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VITA Training Basic Tax Year 2011

VITA Training Basic Tax Year 2011. What Makes a Successful Volunteer. Ask questions Be on time Call in advance if you cannot make it to your volunteer shift Be professional Have fun!. The Intake Process. Taxpayer fills out Intake Sheet (4012 p. 6-8) Volunteer completes Interview

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VITA Training Basic Tax Year 2011

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  1. VITA Training Basic Tax Year 2011

  2. What Makes a Successful Volunteer • Ask questions • Be on time • Call in advance if you cannot make it to your volunteer shift • Be professional • Have fun!

  3. The Intake Process • Taxpayer fills out Intake Sheet (4012 p. 6-8) • Volunteer completes Interview • Check Identification • Review Documents • Prepare Return • Quality Review

  4. What’s new in 2011? • Retirement Savings Credit Income Levels Increased • Due Date: April 17th, 2012 • Provisions that Expire for TY2011 • Making Work Pay Credit • Computer technology and equipment used as educational expenses • Advance EIC

  5. The Taxpayer Will Provide: • Tax information • Forms W-2, 1099, 1098. • Social security cards or ITIN letters • Proof of Identity • Valid drivers license or other government issued picture ID

  6. Filing Status

  7. Standard Deduction • Single / Married Separate $5,800 • Married Joint $11,600 • Head of Household $8,500

  8. Personal & Dependent Exemptions • Claim for Taxpayer and Spouse • If a dependent, cannot have dependents • A dependent who files their own return claims zero exemptions • Qualifying child • Qualifying relative • $3,700 deducted per exemption

  9. 5 Dependency Tests • Household Test • Relationship Test • Gross Income Test • Support Test • Residency Test

  10. ITINS and Dependents • The dependency tests for a qualifying relative or qualifying child apply in the same way to resident aliens • A child can be claimed as a dependent as long as all the other rules for qualifying child or qualifying relative are met. • Parents with ITINS: Cannot claim the EIC. Can claim dependents and Child Tax Credit

  11. Qualifying Child of More than One Taxpayer • Normally, one taxpayer claims all tax benefits for the same child. • Tie-breaker p C-3 • Parent • Parent who lived longer with child • Parent with higher AGI if same length of time

  12. Qualifying Child or Relative? • Bobby lives with his mom Angela and mom’s boyfriend Pete for the full year. Pete provides support of the house and Angela doesn’t work. • Can Pete claim Bobby? • Is Bobby Pete’s qualifying child? • What if Angela worked?

  13. Exercises • Joe, 65, lives with his son. Has a taxable pension of $5,000. Can Joe’s son claim him? • Robert, 35, is permanent disabled and lives with his mom. He collects social security which covers his living expenses. Can his mom claim him?

  14. Intake Sheet Page 2

  15. Other Income • State Tax Refunds (Line 10) – for customers who itemized in 2009 only! • Social Security Benefits (SSA-1099) – nontaxable if ½ SS + income < $25,000 Single and $32,000 MFJ. (Line 20) • 4491-W p. 280 if taking the test by hand. • Child support and welfare benefits (TANF) are not taxable income.

  16. Intake Sheet Page 2 Cont.

  17. Adjustments to Income • Student Loan Interest – like interest income may not be on a 1098 - $2,500 maximum amount (Line 33) • IRA Contribution – Up to $6,000 (Line 32) • Educator Adjustment ? • Alimony Paid (Line 31) but not Child Support • Jury Duty Pay Paid to Employer (Line 34) • If Schedule C income – (Line 27) deduct ½ of the self-employment tax

  18. Itemized Deduction • Schedule A • Expenses greater than Standard Deduction. • Mortgage Interest and Insurance • Taxes – City State and Property – Paid in 2011 • Charitable Contributions • Medical Expenses • Gambling Losses

  19. Earned Income Tax Credit • Must have earned income less than: • $43,998 ($49,078 married filing jointly) with 3 or more qualifying children • $40,964 ($46,044 married) with 2 qualifying children • $36,052 ($41,132 married) with 1 qualifying child • $13,660 ($18,740 married) with no qualifying children? • Taxpayers Married Filing Separately do not qualify • Taxpayers with ITINs are not eligible – Everyone must have SSNs.

  20. EITC • Taxpayer with kids: • Kids must pass three tests (similar to QC test): • Relationship Test • Age Test • Residency Test • *No support test! • Taxpayers without kids: • Taxpayer or Spouse must be 25 to 64 • Cannot be claimed on another’s return • Live in the US for more than 6 months

  21. Disallowed EITC & Precertification • If disallowed, must complete an 8862 in future years • Precertification letter – refer client to Legal Aid

  22. Test Question • Interview Notes • Natasha Jefferson and Daniel Newport are both single and were never married. They have lived together for two years. • They have one child, Hannah, age 4. • In 2011, Hannah lived with Natasha the entire year. Daniel lived alone. • Natasha and Daniel provided all of Hannah’s support. • In 2011, Natasha worked and earned $18,000. Daniel worked and earned $33,000. • Daniel pays the rent and utilities for Natasha's apartment. He is providing over half the cost of maintaining the home for Natasha and Hannah. • Daniel does not pay household expenses for any other family member. • Natasha, Daniel, and Hannah are U.S. citizens and have valid social security numbers. Who can claim the Head of Household filing status? Is Daniel entitled to claim Hannah as a qualifying child for EIC?

  23. Test Question • Interview notes: • Lisa Bolivar is 36 years old. • Oliver, who is single, is Lisa’s 45-year-old brother. He is permanently and totally disabled. • Their parents are deceased. • Oliver lived with Lisa in her home all of 2011. • In 2011, Oliver received Form SSA-1099 showing social security disability benefits of $11,000, his only income. • Oliver provided over half of his own support. • Lisa worked as a clerk and earned $26,500. • Lisa and Oliver are U.S. citizens and have valid social security numbers. Lisa cannot claim Oliver as her dependent because? Is Lisa eligible for EIC?

  24. Finishing Up Federal • Advanced EITC W-2 box 9 (Line 59) • By the way, eliminated for 2011! • Federal Withholding from Box 2 of W-2 (Line 61) • If Withholding too low, client should complete a W-4 at work. • Remember EFIN and Site ID • If e-filing remember the PIN and 8879 • Direct Deposit – Routing number and account number • Client may Split Refund this year – Form 8888. Please Ask! – May Buy a Savings Bond

  25. Finishing Federal • If our client owes the IRS then: • Pay by credit card for a fee • Form 9645 – Installment payments • Electronic withdrawal from bank account • 1040V payment voucher – print and mail. • Request a Full Pay Within 60 to 120 Days agreement • File an Online Payment Agreement request at www.irs.gov

  26. Ohio 1040 • If our client owes, please check your work!! • Children who are dependents may claim themselves on the Ohio return • Joint Filing Credit – each spouse must make at least $500. • Qualified Tuition Deduction up to $2,500 • Retirement Income Credit • Over 65 credit • Child Care Credit – 25% to 100% of federal • Under 10,000 no tax!

  27. Local Taxes • CCA – use CCA form • RITA – include w2 and they will send a bill • Cleveland Heights, Parma Heights, Lakewood have own tax authority • You pay tax to the city where you live and to the city where you work. • If you work in the same city where you live then it is easy. • Hardly ever see a refund if form is filled out correctly.

  28. Quality Review • Return to be reviewed by a 2nd volunteer. • Complete Form 13614-C

  29. Closeout the Return • Self-selecting PIN – 5 digit number from the taxpayer • 1 paper copy for taxpayer Includes: Cover sheet, Federal 1040, State 1040, local return & remaining tax documents • Did client sign intake? • Did client complete survey?

  30. Volunteer Sign Up Visit http://refundohio.org to register as a volunteer and set your schedule.

  31. Practice Labs • Online Practice Lab through IRS website. http://www.irs.gov/app/vita/index.jsp • Password is learntwo • User ID will be created for you to use with practice problems.

  32. Taking the Test • Complete the paper copy – Please complete the Form 13615 in the booklet. • Online web site: http://www.irs.gov/app/vita/index.jsp • Please printout 13615 • New ethics portion of test

  33. Certificates • Please send your certificates to Shannon Crandall, Enterprise • Address: 3500 Lorain, #300, Cleveland, OH 44113 • Fax: 216-631-0450 • Email: scrandall@enterprisecommunity.org

  34. Next Steps for Trainer • Have the class start the basic test. • Give them about a half hour to get to the first scenario. • Do the scenario with the group on Taxwise. • Show them how to create a log in for the Taxwise Practice Lab. • Start the scenario as a group • Download the PDF of scenarios • Read through the info in the scenario • The social security numbers must end in the username number • Enter info into Taxwise in all caps • Boxes underlined in red: required fields, green: auto fills for you, black: not required for now. • Talk about dependent fields and boxes to check for credits • W2 • Show the group what box to check to remove automatic calculations. • Show the group how to add forms • Sch B • Link interest statement • Answer the test questions as a group using the information on Taxwise.

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