Welcome!

1. Welcome! This is the first in a series of seven webinars covering the Tax Law topics.

2. Volunteer Training Materials • Student Training Guide • 2007 VITA/TCE Workbook Comprehensive Problems and Practice Exercises • 2007 VITA/TCE Volunteer Test/Retest • Volunteer Resource Guide Publication 4012 • Link and Learn interactive website http://www.irs.gov/app/vita/index.jsp

3. Form 13615 Volunteer Agreement, Standards of Conduct Only prepare returns within the scope of your training and experience Exercise reasonable care in the use and protection of equipment and supplies Do not accept payment for services provided Treat all taxpayers professionally, with courtesy and respect Safeguard the confidentiality of taxpayer information Apply tax laws equitably and to the best of your ability Do not solicit business from taxpayers you assist or use knowledge gained about them for any direct or indirect personal benefit for you or any other individual or organization Volunteer Rights & Responsibilities

4. Volunteer Rights & Responsibilities Am I legally liable for returns I prepare? No, you are protected by the Volunteer Protection Act of 1997, as long as you are acting within the scope of your volunteer responsibilities and the harm was not caused by willful or criminal misconduct

5. To file a tax return the taxpayer and anybody who is listed on the return Is required to have one of the following: Social Security Number Individual Taxpayer Identification Number (ITIN) note: ITIN’s are most often used by resident aliens Adoption Taxpayer Identification Number (ATIN) If the tax payer does not have a Social Security Card, he or she can obtain one by filing a form with the Social Security Administration. If the taxpayer is not eligible to apply for a SSN, and has not yet applied for an ITIN, you can fill out and submit Form W-7 Application for Individual Taxpayer Identification Number with the taxpayer’s tax return using taxwise. Tax Identification Numbers(pgs 3-7 thru 3-10 in Student Training Guide)

6. Verifying the SSN or the ITIN is Correct on the W-2 If the taxpayer’s W-2 does not have the correct SSN, prepare the tax return with the materials provided. However, the taxpayer needs to request a correct W-2 form the employer Before submitting the tax return. Note: Taxpayers who have ITINs must file their tax returns using the ITIN but are allowed to attach W-2 forms showing erroneous SSNs.

7. Who is required to file: Gross Income(Volunteer Resource Guide- Who must File- Chart A)

8. Who is required to file: Exceptions to the Gross Income Requirement The most common circumstances under which a return must be filed even if the taxpayer does not meet the gross income filing requirements are: • An individual owes uncollected social security or medicare tax, usually on tips • An individual receives advance earned income tax credit payments during the year • An individual has net profit from self-employment of $400 or more

9. People Not Required to File • Individuals may choose to file, even though they are not required to file in order to claim certain tax credits, such as the EITC.

10. For assistance determining the Filing Status of the taxpayer use the chart entitled Determining Filing Status under the Filing Status Tab in the Volunteer Resource Guide (Publication 4012). Five Federal Filing Statuses Single Married Filing Jointly Married Filing Separately Head of Household Qualifying Widow(er) Federal Filing Statuses

11. Taxpayers are considered single if on the last day of the year, they were Unmarried Legally separated or divorced Widowed before the beginning of the tax year and did not remarry Taxpayers who are considered single will use the Single filing status if they do not qualify to use the Head of Household or Qualifying Widow(er) filing Status. Filing Status: Single

12. Married Filing Jointly and Married Filing Separately The Married Filing Jointly Status and the Married Filing separately Status can be claimed by taxpayers who, on the last day of the tax year: • Were married and lived together as husband and wife • Were married and living apart, but were not legally separated or divorced • Lived together in a common law marriage that is recognized in the state where they currently live or the state where the common law marriage began (in Montana common law marriages are recognized) • Did not remarry and their spouse died during the year

13. Married filing jointly is usually the more advantageous filing status on the Federal Tax Return. For more information about the differences between the two statuses refer to pg. 4-3,4-4 in the Student Training Guide Situations in which to Use the Married Filing Separately Status: When itemizing deductions, MFS status may result in a lower tax liability On the Montana State Tax Return, the MFS status (3a) will usually result in a lower tax liability. When one spouse does not want to be responsible for the other spouse’s tax obligations Married Filing Jointly or Married Filing Separately?

14. What if a spouse has died during the year? • Taxpayers whose spouses have died during the tax year are considered married to that spouse for the entire year, providing the taxpayer did not remarry during the same tax year. In this case the taxpayer can choose to file Married Filing Jointly or Married Filing Separately. • If the taxpayer has remarried or has chosen to file MFJ with their new spouse, a tax return may need to be filed for the deceased spouse using the Married Filing Separately status.

15. Qualifying Widower with a Dependent Child status A taxpayer, whose spouse died in one of the two years prior to 2007 (either 2006 or 2005) and who has one or more dependent children, may claim the Qualifying Widow(er) with a Dependent Child status.

16. Qualifying Widower with a Dependent Child Status To qualify, a taxpayer must: • Be eligible to file a joint return for the year the spouse died, regardless of whether the taxpayer actually filed a joint return that year • Have had a spouse who died in 2005 or 2006. The taxpayer must not have remarried before the end of 2007 • Have a child, stepchild, or adopted child who qualifies as the taxpayer’s dependent for the year • Have furnished over half the cost of keeping up a home for himself/herself and the qualifying child for the entire year

17. Head of Household Taxpayers may choose the Head of Household filing status. If they meet all of the following requirements: • Are considered to be unmarried, but are not a Qualifying widow(er) with dependent child on the last day of the tax year • Paid more than half the cost of maintaining a home during the tax year • Had a qualifying person living in their home for more half the year (except for temporary absences such as school or incarceration) • For a married taxpayer “considered unmarried” the taxpayer must also have a child they claim as a dependent.

18. What is included Rent Mortgage interest Real Estate taxes Insurance on the Home Repairs Utilities Food eaten in the home What is not included Clothing Education Medical treatment Vacations Life Insurance Transportation Rental value of a home owned by the taxpayer Services provided by the taxpayer or others Cost of Maintaining a Home

19. Married, But Unmarried for tax purposes • The person must file a separate return from his or her spouse • The person must have provided more than half the cost of maintaining his home for the tax year • The home must have been the principal place of abode of the taxpayer and his qualifying child or relative • The person’s spouse must not have lived in the home at any time during the last six months of the year

20. Montana Filing Statuses • Single • Married Filing Jointly • Married Filing Separately on same Form (3a) • Married Filing Separately on Separate Forms • Married Filing Separately Spouse not Filing • Head of Household (www.mt.gov/revenue/formsandresources/taxamnesty.asp)

21. Exemptions An exemption is a dollar amount ($3,400) that can be deducted from an individual’s total income, thereby reducing the taxable income. • Personal Exemptions allow the taxpayer to claim themselves and possibly their spouse • Dependent Exemptions allow the taxpayer to claim qualifying dependents

22. Claiming the Taxpayer’s Own Personal Exemption • A taxpayer cannot claim a personal exemption for his/herself if they can be claimed as a dependent on someone else’s return.

23. Claiming a Personal Exemption for the Taxpayer’s Spouse To claim a personal exemption for one’s spouse the taxpayer must meet the following conditions: • Married as of December 31 of the tax year • Spouse cannot be claimed as a dependent on another person’s tax return (note: a spouse is never considered the dependent of the other spouse) • Files a joint return, or files a separate return and the spouse had no income and is not filing a return

24. A taxpayer whose spouse died during the tax year can generally claim the personal exemption for the deceased spouse if the taxpayer meets all of these conditions: Did not remarry by Dec 31 of the tax year Was not divorced legally separated from their spouse on the date of death Would have been able to claim the exemption under regular circumstances Claiming a Personal Exemption for a Deceased Spouse

25. Beginning the Tax Return

26. Webinars • Dec 13th Filing Status & Exemptions • Dec 20th Dependency • Jan 3rd Income • Jan 10th Retirement & Social Security • Jan 17th Tax Credits • Jan 24th Education & Scholarships • Jan 31st Itemized Deductions All webinars will start at 7:30 and last for an hour.