EKS TrainingScenario Four

Ground Rules

oDon’t work ahead – stay on the current taskoTurn off your cell phoneoQuestion/Comments – raise your hand, stay in your

seatoNo side conversations - don’t even ask your

neighbor for helpoReturning volunteers sit next to new volunteersoBring your materials every dayoAt least try to do your homework – bring your

questions

Class Structure

4 Steps:

1. As a class, we will review Interview Notes, Intake & Interview Sheet (13614-C) & supporting documents for each scenario.

2. Instructor will teach Tax Law – referencing Publication 4012 and 13614-C

3. Instructor will show you how to enter information into TaxWise. WATCH!

4. Now DO! Students will enter information on TaxWise

Scenario #4

Scenario #4

What you will learn in this scenario:1. ITINs2. Retirement Income3. Self-employment/Business income with expenses4. State Refund Income5. Itemized Deductions6. Affordable Care Act – Exemptions for ITIN and Shared Responsibility

Payment

What you will review in this scenario:7. Filing Status8. Personal and Dependency Exemptions9. Income – W-210. Credits:

Child Tax Credit, Additional Child Tax Credit, Child and Dependent Care Credit, 11. Itemized Deductions versus Standard Deduction12. ACA- 1095-C Employer Coverage13. Form 8888

Scenario #4

Let’s review Mary and Kevin’s Information:

Interview Notes Intake & Interview sheet - 13614-CTax Documents

Interview Notes Review

What did you learn about Mary and Kevin?

Tax Law Topic #1

ITIN Individual Taxpayer Identification Number, issued by

the IRS to taxpayers without a valid SSN (start with a 9 – taxpayer will have a letter from IRS with the number on it)

When applying for an ITIN, a taxpayer submits a W-7 with their tax return along with documentation like a passport, birth certificate and/or other identification

VITA sites can file returns for taxpayers with ITINs – just like any other return

Some VITA sites can help taxpayers apply for the number – called Certifying Acceptance Agents

Intake & Interview

Deep Dive with the 13614-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 13614-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 8-10Scope of Services Chart

Tax Law Topic #2

Determine filing status for a married couple

Publication 4012, Tab B-1

TaxWise

You Got This!Enter Mary and Kevin’s: Personal information on Main Information Sheet

Everything on page one of 13614-C goes on Main Info

Publication 4012, K-6 to K-11 for Main Info

TaxWiseYou Got This!Enter Mary and Kevin’s: Income documents:

W-2Publication 4012, D-3 to D-9 for Income

Tax Law Topic #3

Retirement Income Retirement income such as pensions, 401k’s or IRAs are reported on a 1099-R

Box 7 will let you know what kind of distribution is being reported

What codes do Mary’s two 1099-R’s have? What do they mean? Tab D-21 and D-22

Taxable amount box empty or taxable amount not determined box checked – use simplified method

Publication 4012, Tab D-20 through D-24

TaxWise

Students: WATCH instructor

Enter Mary’s 1099-Rs Remember the simplified method!

Publication 4012, Tab D-20 through D-24

TaxWise

Students:

Enter Mary’s 1099-Rs Remember the simplified method!

Publication 4012, Tab D-20 through D-24

Tax Law Topic #4

Business Income with expensesWhich one’s EZ?

Publication 4012, Tab D-13 to D-15*$25,000 for VITA Scope

Schedule C-EZ Schedule COnly one per return (TP and SP both have businesses won’t work)

Multiple per return possible

Simplified expenses Must categorize expenses (advertising, insurance, supplies, licenses, etc.)

Has limit of $5,000 expenses

No expense limit*

TaxWise

Students: WATCH instructor

Enter Kevin’s cash income and expenses on Schedule C-EZ

Publication 4012, Tab D-13 to D-15

TaxWise

Students:

Enter Kevin’s cash income and expenses on Schedule C-EZ

Publication 4012, Tab D-13 to D-15

Tax Law Topic #5

State Refund as Income

When a taxpayer itemizes their deductions, they can use state income tax paid as a deduction

In turn, any refund received that year needs to be reported as income

The state refund is reported on 1099-G You will need the taxpayer’s prior year return to fill

in: Taxable income Itemized deductions total State income tax paid

Publication 4012, Tab D-13 to D-15

TaxWise

Students: WATCH instructor

Enter the Kents’ state refund on the State Tax Refund Worksheet from 1040, line 10

Publication 4012, Tab D-12

TaxWise

Students:

Enter the Kents’ state refund on the State Tax Refund Worksheet from 1040, line 10

Publication 4012, Tab D-12

Tax Law Topic #6

Itemized Deductions: Deductions reduce a taxpayer’s taxable income Taxpayer can take Standard or Itemized Deductions

(should take the larger): Standard – a fixed dollar amount based on filing status Itemized – uses your qualified expenses like mortgage

interest, medical or dental expenses, charitable contributions

Publication 4012, Tab F & Schedule A

Tax Law Topic #6

Itemized Deductions: Mortgage interest is the major indicator that someone

does or should itemize Use Tabs F-3 and F-4 to interview the taxpayer More details in Publication 17Publication 4012, Tab F-3 through F-8, Publication 17 & Schedule A

TaxWise

Students: WATCH instructor

Enter the Kents’ deductions on Schedule A:

Mortgage Interest Real Estate Taxes Charitable Contributions

Interview notes & Publication 4012, Tab F-5

TaxWise

Students:

Enter the Kents’ deductions on Schedule A.

Interview notes & Publication 4012, Tab F-5

TaxWise

You Got This! Enter the Kents’ childcare expenses on Form 2441 for theChild and Dependent Care Credit

Interview Notes & Publication 4012, Tab G-5

TaxWise

Let’s review credits calculated on TaxWise:

Did the Kents qualify for these credits? Child Tax Credit Additional Child Tax Credit

Tax Law Topic #7

Affordable Care Act Exemptions

Did the Kents have coverage all year? If no, let’s review the exemptions before assessing the Shared Responsibility Payment

Interview Notes, 13614-C, 1095-C and Publication 4012, Tab ACA

TaxWise

You got this!

Enter exemption information for Kevin on ACA Worksheet and 8965

Enter coverage information for Mary and Melissa on the ACA worksheet

Interview Notes, Publication 4012, Tab ACA

Completing the CA return

1. Get the red out! Most information will automatically

populate from the federal return2. 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 Kents’ CA return (540)

RefundDo the Kents want to direct deposit their refund?

If so, are they requesting to split their refund?

Do they want to buy a savings bond?

13614-C and Interview Notes

Savings Ask Every Taxpayer (AET)! Remind the Kents of the savings optionAnswer QuestionsBe enthusiastic and positive!

TaxWise

Students: WATCH instructor Direct Deposit into one account requires that you enter the account information in two places:

Main Info Sheet Page 2 of the 1040

Check “same as federal” for the state return

Publication 4012, Tab K-14

TaxWise

Students: Direct Deposit into one account requires that you enter the account information in two places:

Main Info Sheet Page 2 of the 1040

Check “same as federal” for the state return

Publication 4012, Tab K-14

Finishing the return

THINGS YOU NEED TO KNOW ABOUT FINISHING A RETURN1. Ask the questions in the Prep Use Fields2. All returns must be Quality Reviewed (checklist on

13614-C) Tab, K-253. Run Diagnostics to check for errors4. Print returns (Federal and State) for Taxpayer5. 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 entry of:

- W-2- Schedule C-EZ- State Refund Worksheet- Schedule A- Form 2441- Direct Deposit- ACA Exemptions and Full Year MEC

Look it up!

What Schedule is required to report non-employee compensation from a 1099-MISC? Publication 4012, Tab D-3Schedule C or Schedule C-EZ

True or False: If a self-employed taxpayer has $11,000 in business expenses it is out of scope. Publication 4012, Tab D-14True

Which ACA exemption do taxpayers with ITINs qualify for?Publication 4012, Tab ACAExemption Code C – citizens living abroad and certain noncitizens

Look it up!

What must be done if box 2a on Form 1099-R is empty or box 2b is not checked?Publication 4012, Tab D-24Use the simplified method worksheet

Where do you enter bank account information if the taxpayer wants to direct deposit their refund into only one account?Publication 4012, Tab K-14Main Info and 1040 page 2

What large deductible expense is common among taxpayers who itemize their deductions?Publication 4012, Tab F-3Mortgage Interest

Before next week…

Try your Scenario 5 Homework Let’s review the scenario now… You’ll need to know about:

Social Security Benefits Cancellation of Debt Dividend Income ACA – Marketplace Coverage and Advanced

Premium Tax Credit