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Chapter 8, 9, 11, 13, 14, and 15
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Requirement
Types of Income
Income types we experience in the past.
Samples of forms that we will see
How to enter them in TWO
 All
income must be reported except those
that are exempt from tax by law.
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Taxable Income
o Earned – You worked for it
• Wages
• Self-employment / Business
o Unearned – you did not worked for it
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Interest
Social Security
Alimony
Gambling
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Non-Taxable /
Exempt Income
o Child Support
o Gifts
o Inheritance
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Line 07 – Wages (W-2)
Line 08 – Interest Income (1099-INT)
Line 09 – Dividend Income (1099-DIV)
Line 10 – Taxable Refunds (State Tax Refund - Itemized TP only)
Line 11 – Alimony Received
Line 12 – Business Income (1099-Misc)
Line 15 – IRA Distributions (1099-R)
Line 16 – Pensions / Annuities (1099-R)
Line 19 – Unemployment Compensation (1099-G)
Line 20 – Social Security Benefits (SSA-1099)
Line 21 – Other Income (W-2G)
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Input the amounts as shown in the W-2 Form into TWO.
“KEY IT AS YOU SEE IT”
Note
o If the taxpayer’s job is one in which tips are received, ask if he/she
receive any tips and enter the amount in box 7 even if the
information is not reported on the W-2
o Double check employer name and address – change them manually
if necessary
o Box 14 Other Item: California State Disability Insurance (CASDI)
• Must be entered at the bottom of TWO’s W-2 form to be transferred to
Schedule A (Itemized Deduction) to State Tax Paid
• Must use correct literal “CASDI”
• Deductible because it is mandatory. Thus VPDI is not deductible since it
is voluntary.
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Enter via Schedule B > Interest Statement
List name of institution as much as it will fit
If there is an amount shown in Box 8:
o Enter “E” in NAEOB column
o Enter Box 8 Amount in NAEOB amount
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Enter other amounts as applicable.
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Enter on TWO via Dividend Statement in Schedule B
Enter information from the form 1099-DIV based on the
description of the box.
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Only applicable to tax payer that itemized in the previous
year
Use State Tax Refund Worksheet
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We use Schedule C-EZ only!!!!! (See next slide for details)
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Sole Proprietor (Business Owner)
If the taxpayer owns their own business or works out of their
home or is an independent contractor, he/she will tell you that
about the amount of income and expenses related to the
business.
I.E., Courtney has a small home-based word processing
business.
Her gross income was $6,570. Her expense for materials was
$878.
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Had business expenses of $5,000 or less
Used the cash method of accounting
Did not have an inventory at any time during the year
Did not have a net loss from the business
Were the sole proprietor for only one business (each spouse
on a joint return may use a separate Schedule C-EZ to
report business income from separately owned soleproprietor business if other conditions for filing Schedule CEZ are met)
Had no employees during the year
Did not deduct expenses for business use of their home
Did not have prior-year un allowed passive activity losses
from their business
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Self-employed (Independent Contractor – receive 1099MISC)
You will see
this form
when a
taxpayer
works for
someone
but is not
consider an
employee.
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Business Type & Business Code (NAICS Code*)
Business Name (If different than tax payer name)
Employer ID Number (If tax payer have employee)
Business Address (If different than tax return address)
Was 1099 issued to others (contracted work out to others)
Income (Credit Card, Other than credit card)
Expenses (See more info next page)
Net Profit
Business Miles
* http://www.naics.com/search.htm
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We use only schedule C-EZ to complete business income!!!!!
Using schedule C is out of scope of VITA
 If they have business loss it is also out of scope of VITA
 If they still want to file with us we will use schedule C-EZ
and reduce their expense to match their income so they will
have no profit.
*** Make sure taxpayer is ok with not claiming business loss.
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Advertising
 Car and truck expenses
 Commissions and Fees
 Insurance
 Other Interest
 50% of business meals
and entertainment
 Utilities (including
telephone)
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Legal and professional
services and fees
 Office expenses
 Rent or lease expenses
 Repairs and
maintenance
 Supplies
 Taxes and licenses
 Travel
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Part I: General information
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Line A, Principal business or profession
Line B, Business code
Line D, Employer ID number
Line E, Business address
Part II: Figure Net Profit
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Enter the amount as stated in each line
Use the standard mileage rate method:
 Multiply the business miles by the applicable mileage rate
 Add that amount to the business-related parking, tolls,
and other deductible business expenses
 Business Mileage
 The 2011 rate for business use of a vehicle is:
 51 cents per mile from January 1, 2011, through June 30,
2011
 55.5 cents per mile from July 1, 2011, through December
31, 2011
Gross Income Less Total Expenses
 Line 3, Net profit, is the difference between gross receipts
(line 1) and total expenses (line 2).
 If net profit is less than $400, enter the amount on line 12
of Form 1040 and attach Schedule C-EZ to the return.
 Schedule SE is not required unless there is a profit of
$400 or more
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Insert 1099-R form
Enter data to TWO from original form as seen in each box
Things to note:
o If box 7 “IRA/SEP/Simple” box is check, it will transfer the data to
line 15. Otherwise it will goes into line 16 of form 1040
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Use 1099G Work Sheet to enter information in TWO
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Enter information in 1040 Worksheet 1
Information to be entered: (as applicable)
o Social Security received this year
o Medicare Part B, C, and D (use scratch pad to sum up the amounts)
o Federal tax withheld
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What if tax payer does not have the form?
o www.socialsecurity.gov will allow you to request a copy of the most
recent SSA-1099 and will arrive in about 10 days via mail.
o Or they can go to the local Social Security Office to have them print
it out.
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The type of income that will be reported on this line:
o Foreign earned income
o Prizes and awards
o Gambling Winnings
o Jury Duty Fees
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DO NOT report 1099-MISC in this line as it should be
reported with schedule C or C-EZ
DO NOT report non-taxable income in this line (they are not
supposed to be reported at all)
o i.e., Child Support, Roth IRA distributions, Gifts
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The type of income description is very specific.
o i.e., if you have gambling winning of any type you must use
“GAMBLING WINNINGS” as the description exactly as spelled in the
quotation.
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Gambling Losses
o Gambling losses can be deducted up to the amount of gambling
winnings.
o Gambling losses will not be considered if you are not itemized
o Best practice is just to enter the loss on the form on TWO and if
taxpayer does itemized you will not have to go back to re-enter the
information.
Webster
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