EKS Training Scenario Six

Ground Rules o Don’t work ahead – stay on the current task o Turn off your cell phone o Question/Comments – raise your hand, stay in your seat o No side conversations - don’t even ask your neighbor for help o Returning volunteers sit next to new volunteers o Bring your materials every day o At least try to do your homework – bring your questions

Class Structure 4 Steps:  As a class, we will review Interview Notes, Intake & Interview Sheet (13614-C) & supporting documents for each scenario.  Instructor will teach Tax Law – referencing Publication 4012 and C  Instructor will show you how to enter information into TaxWise. WATCH!  Now DO! Students will enter information on TaxWise

Scenario #6

What you will learn in this scenario: 1.Capital Gains What you will review in this scenario: 1.Filing Status 2.Personal Exemptions 3.Income – W-2, Social Security, 1099-DIV, 1099-INT 4.Business Income with expenses 5.Simplified Method for 1099-R 6.Itemized Deductions versus Standard Deduction 7.ACA – Full coverage 8.Form 8888

Scenario #6 Let’s review Timothy and Nicole’s Information:  Interview Notes  Intake & Interview sheet C  Tax Documents

Interview Notes Review  What did you learn about Timothy and Nicole?

Intake & Interview Deep Dive with the C  Did they bring all the required documents?  Everything accurate?  What’s missing/wrong/mismatched that needs to be changed?  Compare tax documents and interview notes  Make any corrections needed on C  Fill out greyed out boxes (dependency and ACA) Publication 4012, Tabs K-3 and K-4

Who should file? Does this taxpayer need to file their return? Or should they? Publication 4012, Tab A

In Scope? Is client eligible for VITA services? What certification level is needed to prepare this return? Publication 4012, pages 8-10 Scope of Services Chart

Scenario #6 You Got This! Determine filing status and personal exemption Publication 4012, Tab B-1 and Tab C-1

TaxWise You Got This! Enter Timothy and Nicole’s:  Personal information on Main Information Sheet  Everything on page one of C goes on Main Info Publication 4012, K-6 to K-11 for Main Info

TaxWise You Got This! Enter Timothy and Nicole’s:  Income documents:  W-2, 1099-INT, 1099-DIV, 1099-R, SSA-1099, MISC Publication 4012, Tab D for Income

Tax Law Topic #1 Capital Gain or Loss  Capital gains are proceeds from the sale of stock, mutual funds or a personal residence  Sale of any other asset is out of scope  Sale of stock is reported on a 1099-B  Stock held for one year or less is short term  Stock held for more than one year is long term  A taxpayer cannot take net losses of more than $3,000 per year - unused losses can be carried over to later years until they are completely used up Publication 4012, Tab D-16 to D-19

Tax Law Topic #1 Capital Gain or Loss  The taxpayer will need to report:  Date of sale  Date of purchase/acquisition  Short term or long term  Sale price/proceeds of the sale  Cost or other basis  Federal income tax withheld  Wash sale loss disallowed  Description (Rust Corp 100 SH; Rio Motors 150 SH) Publication 4012, Tab D-16 to D-19

Tax Law Topic #1 Capital Gain or Loss - Basis  The basis of property is usually the cost  The cost or basis should be reported on the 1099-B  Taxpayers should go to their broker if they need help determining the basis  If a taxpayer cannot provide the basis, the IRS will deem it to be zero Publication 4012, Tab D-16 to D-19

TaxWise Students: WATCH instructor Enter Timothy and Nicole’s capital gains (1099-B) on the Capital Gains Worksheet Publication 4012, Tab D-16 to D-19

TaxWise Students: Enter Timothy and Nicole’s capital gains (1099-B) on the Capital Gains Worksheet Publication 4012, Tab D-16 to D-19

TaxWise You got this!  Enter Timothy and Nicole’s itemized deductions on Schedule A Publication 4012, Tab F

TaxWise You got this!  Enter health coverage information for Timothy and Nicole on the ACA worksheet Publication 4012, Tab ACA

Completing the CA return 1.Get the red out! Most information will automatically populate from the federal return 2.State EITC Form – 3514* 3.If you have entered more than one W-2 on the 1040, you will have to manually add the additional W-2’s. The first W- 2 will carry over, but the rest won’t. 4.Make sure to complete the direct deposit or balance due portion of the return 5.Complete the CA Renters Credit Worksheet when applicable. *At the time of this ppt creation, details on what TaxWise will auto populate are not available

TaxWise You got this!  Complete the Sterlings’ CA return (540)

Balance Due  Timothy and Nicole have a balance due  What are their payment options?  How can they avoid this in the future? Publication 4012, Tab K-16 through K-18

TaxWise Students: WATCH instructor  Direct debit question on 1040 page 2:  No – 1040V appears in tree & prints  Yes – fill out ACH 1040 Form Publication 4012, Tab K-16 to K-18

TaxWise Students:  Direct debit question on 1040 page 2:  No – 1040V appears in tree & prints  Yes – fill out ACH 1040 Form Publication 4012, Tab K-16 to K-18

Finishing the return THINGS YOU NEED TO KNOW ABOUT FINISHING A RETURN 1.Ask the questions in the Prep Use Fields 2.All returns must be Quality Reviewed (checklist on C) Tab, K-25 3.Run Diagnostics to check for errors 4.Print returns (Federal and State) for Taxpayer 5.Review return with taxpayer (Formula 1040 activity) 6.Have Taxpayer and Spouse sign 8879s for Federal and State and remind them they are responsible for their return and by signing, they are agreeing it is accurate:  One copy for the taxpayer  One copy for the VITA Site Publication 4012, Tab K

Check our work  Do we have matching AGI, refund?  Let’s review:  Income documents  Schedule C/Schedule C-EZ  Capital Gains Worksheet  Schedule A  ACA worksheet

Look it up! What are a taxpayer’s options in figuring out the basis of their stock transaction? Publication 17, Part 3 Put it as zero, find it on their 1099-B or call up their broker! True or False: Stock shares purchased on June 25, 2011 and sold October 8, 2015 are long term Publication 17, Part 3 True Where do I report the stock transactions? Publication 4012, Tab D-16 Capital Gain or Loss Transactions Worksheet. TaxWise will automatically populate the copies of form 8949 and Schedule D.

Look it up! How much loss can a taxpayer take in a given tax year? Publication 17, Part 3 $3,000 True or False: The gain from the sale of a taxpayer’s main home cannot be excluded from the taxpayer’s income Publication 17, Part 3 False– it can be excluded (up to $250,000) as long as it meets the ownership and use tests, the taxpayer has not excluded income from the gain of a sale on another home, did not receive a 1099-S or does not qualify to exclude it or chooses not to But guess what – you never see this – talk to your site coordinator if you do!