Basic B volunteer training Tax year 2014. Basic B training overview Federal nonrefundable and refundable credits NEW: Premium Tax Credit and related

Basic B volunteer training Tax year 2014

Basic B training overview Federal nonrefundable and refundable credits NEW: Premium Tax Credit and related credit reconciliation Exemptions to the ACA insurance coverage requirement Other federal taxes and related tax issues Financial services at the tax site

Affordable Care Act (ACA) and the 2014 tax return

ACA the Basics The ACA created the Health Insurance Marketplace Minnesota has its own marketplace, MNsure MNsure marketplace is where Minnesotans find information about health insurance options, purchase health insurance and enroll in public health plans Taxpayers must report whether he/she (and family) had insurance coverage for the year on their tax return

The tax return A new tax credit, the Premium Tax Credit (PTC), is available to help eligible taxpayers pay for coverage Taxpayers could elect to claim the PTC throughout the year to help pay monthly insurance premiums Advanced Premium Tax Credit (APTC) The ACA also includes the individual shared responsibility provision, which requires individuals to have health insurance coverage for their family Form 8962, Premium Tax Credit (PTC), Form 8965, Health Coverage Exemptions, and Form 1095-A, Health Insurance Marketplace Statement

Line 46: excess advance premium tax credit Must have purchased health insurance through MNsure marketplace Advanced payments of the Premium Tax Credit to help taxpayer pay their 2014 monthly insurance premiums Advanced payments were based on the estimated income the taxpayer entered on their MNsure application Complete Form 8962 to reconcile their payment comparing what they estimated their income would be and what their actual income was for 2014 did they receive too much advanced payment Must have Form 1095-A to complete the return

Line 61: health care, individual responsibility Taxpayer and each family member must have A.Health coverage, B.Qualify for a health coverage exemption, or C.Make a shared responsibility payment (SRP) on their tax return

What you need to determine Did everyone listed on the return have insurance coverage? Yes, is the insurance coverage considered MEC and what months was the taxpayer (family) insurance in 2014 No, is the taxpayer (family member) required to file a return or eligible for an exemption from insurance coverage

Yes, the taxpayer (family) has health insurance Is the health insurance considered minimum essential coverage (MEC)? If the taxpayer (family) had MEC insurance coverage all year, check the full coverage box on line 61, click your heels and shout hooray! If the coverage was not all year, complete Worksheet 8 in TaxWise

no, the taxpayer (family) did not have health insurance Check the federal filing requirement threshold to determine whether the taxpayer is required to file a return Determine whether the taxpayer (family) may qualify for an exemption from the penalty

Minimum essential coverage Insurance through employer Insurance purchased through private company Insurance purchased through MNsure marketplace must have Form 1095-A to complete the return Student health plans Government-sponsored

Exemptions to the penalty Taxpayer (family) may be eligible for more than one exemption Find the exemption that is least complicated Undocumented taxpayers are exempt from the penalty (exemption code C) Some exemptions require approval from the federal marketplace Taxpayer can elect to take the penalty without claiming an exemption

Line 69: Net premium tax credit Credit based on MAGI and family size To be eligible must have purchased insurance through MNsure marketplace Must have Form 1095-A from MNsure If taxpayer elected to receive the APTC, then the portion used during the year will be deducted from the calculated PTC amount

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Topic 7: Nonrefundable Credits

Line 48: Foreign Tax Credit Enter the amount shown in box 6 of 1099-DIV or 1099-INT directly on line 48 If required to use Form 1116 then it is out-of-scope

Line 49: child and dependent care credit Max credit: $3,000 for 1 qualifying person, $6,000 for 2+qualifying persons Cannot be married filing separately Must have earned income Expenses must be paid by the taxpayer to work or look for work Form 2441

Qualifying person Child under age 13 and claimed as an exemption Person who is physically/mentally incapable of self-care and couldnt be claimed as exemption because income was $3,950+ Spouse who is physically/mentally incapable of self-care

Qualifying expenses Paid by the taxpayer (spouse) to work or look for work Child in nursery school or pre-school for children below level of KG qualify for the credit Overnight camp does not qualify Day camp may qualify if the camp specializes in a particular activity such as computers or soccer

Qualifying provider Payments cannot be made to the taxpayers (spouse) dependent If payments are made to a taxpayers (spouse) child, he/she cannot be a dependent and must be age 19 or older by the end of the year If the provider refuses to give EIN/TIN, the taxpayer can still claim the credit, see Pub 17, provider refusal

Line 50: Education credits American opportunity credit, max credit $2,500 per student Lifetime learning credit, max credit $2,000 per return Cannot use both credits for the same student Form 8863 These same rules apply to the tuition and fees deduction on line 34

Cannot claim the credit Claimed as a dependent on another persons tax return, such as the taxpayers parent Filing status is married filing separately Was a nonresident alien for any part of 2014 (nonresidents are out-of-scope)

Education documentation Can be shown on Form 1098-T or annual statement from the institution or receipts for books and equipment Reduce expenses by amounts received from scholarships and grants shown in box 5 of Form 1098-T Use 1098-T Worksheet with every education credit determination, this must be sent to reviewer completed. It is located on the Document Center

American Opportunity Credit 40% of the credit may be refundable Available for the first 4 years of post secondary education Pursuing a degree or recognized educational credential Enrolled at least half time No felony drug convictions

Not eligible for the refundable American Opportunity credit 1.Taxpayer is (a) under age 18; or (b) age 18 and their earned income was less than of their support; or (c) FT student over age 18 and under 24 and earned income was less than of their support; AND 2.At least one of his/her parents was alive at the end of the year; AND 3.Taxpayer is not filing a joint return

Lifetime Learning Credit Nonrefundable Available for an unlimited number of years Do not to be pursuing a degree Can take one or more courses Felony drug convictions are permitted

Expenses Qualifies: tuition, required enrollment fees and course-related materials such as books, supplies and equipment American opportunity credit: books, supplies and equipment do not have to be purchased from the school Lifetime learning credit: books, supplies and equipment must be purchased from the school Does not qualify: computer tech fees, student activity or athletic fees, insurance, room and board, transportation

Calculating expenses Use 1098-T worksheet on Document Center Scenario 1 Tuition $12,500 Course-related materials $650 Scholarships and Grants ($5,000) Eligible expenses for credit $8,150

Line 51: retirement savings credit Taxpayers qualify if they made contributions to an eligible plan Contributions to employer-sponsored plan are shown in box 12, Form W-2 Contributions to a traditional IRA or Roth IRA Must be age 18 or older and cannot be a FT student Form 8880

Line 52: Child Tax Credit Nonrefundable credit up to $1,000 per child Taxpayers not claiming the full amount may be eligible for the refundable Additional Child Tax Credit Must have a Qualifying Child, determined by info entered on TaxWise Main Information Sheet Form 8812

Line 53: Residential Energy Credits Congress has extended this provision for tax year 2014 only $500 lifetime limit for all years after 2005 Credit for homeowners who made energy saving improvements to their home Cost of installation may qualify depending on the type of improvement Expenses paid for with subsidized energy financing are not eligible for the credit

Topic 8: Other taxes

Line 57: self-employment tax Line 59: additional tax on IRAs, other qualified retirement plans early distributions subject to 10% penalty Line 60b: 1 st time homebuyer credit repayment Line 61: health care, individual responsibility

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Topic 9: Payments

Line 64: federal income tax withheld reported on W-2s and other income statements Line 65: 2014 estimated tax payments and amount applied from 2013 return to 2014 taxes

Topic 10: Refundable credits

Line 66a: Earned Income Credit Part A Rules for everyone Must have valid social security number Cannot file married filing separately U.S. citizen or resident alien all year Cannot file Form 2555 or 2555-EZ No investment income $3,350+ Cannot be a qualifying person of another person

Line 66a: earned income credit Part B Rules with a qualifying child Meet rules for everyone in Part A Have a qualifying child Cannot be the qualifying child of another person Qualifying child cannot be used by more than one person

Line 66a: Earned Income Credit Part C Rules with no qualifying child Meet rules for everyone in Part A At least age 25 but under age 65 as of December 31 Cannot be the dependent of another person Lived in the U.S. more than the year Cannot be the qualifying child of another person

Qualifying child tests AgeRelationshipResidence

Earnings not eligible for EIC Income received for work while an inmate Income received from work experience and community service programs for welfare recipients, generally reported in box 3 of Form 1099-MISC Disability insurance payments reported in box 12 of Form W-2 with code J Any nontaxable income received from someone for services performed Unemployment compensation

EIC and ITIN Taxpayer with an SSN is claiming a child with an ITIN Taxpayer qualifies for EIC, but no EIC for child Taxpayer with an ITIN is claiming a child with an SSN No EIC for taxpayer or child Taxpayer with an SSN and spouse with an ITIN is claiming a child with an SSN No EIC for taxpayers or child Taxpayer with an SSN is claiming a child with an SSN and a child with an ITIN The child with the SSN qualifies the taxpayer for EIC, but the child with an ITIN does not

LINE 67: ADDITIONAL CHILD TAX CREDIT A refundable credit is the unused portion of the child tax credit Taxpayer with more than $3,000 of taxable earned income may be eligible regardless of the number of qualifying children Taxpayer with 3+ children may be eligible regardless of income FORM 8812

Line 68: American Opportunity Credit Line 69: Net Premium Tax Credit

Topic 11: Refund or tax owed

Line 76: refund amount There are 4 options 1.Apply it to 2014 taxes 2.Direct deposit 3.Receive a paper check 4.Purchase U.S. savings bonds Taxpayers without direct deposit option should be offered prepaid debit card (CFR Card)

WERE MORE THAN TAXES. WERE ABOUT FINANCIAL CAPABILITY! PLEASE REFER TO THE SAVE SOME, SPEND SOME AND FIX SOME HANDOUT IN THE TRAINING MATERIAL.

Tri-CAP services offers Products you work with most closely: Prepaid debit cards Savings bonds Credit Reports Chex Systems Financial Fitness

Your Role You spend the most amount of time with each customer You are the customers most trusted advisor THUS, YOU. Open a CFR card for customers without direct deposit Reveal the expected refund amount Make the savings pitch with savings account or savings bonds Have customers fill out Credit Report and Chex Systems Sign up for a Financial Fitness Class at Tri-CAP Fill out savings pigs and enter to win CASH!!

Prepaid Card Our goal is 100% direct deposit Faster than a paper check (2-3 weeks) Safer and more secureno missing checks Avoids high check cashing fees

Notice of Account Information To open a CFR Card refer to the Vic Net home page under CFR Debit Card select the site and follow the instructions. After a CFR Card has been accepted print the customer copy form on the VIC Net homepage under CFR Debit Card. Place customer account number and information in the fields, print and send to the review process. Customer will get this document back for their records. No Credit check is required to open this almost FREE account. See fee schedule for applicable fees in the document center under CFR Card.

Why a savings campaign? Tax time can be the most savable moment Saving is a priority for the majority of customers yet few do save at tax time Want something that customers and volunteers can rally behind

1.Customers save at least $50 of their federal refund Enter into Tri-Cap drawing and 2.Tri-CAP staff enters savers into promotion to have 100 chances to win $100 weekly prizes during tax season 3.Optional: customer can submit a photo on their own to be eligible for a contest to win $25,000 grand prize.

Have fun! Help customers reach their savings goals Encourage savings for a rainy day I believe in the power of savings. Also, I found the goals and measuring the goals as a good motivator. Volunteer

Series I U.S. Savings Bonds Bonds make great gifts - Can purchase up to two Series I U.S. savings bonds each tax season Bonds are easy Can split federal tax refund by buying a bond. The rest can be directly deposited or mailed as a check. Use form 8888 to split Federal refund between savings, checking and savings bonds. Refer to the 8888 training guide on the document Center

Series I U.S. Savings Bonds Bonds are flexible - Purchase bonds starting at $50 in $25 increments up to $5,000 (ex. $50, $75, $100, etc.). Bonds are safe - An investment backed by the U.S. Treasury Department with very low risk of default. They never lose value. Purchase savings bonds regardless of credit or banking history.

Revealing the Refund Were almost done. Your return will go through quality review to check my work and the amount may change. Right now, it looks like youll be getting $X in tax refunds today! How much would you like to save? Reveal the expected refund to prompt savings decision Write refunds (or amounts due) on preparer checklist Make the savings pitch to all customers receiving a refund

Create your savings pitch Ask everyone receiving a refund if they would like to save Frame the savings pitch as the default or norm Keep it simple. For example: Lets get you entered to win 100 weekly prizes of $100. How much of your refund would you like to save? If your refund allowed, what would you save some for? How much should we put in a savings account?

SaveYourRefund Recap 57% Indicated they wanted to save some of their refund SaveYourRefund 100 weekly prizes of $100 during tax season $25,000 grand prize photo contest Tri-CAP Contest Savings pig entry 46% of customers have no emergency savings 43% have no savings account CHALLENGE OPPORTUNITY TOOLSINCENTIVE Form 8888 allows tax filers to split and save their refund into: Series I U.S. savings bond New savings account Existing savings account

Financial coaching program Financial Fitness Encourage customer to select yes on the client survey for the Financial Fitness Class, Chex System and Credit Report. Enter this information on the Preparer Use Form in Taxwise

Key takeaways Our customers are experts in their own lives and make the best decision for their situation The majority of customers want to save Our role is to provide info about direct deposit and savings opportunities to all customers Everybody at our tax sites plays a role in making financial capability possible for our customers

Line 78: Amount Owed Option 1: Pay in full within 60 to 120 days with no fee, interest and penalties charged on payments after April 15. Option 2: Set up an installment agreement with the IRS. Option 3: Taxpayer should file their return by the deadline and pay as much as they can. Do not complete Form 2210, IRS will calculate any penalty.

Topic 12: Related tax issues

Power of Attorney (POA) Power of Attorney is the taxpayers written authorization for a representative to act on their behalf in tax matters The representative must have Form 2848 Follow the steps outlined in the Volunteer Tax Manual ask your tax site manager for assistance

Injured spouse allocation MFJ taxpayers and one spouse owes past-due federal or state debt The injured spouse is the spouse that does not owe the past-due debt Complete Form 8379 to allow the injured spouse to receive their portion of the federal refund Minnesota does not have an injured spouse program

Amend prior year tax returns May need to amend return to correct errors or omissions on a return they have already filed The IRS may file on the taxpayers behalf if the return is not filed. The taxpayer can amend the IRS-filed return Amended returns cannot be e-filed Refer customers needing an amended return to the Tri-CAP main office.

Resident alien or nonresident alien? What do you do if an individual may be attending school in the U. S. on a student visa and/or an individual has checked the No box on Form 13614-C indicating they are not a U. S. Citizen? Use Determining Residency Status decision tree to determine whether individual is a resident alien or nonresident alien If you determine the individual is a resident alien, complete Form 1040. If the individual had a green card, they are eligible for tax credits If you determine the individual is a nonresident alien, refer them to their colleges international student program as this is out-of-scope for Tri-CAP

Homework Basic certification, use paper Form 6744 booklet to complete questions 1 13 Advanced certification, use paper Form 6744 booklet to complete questions 1 7 Consider viewing the health savings account training online at the on the training center and certifying at the HSA level

Documents

Basic B volunteer training Tax year 2014. Basic B training overview Federal nonrefundable and refundable credits NEW: Premium Tax Credit and related