2013 – 2014 Campus Fellow Intermediate Training: January Refresher

2013 – 2014 Campus Fellow

Intermediate Training:January Refresher

Training Outline

1. Basic Level Updates2. Social Security and Lump Sum Election Method3. State Tax Refund4. Business Income5. Retirement Income6. Adjustments to Income7. Itemized Deductions8. Intermediate Credits9. Paper & Amended Returns10. Additional Topics on 2013 Advanced Test11. Additional Duties12. Quality Reviews13. Campus Fellow Manual14. Volunteer Paperwork

Training Outline


Due Date of Return

Due Date:April 15, 2014

Exemptions

• The amount a taxpayer can deduct for each exemption increased to $3,900 for 2013.

Standard Deductions: 2013

MFJ or QW $12,200

Head of Household $8,950

Single or MFS $6,100

Training Outline


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)

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)

Social Security Benefits: SSA-1099

Medicare premiums

Don’t miss withholding!

Total benefits

Lump-Sum Benefit

Payments

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!

OPTION 1: Lump Sum Election Method Link Line 20a 1040 Wkt 1

• Social Security received this year

• Medicare• Federal Tax

Withheld

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 2nd option if it

lowers the taxable benefits (TaxWise will automatically determine which is more beneficial)

OPTION 2: Lump Sum Election Method Link Line 20a 1040 Wkt 1

• Social Security received this year

• Medicare• Federal Tax

Withheld

• Then scroll to the bottom of the sheet

OPTION 2: Lump Sum Election Method

• 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


• Enter the earlier year for which the benefits were received and the filing status


• Line 1: Enter the amount of benefits received in prior year and amount for prior year received in current year

• Line 3: Enter the AGI for prior year

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

(e.g., 2012) 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: One 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

Training Outline


2012 State Tax Refund

• The 2012 State Tax Refund may be taxable and need to be reported

• Answer question in Box under line 9

• If YES, link: Line 10 State Tax Refund

• Complete the State Tax Refund Wkst with information from 2012 return

Info Needed from 2012 Return

• State refund amount• Schedule A, line 5a: Income Taxes• Schedule A, line 5b: General Sales

Tax• Total itemized deductions amount• Filing status• Taxable income amount

State Tax Refund in TaxWise

• Enter in the amount for:– State

refund amount (line 1)

– Sch A, line 5a: income taxes (line 2)

– Sch A, line 5b: general sales tax (line 2)

State Tax Refund in TaxWise

• Enter in the amount for:– Total itemized

deductions (line 6)

– Filing status (line 7)

– Taxable income amount (line 12)

Training Outline


Business Income

• Income from personal business or independent contractor

• Income can be reported on:– 1099-MISC–W-2 (Statutory Employee)– Personal records– 1099-K

• Link: Line 12 Sch C-EZ or C

Business Income

• 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

• Schedule C-EZ less than $5,000• Schedule C up to $10,000

1099-MISCBox 7

“Nonemployee

Compensation”

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 Schedule C– Link: Line 12 Sch C-EZ or Sch C– Then, Link: Gross Receipts Line

1099-MISC

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

Schedule C-EZ and Schedule C

• Net profit = Gross Receipts – Expenses• Deductible 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 C, Pg. 2)– See your campus fellow manual Tab 5 for more details

Business Mileage Rates

• If used for business purposes, taxpayers can receive a mileage deduction at the federal rate– Cannot deduct commuting miles

• Cannot calculate depreciation (out of scope)

• For 2013, the following rate is in effect:– 56.5 cents per mile– On Sch C-EZ and Sch C, enter total miles

Business Income

• Line F (Sch C-EZ) or Line I (Sch C)– Did the business make any payments in 2013

that would require filing of Form(s) 1099?

• Line 1 (Income) structured differently:– 1a: Merchant card and third party payments (for

2013 enter -0-)– 1b: Gross receipts or sales not entered on line 1a– 1c: Income reported to you on Form W-2 (if the

“statutory employee” box on that form was checked)

– 1d: Total gross receipts

Schedule C in TaxWise:Income

1a: Merchant card & third party sales

1b: Gross receipts on on 1a

1c: Income reported on W2 if the “statutory employee” box is checked

1d: TaxWise calculates total gross receipts

Schedule C in TaxWise: Expenses

Enter in the amounts for the qualified business expenses

Schedule C in TaxWise:Vehicle Expense

Enter in the amounts and answer the questions

TaxWise carries over the mileage for you

Schedule C-EZ in TaxWise

Enter in the business information

Schedule C in TaxWise: Income & Expenses

1a: Merchant card & third party sales

1b: Gross receipts on 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)

Self Employment Tax

• Must file Schedule SE if self-employment earnings are over $400

• Covers Social Security and Medicare taxes

• Complete Schedule C or C-EZ first• TaxWise automatically calculates the

tax onto Line 56

Training Outline


Types of Retirement Plans

• Pension: A series of payments for past work

• Annuity: 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)

Form 1099-R

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 contributed with before-tax money

– Partially Taxable if:• Employees contributed part of funds with after-tax

money

– Not Taxable if:• Employee made ALL contributions with after-tax

dollars (i.e. Roth IRAs)

Important Note

You can only 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 SITE COORDINATOR

Lines 15/16: Retirement (Form 1099-

R)

Railroad Retirement Plans

• RRB 1099– Treated like SSA-1099 (social security

benefits)

• RRB-1099-R– Treated like 1099-R (pension)

Rollover (Tax-Free Distribution)(Code G will be in Box 7 of the 1099-R)

Enter the amount the taxpayer rolled over

Check the Box and type F9Provide an explanation

Defined Benefits Retirement Plans

IF IT IS A DEFINED BENEFITS PLAN, CLICK BOX 1 ON THE BOTTOM OF THE

1099-R IN TAXWISE

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.

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– 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. – Employee bears investment risk.

Alabama Tax Rules

• Defined Benefits Plans are NOT taxable at the Alabama level.

• To find out if a plan is Defined Benefits or Defined Contributions– Consult online list

(www.impactalabama.org) or your Campus Fellow Manual

– Call the company that administers the plan– Call the IRS

See Tab 5 in your Campus Fellow Manual for more info at the tax site

Hint: All retired civil servants (i.e. teachers, city employees, soldiers, etc)

have Defined Benefits plans

Alabama Tax Rules

IF IT IS A DEFINED BENEFITS PLAN, CLICK BOX 1 IN TAXWISE

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?

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 planAll civil servants will have a defined benefits

plan.

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?

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

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

Training Outline


Adjustments to Income

• Decreases Taxable Income• Found on lines 23-25 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

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

Educator Expenses: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.

Half of Self-Employment Tax

• 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.

Penalty on Early Withdrawal of Savings

• TaxWise will automatically calculate from information on the Interest Statement

• TaxWise automatically calculates the adjustment on Line 30

• Make sure you entered in ALL interest and penalties imposed correctly on the Schedule B

Important: Make sure you have entered in ALL interest received AND penalties

imposed for early withdrawals on

the Interest Statement of Schedule B

Alimony Paid

• 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

• Enter in amount and recipient’s SSN on Line 31

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

IRA Deduction: Deductible Contributions

• Eligibility Requirements:– Only contributions to a traditional IRA

are deductible– Age Limit: must be under the age of 70

½ at the end of the tax year– Compensation: must have taxable

compensation– Time Limit: Contributions must be made

by due date of filing the return

IRA Deduction: Joint Returns

• 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)

IRA Deduction: Allowable Deduction

• The allowable deduction may be adjusted based on – Filing status– Income–Whether or not the taxpayer/spouse is

covered by an employer retirement plan

IRA Deduction: Penalties

• Taxpayers may incur penalties for– Excess contributions– Early withdrawals– Too little withdrawals

IRA Deduction: Excess Contribution

• 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.– They should still be reported on Form

8606– If the taxpayer has made excess

contributions, refer them to a professional preparer!

IRA Deduction:Link: Line 32 IRA Wkt

Student Loan Interest

• Up 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

Student Loan Interest: Eligibility

• 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:– 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

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

Tuition and Fees Deduction

• Taxpayers can deduct up to $4,000 in qualified tuition and related expenses; NOT BOOKS

• Link: Line 34 1040 Wkt2

Student Loan Interest: Qualified Expenses

• Qualified 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 supplies

• Must be reduced by scholarships, employer-provided benefits, or tax-free education expenses

Jury Duty Pay Given to Employer

• Jury duty pay is taxable income.• 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.

Training Outline


Itemized Deductions

• Every 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 deductions– Reduces taxable income by a greater

amount

When to Itemize

• A taxpayer can receive a larger deduction by itemizing if he/she has:– At the Federal Level (higher standard deduction):

• Home mortgage payment • Large 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 level

• Reported 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

Qualifying Expenses

• Unreimbursed Medical Expenses• Charitable Contributions• Taxes• Home Mortgage Interest• Miscellaneous Deductions

Unreimbursed Medical Expenses

• A taxpayer can claim expenses for– Him/Herself– Spouse– Dependents

• He/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

Deductible Medical Expenses

• Co-pays to doctor, dentist, eye doctor• Prescription drugs• Cost of glasses or hearing aids• Cost of medical equipment• Health insurance premiums• Long-term care insurance premiums (cap on amount

based on age)• Cost of surgery, operations• Miles to and from doctor

NOTE: For a complete listing of deductible and nondeductible expenses see Pub 502 on the IRS website

Nondeductible Medical Expenses

• Life insurance policy premiums• Funeral, burial, cremation costs• Unnecessary cosmetic surgery• Nonprescription drugs

NOTE: For a complete listing of deductible and nondeductible expenses see

Pub 502 on the IRS website

Medical Expenses in Taxwise(Click on the A Detail in the Loaded Forms Menu)

Enter in the amounts for:

• Medical miles• Insurance• Medicare (carries

over from 1040 Wkt 1)

• Other medical expenses (prescriptions, glasses, etc.)

Charitable Contributions

• Qualifying Organizations:– Religious– Charitable– Educational– Scientific– Literary

• Non-qualifying Organizations:– Business– Civic/Political – Social – Foreign – Homeowners'

Associations


• Deductible Items:–Monetary donations– Fair market value (FMV) of clothing,

furniture– Uniforms required to be worn during

service– Unreimbursed transportation expenses

IMPORTANT: The taxpayer must keep receipts!


• 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.)

Charitable Contributions in TaxWise(Click on the A Detail in the Loaded Forms Menu)

Enter in the amounts for:• Charitable miles• Charitable cash

contributions• Uniforms

required for service

• FMV of other than cash contributions

Taxes

• Deductible– Taxes imposed on and paid by the

taxpayer in 2013

• Nondeductible – Taxes the taxpayer pays for someone

else– Taxes someone else pays for the

taxpayer– Taxes not paid during 2013

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)

• Nondeductible– Federal taxes– Hunting licenses–Water/sewer– Taxes on alcohol,

tobacco, or gas– Utilities

Taxes Paid in TaxWise (Click on the Schedule A in the Loaded Forms Menu)

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)

Taxes Paid in TaxWise (Click on the Schedule A in the Loaded Forms Menu)

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

Home Mortgage Interest

Home Mortgage Interest in TaxWise (Click on the Schedule A in the Loaded Forms Menu)

Enter the amounts for:• Home

mortgage interest and points (10)

• Mortgage insurance premiums (13)

Nondeductible Interest

• Personal interest – personal loans– car loans– credit cards– etc.

Miscellaneous Deductions

• Union dues• Uniforms (that cannot be worn in any

other circumstance)• Professional books, journals• Employment-related educational expenses• Expenses for looking for a new job• Tax preparation fee from last year• Safe deposit box• Gambling losses up to amount of winnings

Miscellaneous Deductions in TaxWise (Click on the Schedule A in the Loaded Forms Menu)

Enter the amounts and descriptions for:• Employment: job

travel, union dues, job education, literary journal for work, educator expenses (21)

• Tax prep fees (22)• Safe deposit box (23)• Miscellaneous: literal

journal not for work, gambling losses from W2-G (28)

Nondeductible Expenses

• Burial or funeral expenses• Wedding expenses• Fees and licenses• Fines, penalties, traffic tickets• Home repairs and insurance• Rent• Insurance premiums (except health and

mortgage)• Losses from sale of home

Training Outline


Education Credits

• Offset higher education expenses paid during the year – The student can be taxpayer, spouse, or

a dependent

• Partially Refundable• Two types of credits available:– American Opportunity Credit– Lifetime Learning Credit

Education Credits: Eligibility

• Filing status cannot be MFS• Qualified expenses paid by taxpayer• CAN claim on the basis of expenses

paid with student loans• Accredited institution• Taxpayer or student will often receive

Form 1098-T

Education Credits: Dependents

• 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

American Opportunity

(Hope) Credit

Lifetime Learning Credit

Up to $2,500 per eligible student Up to $2,000 credit per return

Available for the 1st 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

Education Credits: Form 1098-T

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)

• Qualified expenses include “Course materials” (any required books and supplies, whether available in regular bookstores)

Remember, room and board is never a qualified expense.

Qualified Expenses for Credit

• American 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)

Link: Line 49 8863 Pg 1

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?

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

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?

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

CreditQualified expenses = $6,000

Education Credits: No Double Benefits

• The 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)

Foreign Tax Credit

• 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!

• We may see some foreign tax reported on a 1099-DIV in Box 6

• Enter the amount of foreign tax paid on Line 47

Residential Energy Credit

• Nonrefundable credit • Available to a taxpayer – who made purchases for qualified

energy efficient improvements for his main home

– who owns his home


• Use Form 5695, Part I• Eligible expenses include – high-efficiency heat pumps, air

conditioners, and water heaters; – energy-efficient windows, doors,

insulation materials, and certain roofs


• 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)

Residential Energy CreditLink: Line 52 5695 Pg. 1

Fill in 1a, b, and c

Residential Energy Credit• 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


• 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


• 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

Training Outline


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.

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.

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.

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.

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

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

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.

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”

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

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

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).

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.

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. Seth Nelson NELSONS

• Password: user set OR if password gets reset, password will be same as username

Training Outline

1. Basic Level Updates2. Social Security and Lump Sum Election Method3. State Tax Refund4. Business Income5. Retirement Income6. Adjustments to Income7. Itemized Deductions8. Intermediate Credits9. Paper & Amended Returns10.Additional Topics on 2013 Advanced Test11. Additional Duties12. Quality Reviews13. Campus Fellow Manual14. Volunteer Paperwork

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

Sale of Stock

Sale of stock = Capital GainsGAIN = 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.

Holding Period

• Period starts the day after the property is acquired and continues through the day it is sold

Short-term: held for one year or less

Long-term: held for more than one year

Inherited property is ALWAYS long-term

Reporting Income from Sale of Stock

Line 13 (if short-term)

Sch D Pg 1

1e, 2e or 3e

8949 Pg 1

1a

Cap Gn Wkt

Line 13 (if long-term)

Sch D Pg 1

8e, 9e or 10e

8949 Pg 1

3a

Cap Gn Wkt

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).

Reporting Carryover Losses: Schedule D

Retirement Income: Taxable Amount Not Determined

• 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

Simplified Method

• 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)

Simplified Method

• 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.

Schedule K-1: Interest & 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 Schedule K-1

Reporting Income from Schedule K-1

Type of Income

Taxable Interest Income

Royalties

Where to Report

1040 Line 8a Sch B Line 1b Interest Stmt

(same as interest income from 1099-INT)

1040 Line 17 Sch E Pg 1 1*C K1 P/S Pg 1 Line 7/6 (use code 6 in Part 1)

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

Training Outline

1. Basic Level Updates2. Social Security and Lump Sum Election Method3. State Tax Refund4. Business Income5. Retirement Income6. Adjustments to Income7. Itemized Deductions8. Intermediate Credits9. Paper & Amended Returns10. Additional Topics on 2013 Advanced Test11.Additional Duties12. Quality Reviews13. Campus Fellow Manual14. Volunteer Paperwork

Additional Duties

• Quality Review• Volunteer organization• Crowd control• Appointment confirmation• Paperwork

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!

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”

Crowd Control

• Make sure each taxpayer signs in at the door

• Direct taxpayers to the Intake and Interview Forms

• Place taxpayers with available volunteers

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

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)


• 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

Note: These signed forms are then given back to the taxpayer for their records. We keep electronic copies

only.


• 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

Assisting the Site Coordinator

• Always ask the Site Coordinator if there is anything you can do to help her/him!

Training Outline

1. Basic Level Updates2. Social Security and Lump Sum Election Method3. State Tax Refund4. Business Income5. Retirement Income6. Adjustments to Income7. Itemized Deductions8. Intermediate Credits9. Paper & Amended Returns10. Additional Topics on 2013 Advanced Test11. Additional Duties12.Quality Reviews13. Campus Fellow Manual14. Volunteer Paperwork

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

Every Taxpayer

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.

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

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

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.

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

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.

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

Thorough Quality Review”

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.

Training Outline

1. Basic Level Updates2. Social Security and Lump Sum Election Method3. State Tax Refund4. Business Income5. Retirement Income6. Adjustments to Income7. Itemized Deductions8. Intermediate Credits9. Paper & Amended Returns10. Additional Topics on 2013 Advanced Test11. Additional Duties12. Quality Reviews13.Campus Fellow Manual14. Volunteer Paperwork

Campus Fellow Manual

• USE THIS AT THE TAX SITE!!


• 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

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.


• 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)


• 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 VolunteersRead through this before coming to the tax site!


• 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


• 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


• Tab 6: Save Your Refund– Completing Form 8888– Entering taxpayers into the prize

drawing


• 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


• Tab 8: Campus Fellow Summary Chart– Line by line instructions for entering

taxpayer information into TaxWise

Training Outline

1. Basic Level Updates2. Social Security and Lump Sum Election Method3. State Tax Refund4. Business Income5. Retirement Income6. Adjustments to Income7. Itemized Deductions8. Intermediate Credits9. Paper & Amended Returns10. Additional Topics on 2013 Advanced Test11. Additional Duties12. Quality Reviews13. Campus Fellow Manual14.Volunteer Paperwork

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.

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.

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.

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.

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.

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.

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.

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

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.

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!

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