welcome december tax training for new volunteers · pdf file8 training & reference...
TRANSCRIPT
2
Handouts
Presentation charts
Instructions for logging into 2015 TaxSlayer Practice Lab (training) are included
IRS Pubs or excerpts for studying
Mass Manual (includes 2 practice returns)
11 practice returns and answer key
Same set was provided to returning volunteers
We will focus on subset of these returns here
TaxSlayer related tools
3
Purpose of This Training
Briefly discuss AARP Tax-Aide Program
Gain experience using TaxSlayer software
Complete typical Federal and MA returns from the set
of 13 returns given to returning volunteers
Discuss and apply Federal and MA basic tax laws
Understand how to use your resources; you do
not have to memorize or learn everything this
year
4
AARP TAX-AIDE Program
Nationwide non-profit program administered by AARP Foundation
AARP Foundation is an IRS approved charity
Free confidential service
Helps low-to-moderate income taxpayers with special attention to age 60+
Prepare returns and answer tax questions
Funded by AARP Foundation and IRS
Has its own management structure
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AARP TAX-AIDE Program
Volunteers protected by Volunteer Protection Act of 1997; we are not liable provided
We stay within scope of program, receive training and get certified
Any error we make is not willfully committed
Volunteers are not identified on tax return copies; only IRS required location information
Travel insurance available (secondary)
Mileage can be reimbursed at end of season
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Where/How Do We Work?
Where
Senior Centers
Weekdays, daylight hours
Libraries
Evenings, weekends available*, also
Other (e.g., community centers)
Seeing taxpayers
By appointment mostly
Walk-in
* Dependent on volunteer availability
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Training & Reference Documents
IRS Pub 4491 - Student Training Guide (STG) Basic training source for Federal tax laws and rules
Follows 1040, line by line
Has many examples that illustrate laws
Refers extensively to other documents
Only available electronically
IRS Pub 4012 - Volunteer Resource Guide (VRG) Great reference for test and for preparing returns
Covers Federal tax law and how to use TaxSlayer software
IRS Pub 4961 Standards of Conduct – Ethics
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Training & Reference Documents
IRS Pub 5101 Intake/Interview and Quality Review
IRS Form 6744 - Volunteer Test/Retest Test problems, test/retest answer sheet, Volunteer
Agreement
Everyone (including client facilitators) takes Standards of Conduct test and Intake/Interview test
Preparers also must pass Advanced segment test
IRS Publication 17 - Your Federal Income Tax Used for more complex issues
2016 version not yet available (Jan 2017)
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Reference Documents & Websites
MA Form 1 Instructions
Covers MA tax rules and laws, line by line
MA Manual (MM) – Fall 2016
Covers MA unique tax laws and how to use TaxSlayer to complete MA returns
Websites
www.irs.gov
www.mass.gov/dor/
https://mataxaide.org
https://aarptaxaidema20.wordpress.com
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Suggested Study Approach
Look at test questions in Pub 6744
Volunteer Standards of Conduct, pages 11-14
Intake/Interview and Quality Review, pages 21-22
Advanced Test, pages 67-111
Identify what tax topics you are not familiar with
Use Pubs 4012 & 4491 as required to learn about tax law topics and try to answer test questions in Advanced test
Prepare tax returns using 2016 TaxSlayer software and answer test questions for returns (after Jan training)
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Suggested Study Approach
Read Pubs 4961 and 5101 as needed
Answer the questions about Standards of Conduct and how to use the Intake/Interview sheets
Tests will be discussed in January training
Submit paper test results (on-line test site not recommended for new volunteers)
More will be covered in January training
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Volunteer Standards of Conduct Excerpt
Do not accept payment or solicit business/donations Tips are considered payment
Do not knowingly prepare false returns
Ensure confidentiality, privacy and security
Keep taxpayer information strictly confidential – do not disclose to unauthorized individuals
Provide only in-scope tax assistance
Treat all taxpayers equally and professionally
Do not engage in unethical behaviour
Do not engage in conduct that is detrimental to program
Follow site leader’s instructions about site requirements
13
Affordable Care Act (ACA) Basics
Taxpayer(s) and dependents must
Have Minimum Essential Coverage (MEC) health insurance each month, or
Have a coverage exemption, or
Make a Shared Responsibility Payment (SRP)
Taxpayers and dependents in class training problems have full time coverage
Government or Private insurance
Other ACA situations will be discussed in January training (practice problems in handout)
“Marketplace” purchased insurance – 1095-A Form
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Before Doing Return
Sort taxpayer paperwork
Review paperwork and Intake sheet
Ensure return is in-scope
Understand complexity of return
Look at prior year Fed and MA returns
Can reveal differences with current year
Need to understand/reconcile differences
Prior year may provide needed information
SSN’s, carryover losses, etc.
Engage taxpayer, as needed
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Courtney Smathers Return
17 yrs old, full time high school student
Lives with her parents who support her
Has W-2 from summer/after school work
Does she have to file Federal & MA returns?
4012, page A-1 & A-2; Mass Manual, page 1
Should she file Federal and MA returns?
4012, page A-3, chart D, item #1
What’s her filing status? 4012, page B-1
Can she claim herself? 4012, page C-2
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Connect to Chelmsford Wireless Network
Use Windows OS* and Internet Explorer 8 or higher or Chrome browsers, Apple Safari
TaxSlayer on-line software also requires Adobe reader
Connect to Chelmsford wireless network
Password: ___________________
*No Windows XP
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Key Items About TaxSlayer (1)
Data is entered on “screens”; software program inserts entered data onto tax return forms
Screens are organized like Fed 1040 or MA Form 1 (next)
TaxSlayer Navigation Tool lays out all the screens and those screens that are out-of-scope
Data on a screen is saved by hitting “continue” at the bottom of screen
If a screen is not used (opened by mistake), click “cancel” at screen bottom
Move from one item to another using the tab key or the mouse – hitting “enter” does not work
TaxSlayer will time out after about 15 minutes of no activity
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Elements of Fed 1040 & MA Form 1 Tax Returns
Taxpayer information
Filing status
Dependents
Income
Adjustments to income (reduces taxes)
Deductions & exemptions (reduces taxes)
Credits (reduces taxes)
Taxes owed, refund due, no taxes owed
TaxSlayer Organized Same Way
“Basic Information” in TaxSlayer
“Deductions” in TaxSlayer
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Connect to TaxSlayer Practice Lab
Make sure you are connected to wireless network
Connect to 2015 Practice Lab
Click on desktop icon, or
Open Internet Explorer or Chrome and insert URL:
https://vita.taxslayerpro.com/IRSTraining
Put URL into favorites list or
Create desktop icon (only if you use Internet Explorer or Chrome as your browser)
Insert password (see next slide)
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Log in – First Time (Continued)
User Name Use info in handout – unique to each student; then
Click
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TaxSlayer On-line - Initial System Navigation
Click “create prior year and enter Social Security Number” buttons and enter Courtney Smather’s SSN twice: 256-00-7210
SSN for practice must have “00” as middle two digits; use 7210 as last four digits
Click “Start Return”
This routine is used to start all returns, even for joint returns that have two SSN’s
Use primary taxpayer’s SSN to start return
Spouse’s SSN will be entered later
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Entering Wages in TaxSlayer
Check SS# and tax year on paper W-2’s
Fill out TaxSlayer W-2 form
See 4012, page D-9, 10
Identify whose W-2 it is; i.e., taxpayer or spouse
Verify address; modify if necessary
Enter data from every box (ex control number) from paper W-2
Click “continue” at bottom to save and enter data
Data will not save until you hit “continue” on each screen
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Smathers Summary
To start a return, enter SSN twice
Fill out Basic Information (filing status, taxpayer information, any dependents)
In Federal Section, follow TaxSlayer menus to enter income, deductions, etc.
Fill out ACA Health Care information
Go to State Section to do MA return
Create PDF of both returns and check
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Samuel & Abigail Johnson
Married for 50 years, 75 & 74 years old
Income:
Social Security – 4012, page D-27
Bank interest, dividends - 4012, pages D-12 to D-15
Pensions, IRA - 4012, page D-17 to D-26
Live with daughter; pays no rent
Have Medicare insurance all year
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More TaxSlayer Key Items
Income data entered in Federal section carried to state as taxable
Exception are traditional IRA distributions
Must enter taxable amount manually for MA
Also, must keep track of following items for manual entry in MA return
Different types of interest as shown on handout, “Interest Entries in MA section of TaxSlayer”
Tax-exempt pensions
Mandatory pension contributions (SS substitute)
“MA TaxSlayer Worksheet” handout provided to keep manual track of these items
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Box 7 Distribution Codes (Pub 4012, page D23-24)
Common codes
1 - early distribution, no known exceptions (usually before 59 ½) – penalties possible
2 – early distribution, exception applies (under 59 ½) - may avoid penalty
3 – disability
4 – death
7 – normal
G – direct rollover - non-taxable
Enter code from paper copy; may require additional TaxSlayer entry (not for Johnson)
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Entering 1099-R’s (Pub 4012, page D-18)
Verify SSN & tax year on paper copy
Verify address in TaxSlayer vs paper; change if needed
Enter data from 1099-R paper copy to TaxSlayer 1099-R (use box #’s)
Double check box 2a (Federal taxable) and box 14 (MA distribution)
If an IRA 1099-R, write down taxable amount (box 2a) on MA Worksheet
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More TaxSlayer Key Items
Use taxpayer documents to fill out MA TaxSlayer Worksheet
Speeds data entry in MA section of return
Must hit “continue” at bottom of each screen in MA section until original “State Return” screen is reached and refund is updated
Appears data entered in MA section does not save until we do this
Remember, we must create PDF of return to see MA return
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Start Johnson Return
Click “create prior year” and enter “Social Security Number” buttons and enter Sam Johnson’s SSN twice: 357-00-7210
Fill out Basic Information
Filing Status: MFJ
Personal Information, including Abigail’s
No dependents
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Steps to Complete Johnson MA Return
After entering all Johnson income, enter health insurance info, then click on State Section on left menu
Answer questions about change of name/address
Answer Health Care questions (next slides)
Full year coverage
Medicare for both (Medicare is always “full-time”
Do not answer other questions
Go to “Additions to Income” screen and enter
both MA bank interest and IRA total
64
Johnson Summary
Introduced SS, interest income, different retirement income types on 1099-R & how to enter in TaxSlayer
Introduced MA Worksheet to keep track of items that are manually put into MA return
Showed how to enter Medicare coverage for MA insurance
65
Sheryl Beringer Return
51 Yrs, divorced years ago
Two children, mother and friend live with her
Filing status and who are dependents must be determined
Worked most of the year (W-2)
Received unemployment (1099-G)
Eligible for some Federal adjustments & credits
Rents – apply MA rental deduction ($1000/mo)
Has full year private insurance
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Exemptions and Filing Status
The Filing Status and Exemptions sections of the tax return may only take a few minutes to complete but they encompass some of the most complex tax law issues.
Determining the correct filing status and whether a taxpayer has a “Qualifying Child” or a “Qualifying Relative” can impact many other areas of the return.
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Personal & Dependency Exemptions
Pub 4012, Tab C
Personal exemption
Dependent exemption Qualifying child dependents
Qualifying relative dependents
Each Exemption reduced taxable income by $4050 for 2016
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Personal Exemptions
One for taxpayer & one for spouse when filing jointly
Taxpayer is ineligible if another can claim him/her as a dependent
Widow(er), if not remarried by 12/31, can claim spouse in year of death
Use 4012, page C-2 to determine if personal exemption is allowed
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Requirements To Claim Dependent Exemptions
Overview of rule for claiming exemption for dependent – 4012 page C-3
Dependency evaluation for qualifying child - page C-5, Table 1
Tie-breaker rules for qualifying child - page C-4
Dependency evaluation for qualifying relative – page C-5, Table 1, then page C-6 & C-7, Table 2
Special case of divorced, separated, or never married parents - page C-8, Table 3
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Filing Status Comparison (Lowest to Highest Tax)
Married Filing Jointly*
Qualifying widow(er) with dependent child*
Head of Household
Single
Married Filing Separately
* same lowest tax
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Analysis of Living Conditions is Critical for Filing Status
Marital status as of 12/31
Who was living in the home during the year?
Relationship/dependency of occupants
Who paid more than half the cost of keeping up the home?
If widow(er) Date of death of spouse
Any dependents?
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How to Determine Filing Status
Use Pub 4012, pages B-1 to B-3
Read Pub 4491, Part 2 on filing status. Examples help reinforce rules
Suggestion: Do exercises in 4491 using 4012 charts for practice
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Federal Credits Available to Beringer
Non-refundable (reduces taxes)
Retirement Savings Credit
Child Tax Credit
Refundable (provides refund even w/o owed taxes)
Additional Child Tax Credit
Earned Income Credit
TaxSlayer calculates credits, but
Some may require extra attention by us
Form 8880 for Retirement Savings Credit
Earned Income Credit
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Prepare Beringer Return
Start a new return and enter Beringer SSN 031-00-7210; click “start return”
Complete Basic Information using the conclusions on filing status and who are her dependents (children & mother)
Click Federal Section and “Enter Myself”
Under Income, enter W-2 and 1099-G for unemployment
Enter Health Insurance information – full year coverage for Sheryl and all dependents
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Beringer Summary
Discussed how to determine best filing status and criteria for being a dependent
Showed how to use form search to bring up screens to fill out in TaxSlayer
Discussed different Federal income adjustments and credits available to taxpayers
Used rental deduction on MA return
Showed how to enter private insurance information on MA return
81
Tim & Nicole Sterling Return
Married couple, 73 & 63 yrs
Tim’s sister, 65 yrs lives with them
MA bank and savings bond interest (1099-INT) and dividends (1099-DIV)
Social security income for all three
Pensions (1099-R) for Tim and Nicole
Has capital gains
Own home: test for Circuit Breaker Credit
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Capital Gains
Sale of stocks, bonds, mutual funds will be reported on 1099-B to taxpayer
We should file returns to establish “cost basis” with IRS and MA DOR; otherwise, IRS will assume all proceeds are ordinary income,
whereas many times assets long term or sold at loss
“Cost basis” is what taxpayer paid for asset (for most cases) Starting with stock purchases in 2011, 1099B must
provide cost basis; mutual funds in 2012
Establishing cost basis is sometimes difficult for purchases before 2011
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Reporting Capital Gain or Loss
Must determine elements of sale
What is it? – on 1099-B
When did you buy it? – long or short term
When did you sell it? On 1099-B
What is sales price? On 1099-B
What is the cost basis? – 1099-B or ask taxpayer
Was it inherited? (always long-term gain)
Once details of sale are entered in TaxSlayer, it runs all calculations and transfers results to Form 8949 and then to Sch D, 1040 & MA forms
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MA Senior Circuit Breaker Credit (MA Manual, page 15)
Credit for taxpayers 65 or over who pay real estate taxes or rent as MA residents
Income level and house value are eligibility criteria (for single, HOH or MFJ)
Many of our clients over 65 are eligible
2015 maximum credit was $1070 (also for 2016)
Fill out screen for Circuit Breaker Credit in TaxSlayer; TaxSlayer determines credit amount (if any)
Taxpayers living in subsidized or public housing are not eligible (no RE taxes are paid)
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Initial Sterling Return Steps
Click “start new return”; enter Tim’s SSN 251-00-7210
Enter Basic Information
Filing status?
Remember Nicole is legally blind, disabled
Does sister qualify as a dependent?
Totally and permanently disabled
Enter all income items
Enter full time medical insurance (all 3)
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Entering Sterling Stock Sale
Go to Federal Section, then Income, then click Capital Gain and Losses (Schedule D)
Click Capital Gains and Loss Items and fill out screen with data provided by taxpayer (see next slide)
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Sterling Circuit Breaker Try
On MA Return main menu, click Credits and choose Senior Circuit Breaker Credit, Schedule CB
Fill out screen with data provided (see next screen); hit “continue” at bottom and then “continue” twice – see if MA refund changes (it won’t)
Go to summary/print and create PDF of returns; look at Schedule CB
100
Sterling Summary
Taxpayer and dependent had disabilities that have to be entered
Simplified Method used to determine taxability of pension
Accommodated stock sale Federal and MA
MA bank and US Bond interest entered on MA form
Example of how taxpayers over 65 may qualify for MA Senior CB Credit
101
Rachel Brown Return
74 yrs, widowed in 2008
Income sources: wages, social security, MA bank interest, dividends, MA refund, MA pension (spouse), MA lottery
Possible itemized deductions versus taking standard deduction
Brings in all information for Sch A
Possible MA Senior Circuit Breaker Credit as homeowner
103
New Forms of Income
2014 MA state refund on 1099-G
Brown did not itemize last year, so refund is not taxable – nothing needs to be entered
If she itemized last year and used MA taxes, we have to fill out State tax refund worksheet (on Income list)
MA Lottery – enter W-2G in “Enter Form Number” box; call up screen, fill in
TaxSlayer recognizes EIN of MA lottery and will put income on 1040, line 21 and MA Form 1, line 8
Her gambling losses of $51 is entered when itemizing her deductions (losses cannot be larger than winnings)
105
Itemizing Deductions
See 4012, Tab F for discussion of standard vs itemized deductions
Shows TaxSlayer screen shots
States what items are not eligible for itemizing, including medical, taxes, interest
More details available in Pub 17
Following screens show what is applicable to Brown
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Initial Brown Return Steps
Click “start new return”; enter Brown’s SSN 801-00-7210 (from SS statement)
Enter Basic Information
What filing status?
Enter income sources using profile, W-2, 1099-R, 1099-INT and DIV, SSA-1099 (same as other returns)
113
Brown Circuit Breaker Try
On MA Return main menu, click Credits and choose Senior Circuit Breaker Credit, Schedule CB
Fill out screen with data provided (see next screen); hit “continue” at bottom and then “continue” twice – see if MA refund changes (it will this time)
Go to summary/print and create PDF of returns; look at Schedule CB