could make the entry online for. It is a little, Kitty, but it is a way of limiting -- it is a
bit complicated, but it is a way to limit the deduction. If you are not certain, look in
the publication or call the IRS. If you have something that you are not sure of or
is not addressed in our publications, you can call the IRS.
>> We will next look at impairment related work costs. Impairment related work
costs can cover a lot of different things. They are addressed in publication 529.
This is what is important, they are taken online 28 of schedule A as a
miscellaneous expense. The big advantage to this over other miscellaneous
expenses is this, most miscellaneous expenses are reduced by 2% of your
adjusted gross income. That would be business expenses that an employee
takes or a number of other things. But, work related impairment expenses are not
reduced by 2%, they go online 28 of schedule A and those are a deduction
where there is no requirement to reduce it. You do not have to lower it by a
percentage over your income.
>> If you are a self-employed person and you have the same kind of expenses,
they aren't adaptable, also, but they would go on either schedule C or CEZ for
self-employed person. You're not missing out, it is just that you use different
schedules.
>> Here is an example of a work related impairment expense. I took something
for my own experience which is a reader. This is an expense -- I'm sorry, can we
go back to slide 24. This is the definition of the work related impairment expense.
We will then look at the example. I have here a reader. In this example, you are
using a reader, because you needed to do your work.
>> If you have a reader for both work and personal use, the work related portion
is deductible on all of it. The portion that you are using of the readers time and
the portion you are paying the reader require you to do your work. This is an
example that was pulled from a publication, the 529. It is usually pretty easy to
determine. If you are incurring an expense, and this is true for anybody whether
they are self-employed or an employee, if you are incurring an expense that is
both business and personal, it is important to keep track of what part is business
and what part is personal. The deductible part is going to be the part that relates
to your work. Again, that is true of a self employed person or an employee, either
way.
>> Let's look at some filing options that we have. We will then take questions.
>> The IRS has several programs for filing tax returns, for this particular
program, the program has no cost. There are sites run by AARP, a number in
Seattle, where you can get your returns prepared at no cost.
>> You can also choose to do the return yourself with facilitated health
assistance where there is a volunteer that help you. This is one that is becoming
more and more popular and that is looking at pre- files on IRS .gov. That takes
you through, if your income is under $57,000, there is a series of questions that
ask you what type of income you have and return you're going to be filing. It will
take you through options to file your tax return for free. These are private
companies that have entered into an alliance to allow the free filing of tax return
select on equity. The nice thing about this is you can do it from your home. The
VITA site you must the men and bring records. If you want to do it yourself, here
is an option for you.
>> Another possibility would be to start the free file link and maybe they sure you
want to have someone help you with it, then the sites are certainly an option for
you. At -- assuming you are getting a refund, you have several options for the
reason. You can purchase U.S. saving bonds. You can also direct deposit to a
bank. A lot of people split a tax refund and send part party checking, part two
savings. That is now another option. Direct deposit is much easier, there is no
check issues. It alleviates the cost or the possibility of losing that check are
having the check stolen or somewhat compromise. The direct deposit is
something that is very much encouraged. It helps everyone out including the IRS.
>> The last thing I want to show you is a link called understanding taxes.
Understanding taxes was designed as a curriculum for teachers. It is something
that can be used for teachers and students and can also be used by anyone who
wants to look at the material. This was designed to get people looking at taxes. It
takes you to whatever links you are asking about or whatever your inquiry is
about. A lot of people have begun to use it in classroom situations, where they
are trying to teach people who are doing their own taxes or just getting into the
workforce about how taxes work. It covers the kind of work words -- records you
need to keep. You can always take a look at the understanding taxes link and
see if it meets your needs.
>> I have a few questions that came in previously and I will address those now. If
you have any questions, you are more than welcome to ask. I will answer them
or if I am not able, I will give you the proper referral to look up the i nformation.
>> This is a question related to an adult child who did not have any income other
than Social Security. In that instant, the child has no filing requirements, because
the only income they had was SSI. The parent provides well over half the support
and the child lives with the parent. The question was, (inaudible) and the answer
is yes. The household filing status would be appropriate in that situation and the
child would normally be your dependent on it even though they are over the age
of 19 or 24 if they are student. That information regarding dependence and filing
status both is included in the publication 501. That is on the website. That has
charts in it that take you through and say if you answer this question continue. If
you answered no, stop. It takes you to the answer of whether you have on what
your filing status would be or if you have someone who qualifies as your
dependent.
>> [ Silence ] we covered service animal which can be taken as a medical
expense. I have some questions regarding the educational expenses.
Educational expenses are pretty complicated, but they can be very beneficial.
The publication that covers educational expenses is publication 970. Educational
expenses can be taken as credit, there are credits available and deductions, the
970 take you through different sonority owes and cover someone who is starting
in college and cover someone who is incurring educational costs in their work
etc. Yes, educational expenses can benefit you on your taxes, but there our a
whole myriad of possibilities as too where you take those expenses. Anyone that
is dealing with that or tuition should take a look at the publication 970 to see how
they would claim and expense.
>> Where the question about adaptive vehicles. The answer is in publication 502.
The cost of the vehicle itself is not medical expense, but the difference between
the regular cost of vehicle and the cost for an adapted vehicle can be taken as a
medical expense. That would include the cost of special adaptive equipment that
is required to make the vehicle accessible. That information is found in
publication 502 on medical e xpenses. If there are any other questions, I would
be happy to take them at this point. .
>> I was wondering in the b eginning, you said that the earned income credit is
(inaudible). Does that mean Social Security or disability?
>> The earned income credit is based on our name come. earned income. A
slide that shows what earned income is and then it shows what earned income is
not. For instant, Social Security and SSI did not qualify as earned income. For
instance, if the only income you have was Social Security or SSI income come a
you would not receive that particular credit.
>> This is DIN that is not mentioned.
>> As SDI is another type of Social Security benefit but it is not considered
earned income for that credit.
>> Also, does anyone have questions about Social Security d ocumentation?
There is a publication on that and it is publication 915. That covers all the
different rules regarding Social Security issues on tax returns.
>> Is that on the IRS website? The Mac yes, that is at the IRS website.
>> Is rental income considered earned income?
>> Rental income is not considered earned income. It is income but it is not
considered compensation for services. It is shown on a different s chedule, it is
on schedule E, and that is publication 527. That talks about the different types of
rental income and the different expenses that go along with that.
>> What about when you file if you work from home, can you file a portion or
deductive portion of your expenses? Can you include electricity, rent, etc. X for
Mac yes, that is a possibility. If you are using a part of your home exclusively for
your business, that is a possibility. The publication that covers that is 587. The
form that is used for self-employed person is form 829.
>> Can you repeat that?
>> It is 88 29. The publication is the critical thing and that is the 587.
>> I have a question, all of this can be complicated and gets down to individual
circumstances. Does the free tax prep software available through the IRS
website take you through all of those steps and/or if you go to the VITA site can
they address these on individual basis?
>> They will ask you what type of income you have. Some of the more
complicated t hings, they will not address. For instance, medical expenses are
common and they can do some schedule Cs that there will be things that crop up
that they cannot address address. There is such a variety of things from an
expense side regarding this that I cannot say that they would or would not do it. A
lot of the software is the same way. It will say you can file this for free, but if it
gets beyond this point, no, you cannot use the free program.
>> That would put you into a situation where you would have to pay to
electronically file or go to a tax preparer. They can do the same thing at a V ITA
site and say this return is beyond what we can do. You may then have to go to a
paying tax preparer.
>> I know that some of the commercial ones guide you through these things
come I do not know how good they are. I have personally used TurboTax and of
that was helpful. I am guessing that someone could also call the IRS or visit their
office to get one-on-one help?
>> True, in Seattle, the office is on the Jackson Federal Jackson's federal
building on the thirty-second floor. You will be guided to the questions out of
scope to someone that can prepare the return. The tax preparation sites do a
great job. It is worth checking one of the three options if you want to try to do it
yourself. If you want to go to a preparer, that is okay. But it does not cost
anything to give it a try on your own.
>> Expenses for home in the 587, the 80 ADA 29, I am not sure if that is used
any longer. The entry may be to directly enter to this schedule, but that will be
covered in the 587. There was a change on that made. That was in the last year
or so.
>> I have a quick question verifying my understanding. It sounds like to detect
both impairment work-related expenses and medical expenses you have to be
itemizing. Is that correct?
>> Remember for the impairment related work schedules, if you are a selfemployed person that would go directly on your schedule C or C EZ. If you are
self employed it is part of your business expenses and it would be different for
someone who is an employee.
>> That is great to know.
>> If you are self-employed, this is where you need to go. A self-employed
person is not going to be using that.
>> Very good, I had one other question and we are on the website can a person
find a free tax prep location?
>> A locator on the IRS website should take you to file for free. There should be
an indicator on their foray lookup feature.
>> Okay, great.
>> You can also call the toll-free number. If you cannot find the lookup feature,
occasionally things go down on the website, which is something we are all
familiar with. You can always call the toll-free number and they can tell can't tell
you how to locate a site near you. Also, that should give you both the location
and the hours of the site. Some sites are only open one day of week. There are a
variety of sites that are open in the afternoons and some are open earlier in the
day. One very large site in Seattle is up the library on fourth Avenue, the main
library. They do a tremendous number of returns every year.
>> There are sites all of the state and plenty in this Seattle/Tacoma areas as
well.
>> Do we have any other questions from the audience?
>> Yes, I have a question. I wanted to find out if your coming even though you
have a disability, but you are not claiming a disability processes security
purposes, do any of these benefits work for you?
>> That is a very good question.
>> I am not claiming -- I have a disability, but I am not claiming it, because I feel
that I can work around it at this point in my life. I can continue to work.
>> I am not limited in what kind of income I can make because of the disability.
>> Look at work-related impairment expenses we talked about. You do not have
to be on Social Security to be claiming those expenses. You must look at what
you are doing and determine that in order to do this, because of the disability,
you have to be incurring this expense. I use the obvious example which was a
blind person using a reader. I use that myself. Is not an expense for me, but I
certainly have used readers in the past to work in different areas. Sometimes it is
not as obvious as that. You must sit down and look at the expense, look at the
publication, and see if you are meeting this requirement. Am I incurring this
expense in order to allow me too do this job.
>> Right.
>> You look at the publications and you may think you are not sure. That is
where he felt call can h elp. They might be able to find an example or something
that has come out more recently that says, yes, this is something that has been
taken in the past and looks like something you could take or we have never seen
this before which can happen also. Yes, it is worth taking a closer look cap -- at.
Put together the best record and see if you can take the expense or maybe it
does not look like it will work for you. It is not always clear-cut.
>> Okay.
>> Are you also saying that the definition of disability my very from what you are
trying to do next if you're trying to take dependent care tax credit, the definition of
disability for that might be different?
>> We are talking about essentially in that situation come and that is where
someone cannot take care of themselves. They must have care in order for you - and that is the point of that credit. That is different then you say I am working,
but I need a reader to read these records for me to allow me too do my job. I
hope that make sense. They can be a little bit different.
>> Great. Are there any other questions? .
>> Thank you so much Eugene, this has been great. I want to point out a couple
of things. For those of you who live in Seattle, on March 9, there will be a prefinancial fitness day at Ray near community Center from 10:00 a.m. to 3:00 p.m.
At that center, or at the financial fitness day, you will be able to get help with
preparing your tax returns, with having someone pull your credit report for you,
for financial planning or if you have issues relating to debt, you can get some
help with that. Plus, there will be some brief discussion on benefits. If you're
interested in that, I encourage you to attend. I will be happy to send you an email to give you more i nformation.
>> There are similar financial fitness days in other counties. If you live in a
different county county and went to know if there is one there, you can e-mail
INFO@w ashingtonaccessfunc. I also wanted to add that if you are a participant
in our match savings account program, you can always use your tax return and
any dollars you get back to make an extra funding into your match savings
account. That is also good to know. Lastly, on March 21, we will be having a
webinar in collaboration with the Washington assisted technology asked program
on buying hearing aids and hearing related devices. If you're interested in that,
just contact us at info @-at-sign Washington access fund .-dot or can we will get
you some of that information.
>> Following the webinar, probably tomorrow, we will send out a recording of the
webinar and also the PowerPoint. You can share with anyone and that would be
great. I think that is it.
>> Kathy, do you have anything to add? Eugene, do you have anything to a dd?
>> I appreciate the opportunity. There is a lot we have not covered, but the
website and publications are a huge help.
>> Thank you so much and we look forward to working with you again.
>> Goodbye.
>> [ Event Concluded ]