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SaveFirst Campus Fellow Intermediate Tax Training: January Refresher 2013-14.

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1 SaveFirst Campus Fellow Intermediate Tax Training: January Refresher 2013-14

2 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

3 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

4 Due Date of Return Due date: April 15, 2014 SaveFirst Basic Training ● 2012 ©

5 Exemptions The amount a taxpayer can deduct for each exemption increased to $3,900 for 2013. SaveFirst Basic Training ● 2012 ©

6 Standard Deductions: 2013 MFJ or QW $12,200 HoH$8,950 Single or MFS $6,100 SaveFirst Basic Training ● 2012 ©

7 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

8 Social Security Benefits Sometimes a taxpayer may receive Social Security payments for previous years. Taxpayers can either  Report the amount for the previous years as income for the current tax year (2013),  Use the Lump Sum Election Method, and report the amount for the previous years as income for the previous years (and thus pay any taxes on it based on previous years’ income). SaveFirst Basic Training ● 2012 ©

9 Lump Sum Election Method Lump Sum Election Method is out of scope for basic volunteers. In order to compute the taxable benefits, you will need copies of the taxpayer’s prior year returns (to get their AGI). SaveFirst Training ● 2013-14 ©

10 SaveFirst Basic Training ● 2011 © Social Security Benefits: SSA-1099 SaveFirst Basic Training ● 2012 © Income Medicare premiums Don’t miss withholding! Total benefits Lump-Sum Benefit Payments

11 Reporting Lump-Sum Benefits Option 1: Report the whole payment as it was received  Enter the whole payment on the first line (SS received this year)  Same step as in Basic Training! SaveFirst Basic Training ● 2012 © Income

12 OPTION 1: Link: Line 20a  1040 Wkt1 SaveFirst Basic Training ● 2012 © Income - Social security received this year - Medicare - Federal tax withheld SaveFirst Basic Training ● 2012 ©

13 Reporting Lump-Sum Benefits Option 2: Separate payments based on year received and record taxable benefits appropriately  Only the current year income will be adjusted  Do NOT file an amended return  Taxpayer can choose 2 nd option if it lowers the taxable benefits (TaxWise will automatically determine which is more beneficial) SaveFirst Basic Training ● 2012 © Income

14 Option 2 – Lump Sum Election Method: Link: Line 20a  1040 Wkt1 - Social security received this year - Medicare - Federal tax withheld - Then scroll to the bottom of the sheet SaveFirst Basic Training ● 2012 © Income

15 Lump-Sum Benefits in TaxWise (Option 2) Enter the benefits for 2013 on the gross amount received line. Click on the amounts taxable from previous years line and type F9 to pull up a Lump Sum Wkt SaveFirst Basic Training ● 2012 © Income

16 Lump-Sum Benefits in TaxWise (Option 2) Enter the earlier year for which the benefits were received and the filing status. SaveFirst Basic Training ● 2012 © Income

17 Lump-Sum Benefits in TaxWise (Option 2) Line 1: Enter amount of benefits received in prior year and amount for prior year received in current year. Line 3: Enter the AGI for prior year. SaveFirst Basic Training ● 2012 © Income

18 Lump-Sum Election Method Step 1-Enter Box 5 total in the Social Security received this year line on 1040 Wkt 1 Step 2-Calculate amount paid for current tax year by subtracting prior years from box 5 benefits Step 3-Enter in appropriate box at bottom of worksheet Step 4-Link to Lump Sum Wkt from line, “amounts taxable from previous years” Step 5-Enter pertinent prior year at top of Lump Sum Wkt (eg, 2010) and check appropriate marital status for that year Step 6-On line 1, enter amount of benefits received in prior year and amount for prior year received in current year Step 7-On line 3, enter AGI for prior year Step 8-On lines 4 and 5, enter adjustments/exclusions and tax exempt interest amounts for prior year Step 9-Close worksheet; repeat steps 4-8 for additional prior years SaveFirst Basic Training ● 2012 ©

19 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

20 SaveFirst Basic Training ● 2012 © 2012 State Tax Refund The 2012 State Tax Refund may be taxable and need to be reported.The 2012 State Tax Refund may be taxable and need to be reported. Answer question in Box under line 9. If, link: Line 10  St Tax Refund.If YES, link: Line 10  St Tax Refund. Complete the State Tax Refund Worksheet with information from 2012 return.Complete the State Tax Refund Worksheet with information from 2012 return. Income

21 Info Needed from 2012 Return State refund amount Sch A, line 5a, income taxes Sch A, line 5b, general sales tax Total itemized deductions amount Filing status Taxable income amount SaveFirst Basic Training ● 2012 © Income

22 St Tax Refund in TaxWise SaveFirst Basic Training ● 2012 © Enter in the amounts for: -State refund amount (line 1) -Sch A, line 5a, income taxes (line 2) -Sch A, line 5b, general sales tax (line 2) Income

23 St Tax Refund in TaxWise SaveFirst Basic Training ● 2012 © Enter in the amounts for: -Total itemized deductions (line 6) -Filing status (line 7) -Taxable income amount (line 12) Income

24 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

25 Sch C: Self-Employment Income From 1099-MISC, Line 7 Nonemployee Compensation Can only report expenses up to $10,000 Cannot report a loss

26 Business Income Income from personal business or independent contractor Income can reported on:  1099-MISC  W-2 (Statutory Employee)  Personal records  1099-K Link: Line 12  Sch C-EZ or C SaveFirst Basic Training ● 2012 © Self-Employment Income

27 Business Income We can file a Schedule C or C-EZ if the taxpayer meets the following:We can file a Schedule C or C-EZ if the taxpayer meets the following:  Cash method of accounting  No inventory  Does not want to depreciate  No net loss  Only one business (if taxpayer owns a business)  No employees during the year  Had business expenses of less than $10,000 Sch C-EZ less than $5,000Sch C-EZ less than $5,000 Sch C up to $10,000Sch C up to $10,000 SaveFirst Basic Training ● 2012 © Self-Employment Income

28 1099-Misc. SaveFirst Basic Training ● 2012 © Self-Employment Income Box 7 “Nonemployee Compensation”

29 SaveFirst Basic Training ● 2012 © Self-Employment Income SaveFirst Basic Training ● 2012 © 1099-Misc. Income reported in Box 7 on a 1099-MISC is considered self-employment income and should be reported on a Schedule C-EZ or a Schedule C. Income reported in Box 7 on a 1099-MISC is considered self-employment income and should be reported on a Schedule C-EZ or a Schedule C.  Link: Line 12  Sch C-EZ or Sch C  Then, Link: Gross Receipts Line  1099-MISC Self-Employment Income

30 1099-Misc ONE MORE TIME: Income reported in Box 7 on a 1099-MISC is considered self-employment income and should be reported on a Schedule C-EZ or a Schedule C. SaveFirst Basic Training ● 2012 © Self-Employment Income

31 Schedule C-EZ and Schedule C Net profit = Gross receipts – ExpensesNet profit = Gross receipts – Expenses Deductible expensesDeductible expenses  Advertising  Insurance  Interest  Legal and professional services  Repairs  50% of business entertainment  Utilities  Vehicle expenses (additional information needed for Part III of the C-EZ or Part IV of the Sch C, pg 2))  See your Campus Fellow Manual Tab 5 for more details SaveFirst Basic Training ● 2012 © Self-Employment Income

32 SaveFirst Basic Training ● 2012 © Business Mileage Rates If used for business purposes, taxpayer can receive a mileage deduction at the federal rate. Cannot deduct commuting miles. Cannot calculate depreciation (out of scope). For 2013, the folllow rate is in effect: 56.5 cents per mile On Sch C-EZ and Sch C, enter total miles. Self-Employment Income

33 Line F (Sch C-EZ) or Line I (Sch C)  Did the business make any payments in 2011 that would require filing of Form(s) 1099? Line 1 (Income) structured differently  1a: Merchant card and third party payments (for 2011, enter -0-)  1b: Gross receipts or sales not entered on line 1a  1c: Income reported to you on Form W-2 (f the “Statutory Employee” box on that form was checked)  1d: Total gross receipts SaveFirst Basic Training ● 2012 ©

34 Sch C in TaxWise SaveFirst Basic Training ● 2012 © Enter in the business information

35 Sch C in TaxWise: Income SaveFirst Basic Training ● 2012 © 1a: Merchant card & third party sales 1b: Gross receipts not on 1a 1c: Income reported on W2 if the “Statutory Employee” box is checked 1d: TaxWise calculates total gross receipts

36 Sch C in TaxWise: Expenses SaveFirst Basic Training ● 2012 © Enter in the amounts for the qualified business expenses

37 Sch C in TaxWise: Vehicle SaveFirst Basic Training ● 2012 © Enter in the amounts and answer the questions TaxWise carries over the mileage expense for you

38 Sch C-EZ in TaxWise SaveFirst Basic Training ● 2012 © Enter in the business information

39 Sch C-EZ in TaxWise: Income & Expenses SaveFirst Basic Training ● 2012 © 1a: Merchant card & third party sales 1b: Gross receipts not on 1a 1c: Income reported on W2 if the “Statutory Employee” box is checked 1d: TaxWise calculates total gross receipts 2: Total expenses (Link to a Scratch Pad)

40 Self Employment Tax Must file Sch SE if self-employment earnings are over $400 Covers Social Security and Medicare taxes Complete Sch C or C-EZ first TaxWise automatically calculates the tax onto Line 56 SaveFirst Basic Training ● 2012 © Self-Employment Income

41 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

42 Types of Retirement Plans series of payments for past workPension: A series of payments for past work Annuity: A series of payments from a contract with a company, trust, or individualAnnuity: A series of payments from a contract with a company, trust, or individual 401(k) Plan: The employer contributes part of the employee’s cash wages to a retirement plan on a pre-tax basis (not subject to income tax when deferred)401(k) Plan: The employer contributes part of the employee’s cash wages to a retirement plan on a pre-tax basis (not subject to income tax when deferred) SaveFirst Basic Training ● 2012 © Retirement Income

43 Form 1099-R SaveFirst Basic Training ● 2012 © Retirement Income

44 Taxable Portion of Distributions Depending on employee contributions, income from retirement plans can be:  Fully Taxable if Employee did NOT contribute (all $ came from employer)Employee did NOT contribute (all $ came from employer) Employee contributed with before-tax moneyEmployee contributed with before-tax money  Partially Taxable if Employee contributed part of funds with after-tax moneyEmployee contributed part of funds with after-tax money  Not Taxable if Employee made ALL contributions with after-tax dollars (i.e. Roth IRAs)Employee made ALL contributions with after-tax dollars (i.e. Roth IRAs) SaveFirst Basic Training ● 2012 © Retirement Income

45 Important Note You can prepare returns for retired individuals ONLY if the taxable amount of the retirement distribution has already been determined IF BOX 2A IS EMPTY, FIND YOUR SUPERVISOR SaveFirst Basic Training ● 2012 © Retirement Income

46 SaveFirst Basic Training ● 2012 © Lines 15/16: Retirement (Form 1099-R) Retirement Income

47 Railroad Retirement Plans RRB-1099RRB-1099  Treated like SSA-1099 (social security benefits) RRB-1099-RRRB-1099-R  Treated like 1099-R (pension) SaveFirst Basic Training ● 2012 © Retirement Income

48 Rollover (Tax-Free Distribution) (Code G will be in Box 7 of the 1099-R) SaveFirst Basic Training ● 2012 © Enter the amount the taxpayer rolled over Check the Box and type F9 Provide an explanation Retirement Income

49 SaveFirst Basic Training ● 2012 © Defined Benefits Retirement Plans IF IT IS A DEFINED BENEFITS PLAN, CLICK BOX 1 ON THE BOTTOM OF THE 1099-R IN TAXWISE. Retirement Income

50 Defined Benefits & Defined Contributions Defined Benefits:  Taxpayer receives a set amount each month for retirement and is based on salary history and years which they worked at a company. Defined Contributions:  Taxpayer's retirement depends on the amount of contributions made into an investment account and the performance of those investments contributed. Examples: 401(k), 403(b), employee stock ownership plan, profit-sharing plan. SaveFirst Basic Training ● 2012 © Retirement Income

51 Alabama Tax Rules Defined Benefits Plan: A promised benefit is based on a formula in the plan, often using a combination of the employee’s age, years worked for the employer, and/or salary.Defined Benefits Plan: A promised benefit is based on a formula in the plan, often using a combination of the employee’s age, years worked for the employer, and/or salary.  Contributions from employee, employer, or both.  Employer bears investment risk. Defined Contributions Plan: The benefit depends on contributions made by the employee and/or the employer, performance of the account’s investments, and fees charged to the account.Defined Contributions Plan: The benefit depends on contributions made by the employee and/or the employer, performance of the account’s investments, and fees charged to the account.  Employee bears investment risk. SaveFirst Basic Training ● 2012 © Retirement Income

52 Alabama Tax Rules Defined Benefits Plans are NOT taxable at the Alabama level.Defined Benefits Plans are NOT taxable at the Alabama level. To find out if a plan is Defined Benefits or Defined ContributionsTo find out if a plan is Defined Benefits or Defined Contributions  Consult online list (www.impactalabama.org) or your Campus Fellow Manual www.impactalabama.org  Call the company that administers the plan  Call the IRS SaveFirst Basic Training ● 2012 © Retirement Income Hint: All retired civil servants (i.e. teachers, city employees, soldiers, etc) have Defined Benefits plans See Tab 5 in your Campus Fellow Manual for more info at the site

53 Alabama Tax Rules IF IT IS A DEFINED BENEFITS PLAN, CLICK BOX 1 IN TAXWISE. SaveFirst Basic Training ● 2012 © Retirement Income

54 Practice Joe has been receiving his retirement payments for several years and has received a 1099-R. When you ask him if he knows what kind of plan it is, he says he has no idea but he knows it is from his employment as a teacher. Is this a defined benefits or defined contributions plan? SaveFirst Basic Training ● 2012 © Retirement Income

55 Practice Joe has been receiving his retirement payments for several years and has received a 1099-R. When you ask him if he knows what kind of plan it is, he says he has no idea but he knows it is from his employment as a teacher. Is this a defined benefits or defined contributions plan? Defined benefits plan All civil servants will have a defined benefits plan. SaveFirst Basic Training ● 2012 © Retirement Income

56 Practice Maria began receiving her retirement payments this year and was issued a 1099-R. She tells you that this is being drawn from an investment account that she would contribute to and her former employer would match that contribution. Is this a defined benefits plan or defined contributions plan? SaveFirst Basic Training ● 2012 © Retirement Income

57 Practice Maria began receiving her retirement payments this year and was issued a 1099-R. She tells you that this is being drawn from an investment account that she would contribute to and her former employer would match that contribution. Is this a defined benefits plan or defined contributions plan? Defined contributions plan SaveFirst Basic Training ● 2012 © Retirement Income

58 Practice Charles has been receiving his retirement for seven years. Every month, he receives $100. Is this a defined benefits plan or defined contributions plan? SaveFirst Basic Training ● 2012 © Retirement Income

59 SaveFirst Basic Training ● 2012 © Practice Charles has been receiving his retirement for seven years. Every month, he receives $100. Is this a defined benefits plan or defined contributions plan? Defined benefits plan SaveFirst Basic Training ● 2012 ©

60 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

61 Adjustments to Income Decrease taxable incomeDecrease taxable income Found on lines 23-35 of Form 1040Found on lines 23-35 of Form 1040  Educator Expenses  Half of Self-Employment Tax  Early Withdrawal Penalty  Alimony  IRA (traditional) Contributions  Student Loan Interest  College Tuition Payments  Jury Duty SaveFirst Basic Training ● 2012 © Adjustments

62 Educator Expenses Eligible Educators:  K-12 teacher, instructor, counselor, principal, or aide  Worked at least 900 hours Qualified Expenses (up to $250):  Ordinary and necessary amounts Books Supplies Equipment SaveFirst Basic Training ● 2012 © Adjustments

63 Link: Line 23  1040 Wkt2 Enter qualified expenses up to $250 for each person. If taxpayer and spouse are both eligible educators, can deduct up to $500. SaveFirst Basic Training ● 2012 © Adjustments

64 Half of Self-Employment Tax Offsets the tax burden placed on individuals who do not have employers to pay half of their taxes.Offsets the tax burden placed on individuals who do not have employers to pay half of their taxes. TaxWise will automatically calculate this adjustment if you have completed a Schedule C-EZ or a Schedule C.TaxWise will automatically calculate this adjustment if you have completed a Schedule C-EZ or a Schedule C. SaveFirst Basic Training ● 2012 © Adjustments

65 Penalty on Early Withdrawal of Savings TaxWise will automatically calculate from information on the Interest Statement.TaxWise will automatically calculate from information on the Interest Statement. TaxWise automatically calculates the adjustment on Line 30.TaxWise automatically calculates the adjustment on Line 30. Make sure you entered in ALL interest and penalties imposed correctly on the Sch B.Make sure you entered in ALL interest and penalties imposed correctly on the Sch B. Important: Make sure you have entered in ALL interest received AND penalties imposed for early withdrawals on the Interest Statement of Schedule B SaveFirst Basic Training ● 2012 © Adjustments

66 Alimony Paid Payment to a spouse or former spouse under a divorce/separation agreement.Payment to a spouse or former spouse under a divorce/separation agreement.  Child support and voluntary payments are NOT considered alimony.  Alimony received is considered income. Deduct total alimony paid for the whole year, not just one month.Deduct total alimony paid for the whole year, not just one month. Enter in amount and recipient’s SSN on Line 31.Enter in amount and recipient’s SSN on Line 31. SaveFirst Basic Training ● 2012 © Adjustments

67 IRA Contributions Deduction IRA: Individual Retirement Arrangements  Personal savings plan that offers tax advantages to set aside money for retirement  Earnings and gains on contributions are not taxable until withdrawal  Contributions to a traditional IRA can be either deductible or nondeductible SaveFirst Basic Training ● 2012 © Adjustments

68 IRA Deduction: Deductible Contributions  Eligibility Requirements: Only contributions to a traditional IRA are deductibleOnly contributions to a traditional IRA are deductible Age Limit: must be under the age of 70 ½ at the end of the tax yearAge Limit: must be under the age of 70 ½ at the end of the tax year Compensation: must have taxable compensationCompensation: must have taxable compensation Time Limit: Contributions must be made by due date of filing the returnTime Limit: Contributions must be made by due date of filing the return SaveFirst Basic Training ● 2012 © Adjustments

69 IRA Deduction: Joint Returns If the taxpayers file a joint return and one spouse’s compensation is greater than the other’s:If the taxpayers file a joint return and one spouse’s compensation is greater than the other’s:  Married taxpayers’ combined contributions cannot exceed combined compensation  Neither spouse can contribute more than $5,000 ($6,000 if > age 50) SaveFirst Basic Training ● 2012 © Adjustments

70 IRA Deduction: Allowable Deduction The allowable deduction may be adjusted based onThe allowable deduction may be adjusted based on  Filing status  Income  Whether or not the taxpayer/spouse is covered by an employer retirement plan SaveFirst Basic Training ● 2012 © Adjustments

71 IRA Deduction: Penalties Taxpayers may incur penalties forTaxpayers may incur penalties for  Excess contributions  Early withdrawals  Too little withdrawals SaveFirst Basic Training ● 2012 © Adjustments

72 IRA Deduction: Excess Contribution Contributions for 2013 can be made up until the due date of the return (i.e. April 15, 2014).Contributions for 2013 can be made up until the due date of the return (i.e. April 15, 2014). An excess contribution above these limits and any earnings on it will be taxed.An excess contribution above these limits and any earnings on it will be taxed.  They should still be reported on Form 8606  If the taxpayer has made excess contributions, refer them to a professional preparer! SaveFirst Basic Training ● 2012 © Adjustments

73 Link: Line 32  IRA Wkt SaveFirst Basic Training ● 2012 © Adjustments

74 Student Loan Interest Up to $2,500 of interest paid on loan in the name of aUp to $2,500 of interest paid on loan in the name of a  Taxpayer  Spouse  Dependent (when the loan was obtained) Note: Student must have been enrolled at least half-time in a program leading to a degree, certificate, or other credential SaveFirst Basic Training ● 2012 © Adjustments

75 Student Loan Interest: Eligibility School IS:School IS:  Accredited  Qualified to participate in a student aid program or conduct internship/residency programs leading to a degree or certificate Taxpayer IS NOT:Taxpayer IS NOT:  Filing MFS  Able to be claimed as a dependent  If the taxpayer cannot be claimed as a dependent but her parents paid the student loan interest, the student can claim the deduction. SaveFirst Basic Training ● 2012 © Adjustments

76 Tuition and Fees Deduction Tuition amounts paid by the taxpayer are reported on a 1098-T and can be entered as an adjustment or a credit. The deduction can be claimed for the taxpayer, spouse or any qualified dependent. Only out-of-pocket expenses can be claimed; you must subtract amounts paid with scholarships and grants. SaveFirst Basic Training ● 2012 © Adjustments

77 Tuition and Fees Deduction Taxpayers can deduct up to $4,000 in qualified tuition and related expenses; NOT BOOKS. Link: Line 34  1040 Wkt2 SaveFirst Basic Training ● 2012 © Adjustments

78 Student Loan Interest: Qualified Expenses Qualified expenses include tuition and fees required for enrollment, usually reported on a 1098-EQualified expenses include tuition and fees required for enrollment, usually reported on a 1098-E Expenses that do not qualify: room and board, transportation, books, and suppliesExpenses that do not qualify: room and board, transportation, books, and supplies Must be reduced by scholarships, employer-provided benefits, or tax-free education expensesMust be reduced by scholarships, employer-provided benefits, or tax-free education expenses SaveFirst Basic Training ● 2012 © Adjustments

79 Jury Duty Pay Given to Employer Jury duty pay is taxable income.Jury duty pay is taxable income. BUT if that pay is given to the employer, it can be deducted as an adjustment.BUT if that pay is given to the employer, it can be deducted as an adjustment. Enter the amount on Line 35, Jury duty pay you gave to your employer.Enter the amount on Line 35, Jury duty pay you gave to your employer. SaveFirst Basic Training ● 2012 © Adjustments

80 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

81 Itemized Deductions Every taxpayer can take a specific amount for a “standard” deductionEvery 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 deductionsThere 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. SaveFirst Basic Training ● 2012 © Itemized Deductions

82 When to Itemize can receive a larger deduction by itemizing if he/she has:A taxpayer can receive a larger deduction by itemizing if he/she has:  At the Federal Level (higher standard deduction): Home mortgage paymentHome mortgage payment Large number of medical billsLarge 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 levelExpenses that may/may not have been sufficient to justify itemization on the federal level Reported on Schedule AReported on Schedule A 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 SaveFirst Basic Training ● 2012 © Itemized Deductions

83 Qualifying Expenses Unreimbursed Medical Expenses Charitable Contributions Taxes Home Mortgage Interest Miscellaneous Deductions SaveFirst Basic Training ● 2012 © Itemized Deductions

84 Unreimbursed Medical Expenses A taxpayer can claim expenses forA taxpayer can claim expenses for  Him/Herself  Spouse  Dependents He/she can only deduct the amount that exceedsHe/she can only deduct the amount that exceeds  7.5% of his/her AGI on federal returns  4% of his/her AGI on state returns SaveFirst Basic Training ● 2012 © Itemized Deductions

85 Deductible Medical Expenses Co-pays to doctor, dentist, eye doctorCo-pays to doctor, dentist, eye doctor Prescription drugsPrescription drugs Cost of glasses or hearing aidsCost of glasses or hearing aids Cost of medical equipmentCost of medical equipment Health insurance premiumsHealth insurance premiums Long-term care insurance premiums (cap on amount based on age)Long-term care insurance premiums (cap on amount based on age) Cost of surgery, operationsCost of surgery, operations Miles to and from doctorMiles to and from doctor SaveFirst Basic Training ● 2012 © Itemized Deductions NOTE: For a complete listing of deductible and nondeductible expenses see Pub 502 on the IRS website

86 Nondeductible Medical Expenses Life insurance policy premiumsLife insurance policy premiums Funeral, burial, cremation costsFuneral, burial, cremation costs Unnecessary cosmetic surgeryUnnecessary cosmetic surgery Nonprescription drugsNonprescription drugs NOTE: For a complete listing of deductible and nondeductible expenses see Pub 502 on the IRS website SaveFirst Basic Training ● 2012 © Itemized Deductions

87 Medical Expenses in TaxWise (Click on the A Detail in the Loaded Forms Menu) SaveFirst Basic Training ● 2012 © Enter in the amounts for: -Medical miles -Insurance premiums paid -Medicare (carries over from 1040 Wkt1) -Other medical expenses (prescriptions, glasses, etc.)

88 Charitable Contributions Qualifying Organizations:  Religious  Charitable  Educational  Scientific  Literary Nonqualifying Organizations:  Business  Civic/Political  Social  Foreign  Homeowners' Associations SaveFirst Basic Training ● 2012 © Itemized Deductions

89 Charitable Contributions Deductible Items:  Monetary donations  Fair market value (FMV) of clothing, furniture  Uniforms required to be worn during service  Unreimbursed transportation expenses SaveFirst Basic Training ● 2012 © Itemized Deductions IMPORTANT: The taxpayer must keep receipts!

90 Charitable Contributions 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.) SaveFirst Basic Training ● 2012 © Itemized Deductions

91 Charitable Contributions in TaxWise (Click on the A Detail in the Loaded Forms Menu) SaveFirst Basic Training ● 2012 © Enter in the amounts for: -Charitable miles -Charitable cash contributions -Uniforms required for service -FMV of other than cash contributions Itemized Deductions

92 Taxes DeductibleDeductible  Taxes imposed on and paid by the taxpayer in 2013 NondeductibleNondeductible  Taxes the taxpayer pays for someone else  Taxes someone else pays for the taxpayer  Taxes not paid during 2013 SaveFirst Basic Training ● 2012 © Itemized Deductions

93 Taxes Deductible  State and local taxes  Real estate taxes (Property Tax)  State and local taxes on a new car purchase  Ad valorem tax on car tags (total paid - $24.50) NondeductibleNondeductible  Federal taxes  Hunting licenses  Water/sewer  Taxes on alcohol, tobacco, or gas  Utilities SaveFirst Basic Training ● 2012 © Itemized Deductions

94 Taxes Paid in TaxWise (Click on the Sch A in the Loaded Forms Menu) SaveFirst Basic Training ● 2012 © Enter in the amounts for: -City/county real estate taxes (6) -Personal property taxes (7) -Ad valorem tax, make sure to subtract $24.50 before entering (8) Itemized Deductions

95 Taxes Paid in TaxWise (Click on the Sch A in the Loaded Forms Menu) SaveFirst Basic Training ● 2012 © TaxWise automatically chooses 5a or 5b: -The amount for income taxes automatically fills -Link: Line 5b  Sales Tax -Line 1: Enter in AL -Line 3: Check Yes and enter local sales tax (6 for Birmingham) -Line 4: Check Yes and enter 4 Itemized Deductions

96 Home Mortgage Interest SaveFirst Basic Training ● 2012 © Itemized Deductions

97 SaveFirst Basic Training ● 2012 © Home Mortgage Interest in TaxWise (Click on the Sch A in the Loaded Forms Menu) Enter the amounts for: -Home mortgage interest and points (10) -Mortgage insurance premiums (13) Itemized Deductions

98 Nondeductible Interest Personal interestPersonal interest  personal loans  car loans  credit cards  etc. SaveFirst Basic Training ● 2012 © Itemized Deductions

99 Miscellaneous Deductions Union duesUnion dues Uniforms (that cannot be worn in any other circumstance)Uniforms (that cannot be worn in any other circumstance) Professional books, journalsProfessional books, journals Employment-related educational expensesEmployment-related educational expenses Expenses for looking for a new jobExpenses for looking for a new job Tax preparation fee from last yearTax preparation fee from last year Safe deposit boxSafe deposit box Gambling losses up to amount of winningsGambling losses up to amount of winnings SaveFirst Basic Training ● 2012 © Itemized Deductions

100 SaveFirst Basic Training ● 2012 © Miscellaneous Deductions in TaxWise (Click on the Sch A in the Loaded Forms Menu) Enter the amounts and descriptions for: -Employment: job travel, union dues, work uniform, job education, literary journal for work, educator expenses (21) -Tax preparation fees (22) -Safe deposit box (23) -Miscellaneous: literary journal not for work, gambling losses from W2-G (28) Itemized Deductions

101 Nondeductible Expenses Burial or funeral expensesBurial or funeral expenses Wedding expensesWedding expenses Fees and licensesFees and licenses Fines, penalties, traffic ticketsFines, penalties, traffic tickets Home repairs and insuranceHome repairs and insurance RentRent Insurance premiums (except health and mortgage)Insurance premiums (except health and mortgage) Losses from sale of homeLosses from sale of home SaveFirst Basic Training ● 2012 © Itemized Deductions

102 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

103 Education Credits Offset higher education expenses paid during the yearOffset higher education expenses paid during the year  The student can be taxpayer, spouse, or a dependent Partially RefundablePartially Refundable Two types of credits available:Two types of credits available:  American Opportunity Credit  Lifetime Learning Credit SaveFirst Basic Training ● 2012 © Intermediate Credits

104 Education Credits: Eligibility Filing status cannot be MFSFiling status cannot be MFS Qualified expenses paid by taxpayerQualified expenses paid by taxpayer CAN claim on the basis of expenses paid with student loansCAN claim on the basis of expenses paid with student loans Accredited institutionAccredited institution Taxpayer or student will often receive Form 1098-TTaxpayer or student will often receive Form 1098-T SaveFirst Basic Training ● 2012 © Intermediate Credits

105 Education Credits: Dependents When the student can be claimed as a dependent,When the student can be claimed as a dependent,  Taxpayer must claim credit if taxpayer claims the exemption.  Student must claim credit if taxpayer does not claim exemption. If the taxpayer claims the dependency exemption, any amount paid by the student is considered to have been paid by the taxpayer.If the taxpayer claims the dependency exemption, any amount paid by the student is considered to have been paid by the taxpayer. SaveFirst Basic Training ● 2012 © Intermediate Credits

106 SaveFirst Training ● 2013-14 © American Opportunity (Hope) Credit Lifetime Learning Credit Up to $2,500 per eligible studentUp to $2,000 credit per return Available for the 1 st 4 years of college 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 Felony drug conviction does not apply Expenses include tuition, fees, and course materials Expenses include only tuition and fees

107 Education Credits: Form 1098-T SaveFirst Basic Training ● 2012 © Intermediate Credits

108 Education Credits: American Opportunity Credit 40% (up to $1,000) is refundable (unless the taxpayer claiming the credit can be claimed as a dependent by his/her parent)40% (up to $1,000) is refundable (unless the taxpayer claiming the credit can be claimed as a dependent by his/her parent) Qualified expenses include “Course materials” (any required books and supplies, whether available in regular bookstores)Qualified expenses include “Course materials” (any required books and supplies, whether available in regular bookstores) Remember, room and board is never a qualified expense.Remember, room and board is never a qualified expense. SaveFirst Basic Training ● 2012 © Intermediate Credits

109 Qualified Expenses for Credit American Opportunity (Hope) CreditAmerican Opportunity (Hope) Credit  Qualified tuition and related expenses  Includes expenses for course materials (books, supplies, and equipment needed for a course of study, whether or not they were purchased from institution) SaveFirst Basic Training ● 2012 © Intermediate Credits Link: Line 49  8863 Pg 1

110 SaveFirst Basic Training ● 2012 © Practice James takes one course at a local community college. He received a Form 1098-T showing qualified tuition expenses of $1,000. He lives with his parents, who can claim him as a dependent. Who is entitled to claim the credit? Which credit? Intermediate Credits

111 SaveFirst Basic Training ● 2012 © Practice James takes one course at a local community college. He received a Form 1098-T showing qualified tuition expenses of $1,000. He lives with his parents, who can claim him as a dependent. Who is entitled to claim the credit? Which credit? If James’s parents claim him, they must claim the credit. If James’s parents do not claim him, James must claim the credit. Lifetime Learning Credit Intermediate Credits

112 SaveFirst Basic Training ● 2012 © Practice LaQuandra is a sophomore enrolled at UAB full- time. She provides all of her own support. She paid $10,000 in 2013 for tuition and fees for enrollment to UAB. She received a tax-free scholarship worth $4,000, and paid the rest from a student loan in her name. Can LaQuandra claim an education credit? Which one? How much of her expenses are qualified expenses? Intermediate Credits

113 SaveFirst Basic Training ● 2012 © Practice LaQuandra is a sophomore enrolled at UAB full-time. She provides all of her own support. She paid $10,000 in 2013 for tuition and fees for enrollment to UAB. She received a tax-free scholarship worth $4,000, and paid the rest from a student loan in her name. Can LaQuandra claim an education credit? Which one? How much of her expenses are qualified expenses? Yes American Opportunity or Lifetime Learning Credit. Qualified expenses = $6,000 Intermediate Credits

114 Education Credits: No Double Benefits The taxpayer CANNOT claimThe taxpayer CANNOT claim  Both the American Opportunity (Hope) 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) SaveFirst Basic Training ● 2012 © Intermediate Credits

115 Foreign Tax Credit SaveFirst Basic Training ● 2012 © Intermediate Credits SaveFirst Basic Training ● 2012 © Taken if a taxpayer paid income tax to a foreign country; U.S. possession; or political subdivision, agency, or instrumentality of a foreign country.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!Foreign tax paid > $300 is out of our scope! We may see some foreign tax reported on a 1099-DIV in Box 6.We may see some foreign tax reported on a 1099-DIV in Box 6. Enter the amount of foreign tax paid on Line 47.Enter the amount of foreign tax paid on Line 47.

116 Residential Energy Credit Nonrefundable creditNonrefundable credit Available to a taxpayerAvailable to a taxpayer  who made purchases for qualified energy efficient improvements for his main home  Who owns his home SaveFirst Basic Training ● 2012 © Intermediate Credits

117 Residential Energy Credit Use Form 5695, Part IUse Form 5695, Part I Eligible expenses includeEligible expenses include  high-efficiency heat pumps, air conditioners, and water heaters;  energy-efficient windows, doors, insulation materials, and certain roofs SaveFirst Basic Training ● 2012 © Intermediate Credits

118 SaveFirst Basic Training ● 2012 © Residential Energy Credit Non-Business Energy Property (home improvements)  Heating, ventilating, air-conditioning, insulation, roofs water heaters (non-solar), windows, and doors.  Part I of the 5695 (IN SCOPE) Residential Energy-Efficient Property Credit  Solar panels, solar-powered water heaters, geothermal heat pumps, photovoltaic systems, small wind energy system, fuel cells  Part II of the 5695 (OUT OF SCOPE) Intermediate Credits

119 Link: Line 52  5695 Pg 1 SaveFirst Basic Training ● 2012 © Fill in 1a, b and c Intermediate Credits

120 Residential Energy Credit SaveFirst Basic Training ● 2012 © Line 2: Enter any amounts claimed in the previous 4 years Line 3 (Qualified energy efficiency improvements): 3a: Insulation 3b: Exterior doors 3c: Roof (metal or asphalt) 3d: Exterior windows /skylights Do NOT include cost of on-site preparation and installation! Intermediate Credits

121 Residential Energy Credit SaveFirst Basic Training ● 2012 © Line 6 (Residential energy property costs): 6a: Electric heat pump, central air conditioner, water heather 6b: Natural gas, propane or oil furnace, hot water boiler 6c: Main air circulating fan used in natural gas, propane or oil furnace Do include cost of on-site preparation and installation! Intermediate Credits

122 Residential Energy Credit Taxpayers MAY qualify for an energy credit for qualified  solar electric property costs  solar water heating property costs  small wind energy property costs  geothermal heat pump property costs. Important: This is outside scope of VITA SaveFirst Basic Training ● 2012 © Intermediate Credits

123 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

124 Paper Returns: When to Mail Situations in which a return CANNOT be e-filed:  A dependent has been claimed incorrectly by another taxpayer on a previous return.  The taxpayer has been incorrectly claimed as a dependent on a previous return.  A taxpayer files MFS but does not know his spouse's SSN. Note: Sometimes, tax returns cannot be e-filed OR the taxpayer simply prefers to mail the return. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

125 Preparing Paper Returns in Taxwise To set up the return to be filed as a paper return:  Federal: On the Main Info Sheet, scroll midway down and click “Paper” next to Type of Return.  State: On the AL40, scroll to the bottom and click “No” stating that you do NOT want to e- file the return. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

126 Preparing Paper Returns in Taxwise Prepare the return as you would normally. Print two copies of everything – give one to the taxpayer to keep and one copy to mail. Have the taxpayer sign the 1040 and the AL40. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

127 Paper Returns: Final Notes Paper returns take much longer to process than e-filed returns. Refunds can still be directly deposited on a paper return – just include this information in TaxWise. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

128 Amended Returns Once a tax return has been accepted by the IRS, it cannot be changed without submitting an amended return. A taxpayer should amend his return if  Anything was excluded that affects taxable income OR  Tax liability OR  If anything was reported incorrectly SaveFirst Basic Training ● 2012 © Paper and Amended Returns

129 Amended Returns Common reasons returns must be amended:  Taxpayer receives another W-2  Taxpayer remembers another source of income  Taxpayer wants to add itemized deductions  A dependent was mistakenly claimed SaveFirst Basic Training ● 2012 © Paper and Amended Returns

130 Amended Returns If we completed the return, you will be able to pull it up in TaxWise to amend it. If someone else completed the return, you will need to re-key the original return that was submitted (exactly as it was submitted) before you can amend it. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

131 Amended Returns: First Steps BEFORE MAKING ANY CHANGES TO THE RETURN Add a 1040X. IMPORTANT: On the 1040X, click the check-box that says “Check this box to override.” If the AL return must be amended, click the box at the top of the AL40 that says “Amended Return.” SaveFirst Basic Training ● 2012 © Paper and Amended Returns

132 Amended Returns: Making Changes Once you check the appropriate boxes on the 1040X and the AL40, make any needed changes to the tax return.  Add a new W-2.  Add or take off a dependent.  Change filing status.  Etc. All changes will be recorded on the 1040X. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

133 Amended Returns: Important Lines Line C: explains what changes are being made to the tax return and why Line 15: indicates if the taxpayer already made a payment Note: A new amount owed or refunded will be listed once ALL changes are made SaveFirst Basic Training ● 2012 © Paper and Amended Returns

134 Amended Returns: Filing Amended returns cannot be e-filed. Print  1040X AND  AL40 AND  any new schedules that have been added (if applicable) Include documentation of changes (if necessary – e.g., a new W-2). SaveFirst Basic Training ● 2012 © Paper and Amended Returns

135 Amended Returns: Final Notes Print the ENTIRE pdf for the taxpayer's records (e.g., the 1040X and the resulting 1040 after changes). Warn the taxpayer that it may take weeks for the IRS to process an amended return. Refer the taxpayer to 1-800-829-1040 if they have further questions about when the return will be processed. SaveFirst Basic Training ● 2012 © Paper and Amended Returns

136 PRACTICE Complete the Fleming exercise on your own Twonline.taxwise.com/training Client ID: 778068 User Name: all caps, last name then first initial, e.g. Rachel Green  GREENR Password: user set OR if password gets reset, password will be same as username SaveFirst Training ● 2013-14 ©

137 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

138 Additional Topics on 2013 Advanced Test Pull out your “Helpful Tips for Additional Topics on the 2013 Advanced Test” packet The following topics will appear on the 2013 Advanced Certification Exam BUT will be out of scope for you at the tax site. Campus Fellows = SaveFirst Intermediate Level The following topics MUST be performed by an Impact Site Coordinator (or SaveFirst Advanced Level) at the site.  Capital gains (sale of stock, capital loss carryover)  Retirement Income with Taxable Amount Not Determined  Schedule K-1: Interest Income, Royalty Income SaveFirst Training ● 2013-14 ©

139 Sale of Stock Sale of stock = Capital Gains GAIN = AMOUNT REALIZED – ADJUSTED BASIS In Layman’s Terms… GAIN = MONEY YOU GET – MONEY YOU PAID BASIS: original cost of the asset. ADJUSTED BASIS: original cost of the shares of stock increased or decreased to account for commissions, fees, depreciation, etc. Sale of Stock SaveFirst Advanced Training ● 2012 ©

140 Holding Period Period starts the day after the property is acquired and continues through the day it is sold Sale of StockShort-term: held for one year or less Long-term: Held for more than one year Inherited property is ALWAYS long-term. SaveFirst Advanced Training ● 2012 ©

141 Reporting Income from Sale of Stock Line 13 (if long-term) Sch D Pg 1 8e, 9e or 10e 8949 Pg 1 3a Cap Gn Wkt Sale of Stock Line 13 (if short-term) Sch D Pg 1 1e, 2e or 3e 8949 Pg 1 1a Cap Gn Wkt View screen shots in your Helpful Tips packet

142 Carryover Losses Loss that can be claimed in one year is the lesser of:  The total loss OR  $3,000 ($1,500 if MFS) Unused portion of loss can be carried over from year to year until total loss is claimed  Remains long-term or short-term.  If not claimed in some year, unused loss is decreased by the amount that should have been claimed. Report carryover losses on Sch D Pg 1. Line 6 (short-term) or line 14 (long-term). Sale of Stock View screen shots in your Helpful Tips packet

143 Sale of Stock SaveFirst Advanced Training ● 2012 © Reporting Carryover Losses: Sch D

144 Retirement Income: Taxable Amount Not Determined SaveFirst Training ● 2013-14 ©

145 Simplified Method Calculates tax-free portion of each pension or annuity payment Calculates taxpayer’s cost basis for each monthly payment Basis – amount the taxpayer paid in to the plan that is being distributed in each monthly payment Taxpayer’s cost basis = Monthly Tax-Free # of monthly payments Portion

146 Simplified Method Taxable Portion of Retirement Distributions SaveFirst Advanced Training ● 2012 © Enter in the amounts for: - Cost in plan at start date from 9b of 1099-R (line 1) - Age at start date (line 2) - Number of months payments were received in 2013 (line 4) - Amount recovered tax free in prior years (line 5) Use Form 1099-R Simplified Method Worksheet in Income Tab of Pub 4012!

147 Simplified Method Taxable Portion of Retirement Distributions SaveFirst Advanced Training ● 2012 © TaxWise Calculates: -Line 3 Exclusion per month -Line 6 Exclusion Automatically pulls through to Line 16b on 1040. Do NOT fill in box 2b on 1099-R – it should remain blank. Use Form 1099-R Simplified Method Worksheet in Income Tab of Pub 4012!

148 Sch K-1: Interest and Royalty Income Reports the taxpayer’s share of income or distributions from partnerships, S Corporations, and some estates & trusts. Some interest income and royalty income is reported on a Sch K-1 Schedule K-1

149 Reporting Income from Sch K-1 Schedule K-1 Type of IncomeWhere to Report Taxable Interest Income1040 Line 8a  Sch B  Line 1b  Interest Stmt (same as interest income from 1099-INT) Royalties1040 Line 17  Sch E Pg 1  1*C  K1 P/S Pg 1  Line 7/6 (use code 6 in Part 1) View screen shots in your Helpful Tips packet

150 PRACTICE Let’s complete practice scenarios 1 and 2 in your “Helpful Tips” packet together You should use this packet and these exercises as a guide for the advanced topics when completing the certification exam SaveFirst Training ● 2013-14 ©

151 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

152 Additional Duties Quality Review Volunteer organization Crowd Control Appointment confirmation Paperwork SaveFirst Basic Training ● 2012 © Additional Duties

153 Quality Review We must thoroughly quality review EVERY RETURN (E-file and Paper) Campus Fellows may assist Site Coordinators to conduct Quality Reviews USE TAB 4 IN YOUR CAMPUS FELLOW MANUAL FOR ALL QUALITY REVIEWS! SaveFirst Basic Training ● 2012 © Additional Duties

154 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” SaveFirst Basic Training ● 2012 © Additional Duties

155 Crowd Control Make sure each taxpayer signs in at the door Direct taxpayers to the Intake and Interview Forms Place taxpayers with available volunteers SaveFirst Basic Training ● 2012 © Additional Duties

156 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 Call taxpayers who do not show up for appointments to reschedule See script on Pg 6 in your Campus Fellow Manual SaveFirst Basic Training ● 2012 © Additional Duties

157 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  Confirm “I authorize” selection on Alabama Form 8453  INPUT pin # on consent to use form (“Gen Use” in Taxwise)  INPUT pin # on consent to disclose form (“Gen Disclose” in Taxwise) SaveFirst Basic Training ● 2012 ©

158 Paperwork Requirements Forms to print for an E-file return:  1 copy of the entire return for the taxpayer’s records (including copy of 8879 and 8453)  Extra Form 8888, if applicable Forms for taxpayer to complete/sign:  Federal form 8879*  Alabama form 8453*  Consent to use/disclose forms ONLY IF volunteer enters pin # on consent to use in Taxwise for taxpayer  SNWL paperwork, if applicable SaveFirst Basic Training ● 2012 © Note: These signed forms are then given back to the taxpayer for their records. We keep electronic copies only.

159 Paperwork Requirements Forms to retain for our records:  Completed Intake/Interview & Quality Review Sheet  Signed copies of consent to use form and consent to disclose form ONLY IF volunteer enters pin # on consent to use/disclose forms for taxpayer  Completed SNWL paperwork and Form 8888, if applicable SaveFirst Basic Training ● 2012 ©

160 Assisting the Site Coordinator Always ask the Site Coordinator if there is anything you can do to help her/him! SaveFirst Training ● 2013-14 ©

161 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

162 Understanding the Intake/Interview Form and Conducting a Thorough Quality Review for Every Taxpayer

163 Required for Use by IRS VITA Sites An important tool for accuracy and due diligence! Must be completed by (or with) the taxpayer. Must be used to conduct the Quality Review process. Must be used when e-filing tax returns. Must be kept on file in our site records.

164 The Intake Process: Completing Form 13614-C In most cases, the taxpayer completes pages 1 and 2 of the Intake Interview Form (Form 13614-C) in the waiting room before meeting with a tax preparer. Provide assistance as needed

165 Complete an Intake/Interview Form for EVERY Return We MUST have an intake/interview form on file for EVERY return filed at our tax sites. If multiple/prior year returns:  Go to IRS.gov and print out the Intake/Interview form from that tax year  Complete an intake/interview form for EVERY year for which the taxpayer is filing

166 The Intake Process Return and Volunteer Certification Levels It is a violation of our VITA Grant and IRS Compliance and your Volunteer Standards of Conduct Agreement to file a tax return that is out of scope of the VITA tax site. At SaveFirst sites, to ensure all returns are in- scope for VITA:  Consult the Scope of Service Chart – at every tax station, in the Pub 4012 Volunteer Resource Guide, and in your Campus Fellow Manual  If a topic seems complicated or unfamiliar to you, double-check the Scope of Service Chart to be sure it is listed in scope.  Sometimes this determination may be unclear. If you are unsure, ask your supervisor.

167 The Intake Process Return and Volunteer Certification Levels Remember, SaveFirst volunteers are following slightly different scopes than the IRS’s levels of certification. Reference your SaveFirst Scope of Service chart in your Campus Fellow Manual, pgs 16-19 if you have questions Remember: Campus Fellows are Intermediate Level Volunteers

168 If part of a taxpayer’s return will be out of scope for the volunteer preparer, but will be in scope for you, the site coordinator, or your Campus Fellows, then if you are busy you may have the volunteer begin the return and stop when they have completed all of the topics within their scope.

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190 Turn to Tab 4, pages 22-26 in your Campus Fellow Manual for the “Process for Conducting a Thorough Quality Review”

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210 Let’s Conduct a Quality Review! With a partner, complete a thorough Quality Review of each other’s Fleming tax returns. Discuss any issues you come across with your “taxpayer” (partner) and ask any relevant questions.

211 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

212 Campus Fellow Manual USE THIS AT THE TAX SITE!! SaveFirst Training ● 2013-14 ©

213 Campus Fellow Manual 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 SaveFirst Training ● 2013-14 © 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.

214 Campus Fellow Manual Tab 2: Site Organization and Set-Up  Site Coordinator’s Daily Checklist: Ask your site coordinator how you can assist them!  Day-Before Call Script, pg 6  Documents/Forms to be kept on site (just for reference) SaveFirst Training ● 2013-14 ©

215 Campus Fellow Manual 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! SaveFirst Training ● 2013-14 ©

216 Campus Fellow Manual Tab 4: Finishing a Return  Pgs. 22-26: 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 SaveFirst Training ● 2013-14 ©

217 Campus Fellow Manual Tab 5: 1040 and Forms  Form 1040  Form AL-40 Alabama Tax Laws  Various Income Forms Important information re: codes on 1099-Rs, W-2s  Itemized Deductions  1098-T Tuition Statement Information  Additional forms you may see SaveFirst Training ● 2013-14 ©

218 Campus Fellow Manual Tab 6: Save Your Refund  Completing Form 8888  Entering taxpayers into the prize drawing SaveFirst Training ● 2013-14 ©

219 Campus Fellow Manual Tab 7: 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 SaveFirst Training ● 2013-14 ©

220 Campus Fellow Manual Tab 8: Campus Fellow Summary Chart  Line by line instructions for entering taxpayer information into TaxWise SaveFirst Training ● 2013-14 ©

221 Training Outline 1.Basic Level Updates 2.Social Security Lump Sum Election Method 3.State Tax Refund 4.Self-Employment Income 5.Retirement Plans 6.Adjustments to Income 7.Itemized Deductions 8.Intermediate Credits 9.Paper and Amended Returns 10.Additional Topics on 2013 Advanced Test 11.Additional Duties 12.Quality Reviews 13.Campus Fellow Manual 14.Volunteer Paperwork SaveFirst Training ● 2013-14 ©

222 Volunteer Etiquette Follow the Quality Site Requirements. Conduct a thorough interview. Be sensitive to the taxpayer. Keep personal information confidential. Do only what you are trained and certified to do.

223 Ethical Violations An ethical violation is a knowing breach of any of the volunteer standards of conduct All VITA volunteers must undergo training on volunteer standards of conduct to avoid ethical violations The IRS uses reviews called SPEC QSS to determine the accuracy rate and possible violations at tax sites.

224 Ethical Violations Consequences of intentional violations impact both the volunteer and the organization The volunteer may be removed from VITA and face criminal investigation SaveFirst might lose its IRS grants and the EFIN number that allows it to operate tax sites 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 that is entered on their return.

225 Quality Site Requirements Every return must be prepared by a volunteer with the proper level of certification needed for that return. Returns should be assigned after the level of certification needed and the certification level of the preparer have been determined and match up. Every volunteer has to use the Intake/Interview sheet in preparing a return.

226 Quality Site Requirements The volunteer must verify the taxpayer has photo ID, social security cards for themselves and any dependents they are claiming, and all income documents as soon as possible. Taxpayers should be informed that they are ultimately responsible for any information they gave us.

227 Other Violations VITA is a volunteer service. We can not accept cash, solicit donations, or have a donation/tip jar in the entry, waiting, tax preparation, or quality review areas of the tax site. Never use or keep a taxpayer's confidential information for personal gain. This includes soliciting a personal business, offering to receive and turn over a refund for a taxpayer without a bank account, or even asking a taxpayer on a date if you notice they are filing single.

228 Other Violations If you feel a taxpayer is providing fraudulent information, you are not required to complete their return. Never knowingly prepare a fraudulent return. Talk to your supervisor (discretely) if you are concerned about a taxpayer’s return or about information they are providing.

229 Standards of Conduct Test All volunteers must complete and pass the Volunteer Standards of Conduct Test before volunteering at the tax site Take the test (in your training materials), and we’ll grade it now!  PUT YOUR NAME ON THE TEST!  Open-book, open-note; refer to the training materials as you complete the exam  Turn in to your trainer when you finish

230 Schedule and Online Availability Forms You will be scheduled for regular weekly shifts between January 20 – March 8 based on your Campus Fellow Agreement On Saturdays, you should be prepared to travel (e.g., Decatur, Montgomery, Gadsden, etc.) You will be reimbursed for mileage and meals. Please complete the appropriate Campus Fellow availability form online (www.impactalabama.org/taxprep). You must complete this form NOW.www.impactalabama.org/taxprep SaveFirst Basic Training ● 2012 ©

231 Volunteer Paperwork If you did not attend the fall training in person, please fill out the following forms and return them to your trainer:  Volunteer Agreement  Confidentiality and Liability Form  Media Release  W-9 If we do not have this paperwork, you cannot receive your stipend or reimbursement! SaveFirst Basic Training ● 2012 ©

232 Certification Remember to take the IRS Advanced Certification by JANUARY 17. Use Classmarker to submit your answers. The link to Classmarker is at www.impactalabama.org/taxprep SaveFirst Basic Training ● 2012 ©


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