SaveFirst Campus Fellow Refresher Training Slides

Campus Fellow Refresher Training

Training Outline

 1) Basic Level Updates

 2) State Tax Refund

 3) Business Income

 4) Retirement Income

 5) Adjustments to Income

 6) Itemized Deductions


 7) Miscellaneous Nonrefundable Credits

 8) Affordable Care Act Tax Provisions

 9) Out of Scope Topics

 10) Additional Duties

 11) Practice Quality Reviews


 12) Campus Fellow Handbook

 13) Volunteer Standards of Conduct & Test

 14) Volunteer Paperwork & Certification

Basic Level Updates

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


 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


 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

State Tax Refund

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

Other Income, Business/Self-

Employment Income

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


 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


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


 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 )


 Taxes and licenses

 Travel/meals & entertainment

 Utilities (for business use only, no personal expenses)



• Enter Business/Self-Employment on Line 12 using Sch C or Sch C-EZ

Retirement Income

Employer

Funded

Defined Benefit

Retirement Plans

Pensions

Annuities

Civil

Service

Retirement

Income

Defined Contribution


Employer

Sponsored

401(k)

Annuities

403(b)

Taxpayer

Funded Individual


IRA

Roth IRA

Defined Benefit


Defined

Contribution


Individual


 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


 Distribution Code(s) identify the type of distribution received

 Only certain distribution types are in scope for

VITA


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)


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

Form 1099-R: Total Employee

Contributions

 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…?

Some retirement plans are not taxable on the state level

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


Defined

Contribution


Individual


 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!



In TaxWise…

Box 1

Box 2

Box 3


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!



In TaxWise…

Box 1

Box 2

Box 3


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


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


 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


 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


• Enter Retirement on Line 15/16

Adjustments to Income

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

Itemized Deductions

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


 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


 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


 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!


 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


 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.)


 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

Miscellaneous Nonrefundable Credits

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


• Enter Foreign Tax Credit & Residential Energy Credits

Education 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

Affordable Care Act

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


 Individual Health Coverage

• Health insurance purchased directly from an insurance company

• Health insurance purchased through healthcare.gov

• Health insurance through a student health plan


 Government-Sponsored Programs:

• Medicare Part A coverage

• Medicare Advantage plans

• Most Medicaid coverage

• Children’s Health Insurance Program (CHIP)

 ALL Kids (Alabama)


 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)


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


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


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


 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


 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)


 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


• Enter Affordable Care Act related information

Out of Scope Topics

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”

*********


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


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)


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


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


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









*********


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



 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



 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



 Enter amounts from line 13 (above) onto Sch D, pg.

1, line 14 (long-term capital loss carryover)









*********


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



Method

 To complete the Simplified Method, you’ll need to gather some information, some from the taxpayer, some from the Form 1099-R



Method

Line 1: Enter the amount from box 9b of the 1099-R



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



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)









*********


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



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



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



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









*********


Cancellation of Debt

 Cancelled debt from a nonbusiness credit card is reported on a Form 1099-C


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


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



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




 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




 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




 Information Needed

• Number of months payments were received this year:

 Since Peeta started receiving payments on April 1, 2015,




 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




 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




1.

What is the total taxable interest income show on line 8a of

Form 1040?

a.

$15 b.

$85 c.

$125 d.

$210




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




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




4.

How much of the $19,500 gross distribution reported on




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

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)


 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)


 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!

Practice Quality Review

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.


 Tab 2: Site Organization and Setup

• Site Coordinator’s Daily Checklist: Ask your site coordinator how you can assist them!

• Day-Before Call Script


 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!


 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


 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


 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


 Tab 7: Campus Fellow Summary Chart

• Line by line instructions for entering taxpayer information into TaxWise

Volunteer Standards of Conduct

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 & Certification

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

SaveFirst Campus Fellow Refresher Training Slides

Campus Fellow Refresher Training

Basic Level Updates

State Tax Refund

Other Income, Business/Self-

Employment Income

Retirement Income

Form 1099-R: Total Employee

Contributions

Some retirement plans are not taxable on the state level

Adjustments to Income

Itemized Deductions

Miscellaneous Nonrefundable Credits

Education Credits

Affordable Care Act

Out of Scope Topics

Additional Duties

Practice Quality Review

Campus Fellow Handbook

Volunteer Standards of Conduct

Volunteer Paperwork & Certification

Related documents

Products

Support

SaveFirst Campus Fellow Refresher Training Slides

Campus Fellow Refresher Training

Basic Level Updates

State Tax Refund

Other Income, Business/Self-

Employment Income

Retirement Income

Form 1099-R: Total Employee

Contributions

Some retirement plans are not taxable on the state level

Adjustments to Income

Itemized Deductions

Miscellaneous Nonrefundable Credits

Education Credits

Affordable Care Act

Out of Scope Topics

Additional Duties

Practice Quality Review

Campus Fellow Handbook

Volunteer Standards of Conduct

Volunteer Paperwork & Certification

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