1 / 27

Adjustments to Income

Adjustments to Income. Pub 4491 – Page 171 Pub 4012 – Tab E. Total Income minus Adjustments = Adjusted Gross Income (AGI). Adjusted Gross Income. Intake/Interview. In-Scope Adjustments. Educator expenses Health Savings Account* Self-employment tax Early withdrawal penalty Alimony paid.

eleanor-hanson
Download Presentation

Adjustments to Income

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Adjustments to Income Pub 4491 – Page 171Pub 4012 – Tab E NTTC Training – 2013

  2. Total Income minus Adjustments = Adjusted Gross Income (AGI) Adjusted Gross Income NTTC Training – 2013

  3. Intake/Interview NTTC Training – 2013

  4. In-Scope Adjustments • Educator expenses • Health Savings Account* • Self-employment tax • Early withdrawal penalty • Alimony paid • IRA contributions • Student loan interest • Tuition and fees deduction • Jury duty pay given to employer * Optional certification NTTC Training – 2013

  5. Adjustments to Income Out-of-Scope NTTC Training – 2013

  6. Educator Expense – Line 23 • Up to $250 for classroom educational materials for taxpayer and $250 for spouse (if both educators). Ask about this if educator(s) • Must be K–12 teacher, counselor, principal or aide • Must work at least 900 hours during school year • Claim entered on 1040 Wkt 2 NTTC Training – 2013

  7. 1040 Wkt2 in TaxWise NTTC Training – 2013

  8. Health Savings Accounts • Counselors may obtain special certification to work with Health Savings Accounts (HSAs) • Counselors must pass Advanced test before testing on HSA • Course and test are in Pub 4942 or online at Link & Learn NTTC Training – 2013

  9. Portion of Self Employment Tax – Line 27 • SE Tax = Social Security and Medicare tax for Self-Employed • Adjustment comes from Schedule SE • Schedule SE automatically generated from Schedule C • Details in later lesson NTTC Training – 2013

  10. Early Withdrawal Penalty – Line 30 • Penalty for withdrawal of funds from time deposits, such as CDs • As reported on 1099-INT or 1099-OID • In TaxWise, flows from Interest Statement NTTC Training – 2013

  11. Alimony Paid – Line 31a • Allowed if paid under Divorce/Separation Agreement • Must provide recipient’s Social Security No. • Recipient must claim as income • Link to Alimony Paid Worksheet from Line 31 if paid to more than one ex-spouse • Child Support not deductible NTTC Training – 2013

  12. IRA Contribution – Line 32 • Can contribute lesser of $5,500 ($6,500 if age 50 or over) or taxable compensation • Taxable compensation • Wages, tips, bonuses, Sch C income, alimony • Not interest, dividends, pensions, social security • Actual amount depends on Taxpayer/ spouse retirement plans, modified AGI, age and filing status NTTC Training – 2013

  13. IRA Contribution – Line 32 • Age limits • For traditional IRA – under 70½ • For Roth IRA – no age limit • Note: Roth IRA contribution is not deductible and will not show on line 32 NTTC Training – 2013

  14. IRA Contribution – Link to IRA Worksheet These data entered automatically

  15. IRA Contribution (cont) • Enter Traditional IRA contributions on line 10 • If part nondeductible, TW generates Form 8606 • Enter Roth contributions on line 20 • Can be a mixture so long as limit is not exceeded NTTC Training – 2013

  16. Non-Deductible Contributions • If client participates in employer’s plan and AGI is too high • Some or all of Traditional IRA contribution may be nondeductible • Client might prefer a Roth IRA instead of a Traditional IRA NTTC Training – 2013

  17. Non-Deductible Contributions • TW adds Form 8606 to form tree • Part I is in scope • If not carried forward, input beginning of year basis on line 2 (from 2012 Form 8606 line 14) • TaxWise carries the deductible amount, if any, to Line 32 NTTC Training – 2013

  18. Student Loan Interest – Line 33 • Intake and Interview Sheet – Part V, Q8 • If > $600, should receive Form 1098-E NTTC Training – 2013

  19. Student Loan Interest – Line 33 Pub 17, Ch 19 • Interest paid on qualified student loan for post secondary education expenses • Qualified Loan: • Expenses of taxpayer, spouse, or dependent (when loan originated) • For education expenses paid within reasonable time since loan was opened • For education provided during academic period when eligible student NTTC Training – 2013

  20. Student Loan Interest – Line 33 • Qualified Loan (cont) • Loan cannot be from relative • Taxpayer cannot be filing MFS • Taxpayer cannot be claimed on someone else’s return • Loan cannot be from qualified retirement plan • Taxpayer must be liable on the loan NTTC Training – 2013

  21. Student Loan Interest – Line 33 • Maximum $2,500 per year • Phases out as AGI increases • Link to 1040 Wkt 2 NTTC Training – 2013

  22. 1040 Wkt2 in TaxWise NTTC Training – 2013

  23. Tuition and Fees – Line 34 • Up to $4,000 adjustment allowed • For qualified education expenses of higher education • One of several choices for education benefits • Will cover details in education benefits lesson later NTTC Training – 2013

  24. Jury Duty Pay Given to Employer • Show Jury Pay received on Line 21, Other Income • Enter amount turned over to employer on Line 35 NTTC Training – 2013

  25. Quality Review – Adjustments • Does 1040 page 1 reflect Adjustments properly • Compare with Intake/Interview Sheet • Compare with last year’s return • Were other forms generated that should be addressed NTTC Training – 2013

  26. Adjustments to Income Questions? Comments… NTTC Training – 2013

  27. Let’s Practice In TaxWise • Open return for Kent in TaxWise • From Pub 4491W page 67, enter adjustments • Verify tax liability NTTC Training – 2013

More Related