Basic A volunteer training
Tax year 2014
BASIC TRAINING OVERVIEW
• Tri-CAP scope of services
• VITA certification Link and Learn
• VITA volunteer standards of conduct
• Tri-CAP and VITA intake and screening
• Who must file and who should file a tax return
• Exemptions and filing status
• Form 1040, income and adjustments
• Form 1040, standard deduction or itemized deductions
P+P VOLUNTEER TAX MANUAL
• Table of contents
• Acronyms
• Index
• TaxWise instructions
INCOME GUIDELINES
• $30,000 or less for single taxpayer
• $53,000 or less for families
• $53,000 for taxpayer with self-employment
income
SELF-EMPLOYMENT (SE) INCOME
• SE income of $5,000 or below can be prepared at
the site EXCEPT daycare, inventory, business use
of the home
• Tri-CAP is an IRS-approved Schedule C EZ
program Schedule C sent To Prepare and
Prosper.
• Out-of-scope returns – cab drivers, clergy
members, corporation, partnership, rental income
or businesses with employees
REFER TO TRI-CAP MAIN OFFICE
• Taxpayer needing to apply for an individual
taxpayer identification number (ITIN)
• Amendment of a tax return
• Property tax return when federal and state return
already prepared at tax site
OUT-OF-SCOPE RETURNS
• Cancellation of debt – business cards, student
loan or repossessed vehicle (manual should read
out-of-scope, not refer to P+P or Tri-CAP)
• Auto donation, moving expenses, bankruptcy,
adoption credit, casualty/theft losses
• Military income
• Nonresident aliens
• Non-cash donations over $500
CERTIFICATION LEVELS FOR TAX PREP
• Basic
• Advanced
• Military (out-of-scope for Tri-CAP)
• Health savings account (HSA)
CERTIFICATION REQUIREMENTS
Tax preparer hrs
1. Volunteer standards of
conduct
2. Intake/interview and
quality review training
3. Advanced (Skip Basic)
4. Health savings account
(encouraged)
VOLUNTEER STANDARDS OF CONDUCT (VSC)
1. I will follow the Quality Site Requirements (QSR).
2. I will not accept payment or solicit donations.
3. I will not solicit business from taxpayers or use their
information for personal benefit.
4. I will not knowingly prepare false returns.
5. I will not engage in criminal, infamous, dishonest,
etc. conduct deemed to have a negative effect on
the VITA/TCE programs.
6. I will treat all taxpayers in a professional, courteous
and respectful manner.
TAX CLINIC PROCESS
Intake
Interview
Prepare
Quality
Review
Complete tax return
INTAKE/INTERVIEW & QUALITY REVIEW
INTAKE/INTERVIEW & QUALITY REVIEW
INTAKE/INTERVIEW & QUALITY REVIEW
INTAKE/INTERVIEW & QUALITY REVIEW
Pretend
you’re the
customer,
complete
pages 1, 2,
and 3!
P+P INTAKE
SHEET
P+P INTAKE
SHEET
P+P INTAKE
SHEET
P+P INTAKE
SHEET
TRUE OR FALSE
1. If the site is really busy, don’t worry about
completing IRS Form 13614-C intake/interview
sheet.
2. I have until February 6, 2015, to pass the IRS
certification test.
3. All returns with daycare income must be
completed at the P+P main office.
4. If I certify at the Advanced level, my returns do
not have to go through the review process.
QUESTION 1
As I’m reviewing the customer’s information, I
notice the Tax Site Specialist (TSS) screening
checklist has not been completed on the P+P
intake sheet. What should I do?
A. Storm up to the front desk and loudly ask
why this hasn’t been done.
B. Ignore it and move to the Preparer
checklist.
C. Use the screening tool checklist in the P+P
manual and complete the checklist.
D. Ask the customer to complete the checklist.
QUESTION 2
What should I do before I start entering data into
TaxWise?
A. Make sure all questions on Form 13614-C
are answered.
B. Change “Unsure” answers to “Yes” or “No”
based on a conversation with the taxpayer.
C. Verify the return is within my certification
level.
D. All of the above.
TAXWISE PRIMER
• Pages 28
through 38 will
be reviewed
during Basic D –
TaxWise training.
General tax information
GUIDELINES ON WHO MUST FILE
PUB 4012
• Chart A – filing status, age and gross income
requirements
• Chart B – children and other dependents
• Chart C – other situations
o Owes special taxes
o Self-employment of $400+ net earnings
o Received Advanced Premium Tax Credit
GUIDELINES ON WHO SHOULD FILE
PUB 4012, CHART D
• Federal or state income tax WH from income
• Qualifies for federal and state tax credits
• Made estimated tax payments during the year
• Eligible for the Minnesota homeowner and
renter refund
Topic 1: Taxpayer
Identification
PROOF OF IDENTITY
TIN VERIFICATION
• Drivers’ license
• Prior year return
• Birth certificate
• Original SSN card
• Passport/visa
• Original ITIN card/letter
• Employer/school ID
• Form SSA-1099
• Military ID
• IRS/MDOR letter
• State/national ID
• SSA benefit
statement/letter
• Medicare card
WHAT IS AN ITIN?
• IRS issues to nonresidents and others living
in the U.S. who are required to file a return,
but not eligible for an SSN
• Nine-digit number that begins with the
number 9
• Reported on a letter
• P+P is an approved Certifying Acceptance
Agent
10 MINUTE BREAK
Topic 2: Personal &
Dependency Exemptions
• $3,950 for each personal and dependent
exemption
• Reduces taxable income
• To claim a personal exemption taxpayer
(spouse) cannot be claimed as a dependent by
another person
• Dependent exemption– Qualifying Child or
Qualifying Relative
YOUNG ADULT TAXPAYER
• Young adult checks the “NO” or “UNSURE”
box on Form 13614-C, Part I, #11 – ask more
questions
• May require the young adult to phone “home”
to ask if parent will or has claimed him/her as
a dependent
• Parent unsure if they can claim their child as
a dependent – use Worksheet for Determining
Support, Pub 4012, C-9
RULES FOR CLAIMING AN EXEMPTION
FOR A QUALIFYING CHILD
1. Taxpayer (spouse) on the return cannot be
claimed on another tax return
2. Cannot claim a married person who files MFJ
unless the married person is only filing to claim a
refund of tax withheld and he/she has no tax
liability
3. Must be U.S. citizen or resident, or a resident of
Canada or Mexico for some part of the year
4. Dependent must meet the six tests for Qualifying
Child
Relationship
Entitled to
claim child
Age
Qualifying
child tests
Joint
Residency
Support
QUALIFYING CHILD OF MORE THAN ONE PERSON
If…
Then the child will be treated as
the qualifying child of the…
Only one of the persons is the child’s
parent…
Parent
Both persons are the child’s parent…
Parent with whom the child lived for
the longer period of time
Both persons are the child’s parent
and the child lived with each parent
the same amount of time during the
year…
Parent with the highest AGI
None of the persons are the child’s
parent…
Person with the highest AGI
RULES FOR CLAIMING AN EXEMPTION
FOR A QUALIFYING RELATIVE
1. Taxpayer (spouse) on the return cannot be
claimed on another tax return
2. Cannot claim a married person who files MFJ
unless the married person is only filing to claim a
refund of tax withheld and he/she has no tax
liability
3. Must be U.S. citizen or resident, or a resident of
Canada or Mexico for some part of the year
4. Person must meet the four tests for Qualifying
Relative
Not a
qualifying
child
Support
Qualifying
relative
tests
Gross
income
Relationship
Quiz
time
Topic 3: Filing Status
MARRIAGE STATUS
• Determines the Standard Deduction amount
• Form 13614-C, Part II, Marital Status and
Household Information
• Taxpayer marked the “single” check box on Form
13614-C doesn’t mean filing status is single!
MARRIAGE
• IRS ruling recognizes same-sex marriages for federal tax
purposes
• Legally married same-sex couples can choose to amend
prior year returns – 2013, 2012, 2011
• For tax year 2014, legally married same-sex couples must
file married filing joint or married filing separate (head of
household, if applicable)
• Cultural marriage ceremonies performed in certain groups
and communities are not legal marriages in Minnesota
without a license
• Minnesota does not recognize common-law marriage unless
the couple (prior to moving to Minnesota) was legally
married in a state recognizing common-law marriages
FILING STATUS
• Single (S): unmarried or legally separated
• Married filing jointly (MFJ): married.
Including same-sex couples
• Qualifying widower (QW): spouse died in
one of two prior tax years and taxpayer did
not remarry. Must be able to claim
exemption for child or stepchild. Use MFJ in
the year in which the spouse died.
MARRIED FILING SEPARATELY (MFS)
• Married, but chooses to file MFS
• Least desirable filing status, tax rate generally
higher than joint return
• Not eligible for many of the credits
• Consider HH if child or relative lives in the
home
• If taxpayer is filing MFS because spouse owes
past-due federal debts consider filing Form
8379, Injured Spouse Claim and Allocation.
HEAD OF HOUSEHOLD (HH)
• Unmarried or “considered unmarried”
• Must have a Qualifying Person that lived in
the home for more than ½ the year
• Must meet 5 tests to be “considered
unmarried”
“CONSIDERED
UNMARRIED”
5. Can claim
exemption
for child
1. File
separate
return
2. Paid ½
cost of
keeping up
home
4. Main
home of
child
3. Spouse
not in home
last 6
months of
year
QUALIFYING PERSON FOR HH
• A Qualifying Child
• A married child who can be claimed as a
dependent
• A dependent parent
• A Qualifying Relative who:
1. lived with the taxpayer more than ½ the
year;
2. taxpayer can claim exemption; and
3. is related to the taxpayer.
Quiz
time
10 MINUTE BREAK
Topic 4: Income
LINE 7: WAGES, SALARIES, AND TIPS
• Payment for work performed as a VISTA
volunteer is considered wage income
• Income earned as an election official or
worker is reported on Form W-2
• Qualified Medicaid waiver payment reported
on Form W-2
FORM W-2 ALERTS
Don’t start the return -
Start the return –
• Taxpayer doesn’t have
all their W-2s
• W-2 appears altered
• SSN on W-2 differs
from SS card (and
taxpayer isn’t filing
with an ITIN)
• Name is different than
the SS card for a
reason other than an
obvious minor typo
error
• Name on W-2 differs
from SS card because
taxpayer got married
and did not notify
their employer
FORM W-2, BOX 12
(D) 401(k) contribution deducted from income
(E) 403(b) contribution deducted from income
(J)
Nontaxable sick pay
(W) Employer contribution to employee’s HSA
(DD) Nontaxable employer-sponsored health coverage
SCHOLARSHIP/FELLOWSHIP INCOME
• Form 13614-C, Part III, Income, #3
• Is the scholarship/fellowship income taxable?
– Determine the type of expenses paid with
scholarship/fellowship income
– Ask taxpayer whether he/she was a degree or
non-degree student
• Use worksheet to determine taxable portion, Pub
4012, Tab J, page J-1
SCHOLARSHIP INCOME
Scenario 2
Tuition
Course-related materials
Scholarships and grants
Taxable scholarship income
$12,500
$650
($20,000)
$6,850
LINE 8: INTEREST
LINE 9: DIVIDENDS
• Form 1099-INT
• Form 1099-B
• Taxpayers at our sites,
generally taxable
interest from checking
or savings accounts
• Ordinary and qualified
dividends from
corporate distributions
• Look for withholding
in box 4
• Look for withholding
in box 4 and foreign
tax paid in box 6
LINE 10: TAXABLE STATE TAX REFUND
• Scenario 1: Taxpayer used the Standard Deduction on
their 2012 tax return. State refund, if any, not
taxable.
• Scenario 2: Taxpayer did not receive a state refund.
Nothing to report.
• Scenario 3: Taxpayer received a state tax refund and
itemized deductions on Schedule A using the general
sales tax deduction on 5b – state refund not taxable.
• Scenario 4: Taxpayer received a state refund and
itemized deductions on Schedule A using state
income paid on 5A – some or all of their refund may
be taxable. Complete St Tax Refund – State Tax
Refund Worksheet.
LINE 11: ALIMONY RECEIVED
• Alimony is a payment to or for a spouse or former
spouse under a divorce or separation instrument.
• Does not include any voluntary payments not
outlined under a divorce or separation instrument.
• Alimony does not include payments for child
support, noncash property settlements, payments
to keep up the payer’s property or the use of the
payer’s property.
• Alimony payments are not reported on a form.
LINE 12: SELF-EMPLOYMENT INCOME
• SE income is an Advanced level topic
• If interested in Advanced certification, check out
the online training available on P+P volunteer site
LINE 13: CAPITAL GAINS
• Capital gains income is an Advanced level topic
• If interested in Advanced certification, check out
the online training available on P+P volunteer site
LINES 15 AND 16: PENSION AND ANNUITIES
• Distribution can be reported on 4 different
forms
• Form 1099-R are generally the retirement
distributions seen at the tax site, box 2 showing
taxable portion
• Form 1099-R distribution codes identify the type
of distribution
• Occasionally will come across a Roth IRA
distribution
TAXABLE PORTION NOT CALCULATED
• Taxable amount not shown in box 2, Form 1099R or the distribution is reported on Forms CSA1099-R, CSF-1099-R or Form RRB 1099-R
• See Pub 4012, Tab D, page D-25 to complete the
Simplified Method Worksheet in TaxWise to
determine taxable amount
EARLY DISTRIBUTION OF A RETIREMENT PLAN
• Form 1099-R, box 7 shows the type of
distribution on box 7
• If early distribution, code 1 appears in box 7
and distribution is subject to a 10% penalty
• Some exceptions apply to the 10% penalty,
but the early distribution income is still
taxable!
LINE 19: UNEMPLOYMENT COMPENSATION
• Reported on Form 1099-G
• Be sure to include any federal or state
withholding on the unemployment worksheet
in TaxWise
• Copies of Form 1099-G can be found online
LINE 20: SOCIAL SECURITY AND
RAILROAD RETIREMENT BENEFITS
• Social Security reported on Form SSA-1099
• Railroad Retirement-Tier 1 reported on Form
RRB-1099 (blue form)
• Do not include any benefits paid to the taxpayer’s
child or other dependent
• Taxpayer filing MFS up to 85% of the benefits will
be taxed
• Significant lump sum payments, refer to P+P for
an appointment
LINE 21: OTHER INCOME
• Taxpayers with income from sheltered
workshops or work training programs
prepared at the P+P main office only
• NEW: cancellation of nonbusiness credit card
debt is now in-scope (Form 1099-C)
• Gambling winnings (Form W-2G)
• Tribal distributions (Form 1099-MISC)
•
Income received from jury duty, as a medical
subject, AmeriCorps or hobby income
Topic 5: Adjustments
LINE 23: EDUCATOR EXPENSES
• Congress extended this expired provision for tax year
2014 only
• Eligible educator: K-12 teacher, instructor, counselor,
principal, or aide in a school for at least 900 hour
during the school year.
• Qualified expenses: ordinary & necessary expenses
paid for books, supplies, equipment, and materials
used for the classroom.
• Home-school instructors or expenses related to homeschooling do not qualify.
• Max $250 for taxpayer and $250 for spouse if MFJ.
LINE 25: HEALTH SAVINGS ACCOUNT
• Health Savings Account (HSA) adjustment to
income is separate certification test
• If interested in HSA certification, check out the
online training available on P+P volunteer site
• Please consider taking the HSA test!
LINE 31A: ALIMONY PAID BY THE TAXPAYER
• Alimony is a payment to or for a spouse or
former spouse under a divorce or separation
instrument
• Alimony does not include payments for child
support, noncash property settlements,
payments that are part of community income,
payments to keep up the payer’s property, or
the use of the payer’s property
• Must have the social security number of the
person to whom he/she paid the alimony to efile the return
LINE 32: IRA DEDUCTION
• Only contributions to traditional IRAs are
deductible.
• Must be under 70 ½ years of age at end of
tax year
• Must have taxable compensation
• Contributions must be made by April 15, 2015
for the 2014 tax year
LINE 33: STUDENT LOAN INTEREST
• Reported on Form 1098-E or statement from the
lender
• Eligible deduction up to $2,500
• Taxpayer filing MFS is not eligible for deduction
• Interest paid for eligible student that was the
taxpayer, spouse, or person who was the
taxpayer’s dependent when the loan was obtained
• Interest does not qualify if the loan was from a
related person, employer plan or if taxpayer not
legally responsible for the loan
LINE 34: TUITION AND FEES DEDUCTION
• Congress extended this expired provision for tax
year 2014 only
• Reported on Form 1098-T or statement from the
school or lender.
• Can deduct up to $4,000 in qualified expenses
during the year
5 MINUTE BREAK
Topic 6: Taxable
income & tax
STANDARD OR ITEMIZED DEDUCTION?
• Most taxpayers have a choice
• Complete Schedule A (itemized deductions), if
taxpayer has deductible expenses, and TaxWise
will determine the best tax benefit
• Line 39b: If married filing separately and spouse
itemizes, then he/she must itemize
LINE 40: STANDARD DEDUCTION
• $12,400, married filing jointly and qualifying
widower
• $9,100 head of household
• $6,200 single and married filing separately
• If taxpayer claimed as dependent on another
return, TW calculates standard deduction.
LINE 40: ITEMIZED DEDUCTIONS
(SCHEDULE A)
• Allows taxpayer to reduce taxable income
based on specific personal expenses
• Generally itemized deductions are
mortgage interest, large unreimbursed
medical expenses or large charitable
donations
• Interview questions to determine whether
to itemize, Pub 4012, Tab F, pages F-3
and F-4
Schedule A deductions
• Line 1: unreimbursed medical and dental
expenses
• Line 5a: state income tax withheld from
W-2s and 1099s and other tax payments
for an earlier year paid during the current
year, such as state taxes owed on the
Minnesota individual tax return
• Line 5b: general sales tax deduction for
taxpayer with little or no state income tax
withholding (extended provision)
SCHEDULE A DEDUCTIONS
• Line 7: personal property taxes, such as car
tabs
• Line 10: mortgage interest (box 1) and points
(box 2) on Form 1098
• Line 13: qualified mortgage insurance premiums
(box 4) on Form 1098 (extended provision)
• Line 16: donations by cash or check to
charitable organizations
SCHEDULE A DEDUCTIONS
• Line 17: in-kind donations to charities
(donations of $500+ are out-of-scope)
• Lines 21 to 23: portion that exceeds 2% of
taxpayer’s AGI for expenses to work or look
for work, union dues, tax prep fees or safety
deposit box
• Line 28: gambling losses to the extent of
winnings reported on line 21, Form 1040
• Casualty and theft losses are out-of-scope
HOMEWORK
• Get a head start on your IRS certification test!
• Use Form 6744 booklet to complete the Volunteer
Standards of Conduct certification level
• Go to P+P volunteer page and view
Intake/Interview & Quality Review power point,
Pub 5101
• First year volunteers – did you show your picture
ID to the assistant?