Lecture Day 2 What you should have! Class Syllabus Publication 4491 Book Publication 4491W
Sample W-2, 1099 Quality Review Sheet Basic , Intermediate, Advanced Practice Exercises EIC Chart Tax Tables Blank Forms
Test/Retest From 6744 Resource Guide Pub 4012 Tax Law White tabs Tax Wise Yellow tabs Decision Trees
Residency Status page 9 Recovery Rebates page 12/13 Who Must File A-1
Children/Dependent file A-1 Which Forms A-3 Filing Status B-2 Exemptions/Dependents C-2 Income D Deductions F Credits G EIC - H Publication 17 Index 274
1040, 1040A, 1040EZ Booklets Intake Form - Green Credit or Community Must be registered for Acctg 155 to register for Acctg 156 for Spring 09. Acctg 155 2 units ( 5 weeks) Acctg 156 1 unit (8 weeks) If credit is not necessary can still volunteer as a community member.
Sign up for a volunteer site Glendale AM - Saturdays Glendale PM - Saturdays South Pasadena Senior Citizen Center (Thursday) VITA Courses Matrix Acctg 155 First Time VITA Students to learn Tax Law Basics Returning Students for Update on Tax Law
Class is repeatable 2 units Must Take before Acctg 156 Must pass IRS test every year Offered in Winter Session only Acctg 156 VITA LAB Students who have passed VITA Lecture or Update Tax Return Preparation--- must pass IRS Test every year
Repeatable 4 times 1 unit Acctg 157 VITA Leadership Students that have taken Acctg 155 and 156 in the prior year. Group leaders for Acctg 156 students Review tax preparation of group members Must pass IRS Test every year Repeatable 4 times 1 unit (VITA has become so big that the instructor
needs help from former students) It is very important that you assist only with returns, forms, and supporting schedules for which you have been trained and certified. If you go beyond your training, you risk making errors and causing difficulties for those you wish to help. Refer taxpayers with very complex returns, or with portions of returns that are beyond the scope of your training, to seek assistance from a
paid professional tax payer. Volunteer Agreement Standards of Conduct Must have one from everyone to keep in the file when IRS comes to check on us Volunteers are expected to complete the test on their own. Taking the test in groups
or with outside assistance could prove to be a disservice to the taxpayer. Testing and Certification Test is to be taken online at (pg iv of test/retest) www.irs.gov/app/vita/index.jsp Must earn 80% on both Basic and Intermediate If under 80% on Test you can retest. Must print out certificate so you can display it to the
client. I need a copy. To Take Certification Test on line Complete both the test and retest manually. Get on the website and start answering the questions. Make sure you write the number of the test question on the test booklet. It will help you. You have two times to pass each level for each email address.
If you dont pass it on the second time, use a different email address. Once you pass, make a copy for yourself and one for my files. This certification is good to put on your resume. Basic Process Client signs in and receive Intake Sheet
Intake Sheet is given to Volunteer who is to confirm the information and ask probling questions verify the phone #. Tell them to return next week to sign and efile. If there are only a few clients you can work on the return at that time. Or it can be worked on later. Have group leader complete Quality Review portion of the intake form Will be using Taxwise to input data. Print out return: 1) client 1) us w/ 8879 Can do prior years but cant efile them.
Interview Process Important: Ask if they are uncertain about any responses on Intake Sheet Avoid making assumptions Confirm taxpayers identity If more than you can handle Ask for someone else to handle it Courteously restate the scope of the program
Keep Records Summary Sheet to keep track of who did each clients return. Must keep track of the computer you used to enter the clients data Put your name on the intake form as the preparer You will be correcting the returns you did so you can learn. Make sure you get the phone number so you can call for any correction or
additional data. Use Resource Guide Table 2 : Dependency pg C-5 Use guide to answer next question. CPA Exam Question Jim and Kay Ross contributed to the support of their two children, Dale and Kim, and Jims widowed parent, Grant. Dale, a 19 year old full
time college student, earned $4,500 as a babysitter. Kim, a 23 year old bank teller, earned $12,000. Grant received $5,000 in dividend income and $4,000 in nontaxable social security benefits. Grant, Dale, and Kim are U.S. citizens and were over one-half supported by Jim and Kay. How many exemptions can Jim and Kay claim on their joint income tax return?
Jim and Kay = 2 Dale, 19, student = 1 Kim, 23, non student, over $3,500= 0 Grant, $5000 income = 0 Answer is 3
Intake Sheet Get familiar with the form Complete your own
Get group leader to do the quality review Any questions We keep the return and file the intake forms alphabetically Other INCOME Canceled Debt pg 82 Line 21 1040 pg 5
Pub 17 Chapter 10 Adjustments to Income Adjusted Gross Income (AGI) Taxable Income - Adjustments
= Adjusted Gross Income Adjustments to Income Educator expenses- line 23 1040 pg 26 K-12 educator $250 per person maximum EMPLOYEE Business Expenses
Line 24 Form 2106 EZ page 193 Comprehensive Problems & Exercises Employee not self employed Number of miles for business but still need commuting and other Mileage rate 48.5 cents Misc Lines Early withdrawal of Savings line 30
Alimony It is included at compensation line 31 Lines 25-29: Health Savings, Moving expenses, Self employment tax, - not within VITA scope Individual Retirement Terminology Contribution What you pay into a IRA Distribution When you take money out of an IRA
Individual Retirement Accounts (IRA) Contributions may result in an adjustment to lower your AGImust be a traditional IRA Nontraditional are not adjustment to income.
Limits: $4,000 if under 50 $5,000 if over 50 Spouse has same limits example 6 pg 10-5 Pg 115 pub 17 Traditional vs Non Traditional Traditional IRA any IRA that is NOT a Roth or Simple IRA Roth IRA a plan in which you pay tax on the contribution so you dont have to when you
get a distribution. Interest earned not taxable SIMPLE tax favored retirement plan that certain small employers can set up for the benefit of their employees (Salary Reductions) Compensation pg 10-4 Includes: Wages, salaries, commission, tips, bonuses, professional fees, self employment earnings, alimony, Does not include: interest, rents, dividends,
pension, annuity income, deferred compensation Exercise 1 pg 10-6 Modified Adjusted Gross Income (MAGI) AGI plus: IRA deduction Student Loan Interest Other misc income pg 10-7
Nondeductible Contributions Not a deduction from taxable income Interest earned will not be taxable until distribution Cant withdraw (distributions) before 59 Limits if have an employer plan MFJ S
Should receive a statement Loan cant be from relative or employer Student must be liable Cant claim if MFS Limit S or HOH less than $70,000 MFJ less than $140,000 Pg 30- 1040 instructions Deduction vs Credit Deduction reduces taxable earnings that you
pay taxes on Credit reduces dollar for dollar of taxes 8917 Tuition and Fees Deduction pg 10-21 8863 Education Credit pg 8-8 Jury Duty The amount you give to your employer Line 36 Put jury duty on dotted line Credits
Refundable Credit -- Even if you dont need to pay taxes you will get the remaining credit. EIC refundable credit Example: EIC Credit is $1000. You owe $200 in tax, you will get an $800 refund ***************************************** Nonrefundable Credit Credit is only up to the amount of tax you owe.
Example: CTC Credit is $1000. You owe $200 in tax, you will NOT get an $800 refund. Only $200 will be used to reduce your taxes to $0. Chapter 5 Earned Income Credit
Earned Income Age 25 to 65 Social Security Number Not MFS Citizen or resident alien No Foreign income excluded
Investments income less than $2,900 Not qualifying child: Relation, Age, Resident Investment Income Interest taxable and non taxable line 8 Dividends Ordinary -- line 9 Capital gain- if loss enter 0 -- line 13 Earned Income Credit Limits
(Less than $2,900 Investment income) Child Max Cr Span Max Cr
Max Income* None $428 $5,500--$7,000 $12,590 One $2,853 $8,350--$17,400 $33,241 Two $4,716 $11,750--$17,400 $37,783
Add $2,000 if MFJ See page 51 (1040) 42 (1040A) Other Earnings in Prison not earned income Household employee pg 5-5 Disability benefits are earned income to minimum retirement age then pension(not earned)
Exercise 1 pg 5-11 A. No - August 2007 is not more than 6 mos B. No MJS cant claim EIC C. Tina can claim the two. She can give dependency and CTC to ex but not EIC D. Yes, but not the Maximum E. No- no dependent F. 4,5,7 Exercises pg 5-12
Exercise 2 Answer C Dependent Child Tax Credit -------------------Earned Income Credit Head of Household Dependent Care Exercise 3
Answer D must file joint Exercise 4 pg 5-20 A. MFJ 2+ children Answer: B.$2,853 C.$2,853 $25,850 to $25,900
$2,929 Advanced EIC W-5 Must file even if they are not otherwise required Line 61 (1040) Or Line 36 (1040A) Chapter 6 Child Tax Credit
Under age 17 Citizen More than support Lived with more than year Credit is $1,000 per child Income Max: $110,000 MFJ/ $55 MFS $75,000 S, HOH, QW Addl Child Tax Credit 15% of Earned Income over $11,750 only up
to the remaining amount not used in Child Tax Credit. Exercise 1 page 6-14 A. No B. yes C. yes D. no Page 6- 15 Example A dependent cant claim a dependent
Chapter 4 Deductions and Tax Computations Standard Deduction If someone can claim you, it is the greater of: $850 or
earned income + $300 Limited to $5,350 Pub 17 pg 135/136 65 Blind- Single or HOH Add $1,300 for 65 if single or HOH Add $1,300 for blind if single or HOH Single, 65 or over
Blind Std Ded $5,350 $1,300 $1,300 $7,950 see page 136 Pub 17 65 BLIND- married or MJS Add $1,050 for 65 if married or MJS
Add $1,050 for blind if married or MJS Married 65 or over Blind Std Ded $10,700 $1,050 $1,050 $12,800 see page 136 Pub 17
Standard Deduction Exercise 1 page 4-4
A. B. C. D. E. F. $7,850 $5,350 + 1,300 = $6,650 $10,700 + $1,050 = $11,750
$5,350 + $1,050 = $6,400 $5,350 $2,500 +$300 = $2,800 Standard or Itemized Who should itemized Pub 17 pg 135 If your deductions are more than the standard deduction Large medical/dental expenses Taxes and interest on home
Large unreimbursed employee business expenses Large casualty or theft loss Large contributions Change Mind Didnt itemized but should have,--- what can you do? 1040X amended return (no efile)
Married Filing Separately If one itemizes deductions, the other should itemize because he or she will not qualify for the standard deduction Pub 17 pg 135 Itemized Deductions-Sch A pg 4-19
Medical/Dental more than 7.5% agi Taxes - Sales or Income Interest/points/ mtg insurCharitable Contributions Casualty/ Theft loss Job Expenses, tax prep, Other (line 23) more than 2% agi
Other Misc 1040 A-10 Limitations Exercise 2 pg 4-7
Unreimbursed doctors bills Unreimbursed braces Hospital Insurance Life Insurance Prescription medicines Vitamins Hospital bill (500 reimbursed)
Nonsmoking program 600 800 200 400 400 100 100 200
Sales Tax vs Income Tax Sales tax from table based on income plus Big ticket items. 1040 pg A-11 Must choose which one will give you the greatest deduction.
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