What’s New in 2012 Highlights – Dist 5

1. What’s New in 2012Highlights – Dist 5 • Bob Eslinger • Pacific Region Training Advisor

2. WHAT'S NEW IN 2012Highlights Training Approach 2012 Potential Changes TWO Changes TIGTA/IRS/SPEC Review Program Scope ShareNet/AZ Tax Certification

3. TRAINING APPROACH Train to 2011 Tax Law using 2011 Tax Software Transfer to 2012 once tax law is defined and software is available Certification same as last year

4. TRAINING PACKETS, cont’d • Kit 2 - Once 2012 tax forms and tax law updates are determined, Pub 4012 Kit will be released: • Pub 4012, “Volunteer Resource Guide” and Pub 4491-X, VITA/TCE Training Supplement along with CD containing 2012 tax forms and instructions

5. 2012 Changes • 2012 Standard Deduction: • Single/MFS = $5,950 ($150 increase) • HOH = $8,700 ($200 increase) • MFJ/QW = $11,900 ($300 increase) • Additional standard deduction for people 65/older or blind remains same • $1,150 for married individuals filing jointly or separately and qualifying widow(er)s and $1,450 for singles/HOH • Personal exemption increase of $100 to $3,800.

6. 2012 Changes (cont’d) • FICA Tax - Extension of temporary decrease in employee’s share of payroll tax • 4.2% social security tax on first $110,100 wages • Self-employed tax rate of 10.4% up to the social security wage limit of $110,100 wages • Social Security & Medicare wage threshold for household employees = $1,800 ($100 increase)

7. Expired Provisions(beginning after December 31, 2011) • IRA Distributions for Charitable Purposes • Educator Expense Adjustment - not in excess of $250 • Tuition/Related Expenses - for qualified tuition and related expenses, ranging from $2,000 to $4,000 • Mortgage Insur Premium Deduction • State/local general sales taxes Deduction

8. Expired Provisions(beginning after December 31, 2011) • AMT Exemption Amount - alternative minimum tax (AMT) exemption amount for individuals is scheduled to drop significantly • It will decrease from 2011 levels of $74,450 for joint filers and surviving spouses and $48,450 for single individuals other than surviving spouses • To $45,000 and $33,750, respectively, in 2012 • Nonbusiness Energy Credit

9. Standard Mileage Rate • 55.5 cents per mile for business • 23 cents per mile for medical or move-related mileage • 14 cents per mile for charitable purpose

10. Earned Income Tax Qual ChildIncome(Single)Income (MFJ) Max 3 45K 50K $5891 2 41K 47K $5231 1 37K 42K $3169 0 14K 19K $475 Must have <$3200 investment income

12. Tax Form Changes Form W-2 – Cost of employer-sponsored health coverage reported in box 12 using code DD. NOT TAXABLE

13. Sch C Limitations

16. Tax Forms Form 8863- Education Credits • Parts II and IV are moved to page 1 and renumbered as Parts I and II • Old Part I became Part III on page 2 • Part III is for information regarding the student, the student’s eligibility for a credit and the educational institution(s) information • Additional page 2 information required for each student • Go to page 2 first to enter data

17. Form 8863 – Page 2

19. Form 8863 – Page 1

20. New TWO Form (Wkt7) • 1040 Line 21 Other Income • New Worksheet for reporting Miscellaneous Income • Includes 16 additional income lines • New diagnostics will be added • Income from another form auto-populates the worksheet with amount and type • 1099-Misc income • link to worksheet then to 1099M.

22. SCH D & FORMS 8949 • New 2012 - Form 8949 has been changed – which requires separate columns along with description of the sale • Stock Symbol • Number of Shares • Code for adjustment is next to amount • TaxWise will create appropriate 8949s based on entry in the Capital Gain or Loss Transactions Worksheet (Cap Gain Wkt) • Schedule D has new reporting lines for use in Forms 8949

23. Beginning in 2011, brokers must report cost or other basis on Form 1099-B, unless securities sold were noncovered* securities Beginning in 2011, brokers must report whether a gain or loss is short-term or long-term on Form 1099-B, unless the securities sold were noncovered* securities NEW BROKER REQUIREMENTS

24. NONCOVERED SECURITIES A security other than stock Stock purchased before 2011 Stock acquired before 2012 in a regulated investment company for which the average basis method is available Stock acquired before 2012 in connection with a dividend reinvestment plan

26. 2012 Capital Gains Worksheet

29. What’s New for 2012-13 TWO • No More Legacy processing all Modernized eFile (MeF) • “Linked” State Returns will be held until Federal Return is accepted. • No more State Reject 901 and 902

30. What’s New for 2012-13 TWO TaxWise 2012 - TWO • TWO Training Templates can be “Published” to Production version • Create Template from Master Template in Training, then “Publish” to Production • TaxWise Online Training and Practice Lab • Time out increased to 60 minutes

31. TaxWise 2012 - TWO A new button on the toolbar to create Taxpayer Diary The diary will automatically record the user you are logged in as, the day, date and time. A new icon will appear in the Existing return list to the left of the TIN

32. TIGTA/IRS/Spec Review • TIGTA: 39 sites reviewed • 49% were accurate • IRS/Spec: 92% accuracy rate (87% last year) • Keys: QR by second person Tax preparers certified annually to Advanced • Continued Emphasis: • Mandatory use of Intake/Interview and Quality Review Sheet during all taxpayer interviews • Due Diligence

33. DUE DILIGENCE WHAT IS DUE DILIGENCE? Asking sufficient and thorough questions to ensure the accuracy and completeness of the tax return AND Verifying the accuracy of documents/receipts presented OR determining when to rely in good faith and without verification on the customer’s oral testimony AND Ensuring a second person quality review.

34. DUE DILIGENCE (continued) Counselor must ask questions if the information furnished appears to be incorrect, inconsistent, or incomplete Volunteer may not ignore information furnished to, or actually known by, the preparer Counselors must not KNOWINGLY prepare false returns! Remind taxpayers that when they sign their return, they are stating that the return is accurate to the best of their knowledge and they are responsible for the return

35. Intake Sheet Changes • Section A • Picture ID (such as valid drivers license or other government issued ID) • Part III Income questions added • 7. Self Employment Income • 8. Cash/check payments for any work performed not reported on Form W-2 • Section C Certified Volunteer QR Section • No boxes, emphasis placed on reviewing information on pages 1 &2

38. Taxpayer Data and PrivacyPolicy The Site or ERO will not keep any forms or documents with a taxpayer identity and/or SSN that is not mandated by the IRS or a State. ie. Form 8453 if used for mailing

39. QSR#10: Security Privacy and Confidentiality • More critical than ever to ask taxpayers for proof of identity andsocial security numbers • Individuals who are victims can report the incident to the Identity Protection Specialized Unit (IPSU) at 1-800-908-4490. • Tax-Aide will provide taxpayer with two copies of their return for use as directed by the IRS. • If it is determined the taxpayer is a victim of identity theft, the IRS will place an Identity Theft indicator on the taxpayer’s account. • Taxpayer will received an Identity Protection PIN for use in preparation of future returns.

40. Enter Pin In TW

41. SCOPE • Poster C2467 – What AARP Foundation Tax-Aide can and can’t do for you today (Next 4 slides) • Training Guide Appendix H – Scope Topics • Seven pages of In Scope/Out of Scope discussion by Form/Schedule

42. $5,000

45. $5,000

47. Other Training • District must decide approach to train ERO’s. • Reference ERO Presentation on ShareNet or AZ Tax • As a minimum, a mentor (experience ERO) should be assigned to any new ERO • Client Facilitator and any other volunteer must pass Standards of Conduct test • Reference Client Facilitator training on the ShareNet or AZ Tax

48. https://volunteers.aarp.org

50. http://www.aztax-aide.org/