1.  Chapter 8, 9, 11, 13, 14, and 15

2.  Requirement  Types of Income  Income types we experience in the past.  Samples of forms that we will see  How to enter them in TWO

3.  All income must be reported except those that are exempt from tax by law.

4.  Taxable Income o Earned – You worked for it Wages Self-employment / Business o Unearned – you did not worked for it Interest Social Security Alimony Gambling  Non-Taxable / Exempt Income o Child Support o Gifts o Inheritance

7.  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)

9.  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.

11.  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  Enter other amounts as applicable.

13.  Enter on TWO via Dividend Statement in Schedule B  Enter information from the form 1099-DIV based on the description of the box.

14.  Only applicable to tax payer that itemized in the previous year  Use State Tax Refund Worksheet

15.  We use Schedule C-EZ only!!!!! (See next slide for details)  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.

16.  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 sole- proprietor business if other conditions for filing Schedule C- EZ 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

17. You will see this form when a taxpayer works for someone but is not consider an employee.  Self-employed (Independent Contractor – receive 1099- MISC)

18.  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.htmhttp://www.naics.com/search.htm

19.  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.

20.  Advertising  Car and truck expenses  Commissions and Fees  Insurance  Other Interest  50% of business meals and entertainment  Utilities (including telephone)  Legal and professional services and fees  Office expenses  Rent or lease expenses  Repairs and maintenance  Supplies  Taxes and licenses  Travel

21. Part I: General information  Line A, Principal business or profession  Line B, Business code  Line D, Employer ID number  Line E, Business address Part II: Figure Net Profit  Enter the amount as stated in each line

22. 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

23. 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

26.  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

27.  Use 1099G Work Sheet to enter information in TWO

29.  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  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. www.socialsecurity.gov o Or they can go to the local Social Security Office to have them print it out.

30.  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  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

32.  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.  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.

33.  Webster Return