2008 Counselor Reference Manual-Update
12/15/2008
Because of late Tax Law changes, the 1040 form has been revised from the original
“draft 2008 form” resulting in changes to the Table of Contents Pg iii. A revised Pg iii is
attached.
Page 3
Creating Back-ups of Tax returns
TW 2008 no longer supports ’A’ or floppy drives. In addition, the screen offering the
choice between Regular, Transfer files to transmitting PC and Advanced backup is no
longer displayed. You simply choose between “Start a new backup” or “Add to a
previous backup”. The Add to previous backup is not used by AARP TaxAide unless
you receive specific permission or instructions from your Site Coordinator
Page 7
Under Confusing situation in TaxWise
“Last Field on form” problem has been corrected. Cross out
“Field is yellow resulting from linking in error” instruction is incorrect.
Follow these steps if a field is linked in error. Delete the linked form. Unlink the field
with “Shift-F9”. Close the return and reopen.
ADD”WHAT-IF Mode”
When you select “What if” mode from the File menu, the return background changes to
Green. You can then make any additions or subtractions you wish without affecting the
original return. This is useful in talking about why this years tax is so high (e.g. show tax
without the IRA distribution) or next years tax obligations (e.g. Filing as Single instead of
MFJ after a death). Some find this useful in checking the various education
credits/adjustments.
When you finish the “What if“ scenario, you can Save it, Discard it, or replace the
original return. Warning: Read the message carefully before exiting.
Page 9
For 2008 you can start a return in “Interview mode” In this mode you will be led through
a series of questions, that when answered will populate the Main Info screen. This
method is useful for new clients. To access the Interview feature, check the box “Start
Return in Interview mode” on the Enter SSN screen. The box stays checked when future
returns are started. When you complete or opt out of the Interview screens, you cannot
switch back.
.
Add the following to acceptable Social Security Number verification.
Add “or RRB1099” to the end of line 2
Add “(includes Post Office) or 1099R” to the end of line 6
Under PROFORMA/DATA CARRYFORWARD
In the first bullet change as follows:
(1) was prepared by the local CA2 TaxAide District (for 2009, only returns prepared
by that EFIN will pro-forma)
The last sentence of the first bullet should be changed to read “Only a few dollar
amounts, such as capital loss carry-over, charitable contribution carryover, SUMMARY
form, and 1099R General Rule are populated.”
Page 10
Under Mailing Address, first bullet, delete references to %
“(without %)” and “preceded by % (i.e. %William Jones)”
Second bullet, add
“Fractions OK”
Fourth bullet, add
“If foreign address is used, notify ERO for separate efiling”
Page 11
Last bullet under Taxpayer Information, delete
“for a surviving spouse”
Under Dependents, Bullet 6 Code Field
Use context sensitive help to see codes
Under Dependents, Bullet 8, EIC
Insert “for dependent children” after check the box
TaxWise will add two new Preparer Use Fields. These fields are numbers 11 and 12 and
will have questions regarding language used in home and Whether you consider yourself
disabled. These are not mandatory:
Page 13
In the W2 section for “Rancho Cordova W2’s. Add
Alternate method of handling: Enter Name of payer as “IHHS” and State ID as NA.
Page 14, last bullet on page.
After the sentence “enter the Descriptions of the Disability premium and the amount so
that TaxWise can calculate any excess SDI and claim a refund for the excess on the CA
return.” Add “This is necessary only if an individual has two or more W-2’s and total
W2 income exceeds $86,698.”
Page 15
Under Interest (interest statement)- Completing the Statement-Amount
Add: For Tax exempt income, do not enter an amount in the first amount column.
Note: This is a change from prior years. If you do enter an amount it will be shown as
taxable income and also as non taxable income.
Page 16
In the “Examples of Interest Income” Chart, for examples D, E, F, change the number in
the first amount column to zero.
In the written Examples D, E, F, change the first line of each to read “Do not enter
anything in the “Amount” column”
Page 20
After “Select “Sch C-EZ” from the tree” change the rest of the line to read “(Only one CEZ allowed per person)
There are three lines provided for 2008 mileage.
Total Business miles are entered on the first line, and that amount is allocated to the first
half of the year.
Mileage for the first half of the year is calculated and cannot be entered directly.
The mileage during the second half of the year is entered on the third line, and that
amount automatically reduces the mileage allocated to the first half of the year.
Page 21
Second bullet up from bottom that starts “If federal tax has been withheld ….”
Substitute the following instructions.
Go to line 62 and the field marked withholding from 1099’s
Link to a Scratch pad
Enter the Broker name and 1099B in the description and the amount withheld
Page 30
Payments from Qualified Education programs 1099 Q
Add:” Enter on Form 1040 Wkt2”
Page 31
LINE 23 Cross out “ARCHER MSA DEDUCTION-(out-of-scope)” and Add
“EDUCATOR EXPENSE- See pg 32”
LINE 34 Cross out JURY DUTY PAY YOU GAVE TO YOUR EMPLOYER” and add:
TUITION AND FEES - See below
EDUCATOR EXPENSES Cross out (NOT AVAILABLE FOR 2008) and add: LINE 23
before EDUCATOR
TUITION AND FEES Cross out (NOT AVAILABLE FOR 2008) and add LINE 34
before TUITION.
Page 33
Under Standard Deduction, the sentence starting “The method for doing this…” should
be crossed out. Add: Entering the Property Tax deduction on Schedule A will
automatically add it to the standard deduction.
Page 36
Sch A- Line 17 Contributions – Other than cash.
Add: If cumulative non-cash donations exceed $500 we cannot do the return. However,
suggest that claimed contribution deduction be limited to $500 as the cost for a paid
preparer may exceed the tax benefit of the higher contribution.
Page 37
Add “LINE 47 FOREIGN TAX CREDIT” See Page 38
Change LINE 47 to LINE 48
Change LINE 48 to LINE 49
Page 38
Change LINE 49 to LINE 50
Change LINE 50 to LINE 47
Change LINE 51 to LINE 52
Page 39
Change LINE 52 to LINE 51
Page 40
Change LINE 61 to LINE 60
Change LINE 63 to LINE 62
This line has a new field for entering withholding from 1099’s that are not entered
elsewhere.
Change LINE 64 to LINE 63
Page 42
Change LINE 65 to LINE 64
Change LINE 66 to LINE 65
Change LINE 67 to LINE 66 Under Additional Child tax credit delete ($11,750 for 2007)
and replace with ($8,500 for 2008)
Change LINE 68 to LINE 67
Change LINE 69 to LINE 68
Change LINE 70 to LINE 69 Replace with “FIRST TIME HOMEBUYER CREDIT”
Enter home address and acquisition date on Form 5405
Change LINE 71 to LINE 70
Change “worksheet” to Form 1040 Wkt 5
Add: If Notice is unavailable, the ESP can be determined by calling 1-866-234-2942
Page 49
Under RUNNING DIAGNOSTICS, A warning message appears when Diagnostics are
run: “DCN will not print on 8879 prior to creating electronic file.”
Page 50
Under QUALITY REVIEW, Cross out Form 8158 and replace with “the quality review
section of the Intake and Interview sheet.
Page 52
Under PRINTING RETURNS Add:
Delete: “If the correct packets Have not been previously selected, Check Global to save
the selections.” This is restricted to Admin user.
Page 54
Under Paper returns, change the first sentence to read “When a paper return is required
because the return cannot be e-filed, verify that the following has been done to prevent
generating e-files:
Page 60
The CA Homeowners and Renters Assistance program has been suspended for this year.
ADJUSTMENTS TO INCOME
Line 23- Educator Expense
Line-24- Certain Business expenses – (out-of-scope)
Line 25- Health Savings Account – (out-of-scope)
Line 26- Moving Expenses – (out-of-scope)
Line 27- One-Half of Self Employment Tax
Line 28- Self Employed SEP, Simple Plans – (out-of-scope)
Line 29- Self-Employed Health Insurance Deduction
Line 30- Penalty on Early Withdrawal of Savings
Line 31- Alimony Paid
Line 32- IRA Deduction
Line 33- Student Loan Interest Deduction
Line 34- Tuition and Fees deduction
Line 35- Domestic Production Activities – (out-of-scope)
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32
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31
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32
32
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32
TAX CALCULATION
Line 40- Deductions
33
33
CREDITS
Line 48- Credit for Child & Dependent Care Expenses
Line 49- Credit for the Elderly and Disabled
Line 50- Education Credit
Line 47- Foreign Tax Credit
Line 52- Child Tax Credit
Line 51- Retirement Savings Contribution Credit
Line 53- Residential Energy Credits
Line 54- Alternative Vehicle Credits
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OTHER TAXES
Line 57- Self Employment tax
Line 58- Unreported Social Security and Medicare tax
Line 59- Additional Tax on IRAs, Other Qualified Plans
Line 60- Advance Earned Income Credit Payments
Line 60- Household Employment Taxes – (out-of-scope)
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40
PAYMENTS AND REFUNDABLE CREDITS
Line 62- Federal Income tax withheld
40
Line 63- 2008 Estimated Tax Payments
40
Form 540 (California) Line 37 State Estimated Tax Payments
40
Line 64- Earned Income Credit
42
Line 65- Excess Social Security
42
Line 66- Additional Child Tax Credit
42
Line 67- Amount Paid With Request for Extension to File
42
Line 68- Payments from Form 2439-4136-8865 (out-of-scope)
42
Line 69– First Time Homebuyers credit
( See update)
Line 70- Recovery Rebate Credit
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40