EKS TrainingScenario Two

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 #2

Scenario #2

What you will learn in this scenario:1. Head of Household Filing Status

2. Exemptions: Dependency

3. Business Income

4. Adjustments – Student Loan Interest

5. Credits: Child Tax Credit, Additional Child Tax Credit, Child and Dependent Care

Credit, American Opportunity Credit and Retirement Savings Credit

6. Determining Itemization

7. Affordable Care Act – Exemptions

What you will review in this scenario:8. Filing Status

9. Personal Exemptions

10. Income – W-2, Interest Income, and Unemployment

11. Credits- Refundable vs Nonrefundable Earned Income Tax Credit

12. Itemized Deductions versus Standard Deduction

Scenario #2

Let’s review Cheryl’s Information:

Interview Notes Intake & Interview sheet - 13614-CTax Documents

Interview Notes Review

What did you learn about Cheryl?

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 8-10

Scope of Services Chart

Tax Law Topic #1

Dependency Exemption: Review personal exemption and dependency

exemption

What is a “qualifying child” or “qualifying relative”?

Publication 4012, Tab C-3

Tax Law Topic #1

What exemptions can Cheryl take?

Do Jeremy and Joshua qualify as “qualifying relatives” or “qualifying children”?

Tax Law Topic #2

Head of Household Filing Status

Publication 4012, C-3, Tab B-1, B-3 and B-4

Tax Law Topic #2

Review 13614-C, Part II, numbers 1 & 2

Let’s review the Decision Tree Could Cheryl qualify for more than one status?

TaxWise

You Got This!:

Enter Cheryl’s: Personal information on Main Information Sheet

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

Income documents:

W-2, 1099-G & 1099-INT

Publication 4012, K-6 to K-11 for Main Info and D-3 to D-9 for Income

TaxWise

Students: WATCH instructor

Enter Cheryl’s dependents’ information on the Main Information Sheet

Publication 4012, K-8

TaxWise

Students:

Enter Cheryl’s dependents’ information on the Main Information Sheet

Publication 4012, K-8

Tax Law Topic #3

Business Income Businesses with inventory, employees,

depreciation, business use of home or a net loss are out of scope (Sch C-EZ rules)

Any Form 1099-MISC with nonemployee compensation (box 7) for a trade or business must be reported on Line 1 of the Schedule C-EZ

Cash Income is considered Business Income and should be reported on a Schedule C or C-EZ

Taxpayers can claim expenses for their trade or business and this will reduce the amount of Gross Receipts

Self-employment taxes will be paid on Gross Receipts (TaxWise calculates)

Publication 4012, Tab D-13 to D-15

Tax Law Topic #3

Business IncomeWhich one’s EZ?

Publication 4012, Tab D-13 to D-15

Schedule C-EZ Schedule C

Only one per return (if 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

Tax Law Topic #3

Review 13614-C, Part III Let’s review the 1099-MISC

What did Cheryl receive this for? Did she have any expenses related to this

business income?

TaxWise

Students: WATCH instructor

Enter Cheryl’s 1099-MISC income on Schedule C-EZ

Must link 1099-MISC to line 1

Publication 4012, Tab D-13 to D-15

TaxWise

Students:

Enter Cheryl’s 1099-MISC income on Schedule C-EZ

Must link 1099-MISC to line 1

Publication 4012, Tab D-13 to D-15

Tax Law Topic #4

Adjustments What are adjustments to income? Where are they on the 1040? Does Cheryl have an “adjustment to income”?

Publication 4012, Tab E-4 & Cheryl’s 13614-C

TaxWise

Students: WATCH instructor

Enter Cheryl’s 1098-E on 1040 Worksheet 2

Publication 4012, Tab E-5

TaxWise

Students:

Enter Cheryl’s 1098-E on 1040 Worksheet 2

Publication 4012, Tab E-5

Tax Law Topic #5

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

Use Schedule A Have documentation

Publication 4012, Tab F & Schedule A

Tax Law Topic #5

Itemized Deductions: Medical Expenses need to be more than 10% of the

taxpayer’s AGI before it will count against the deduction amount

How much are Cheryl’s unreimbursed medical expenses?

So many details in Publication 17

Publication 4012, Tab F, Publication 17 & Schedule A

TaxWise

Students: WATCH instructor

Let’s enter Cheryl’s deductions on Schedule A.

Interview notes & Publication 4012, Tab F-5

TaxWise

Students: Enter Cheryl’s deductions on Schedule A.

Publication 4012, Tab F-5

TaxWise

Should Cheryl itemize her deductions?

Publication 4012, Tab F and Schedule A

Tax Law Topic #6

Tax Credits: Two Types: Refundable & Nonrefundable

Nonrefundable credits allow taxpayers to lower their liability to zero.

Refundable credits allow taxpayers to lower their tax liability and receive as a payment once liability is zero.

Tax Law Topic #6

Nonrefundable Credits: Child & Dependent Care Credit*

Lifetime Learning - Education Credit

Retirement Savings Credit*

Child Tax Credit*

Less common: Credit for Elderly or the Disabled Foreign Tax Credit

Publication 4012, Tab G & J

*Let’s look at the 4012 for more details on these credits

Tax Law Topic #6

Refundable Credits:

Additional Child Tax Credit*American Opportunity Tax Credit – Education Credit*

Earned Income Tax Credit*

Publication 4012, Tabs G, I & J

*Let’s look at the 4012 for more details on these credits

TaxWise

You Got This!:

Enter Cheryl’s Schedule EIC Worksheet

Publication 4012, Tab I-6 and I-7

TaxWise

Students: WATCH instructor

Enter Cheryl’s childcare expenses on Form 2441 for the

Child and Dependent Care Credit

Interview Notes & Publication 4012, Tab G-5

TaxWise

Students:

Enter Cheryl’s childcare expenses on Form 2441 for the

Child and Dependent Care Credit

Interview Notes & Publication 4012, Tab G-5

TaxWise

Students: WATCH instructor

Enter Cheryl’s tuition expenses on Form 8863 for the

American Opportunity Credit

1098-T & Publication 4012, Tab J-7

TaxWise

Students:

Enter Cheryl’s tuition expenses on Form 8863 for the

American Opportunity Credit

1098-T & Publication 4012, Tab J

TaxWise

Let’s review credits calculated on TaxWise:

Did Cheryl qualify for these credits? Child Tax Credit Additional Child Tax Credit

Tax Law Topic #7

Affordable Care Act Exemptions

Did Cheryl and her dependents 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

Students: WATCH instructor

Enter Exemption information on ACA Worksheet and 8965

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

TaxWise

Students: Enter Exemption information on ACA Worksheet and 8965

Interview Notes, 1095-C and 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 how TaxWise will auto-populate the 3514 were not available

RefundDoes Cheryl want to direct deposit her refund?

If so, is she requesting to split her refund?Does she want to buy a savings bond?

13614-C and Interview Notes

Savings Ask Every Taxpayer (AET)!

Remind Cheryl of the savings optionAnswer QuestionsBe enthusiastic and positive!

Bank Account Numbers

Remember: On the 8888, fill in both accounts, amounts, choose checking/savings

Best practice to check they were entered in correctly

On the 540, check the “different account” option, will have to enter twice to verify

TaxWise

You Got This!:

Enter Cheryl’s Form 8888

Interview Notes & Publication 4012, Tab K-14 to K-15

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 13614-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 entry of:

- W-2- 1099-MISC- 1098-T- 1098-E- Form 2441- ACA Exemptions - Split refund

Look it up!

Can an unmarried person claim “head of household” status?

Publication 4012, Tab B-1, B-3, B-4 and C-3

Yes, if they provide more than half of the cost of keeping their home and a “qualified person” lived with them for ½ the year.

True or False: The term “dependent” means the person met all the requirements to be “qualifying child” or “qualifying relative”.

Publication 4012, Tab C-3

True

A taxpayer must have this to qualify for EITC?

Publication 4012, Tab I

Earned Income

What are some examples of earned income?

Publication 4012, Tab I-1

Taxable wages, self-employment earnings

Look it up!

True or False: Laura’s foster son Jack is 12. He is a US citizen, he lives with Laura and she provides his full financial support. Is Jack a qualifying child for the child tax credit?

Publication 4012, Tab G-8

True

The tax credit for child and dependent care expenses allows taxpayers to claim a credit for expenses paid for the care of children under what age?

Publication 4012, Tab G-3

13

True or False: For the CDCC, the qualifying person must live with the taxpayer for the entire year?

Publication 4012, Tab G-3

False, the qualifying person must live with them for more than ½ the year.

What are the two deductions options?

Publication 4012, Tab F

Standard or Itemized

Look it up!

What is the most common big ticket item for itemizing deductions?

Publication 4012, Tab F-3 and F-4

Mortgage Interest

Name two requirements to qualify for the Child Tax Credit

Publication 4012, Tab G-8 and G-9

Qualifying Child must be under age 17, a US Citizen, be claimed as a dependent and live with the taxpayer for more than half the year

Is the Child Tax Credit a refundable or nonrefundable credit?

Publication 4012, Tab G-8

Nonrefundable, but the client may be eligible for the Additional Child Tax Credit which is refundable.

What should you do for every tax return to ensure the taxpayer receives EITC, if eligible?

Publication 4012, Tab K-8

Always check the EIC box on the Main Information Sheet when entering dependents