Tax Payments

Form 1040 Lines 61-71Pub 4012 Tabs H, 6Pub 17 Chapter 36

LEVEL 2 TOPIC

4491-29 Payments v1.0 VO.ppt

11/30/2010 1NJ Training TY2010 v1.0

Objectives

Amounts that can be applied against tax liability: Federal income tax withheld from W-2s, Federal income tax withheld from 1099s Estimated tax payments Amounts applied from prior year’s return Various refundable credits Payments made with a request for extension

11/30/2010 2NJ Training TY2010 v1.0

Estimated Payments

Means of payment for: Self-employed Those with Investment Income Projected tax due with return >$1,000

Payments made periodically by taxpayer Need to know “When” and “How Much” for

each payment

11/30/2010 3NJ Training TY2010 v1.0

Estimated Tax Payments – TW Link from 1040 Line 62 to “F/S Tax Pd” and insert

estimated payments for both Federal and State Report in box “From Last year” Overpayment

from prior year applied to current year Estimated taxes

State: Insert estimated payments and also State taxes paid this year applicable to prior year(s) State estimated taxes paid in January current year for

prior year Tax Wise includes latter two amounts in State Taxes

Paid on Federal Schedule A, Itemized Deductions

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Federal Estimated Tax Payments

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Overpayment From Prior Year

Can elect to have refund applied to next year’s return

Ask TP if prior year refund was applied to current year taxes

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Making Work Pay Retiree Credits (Schedule M) Refundable Credit Making Work Pay

Must have earned income 6.2% of earned income – Max of $400 ($800 MFJ) Phase-outs based on income T/P claimed as dependent not eligible

Economic Recovery Payment S/S, SSI, Railroad Retirement and Vets Disability $250 ($500 MFJ) Vast majority already received this in TY2009, but there may

people who got it late (in TY2010) Look at TY2009 return Sch M – if shown, then done Otherwise - Can lookup on IRS website

Making Work Pay Credit, if any, reduced by Economic Recovery Payment received (See Sch M)

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Refundable Education Credit (Form 8863) Entitled to this credit if T/P did not get full

benefit of non-refundable American Opportunity (Hope) credit

Refundable credit is 40% of unused portion of non-refundable credit – Max of $1,000

Taxwise will automatically calculate

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First-Time Homebuyer Credit Refundable credit up to $8,000 Settlement must be between 04/09/2009 and

09/30/2010 (inclusive) Note: Must have binding contract by 04/30/2010

“First Time” means did not own principal residence in 36 months prior to purchase

Credit must be repaid if home ceases to be TP’s principal residence within 36 months of purchase

Credit for purchase made in 2010 can be claimed on 2010 or 2009 tax return

Credit reduced or eliminated for high income TPs Form 5405 to claim credit (documents must be attached

so NO E-FILE allowed)

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Credit for Long Time Homeowner Buying a Replacement Home Refundable credit up to $6,500 “Long Time” means owned principal

residence for any 5-year consecutive period during 8 years ending on date of replacement home purchase

See previous slide for other conditions (dates, repayment, no e-file, etc.)

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Payments Made With Extension To File Taxpayer requests extension to file

Must pay estimated Balance due with extension

Amount paid with Extension reported on final return, Form 1040, line 68

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REFUNDABLE CREDITS QUIZ #1 Which of the following are automatically calculated

in TaxWise: Federal Income Tax Withholding Estimated taxes Making Work Pay Credit Earned Income Credit Additional Child Tax Credit Refundable American Opportunity Credit First Time Home Buyer Credit

Answer: It depends on your definition of “calculated” – discuss as appropriate…

11/30/2010 12NJ Training TY2010 v1.0