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Tax Training 2011: Volunteer Success Guide & New Tax Provisions Overview

Learn essential volunteer skills, intake process steps, 2011 tax updates including credits & deductions. Understand filing status, exemptions, EITC, and more. Practice scenarios & income adjustment tips.

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Tax Training 2011: Volunteer Success Guide & New Tax Provisions Overview

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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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