Scenario #5
SCENARIO #5
TAX LAW TOPICS COVERED
1.
2.
3.
4.
5.
6.
7.
Income
Dividends
Medical expenses and church donation
Mortgage Interest
Cancellation of Debt: Credit Card
Social Security Benefits
ACA through Medicare and Exchange
OBJECTIVES
Students will be able to




Build on their skills from previous lessons
o Login into TW and start a return
o Identify filing status
o Input income documents
o Identify and input itemized deductions
Determine Cancellation of Debt
Input benefits from a SSA-1099 Social Security Benefit Statement
Finish an advanced tax return
MATERIALS
Print

Volunteer scenario packet for scenario 5
Tax Forms
1. 13614-C Intake and Interview sheet for Anthony and Courtney- Scenario #5
2. Tax forms for Anthony & Courtney
a. Social Security Numbers
b. W-2, Wage and Tax Statement for SF Waste Management
c. SSA-1099, Social Security Benefit Statement
d. 1099-C, Cancellation of Debt
e. 1099-DIV, Dividends and Distributions
f. 1098- Mortgage Interest Statement
g. 1095- A, Health Insurance Marketplace Statement
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Scenario #5
SCENARIO OVERVIEW FOR INSTRUCTOR
Anthony and Courtney Webster are filing a joint return. Courtney receives Social Security benefits and Anthony
has income from her job at SF Waste Management. They are itemizing this year. In addition, they had cancelled
credit card debt. Anthony had health insurance all year through Covered CA and Courtney had Medicare. If they
are due a refund, they would like to split it 50% into savings and checking.
OPENING THE LESSON
Turn to Scenario 5 in packet
Review the objectives of the scenario with the volunteers and tell them what exactly they
will be learning. Go over the documents included
1. 13614-C Intake and interview form
2. Supporting documents
3. Scenario Interview Notes
Intake & Interview
Things you still need to know:
1. As a volunteer you must review form and verify if their answers correspond with
documents presented
2. Verify if form is filled out correctly and corrections are made when clarifying
questions are asked
3. Determine if the client is eligible for VITA services- see Scope of Service chart in
Publication 4012, Page 8
WITH CLASS –
Ask volunteers: Have the Websters completed the following?


Met the taxpayer requirements (household income, IDs, and Social Security
Numbers for everyone on the return)
Completed the intake and interview sheet and has supporting documentation
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Scenario #5
CONDUCTING THE LESSON
Starting tax return – Pub 4012, Tab N
Now that volunteers have determined that Anthony and Courtney are eligible for VITA,
it’s time to create a new return.
Have all students refer to instructions covered in lesson 1. Remind volunteers that their
screen should be a green for practice.
TAXWISE 1. Create a new return and locate the forms tree on the left side of the screen
2. Input information from Part I of Intake Sheet into Main Information sheet. Refer
to Pub. 4012, Tab K 6-9
3. Taxpayers must choose a five digit PIN number (recommend using zip code) and
today’s date. This is the client’s e-file approval signature.
4. Have volunteers enter all income documents for the Webster’s:
 W-2
 Social Security Benefits
 1099-C
 1099-DIV
 1099-INT
 1098 Mortgage Interest Statement - Schedule A
Social Security Benefits - Publication 4012,
Tab D-26
THINGS YOU NEED TO KNOW ABOUT SOCIAL SECURITY BENEFITS
1. Most of the taxpayers seen at VITA sites have nontaxable Social Security
2. Always input Social Security benefits, whether taxable or not
3. If a taxpayer only has Social Security benefits, they do not have a filing
requirement, since they do not have any gross income
4. If taxpayers have other income, part of their Social Security benefits may be
taxable
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Scenario #5
TAXWISE –
1. Input SSA-1099, link from 1040, line 20a to 1040 Wkt 1
2. Complete Wkt 1 (see Tab D-26 for instructions on how to input data from SSA1099)
Itemized Deductions - Publication
4012, Tab F 3-14
WITH CLASS –
1. Determine if the Websters should take the standard deduction or itemize their
deductions. HINT: Do they have those two big ticket items: mortgage interest
and/or high unreimbursed medical expenses? Mortgage Interest
TAXWISE –
1. Open Schedule A from the forms tree. Refer to Pub 4012, Tab F-5
2. Have class enter:
 mortgage interest - Schedule A, Line 10
 mortgage insurance premiums – Schedule A, Line 13
 property taxes (see notes for the amount) - Schedule A, Line 6 (there are
several lines, input on 3
 charitable donation
 determine if medical expenses can be reimbursed
Cancellation of Debt – Publication 4012, Tab D33
THINGS YOU NEED TO KNOW ABOUT CANCELLATION OF DEBT
1. Any debt forgiven by a creditor is considered income by the IRS.
2. Creditors and debt collectors that agree to accept at least $600 less than the
original balance of the debt are required by law to file a 1099-C form with the
IRS and to send it to debtor.
3. There are exclusions that the IRS lists, use the screening tool in Publication
4012 Tab D-33 to determine if the client’s COD is in scope of VITA services.
WITH CLASS –
1.
2.
3.
4.
Review 1099-C
Determine if its within scope with the information you have
Review Pub. 4012 D-33 and to make scope determination.
Report income on 1040 line 21 “other income”
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Scenario #5
TAXWISE –
1.
Enter information on Worksheet 7, link from line 21 on the 1040
Affordable Care Act, Publication 4012, Tab
ACA
Refer to Lesson 1 on how to interview for ACA procedures
With class –
1. Review taxpayer answers on Part VI on 13614-C using the Job-Aid in Pub. 4012
Tab K 3-4
2. Determine coverage for each person on Pub. 4012, Tab ACA-1
3. Review Form 1095-A and Publication 4012, Tab ACA-15
4. Have students complete 13614-C gray box in part VI
TAXWISE –
1. Indicate on TaxWise ACA worksheet if any taxpayer had coverage through the
marketplace. Go to Form 8962 to fill out details.
2. Follow the instructions on how to determine amounts on Form 8962 from the
1095-A. Publication 4012, Tab ACA 15-16
Complete CA State Return
See lesson plan 2 for details on how to complete the CA return in TaxWise
FINISHING THE RETURN
Reviewing the Federal Tax Return
Review the 1040, line by line pointing out the different amounts and where they came
from. Tie it back to the documents and information input by the volunteers.
TAXWISE –
1. Review all lines of the 1040 that have amounts in them.
2. Bank account information needed for direct deposit- refer to Part VII of the Intake
Sheet
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Scenario #5
3. Identity Protection PIN- if client checked the “yes” in box 12 of the Intake Sheet,
refer to Pub. 4012, Tab P-1
Finishing the return- Publication 4012, Tab K
See scenario 1 on how to further complete the tax return then…
1. Ensure that all federal and state forms are green, then…
2. Click the Run Diagnostics button at the top of the page to check for mistakes or
missing information. Address any issues and click the button again until it is clear.
3. Click E-file button below the Diagnostics summary
FINISHING THE LESSON
After all volunteers have entered all documents into TaxWise for Scenario 5, ask them whether that
have any questions about the information that was taught. Review all topics that were covered and
be sure to use the questions in the PowerPoint to gauge student comprehension.
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