Training Outline
1) Basic Level Updates
2) State Tax Refund
3) Business Income
4) Retirement Income
5) Adjustments to Income
6) Itemized Deductions
Training Outline
7) Miscellaneous Nonrefundable Credits
8) Affordable Care Act Tax Provisions
9) Out of Scope Topics
10) Additional Duties
11) Practice Quality Reviews
Training Outline
12) Campus Fellow Handbook
13) Volunteer Standards of Conduct & Test
14) Volunteer Paperwork & Certification
Due Date of the Return
April 18, 2016
Standard Deduction
Married Filing Jointly / Qualifying Widow(er) $12,600
Head of Household
Single / Married Filing Separately
$9,250
$6,300
Additional Amounts for Taxpayers who are 65+ or Blind
Single or Head of Household
Married Taxpayers
$1,550
$1,250
Exemptions
The amount a taxpayer can deduct for each exemption increased to $4,000 for 2015
Retirement Savings Contribution Credit
Maximum income limits to claim the Retirement
Savings Contribution Credit have increased
To claim this credit, your MAGI must not be more than:
• $30,500
• $61,000 (if Married Filing Jointly)
• $45,750 (if Head of Household)
Earned Income Credit
For 2015, the amount of the credit has increased
The maximum credit is:
• $6,242 with three or more qualifying children
• $5,548 with two qualifying children
• $3,359 with one qualifying child
• $503 with no qualifying child
Earned Income Credit
For 2015, the amount of earned income required has increased
To be eligible for a full or partial credit, the taxpayer must have earned income of at least $1 but less than:
• $47,747 ($53,267 if Married Filing Jointly) with three or more qualifying children
• $44,454 ($49,974 if Married Filing Jointly) with two qualifying children
• $39,131 ($44,651 if Married Filing Jointly) with one qualifying child
• $14,820 ($20,330 if Married Filing Jointly) with no qualifying child
Earned Income Credit
Taxpayers whose investment income is more than
$3,400 cannot claim the Earned Income Credit
W-2 Verification Codes
For filing season 2016, the IRS plans to test a capability to verify the authenticity of Form W-2 data. This test is one in a series of steps to combat tax-related identity theft and refund fraud.
W-2 Verification Codes
TaxWise Exercise – Walter White
twonline.taxwise.com
Client ID: 778068
• USERNAME: Last name, first initial, all caps (e.g.,
NELSONS)
We will be using this exercise to review material covered in the fall!
Enter Basic level information now
PTY State Tax Refund
Answer question in the box on the Form 1040:
• If NO: the state tax refund does not need to be reported
• If YES: additional steps will be required to report the state tax refund
Info Needed from PTY Return
To correctly report a state tax refund amount, the following info from the PTY return is needed:
• State tax refund amount
• Sch A, line 5a, state income taxes
• Sch A, line 5b, general sales tax
• Total itemized deductions amount
• Filing status
• Taxable income amount
State Tax Refund
Open up Walter White in TaxWise
• Enter State Tax Refund on Line 10
Form 1099-MISC
Form 1099-MISC: Other Income
Reported in box 3
Other income reported in this box is generally:
• Prizes
• Awards
• Taxable damages (from a lawsuit settlement)
• Other taxable income
Other income in box 3 is classified as unearned income
Form 1099-MISC:
Nonemployee Compensation
Reported in box 7
Nonemployee compensation is paid to an independent contractor
Independent contractors work for a company or organization without being considered an
“employee”
• Freelancers, part-time workers, contractors, interns
Form 1099-MISC:
Nonemployee Compensation
If payment for services from a company or organization is reported in box 7, the taxpayer is being treated as a self-employed worker
Self-employment income, also known as business
income, is taxed differently than wages/salary
Business/Self-Employment Income
Business/self-employment income can be reported to taxpayers in a variety of ways
Form 1099-MISC
Form W-2: Wage and Tax Statement
See Your Site
Coordinator
See Your Site
Coordinator
Form 1099-K
Cash Payments
Business/Self-Employment Income
VITA Filing Conditions
Less than $25,000 (*new* as of 2016) of business expenses
Cash method of accounting
No inventory
Does not want to depreciate assets
Must report a profit— no net loss!
No employees
Business/Self-Employment Income:
Schedule C or C-EZ
Schedule C-EZ is just the simplified version of the
Schedule C
• Use the Schedule C-EZ if there are few business expenses and only one business
Less than $5,000
• Use the Schedule C if there are a lot of business expenses and/or more than one business
$5,000 to $25,000
Deductible Business Expenses:
Advertising
Business Miles (at federal mileage rate)
Commission and fees
Insurance (property, malpractice)
Interest on operating loans
Legal and professional fees
Deductible Business Expenses:
Office supplies
Rental fees for cars, trucks, vans, machinery (leases less than 30 days only)
Repairs and maintenance
Costs for general operating supplies (NOT associated with cost of goods sold – inventory is out of scope )
Deductible Business Expenses:
Taxes and licenses
Travel/meals & entertainment
Utilities (for business use only, no personal expenses)
Business/Self-Employment Income
Open up Walter White in TaxWise
• Enter Business/Self-Employment on Line 12 using Sch C or Sch C-EZ
Employer
Funded
Defined Benefit
Retirement Plans
Pensions
Annuities
Civil
Service
Retirement
Income
Defined Contribution
Retirement Plans
Employer
Sponsored
401(k)
Annuities
403(b)
Taxpayer
Funded Individual
Retirement Plans
IRA
Roth IRA
Defined Benefit
Retirement Plans
Defined
Contribution
Retirement Plans
Individual
Retirement Plans
Funded by the employer
Monthly set amount based on salary history, years of service
Employee pays taxes on payments received
Employer-sponsored, employee contributes portion of gross salary pre-tax
Offers benefits by allowing employee to defer taxes
Funded by individual taxpayers
Like DC plans, offers benefits by allowing employee to defer taxes
Common Types of Retirement Plans
Pension: series of payments for past work (based on salary history and years of service)
Defined Benefit Plan
401(k) Plan: part of employee’s gross salary is placed in a retirement plan on a pre-tax basis (not subject to income tax until employee receives it as a distribution from retirement account)
Defined Contribution Plan
Common Types of Retirement Plans
Individual Retirement Arrangements: A personal savings plan that offers tax advantages to set aside money for retirement
• Earnings generally accumulate tax free until withdrawn
• Types:
Traditional
Roth: Usually Out of Scope (in scope under certain conditions)
SIMPLE: Out of Scope!
SEP: Out of Scope!
Retirement Forms
Retirement income can be reported on:
• Form 1099-R Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
• Form CSA 1099-R Statement of Annuity Paid (civil service retirement payments)
• Form CSF 1099-R Statement of Survivor Annuity Paid
• Form RRB1099R Annuities or Pensions by the Retirement
Railroad Board (out of scope for Campus Fellows)
Form 1099-R: Distribution Code(s) &
IRA/SEP/SIMPLE
Reported in box 7
Distribution Code(s) identify the type of distribution received
Only certain distribution types are in scope for
VITA
Form 1099-R: Distribution Code(s) &
IRA/SEP/SIMPLE
1: Early distribution, no known exception (in most cases, under age 59 ½)
2: Early distribution, exception applies (under age 59 ½)
3: Disability
4: Death
7: Normal distribution
B: Designated Roth account distribution
G: Direct rollover and rollover distribution
See the Publication 4012, Income Tab for a full list of box 7 distribution codes (and which are in scope)
Form 1099-R: Distribution Code(s) &
IRA/SEP/SIMPLE
❒ IRA/SEP/SIMPLE indicates that the distribution was from a traditional IRA, SEP, or SIMPLE retirement account
ONLY traditional IRAs are in scope for Campus
Fellows!
Verify with the taxpayer that the amount distributed was from a traditional IRA
Reported in box 9b
For certain plans, an amount may be listed here showing the taxpayer’s contributions to the plan
This amount is used to help determine the taxable amount if box 2a is blank (however, this is out of scope for Campus Fellows )
Why is it Important…?
It is extremely important to determine what type of retirement plan a taxpayer has because it will change how the form is entered into TaxWise
Why is it Important…?
Defined Benefit Plans
…are NOT taxable in Alabama
In TaxWise…
Box 1
Box 2
Box 3
Railroad Retirement
How to Determine the Plan Type
What if the taxpayer doesn’t know what type of plan they have?
Unfortunately, the Form 1099-R often doesn’t make clear what type of plan the distribution is from
Defined Benefit
Retirement Plans
Defined
Contribution
Retirement Plans
Individual
Retirement Plans
Not clearly evident from the 1099-R
Will require asking taxpayer questions, consulting resources
Not clearly evident from the 1099-R
Will require asking taxpayer questions, consulting resources
❒ IRA/SEP/SIMPLE box will be checked on the Form 1099-R
Defined Benefits vs. Defined Contributions
To find out if a retirement plan is Defined Benefits or Defined Contributions
• Consult the DB list in the Campus Fellow Manual
• Call the company that administers the plan
• Call the state Department of Revenue
• Call the IRS
• Ask for a Summary Plan Description
Defined Benefits vs. Defined Contributions
All retired civil servants (teachers, city employees, soldiers, etc.) have Defined
Benefits plans
401(k)s are NOT Defined Benefits
Why is it Important… Check Box 1!
Defined Benefit Plans
…are NOT taxable in Alabama
In TaxWise…
Box 1
Box 2
Box 3
Railroad Retirement
Defined Benefits or Defined Contributions?
You can also ask the taxpayer the following questions to help you reach a decision:
• Do you receive the same amount every pay period? (If yes
Defined Benefits )
• Did your employer match your retirement contributions? (If yes Defined Contributions )
• Were your contributions placed into an investment account?
(If yes Defined Contributions )
Summary Plan Description
A document provided by the plan administrator that includes a plain language description of important features of the plan, e.g., when employees begin to participate in the plan, how service and benefits are calculated, when benefits become vested, when payment is received and in what form, and how to file a claim for benefits
Everybody Together Now… Check Box 1 if Defined Benefit Plan!
Defined Benefit Plans
…are NOT taxable in Alabama
In TaxWise…
Box 1
Box 2
Box 3
Railroad Retirement
Rollover
Refers to transferring the holdings in one retirement account to another
Specifically, the retirement account is emptied and distributed to the owner, who then deposits them into a new account for reinvestment
This is a TAX-FREE DISTRIBUTION
• But still must be reported on the federal tax return
• Code G will be in Box 7 of the 1099-R
Disability Pension Income
Why would a taxpayer have disability pension income?
• Perhaps they had an accident that rendered them totally and permanently disabled
Disability payments may be coming from a qualified retirement pension plan
Disability Pension Income
Why is it important to determine if a taxpayer’s
1099-R is for disability pension payments?
…because until a taxpayer reaches the retirement age FOR THAT SPECIFIC PLAN, the income will be treated like wages, which might make the taxpayer eligible for the...
EARNED INCOME TAX CREDIT
Disability Pension Income
Code 3 will be in box 7 on a 1099-R, HOWEVER, you must…
• Check to see if taxpayer has reached retirement age for that specific plan
If taxpayer isn’t sure, may need to consult retirement paperwork or contact plan manager
Don’t just rely on a previous year return—previous tax preparer might not have entered in correctly
Disability Pension Income
If taxpayer has not reached retirement age, choose Check if disability and taxpayer is disabled and verify that amount appears on the Form 1040 as wages
If taxpayer has reached retirement age, do NOT check that box and verify that the amount appears on the Form 1040 as retirement income
Retirement Income
Open up Walter White in TaxWise
• Enter Retirement on Line 15/16
Total Income
(Earned + Unearned)
Adjustments
Adjusted Gross
Income
Adjustments to Income
Adjustments are basic life expenses that help decrease the amount of taxable income:
• Educator expenses
• Half of self-employment tax
• Early withdrawal penalty
• Alimony paid
• IRA contributions (traditional)
• Student loan interest
• College tuition payments
• Jury duty pay turned over to employer
Adjusted Gross
Income
Deductions
(Standard or Itemized)
Exemptions
Taxable
Income
Itemized Deductions
Every taxpayer can take a specific amount for a
“standard” deduction
• Reduces taxable income
There are certain designated expenses that a taxpayer can choose to list out separately, and, if they total more than the standard deduction, the taxpayer will
“itemize” his deductions
• Reduces taxable income by a greater amount
When to Itemize Deductions
A taxpayer can receive a larger deduction by itemizing if he/she has:
• At the Federal Level (higher standard deduction):
Home mortgage payment
Large number of medical bills
• At the State Level (lower standard deduction):
Expenses that may/may not have been sufficient to justify itemization on the federal level
Note: If a taxpayer is MFS and his/her spouse itemizes, the taxpayer must also itemize, regardless of whether the Standard Deduction would be higher
Qualifying Expenses
Unreimbursed Medical Expenses
Charitable Contributions
Taxes
Home Mortgage Interest
Miscellaneous Deductions
Unreimbursed Medical Expenses
Deductible Medical Expenses
• Co-pays to doctor, dentist, eye doctor
• Prescription drugs
• Cost of glasses or hearing aids
• Cost of medical equipment
Unreimbursed Medical Expenses
Deductible Medical Expenses
• Health insurance premiums
• Long-term care insurance premiums
• Cost of surgery, operations
• Miles to and from doctor
NOTE: For a complete listing of deductible and nondeductible expenses see Site Coordinator Handbook
Unreimbursed Medical Expenses
Nondeductible Medical Expenses
• Life insurance policy premiums
• Funeral, burial, cremation costs
• Unnecessary cosmetic surgery
• Nonprescription drugs
NOTE: For a complete listing of deductible and nondeductible expenses see Site Coordinator Handbook
Charitable Contributions
Qualifying Organizations:
• Religious
• Charitable
• Educational
• Scientific
• Literary
Non-qualifying
Organizations:
• Business
• Civic/Political
• Social
• Foreign
• Homeowners’ Associations
Charitable Contributions
Deductible Expenses:
• Monetary donations
• Dues, fees, and assessments
• Fair market value (FMV) of clothing, furniture
• Uniforms required to be worn during service
• Unreimbursed transportation expenses
Tolls, bus fare, parking fees, charitable miles
IMPORTANT: The taxpayer must keep receipts!
Charitable Contributions
FMV of Donated Goods
• If a taxpayer has made non-cash contributions to charity and does not have receipts, use the following resources to determine the FMV of donated items:
• Salvation Army Valuation Guide
Charitable Contributions
Nondeductible Expenses:
• Raffle, bingo, lottery tickets
• Tuition
• Value of time of service
• Blood
• Contributions to individuals
• The FMV of any good received in exchange for a donation (i.e. t-shirts, cds, tote bags, etc.)
Charitable Contributions
Limits to Charitable Contributions
• Contributions that total more than 20% of their AGI may be able to deduct only a percentage of their contributions, and must carry over the remainder to a later tax year
• If taxpayers have >$500 of noncash contributions, they need to be referred to a professional preparer if they want to deduct the full amount.
• Form 8283 (OUT OF SCOPE)
Taxes
Deductible
• State and local taxes
• Real estate taxes
• Personal property taxes
• State and local taxes on a new car purchase
• Ad valorem tax on car tags
Nondeductible
• Federal taxes
• Hunting licenses
• Water/sewer
• Taxes on alcohol, tobacco, or gas
• Utilities
State and Local Taxes
Taxpayers can choose one of the following, but not both:
• Income taxes
• Sales taxes
County sales tax amounts differ
AL state sales tax is 4%
TaxWise will make an estimate of sales tax paid based on income
Home Mortgage Interest
Only taxpayers who are legally liable for the debt can deduct the interest
Taxpayers may have more than one mortgage or may have refinanced and have multiple statements
Points: only points paid as a form of interest (for the use of money) can be deducted
Form 1098: Mortgage Interest Statement
Form 1098: Mortgage Interest Statement
Boxes 4 or 5 MAY also report real estate taxes
These amounts can be included as an itemized deduction
Nondeductible Interest
Personal interest
• personal loans
• car loans
• credit cards
• etc.
Miscellaneous Deductions
Union dues
Uniforms (that cannot be worn in any other circumstance)
Professional books, journals
Small tools and supplies, used for business
Miscellaneous Deductions
Employment-related educational expenses
• Includes educator expenses > $250 (after the adjustment)
Expenses for looking for a new job
Tax preparation fee from last year
Safe deposit box
Gambling losses up to amount of winnings
Nondeductible Expenses
Burial or funeral expenses
Wedding expenses
Fees and licenses
Fines, penalties, traffic tickets
Home repairs and insurance
Rent
Insurance premiums (except health and mortgage)
Losses from sale of home
Nonrefundable Credits
Remember: Nonrefundable credits directly reduce the tax liability, but only to zero (no refund of additional credit is available)
Foreign tax credit
Residential energy credit
Foreign Tax Credit
Taken if a taxpayer paid income tax to a foreign country; U.S. possession; or political subdivision, agency, or instrumentality of a foreign country
Foreign tax paid > $300 is out of our scope!
We may see some foreign tax reported on a
1099-DIV or 1099-INT in Box 6
Form 1099-DIV: Dividends and
Distributions
Residential Energy Credit
Two Types of Residential Energy Credits
• Residential energy-efficient property credit – OUT OF
SCOPE!
• Nonbusiness energy property credit
Available to a taxpayer:
• Who made purchases for qualified energy efficient improvements for his/her main home
• Who owns his/her home
Nonbusiness Energy Property Credit
Non-business energy property (for home improvement):
• Heating
• Roofs
• Ventilating
• Water heaters (non-solar)
• Air-conditioning
• Windows
• Insulation • Doors
Eligibility Requirements
Improvements must be for taxpayer’s main home
• The home where the taxpayer lives most of the time
• Temporary absences do not change main home
Credit is only available for improvements made to existing homes
• Cannot claim based on expenses paid during the construction of a home
Miscellaneous Nonrefundable Credits
Open up Walter White in TaxWise
• Enter Foreign Tax Credit & Residential Energy Credits
Education Credits
Education credits help to offset the cost of higher education expenses paid during the year
Two education credits available
• Nonrefundable: Lifetime learning credit
• Partially Refundable: American opportunity credit
General Eligibility
Filing status cannot be Married Filing Separately
Cannot be claimed as a dependent on someone else’s return
Accredited institution
CAN claim on the basis of expenses paid with student loans
American Opportunity
(Hope) Credit
Up to $2,500 per eligible student ($1,000 is refundable)
Available for the 1 st 4 years of college
Lifetime Learning Credit
Up to $2,000 credit per return
Available for all years
Student must be pursuing a degree or recognized education credential
Student does not need to be pursuing a degree or credential
Student must be enrolled at least half time Available for one or more courses
No felony drug conviction on student’s record
Expenses include tuition, fees, and course materials
Felony drug conviction does not apply
Expenses include only tuition and fees
Form 1098-T: Tuition Statement
Qualified Expenses for Credit
American Opportunity (Hope) Credit
• Qualified tuition and related expenses up to $4,000 per eligible student
• Includes expenses for course materials – books, supplies, and equipment needed for a course of study, whether or not they were purchased from institution
Qualified Expenses for Credit
Lifetime Learning Credit
• Expenses include only tuition and fees
• Course-related books, supplies and fees are included
ONLY if they must be paid to the institution as a condition of enrollment
No Double Benefits
The taxpayer CANNOT claim:
• Both the American opportunity and lifetime learning credits for the same qualified tuition expenses
• Expenses paid with a tax-free scholarship, grant, or other assistance, including Pell grants (in other words, the taxpayer must subtract these scholarships from the total expenses before claiming either credit)
No Double Benefits
The taxpayer CANNOT claim:
• Both an education credit AND the tuition and fees adjustment for the same qualified tuition expenses
• Most taxpayers benefit more from the credit, but you should try the expenses as both an adjustment AND a credit to determine which benefits the taxpayer more
Qualified Expenses
IMPORTANT!
Verify with the taxpayer that the amount in Box 1 or 2 of Form 1098-T is actually the amount paid in the current tax year for qualified expenses!
Nonrefundable vs. Refundable
Lifetime Learning Credit
• Entirely nonrefundable
• Limit to $2,000 PER RETURN (not per eligible student)
American Opportunity Credit
• Partially refundable – up to $1,000 PER STUDENT
• Limit to $2,500 PER STUDENT (not per return)
Refundable American Opportunity Credit for Taxpayers under the age of 24
See Your Site Coordinator if you have a taxpayer under the age of 24 claiming an education credit – the taxpayer may or may not be eligible to take the refundable American Opportunity Credit, but the process for determining eligibility is complicated
Who Needs MEC?
Everyone on the tax return needs MEC or a coverage exemption
The taxpayer is responsible for the insurance, coverage exemption, or individual shared responsibility payment (penalty) of each person on the return
How Many Months Do Taxpayers Need to
Have MEC?
Everyone needs MEC for every month
• A person is considered covered for the whole month if they had coverage for at least one day
• A person who was born or died during the year is required to have coverage for every full month alive
Types of Minimum Essential Coverage
Employer-Sponsored Coverage
• Group health insurance coverage for employees under
A governmental plan (such as the Federal Employees Health
Benefit Program)
A grandfathered health plan
• A self-insured health plan for employees
• COBRA coverage
• Retiree coverage
Types of Minimum Essential Coverage
Individual Health Coverage
• Health insurance purchased directly from an insurance company
• Health insurance purchased through healthcare.gov
• Health insurance through a student health plan
Types of Minimum Essential Coverage
Government-Sponsored Programs:
• Medicare Part A coverage
• Medicare Advantage plans
• Most Medicaid coverage
• Children’s Health Insurance Program (CHIP)
ALL Kids (Alabama)
Types of Minimum Essential Coverage
Government-Sponsored Programs:
• Most TRICARE coverage
• Veteran Affairs comprehensive health care
• Peace Corps volunteer health coverage
• Department of Defense Nonappropriated Fund Health
Benefits Program
• Refugee Medical Assistance
What is a Health Coverage Exemption?
A reason for not having health insurance that avoids payment of the individual shared responsibility payment
Who Needs a Health Coverage
Exemption?
Anyone without insurance coverage for any month should be screened for exemption eligibility
Exemptions: Where Do I Start?
Step
1
Does anyone on the tax return already have an exemption in hand from the Marketplace
(healthcare.gov)?
Marketplace exemptions require an application. If a person applied for an exemption, they should have received an Exemption Certificate Number (ECN) from healthcare.gov (it is a 6 or 7 alphanumeric code)
Exemptions: Where Do I Start?
Step
2
Is household or gross income under the filing threshold?
If YES, everyone on the tax return is exempt from the coverage requirement, and there is no need to consider additional exemptions
Exemptions: Where Do I Start?
Step
3
If the family does not qualify for an exemption under Step 2, does any individual qualify for an exemption that can be claimed directly on the return?
If YES, enter the exemption code on the tax return
Exemptions: Where Do I Start?
Step
4
For any uninsured individual that does not qualify under Step 2 or 3, does any individual on the tax return qualify for an exemption from healthcare.gov?
If YES, see your Site Coordinator for additional help in applying for the exemption and enter “pending” on the tax return
Exemptions: Household/Gross Income
Below Filing Threshold
Household Income
The Modified Adjusted Gross Income (MAGI) of each individual on the tax return with a filing requirement. Include dependent income ONLY IF the dependent has a filing requirement
Gross Income
All the income received in the form of money, goods, property, and services that is not exempt from tax, including taxable portions of Social Security (do not income dependent income)
See Filing Basics tab of Pub 4012 for Filing Thresholds
Exemptions: Claimed on the Tax Return
Certain noncitizens and U.S. citizens living abroad
Federally recognized Indian tribe or eligible for services through the Indian Health Service
Member of a health care sharing ministry
Incarceration
Lived in a state that did NOT expand Medicaid
(Alabama, Tennessee, Florida, South Carolina)
Exemptions: Claimed on the Tax Return
Unaffordable Insurance (cost of coverage exceeds
8% of household income) see Site Coordinator
Aggregate cost of employer insurance in unaffordable see Site Coordinator
Short coverage gap (less than 3 months)
Full list of exemptions for Individuals claimed on the tax return can be found in Pub 4012, ACA Tab
What is a Premium Tax Credit?
A premium tax credit (PTC) lowers the cost of health insurance coverage purchased from healthcare.gov
PTCs can be either:
Taken in advance (payment forwarded directly to the insurer monthly to reduce premiums), OR
Taken on the tax return (payment is claimed as a lump sum when filing the return)
Premium Tax Credits: Where Do I Start?
Step
1
Did the taxpayer or dependent purchase coverage from healthcare.gov?
If YES, complete Form 8962 and go to Step 2.
If NO, do not complete Form 8962 and STOP.
Premium Tax Credits: Where Do I Start?
Did the taxpayer receive Form 1095-A,
Health Insurance Marketplace Statement?
Step
2
If YES, use this to complete Form 8962. All members of a household in a single policy will be on one Form
1095-A (if family members enroll in different policies or made mid-year changes, there will be multiple
1095-As)
If NO, call the Marketplace call center and/or check taxpayer’s account on healthcare.gov
Form 1095-A: Health Insurance
Marketplace Statement
Form ACA Supplement
Turn to page 6 of the Walter White Exercise
• You can also view the form on impactamerica.com/taxprep
Part I: Healthcare.gov
• If taxpayer checks yes, you must complete Form 8962 in
TaxWise
Part II: Health Insurance
• Verify that each person on the return had one of the following types of health coverage for ALL 12 months of the year
• If they did not have it for all 12 months, screen for exemption
Form ACA Supplement
Part III: Household Information
• Use this section to help you determine if a taxpayer qualifies for a coverage exemption (see shaded box
“To be completed by a Certified Volunteer Preparer”)
Use information from Parts I, II, and III to complete the shaded sections of Part VI – Health Care
Coverage on the Intake/Interview form
Form ACA Supplement
Part IV: IRS Certified Volunteer Quality Reviewer
Section – Federal Return
• These are additional questions for you to check yes/no to while quality reviewing the return (use in conjunction with I/I form)
Form ACA Supplement
Part V: IRS Certified Volunteer Quality Reviewer
Section – Alabama Return
• Not included in the Walter White exercise, but version at tax site will include additional questions for you to review while quality reviewing the return
Affordable Care Act
TaxWise Walkthrough
• NEW ACA Pg. 1 and Pg. 2
Open up Walter White in TaxWise
• Enter Affordable Care Act related information
Additional Topics – Out of Scope at Tax Site
IRS changed VITA certification levels
There are more advanced topics on your 2015 IRS
Advanced Certification test, but you will not prepare these at the tax sites
We will briefly review now…
Additional Topics for 2015 VITA Advanced
Exam – Out of Scope at Tax Site
1) Sale of Stock
2) Capital Loss Carryover
3) Retirement Income (the Simplified Method)
4) Retirement Income (Additional Tax on IRAs)
5) Cancellation of Debt
Use Handout: “Helpful Tips for Out of Scope Topics on 2015 IRS Advanced Certification Exam”
*********
Additional Topics – Out of Scope at Tax Site
Sale of Stock
Sale of stock is reported as a capital gain (or loss) on a Form 1099-B or a Tax Reporting Statement from the Broker
Additional Topics – Out of Scope at Tax Site
Sale of Stock
In order to properly report the sale of stock on the tax return, the following information from the
1099-B or Tax Reporting Statement is needed:
• Date of Acquisition (1b)
• Date of Sale or Exchange (1a)
• Sales Price of Stocks, Bonds, etc. (2a)
• Cost or Other Basis (3)
Additional Topics – Out of Scope at Tax Site
Sale of Stock
In order to properly report the sale of stock on the tax return, the following information from the
1099-B or Tax Reporting Statement is needed:
• The holding period of the transaction and whether or not the basis was reported to the IRS
Enter A as the transaction code for short-term transactions in which the basis is NOT reported to the IRS
Enter E as the transaction code for long-term transactions in which the basis is NOT reported to the IRS
Additional Topics – Out of Scope at Tax Site
Sale of Stock
A capital gain occurs when the amount realized (the gross proceeds from the sales) is GREATER than the
adjusted basis of the stock (how much the taxpayer paid for the stock)
A capital loss occurs when the amount realized is
LOWER than the adjusted basis of the stock
Additional Topics – Out of Scope at Tax Site
Sale of Stock
Holding period starts the day after the property is acquired and continues through the day it is sold
• Short-term: stock is held for one year or less
• Long-term: stock is held for more than one year
Additional Topics for 2015 VITA Advanced
Exam – Out of Scope at Tax Site
1) Sale of Stock
2) Capital Loss Carryover
3) Retirement Income (the Simplified Method)
4) Retirement Income (Additional Tax on IRAs)
5) Cancellation of Debt
Use Handout: “Helpful Tips for Out of Scope Topics on 2015 IRS Advanced Certification Exam”
*********
Additional Topics – Out of Scope at Tax Site
Capital Loss Carryover
If a taxpayer had a capital loss more than the allowable loss for the tax year, they can “carry” that loss over to the next tax year to help reduce taxable income
The limit is generally $3,000—any loss greater than that should be carried over to the next tax year
Additional Topics – Out of Scope at Tax Site
Capital Loss Carryover
If a taxpayer had a capital loss more than the allowable loss for the tax year, they can “carry” that loss over to the next tax year to help reduce taxable income
The limit is generally $3,000—any loss greater than that should be carried over to the next tax year
Additional Topics – Out of Scope at Tax Site
Capital Loss Carryover
Carryover loss from the previous year can be found on the Worksheet for Capital Loss
Carryovers of that tax year
Long-term capital loss is found on line 13
Additional Topics – Out of Scope at Tax Site
Capital Loss Carryover
Enter amounts from line 13 (above) onto Sch D, pg.
1, line 14 (long-term capital loss carryover)
Additional Topics for 2015 VITA Advanced
Exam – Out of Scope at Tax Site
1) Sale of Stock
2) Capital Loss Carryover
3) Retirement Income (the Simplified Method)
4) Retirement Income (Additional Tax on IRAs)
5) Cancellation of Debt
Use Handout: “Helpful Tips for Out of Scope Topics on 2015 IRS Advanced Certification Exam”
*********
Additional Topics – Out of Scope at Tax Site
Retirement Income – The Simplified
Method
If the taxable amount (box 2a on Form 1099-R) is not determined, you must use the Simplified Method to calculate the taxable portion of the retirement distribution for the tax year
Use the Simplified Method worksheet at the bottom of the Form 1099-R in TaxWise
Additional Topics – Out of Scope at Tax Site
Retirement Income – The Simplified
Method
To complete the Simplified Method, you’ll need to gather some information, some from the taxpayer, some from the Form 1099-R
Additional Topics – Out of Scope at Tax Site
Retirement Income – The Simplified
Method
Line 1: Enter the amount from box 9b of the 1099-R
Additional Topics – Out of Scope at Tax Site
Retirement Income – The Simplified
Method
Line 2: Choose the age of the recipient at the start date of the retirement plan
(NOT the taxpayer’s current age) AND check the box stating the annuity started after
11/18/1996
Additional Topics – Out of Scope at Tax Site
Retirement Income – The Simplified
Method
Line 4: Enter the number of months payments were received during the tax year, starting with the first month payments were received (e.g., enter
8 if payments started May 1)
Additional Topics for 2015 VITA Advanced
Exam – Out of Scope at Tax Site
1) Sale of Stock
2) Capital Loss Carryover
3) Retirement Income (the Simplified Method)
4) Retirement Income (Additional Tax on IRAs)
5) Cancellation of Debt
Use Handout: “Helpful Tips for Out of Scope Topics on 2015 IRS Advanced Certification Exam”
*********
Additional Topics – Out of Scope at Tax Site
Retirement Income – Additional Tax on
IRAs
If a taxpayer is required to pay an additional tax on their IRA, other qualified retirement plan, etc., it will appear on Form 1040, Pg 2, line 59
Additional Topics – Out of Scope at Tax Site
Retirement Income – Additional Tax on
IRAs
Taxpayers who make an early withdrawal from a a retirement account may have an additional tax penalty that will appear on this line
Indicated by Code 1 in box 7 of Form 1099-R
Additional Topics – Out of Scope at Tax Site
Retirement Income – Additional Tax on
IRAs
HOWEVER, depending on what the taxpayer used the funds for, they may qualify for an exception to the 10% additional tax on the early distribution
Note: early distributions from a 401(k) to pay for household expenses due to unemployment do NOT qualify
Additional Topics – Out of Scope at Tax Site
Retirement Income – Additional Tax on
IRAs
Exceptions to the 10% additional tax
• IRA distributions were made for higher education expenses
• IRA distributions were made for the purchase of a first home, up to $10,000
• Distributions were made due to total and permanent disability
Additional Topics for 2015 VITA Advanced
Exam – Out of Scope at Tax Site
1) Sale of Stock
2) Capital Loss Carryover
3) Retirement Income (the Simplified Method)
4) Retirement Income (Additional Tax on IRAs)
5) Cancellation of Debt
Use Handout: “Helpful Tips for Out of Scope Topics on 2015 IRS Advanced Certification Exam”
*********
Additional Topics – Out of Scope at Tax Site
Cancellation of Debt
Cancelled debt from a nonbusiness credit card is reported on a Form 1099-C
Additional Topics – Out of Scope at Tax Site
Cancellation of Debt
Taxpayers who have canceled debt from a Form
1099-C who were solvent (the condition in which assets are greater than liabilities) BEFORE the debt was canceled will report it on Form 1040, line 21, other income
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #1: Frodo Baggins
Review practice exercise #1 in the Helpful Tips… handout and answer the following question
1.
Frodo qualifies for an exception to the 10% additional tax on the early distribution from his IRA.
a.
True b.
False
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
Review practice exercise #2 in the Helpful Tips…
On your own, in TaxWise:
• Enter the taxpayer information in the interview section
• Fill out Dependents Worksheet
• Complete ACA Pg. 1
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
Gather necessary information to complete the
Simplified Method (for 1099-R from District 12
Corporation)
• You must complete the Simplified Method because the taxable amount (box 2a) is not determined
• First, enter the 1099-R as indicated on the Form in
TaxWise
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
Information Needed
• Cost in the plan at the start date: $14,500
• Age of recipient at the start date of the retirement plan:
Peeta was born on February 19, 1946
He started receiving payments on April 1, 2015
Therefore, his age at the start date was… 69 years
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
Information Needed
• Number of months payments were received this year:
Since Peeta started receiving payments on April 1, 2015,
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
Follow along with your trainer and enter the following into TaxWise:
• Finish Form 1099-R with Simplified Method
• Add additional Form 1099-R
• Enter interest, dividends, and sale of stock from Tax
Reporting Statement
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
Follow along with your trainer and enter the following into TaxWise:
• Enter capital loss carryover from previous year
• Enter canceled debt from Form 1099-C
Answer the questions on the following slides once complete
Note: the “Helpful Tips...” packet has step-by-step instructions and TaxWise screenshots for your reference
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
1.
What is the total taxable interest income show on line 8a of
Form 1040?
a.
$15 b.
$85 c.
$125 d.
$210
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
2.
How does the Code Q on Peeta’s Form 1099-R from Essex
Bank affect the return?
a.
The entire $5,500 distribution is taxable b.
Half of the $5,500 distribution is taxable c.
There is a 10% additional tax on the distribution d.
The entire $5,500 distribution is not taxable
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
3.
What is the amount shown on Form 1040, Line 13 – Capital
Gain or Loss?
a.
A gain of $957 b.
A gain of $1,017 c.
A gain of $1,407 d.
A gain of $1,467
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
4.
How much of the $19,500 gross distribution reported on
Additional Topics – Out of Scope at Tax Site
Helpful Tips For Out of Scope Topics…
Practice Exercise #2: Peeta and Katniss Everdeen
5.
Where is the canceled debt on Form 1099-C reported on the
Everdeen’s tax return?
a.
On Form 1040, line 7 as wages b.
It is not reported on the return c.
On Schedule A as a miscellaneous deduction d.
On Form 1040, line 21 as other income
Additional Duties
Quality Review
Volunteer Organization
Crowd Control
Appointment Confirmation
Paperwork
Quality Review
We must thoroughly quality review EVERY RETURN
(E-file and Paper)
Campus Fellows may assist Site Coordinators to conduct Quality Reviews
USE YOUR CAMPUS FELLOW MANUAL FOR ALL
QUALITY REVIEWS!
Volunteer Organization
Make sure that everyone signs in (Campus Fellows: set a good example!)
Place volunteers in stations
Partner volunteers in such a way that they are both comfortable and competent
Keep students busy!
Enforce “ Volunteer Dos and Don'ts ”
Crowd Control
Make sure each taxpayer signs in at the door
Direct taxpayers to the Intake and Interview Forms
Place taxpayers with available volunteers
Appointment Confirmation
Talk to the Site Coordinator about assisting with day-before appointment reminder calls
Call all appointments 24 hours before
• Identify Self and Organization (you may need to say “ the tax people ” )
• Confirm appointment time (make a note if the taxpayer mentions he/she might be late)
• Remind the taxpayer to bring Social Security Cards, W2s, and other tax forms; if filing jointly, spouses both need to come in
Appointment Confirmation
Call taxpayers who do not show up for appointments to reschedule
See script in your Campus Fellow Manual
Paperwork Requirements
Items for TAXPAYER (AND SPOUSE) to complete
DURING the return:
• INPUT pin # for Main Information Page in TaxWise
• Confirm “ I authorize ” selection on Federal Form 8879
• INPUT pin # on consent to use form ( “ Gen Use ” in
TaxWise)
• INPUT pin # on consent to disclose form ( “ Gen
Disclose ” in TaxWise)
Paperwork Requirements
Forms to print for an E-filed return:
• 1 copy of the entire return (including state) for taxpayer’s records
Forms for taxpayer to complete/sign:
• Federal Form 8379
• AL Form 8453
Note: these signed forms are given back to taxpayers for their records (we only keep the Intake/Interview form)
Paperwork Requirements
Forms to retain for our records:
• Completed Intake/Interview & Quality Review Sheet
• Complete ACA Supplement Form
Assisting the Site Coordinator
Always ask the Site Coordinator if there is anything you can do to help her/him!
Let’s Conduct a Quality Review!
With a partner, complete a thorough Quality Review of each other’s Walter White tax returns.
Discuss any issues you come across with your “taxpayer” (partner) and ask any relevant questions.
Campus Fellow Handbook
Tab 1: Site Information
• Remember: Each tax site has a unique Client ID! Make sure you use the correct Client ID!
• Important phone numbers, Local IRS and SSA Offices
Always talk to your Site Coordinator if you have questions BEFORE calling one of these numbers with a question or referring your taxpayer to any of these numbers.
Campus Fellow Handbook
Tab 2: Site Organization and Setup
• Site Coordinator’s Daily Checklist: Ask your site coordinator how you can assist them!
• Day-Before Call Script
Campus Fellow Handbook
Tab 3: Volunteer Information
• Volunteer FAQ
• Volunteer Etiquette Guide
• What Issues Can I Handle? (Campus Fellows are
Intermediate)
• Scope of Service Chart
• Form 13614-C Intake/Interview Job Aid for Volunteers
Read through this before coming to the tax site!
Campus Fellow Handbook
Tab 4: Finishing a Return
• Process for Conducting a Thorough Quality Review
USE THIS EVERY TIME you do a Quality Review!!
• Consent to Use and Disclose Forms (Read through this before you come to the tax site)
• Paper Returns
• Amended Returns
• Prior Year Returns
• Federal Payment Options
Campus Fellow Handbook
Tab 5: Preparing a Return
• Form 1040
• Form AL-40
Alabama “Pub 4012”
• Various Income Forms
Important information re: codes on 1099-Rs, W-2s
• Itemized Deductions
• 1098-T Tuition Statement Information
• Affordable Care Act Provisions
• Additional forms you may see
Campus Fellow Handbook
Tab 6: Alabama Exempt Defined Benefits Plans
• Lists defined benefits plans exempt from AL taxes
• Check this list first when trying to determine if a plan is defined benefits
Campus Fellow Handbook
Tab 7: Campus Fellow Summary Chart
• Line by line instructions for entering taxpayer information into TaxWise
Volunteer Standards of Conduct
Follow the Quality Site Requirements
Do not accept payment, solicit donations, or accept refund payments for federal or state returns
Do not solicit business or use personal information from taxpayers
Do not knowingly prepare a false return
Do not engage in criminal, infamous, dishonest, notoriously disgraceful conduct
Treat all taxpayers in a professional, courteous manner
Quality Site Requirements
Do only what you are trained to do
Use the intake/interview form for every taxpayer
Ensure a quality review is conducted for every return
Use your reference materials to help prepare the return
Undergo training and pass test to adhere to volunteer standards of conduct
Do Not Accept Payment
Do not accept cash for services
We cannot solicit donations, or have a donation/tip jar in the entry, waiting, or tax preparation areas of the tax site
Refunds CANNOT be deposited into a volunteer’s bank account on behalf of taxpayer’s who don’t have bank accounts
Do Not Solicit Business or Use Personal
Knowledge Gained About a Taxpayer
As a volunteer, you must keep taxpayer’s personal information confidential
This means you cannot use your knowledge about a taxpayer to engage in financial transactions
This also means you cannot ask a taxpayer on a date if you notice they are single
Do Not Knowingly Prepare False Return
An ethical violation is a knowing breach of any of the volunteer standards of conduct
Correctly apply tax law to the taxpayer’s situation— trust in the VITA program is broken when ethical standards aren’t followed
NOTE: If you make an accidental mistake, you are protected as a volunteer by the VITA program—and ultimately, taxpayers are responsible for the information entered on their return
Do Not Engage in Negative Conduct
Volunteers performing egregious activities may be barred from the VITA program
Consequences may also include:
• Criminal investigation
• Discontinuing IRS support for tax site
• Revoking sponsoring organization’s grant funds
• Deactivating IRS EFIN (site identification number)
Treat All Taxpayers With Courtesy
All volunteers are expected to conduct themselves professionally in a courteous, businesslike, and diplomatic manner
Taxpayers are often under a lot of stress and may wait extended periods for assistance, and volunteers may also experience stress due to the volume of taxpayers needing service
This situation can make patience run short—It is important to remain calm and create a peaceful and friendly atmosphere!
Taxpayer Civil Rights
Discrimination against taxpayers on the basis of race, color, national origin, disability, sex, age, or
sexual orientation is strictly prohibited
Reporting Questionable Activity
Violations that raise substantial questions about another volunteer’s honesty, trustworthiness, or fitness as a tax preparer should be reported
Taxpayers and tax preparers who violate tax law are subject to civil and criminal penalties
You can report a violation by speaking to your site coordinator or emailing WI.Voltax@irs.gov
directly
Volunteer Standards of Conduct Test
We will take the test after you have completed all volunteer paperwork (next section)
Volunteer Paperwork
Complete Volunteer Paperwork by logging into your account on volunteers.generationforchange.org
. It’s very important you complete this BEFORE you leave today.
• Click Review Volunteer Profile and add information to your profile.
Click Submit.
• Complete Acknowledgment of Risk and Release From Liability Form
• Complete Media and Publicity Release Form
• Complete Confidentiality Form
• Complete IRS Volunteer Agreement
• Complete Availability Form
Intake/Interview & Quality Review Test &
Volunteer Standards of Conduct Test
ALL volunteers must complete and pass the 2015
Intake/Interview & Quality Review Test & the 2015
Volunteer Standards of Conduct Test with a score of 80% on each
• Note: Most took the I/I & QR test in the fall—if you did NOT, complete this now (you may download Fall PPT from the website to help you complete the test)
Please login to your account on volunteers.generationforchange.org
and follow the links in your profile to take these two tests
You may use all your training materials to complete the short tests!
Congratulations!
This completes your SaveFirst Campus Fellow Refresher
Training
Next steps:
• Complete IRS Advanced Certification Exam (with score of
80% or higher)
• Serve families at tax sites!
• Reminder: You MUST bring your photo ID and show it to your site coordinator when you arrive at a tax site
IRS Advanced Certification
You must complete the 2015 IRS Advanced
Certification exam with a score of 80% or higher to complete your certification
Take the exam by logging in to your account on volunteers.generationforchange.org
and following the link in your profile
Complete:
• On your own
• At a testing session hosted by Impact staff member
Testing Session
If you attend a testing session, please bring a printout of the 2015 IRS Advanced Certification
Exam
Upcoming testing sessions:
• Trainer – insert upcoming sessions here