Tax Year 2011

VITA Training Basic

Tax Year 2011

1

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!

2

The Intake Process

1.
Taxpayer fills out Intake Sheet (4012 p. 6
-
8)

2.
Volunteer completes Interview

3.
Check Identification

4.
Review Documents

5.
Prepare Return

6.
Quality Review

3

What’s new in 2011?

•
Retirement Savings Credit Income Levels Increased

•
Due Date: April 17
th
, 2012



•
Provisions that Expire for TY2011

o
Making Work Pay Credit

o
Computer technology and equipment used as educational expenses

o
Advance EIC

4

The Taxpayer Will Provide:

•

Tax
information

o
Forms
W
-
2, 1099, 1098
.

•
Social
security cards or ITIN
letters

•
Proof
of Identity

o
Valid
drivers license or other government issued picture
ID

5

Filing Status

6

Standard Deduction

•
Single / Married Separate


$5,800

•
Married Joint




$11,600

•
Head of Household



$8,500


7

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


8

5 Dependency Tests

•
Household Test

•
Relationship Test

•
Gross Income Test

•
Support Test

•
Residency Test

9

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

o
Parent

o
Parent who lived longer with child

o
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:

o
$
43,998 ($49,078 married filing jointly) with
3 or
more
qualifying
children

o
$
40,964 ($
46,044 married)
with
2 qualifying
children

o
$
36,052 ($41,132
married)
with
1 qualifying child

o
$
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:

o
Kids must pass three tests (similar to QC test):

•
Relationship Test

•
Age Test

•
Residency Test

•
*No support test!

•
Taxpayers without kids:

o
Taxpayer or Spouse must be 25 to 64

o
Cannot be claimed on another’s return

o
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


o
Natasha
Jefferson and Daniel Newport are both single and were
never married. They have
lived
together for
two
years.

o
They have one child, Hannah, age 4.

o
In 2011, Hannah lived with Natasha the entire year. Daniel lived
alone.

o
Natasha and Daniel provided all of Hannah’s support.

o
In 2011, Natasha worked and earned $18,000. Daniel worked and
earned $33,000.

o
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.

o
Daniel does not pay household expenses for any other family
member.

o
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:

o
Lisa
Bolivar is 36 years old.

o
Oliver, who is single, is Lisa’s 45
-
year
-
old brother. He is
permanently and totally disabled.

o
Their parents are deceased.

o
Oliver lived with Lisa in her home all of 2011.

o
In
2011, Oliver received Form SSA
-
1099 showing social security
disability benefits of $11,000, his only income.

o
Oliver provided over half of his own support.

o
Lisa worked as a clerk and earned $26,500.

o
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)

o
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:

o
Pay by credit card for a fee

o
Form 9645
–

Installment payments

o
Electronic withdrawal from bank account

o
1040V payment voucher
–

print and mail.

o
Request a Full Pay Within 60 to 120 Days
agreement

o
File an Online Payment Agreement request at
www.irs.gov

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 2
nd

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

o
Password is
learntwo

o
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.

o
Give them about a half hour to get to the first scenario.

•
Do the scenario with the group on
Taxwise
.

o
Show them how to create a log in for the
Taxwise

Practice Lab.

o
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

o
Show the group what box to check to remove automatic
calculations.

•
Show the group how to add forms

•
Sch

B

o
Link interest statement

•
Answer the test questions as a group using the
information on
T
axwise
.



35