Massachusetts Practice Return Workbook Tax Year 2017

Transcription

1 Massachusetts Practice Return Workbook Tax Year 2017 This workbook contains 13 returns that can be used to practice completing tax returns similar to the ones we typically prepare at Massachusetts AARP Foundation Tax-Aide sites. The first 6-7 returns can be used by instructors for training new counselors by focusing on fundamental federal and Massachusetts tax laws and to how to use TaxSlayer software to complete these returns. All the returns can be used by returning or new counselors to gain additional practice using TaxSlayer because this is only the second year we are using this new software program and changes have been made over the summer. All the returns are for full year Massachusetts residents. Based on last years experience, some returns that contain many tax elements are partitioned into two or three parts. This partitioning should make it easier to use them in a classroom environment. Partitioning should also provide counselors intermediate steps to verify results before reaching the end of a long return preparation process. For new counselor training, instructors should use charts that explain the fundamental federal and Massachusetts tax laws inherent in the practice problems. Instructors should refer to IRS Pub 4012 and the Guide for Massachusetts Tax-Aide Volunteers (Mass Manual) as appropriate, so counselors become accustomed to using these reference documents. A candidate set of instruction charts are being prepared and will be posted on the Massachusetts Tax-Aide website when they are ready. The URL for the website is: All the tax forms are labelled for the 2017 tax year. TaxSlayer Practice Lab 2017 will not be available until about mid-november for federal returns and sometime in late December or early January 2018 for Massachusetts. Until then, counselors can use Practice 2016 and assume the tax forms are labelled An answer key for using 2016 Practice Lab is posted on the Massachusetts Tax-Aide website. Once 2017 software is available, the answer key will be updated for the new software. The answer keys are based on using the taxpayer and dependent birth dates on the Intake Sheets. This set of practice returns incorporate the Ahmed Karr and Charles Rivers returns that were originally prepared by Bill Long from District 18, so we thank Bill for his efforts. In past years, these two were included in the Mass Manual. Special thanks go to the following individuals who prepared some or all of the 13 returns, provided comments and verified the 2016 answer key: Maria Nazzaro (District 18), Frank Dutt (District 25) and Harry Hartford (District 7). Please send any comments on this workbook and answer key to us directly or to mataxaideweb@gmail.com. We also have PDFs of each of the completed practice returns; these will not be posted on the website, please contact us directly if you need any.

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3 Courtney Smathers Fall

4 Courtney Smathers Fall

5 Courtney Smathers Fall 2017 Objectives Prepare a very simple return Determine if Courtney can claim personal exemption Enter W-2 wage information Enter health insurance information and discuss federal and MA requirements Interview Notes Courtney shows you her social security card with the number Courtney is a full-time high school student and works part time weekends and summers at Food Basket as a cashier to save for college. Courtney s mother is a single parent (divorced) who provides all of her support. Courtney has been covered by MassHealth since her parent s divorce. 1-3

6 Courtney Smathers Fall

7 Samuel and Abigail Johnson Fall

8 Samuel and Abigail Johnson Fall

9 Samuel and Abigail Johnson Fall 2017 Objectives Prepare straightforward MFJ retiree return Enter typical income types social security, pension, IRA s, MA bank interest Introduce MA worksheet to keep track of manual entries required for MA return Interview Notes Sam and Abby have been married for 50 years. Both are retired. They sold the big house where they raised their family several years ago and now live in an in-law apartment in their daughter s home. They pay no rent. Social security cards provided: Samuel Johnson Abigail Johnson You review the copy of last year s return they brought and determine that they did not itemize. This problem is partitioned into two parts, the second builds on the first. Part 1 Sam and Abby both collect social security. Sam retired from Big D Incorporated, a major defense contractor, and receives a monthly pension. Sam and Abby were both on Medicare for the full year. Enter the following information: Basic information and filing status Social Security Payment (Form SSA-1099) Pension (1099-R) Health care information 2-3

10 Samuel and Abigail Johnson Fall

11 Samuel and Abigail Johnson Fall

12 Samuel and Abigail Johnson Fall 2017 Part 2 They have multiple CDs at their local bank They are also both taking their required distributions from the IRAs they established from rolling over 401(K) accounts. Enter the following information: Massachusetts bank interest IRAs (1099-R) Use MA worksheet, as required 2-6

13 Samuel and Abigail Johnson Fall

14 Samuel and Abigail Johnson Fall 2017 This page left blank. 2-8

15 Ahmed Karr Fall

16 Ahmed Karr Fall

17 Ahmed Karr Fall 2017 Objectives Prepare straightforward retiree federal return Discuss new MA items: mandatory retirement contribution on W2, MA government pension, Senior Circuit Breaker Credit as a homeowner Interview Notes Originally prepared by Bill Long, District 18 Ahmed Karr lives alone and was widowed several years ago. Ahmed is a full-time resident of Massachusetts. You verify his Social Security number is A life-long public servant, he has not contributed sufficiently to the Social Security system to earn benefits. His 401(k) retirement plan has earned $2400 during the tax year, but he has taken no distributions from that plan. During his later years he turned to teaching at the local high school, for which service he collects the pension reported on the 1099R that he hands you. He left teaching when his eyesight began to fail. Now legally blind, he still sees well enough to perform a part-time job at the public library as a Library Assistant, for which he received the W-2 also provided. Mr. Karr is registered with the Massachusetts Commission for the Blind and shows you a certificate to that effect. Although he does not intend to itemize his deductions on the Federal return, nor did he do so last year, Ahmed gives you copies of his real estate tax bills for the year, dated May and November, totaling $2750; he received an adjustment to that bill of $350 for his blindness, yielding a net of $2400 RE tax paid. He also paid water bills totaling $120; his home was not connected to the public sewer system. Years ago he inherited and took residence in the family home located near but not on the water, assessed at $325,000. He checks YES for both US and Massachusetts election campaign options. Ahmed paid no estimated taxes, nor did he apply part of either of his prior year refunds to his estimated taxes. He assures us his only bank account was for checking; it paid no interest. You check his prior year Massachusetts return, confirming there were neither short-term nor long-term capital losses to carry forward and no Septic Credit to initiate or to carry forward. Ahmed laments the fact that he is required to make a non-elective contribution to his Falmouth retirement, as evidenced by Box 14 of his W-2, while at the same time collecting his Falmouth pension as indicated by their 1099R. Ahmed offers his Tufts Health Plan of NE card, subscriber , along with a form Massachusetts-1099-HC from Tufts, indicating he was insured for the full year; the 1099-HC included the Tufts FEIN:

18 Ahmed Karr Fall

19 Rachel E. Brown Fall

20 Rachel E. Brown Fall 2017 ` 4-2

21 Rachel E. Brown Fall 2017 Objectives Prepare return for over 65 taxpayer who works part-time Discuss how to handle prior year MA tax refund Itemize deductions on federal return and discuss carryover of excess medical to MA Enter MA lottery winnings Make MA insurance entry for a private insurance firm Understand what constitutes real estate tax for MA Senior Circuit Breaker Interview Notes You confirm the entries on her Intake and Interview sheet (13614-C) and note her SSN on her Form SSA This problem is partitioned into three parts, each builds upon the previous. Part 1 Rachel is retired and collects Social Security. She has several other sources of income to augment that. Enter personal information and the following income and health care information: Social Security payment (SSA-1099) Wages paid statement (W-2) Interest and Dividend statements (1099-INT / 1099-DIV) Mass HC-1099 from Blue Cross/Blue Shield - EIN showing coverage for entire year. Her subscriber number is

22 Rachel E. Brown Fall

23 Rachel E. Brown Fall

24 Rachel E. Brown Fall 2017 Part 2 Rachel receives a survivor s pension from her late husband from Commonwealth of Massachusetts. She buys a $1 lottery ticket each week and had one winning ticket. She also received a state tax refund last year after checking her copy of last year s return, you see she did not itemize last year. Enter the following (if applicable): State tax refund notice (1099-G) A Massachusetts state pension for her late husband (1099-R) State Lottery winnings statement (W-2G) 4-6

25 Rachel E. Brown Fall

26 Rachel E. Brown Fall 2017 Part 3 She is not sure whether she should itemize this year or not. She heard about the Senior Circuit Breaker credit and wonders if she is eligible. Rachel owns her home, has no mortgage, and pays her real estate taxes herself. Real estate and car excise tax statements (marked PAID by the town clerk). Her single dwelling house is assessed at $ 263,200. Feb: $1, May: $1, Aug: $1, (includes $14.78 in late fees) Nov: $1, Car Excise $ Water and sewer bills for her home (marked PAID by the town clerk) Feb: $60.43 May: $59.78 Aug: $72.96 Nov: $81.16 Medical Medicare (from SSA-1099) $1,969 Blue Cross/Blue Shield 903 MD Co-Pay 35 Rx Drugs 626 Glasses 175 Dental 250 Medical Miles Driven trips to MD at 20 miles RT 2 trips to Dentist at 5 miles RT Donations Cash donations to church $520 American Cancer Society

27 Sheryl Beringer Fall

28 Sheryl Beringer Fall

29 Sheryl Beringer Fall 2017 Objectives Prepare single taxpayer return with possible dependents and eligibility for credits Understand criteria for claiming dependents using Pub 4012 Understand how to enter federal health insurance for dependents Enter new items: unemployment income, student loan interest Understand how federal and MA credits are handled with software Interview Notes - adapted from Pub 4491W Social security cards provided Sheryl Beringer Courtney Johnson Artis Johnson Monica Jesse Willie W. Cash Sheryl has two children, Courtney and Artis Johnson, who live with her full time. She has been divorced since She paid all the household expenses and provided all of her children s support. Sheryl s mother, Monica Jesse, also lives with her full time and Sheryl provides over half of her support. Monica s only income is from Social Security and a small amount of bank interest. She spends her SSA benefits on her medical expenses and does not contribute to the household expenses. Sheryl did not itemize on last year s return. Sheryl is repaying a student loan and received a statement from the lending institution showing that she had paid $ in interest last year. Sheryl s friend, Willie Cash, lost his home and moved in with her April 18 of the tax year. He does not have any income and is currently looking for work. Sheryl would like to claim Willie as a dependent. Sheryl rents her home, paying $1000 per month eligible for MA rental deduction Sheryl s company provides health insurance for her and her two children. She provides Forms 1095C and MA 1099-HC showing she had full-year Aetna insurance with a plan ID of and subscriber number of Monica is on Medicare. 5-3

30 Sheryl Beringer Fall

31 Hannah Fleming Fall

32 Hannah Fleming Fall

33 Hannah Fleming Fall 2017 Objectives Prepare return for single parent with two children; ex-spouse claims one child Discuss and enter self-employment income, tax-exempt interest, disability income, early IRA withdrawal, prepare Schedule C Discuss child care credit and how to enter into software Determine how to handle ID theft PIN Interview Notes - adapted from Pub 4491-W Hannah is a single mother of two children, Tara and Jerry. She showed you three social security cards with the following numbers: Hannah E Fleming Tara Fleming Jerry Fleming Hannah is divorced. The divorce decrees states that her ex-husband is to claim their son, Jerry, as a dependent on his return even though Hannah provides all the support for their children, Tara and Jerry. Hannah confirmed that the tax exempt interest she received from Northern Bank was exempt both federally and in Massachusetts. In January of the tax year, Hannah took an IRA distribution of $5,000 to pay off credit card debt. She made no contributions to this IRA while a MA resident. She did not itemize deductions last year. Hannah had a serious accident in June of the tax year and stopped working. She collected unemployment compensation, but was too young to retire. Hannah is now totally and permanently disabled. Hannah rents an apartment; her monthly rent was $975. She and the children were covered by MassHealth for the year. Part 1 Enter the following: Basic Information, filing status, and dependents Income: Wages (W-2), unemployment (1099-G), interest (1099-INT), IRA distribution (1099-R) Health care information 6-3

34 Hannah Fleming Fall

35 Hannah Fleming Fall

36 Hannah Fleming Fall

37 Hannah Fleming Fall 2017 Part 2 Hannah was employed as an editor. Starting on July 1, 2009 she did some editing work from her home for Candid Publishing Co. who provided form 1099-MISC. She kept a record of her expenses: $1,625 for paper, $1, for printer cartridges, $1,250 for postage, $350 for a business phone line and long distance calls, and total mileage of 234 for January and February for making deliveries. She had 10,000 other miles on her car. Hannah has one car which she bought in 2007 and began using for her work when she started working at home. She has a written record of her business mileage. She took a processing course in the evening at the local college to improve her skills. The tuition was $575. The Business Code for Schedule C-EZ or C is The address for the college was: One University Way, Your City, State and Zip Code. Hannah s education expenditures could be a business expense or a credit. Determine the most advantageous benefit for which she is qualified. Tara s divorce decree states that her ex-husband is to pay her $300 per month alimony. Due to the loss of his job during the year, he only paid for 8 months. Hannah paid the After School Academy (EIN ), located at 54 Unique Way, Your City, State and ZIP Code, for Tara and Jerry s after school care while she was at work. She paid the day-care center $1,794. Hannah let you know that a couple of years back she experienced an identity theft issue. She brought with her a copy of the IRS CP01A letter. Her letter shows that she was issued a PIN of for use when completing her return. Enter the following: Disability payment (1099-R) Self-employment income (1099-MISC); prepare Schedule C s (federal and MA) Alimony received Dependent care expenses MA rent IRS ID theft PIN 6-7

38 Hannah Fleming Fall

39 Gail Hudson Fall

40 Gail Hudson Fall

41 Gail Hudson Fall 2017 Objectives Understand and enter data for medical insurance bought on Marketplace Understand how to account for short term gap in coverage, federal and MA Understand impact on returns of insurance information Interview notes adapted from the NTTC workbook Learning objective: federal health care exemptions Gail has recently taken a job as a restaurant manager. Gail shows you her social security card with number Gail did not have any health insurance with her job and purchased insurance through the Marketplace in March. She gives you her 1095-A and MA Form HC showing an EIN of and subscriber number of She did have coverage at the end of Gail rents her apartment for $1000 per month. 7-3

42 Gail Hudson Fall

43 Gail Hudson Fall

44 Gail Hudson Fall

45 Timothy and Nicole Sterling Fall

46 Timothy and Nicole Sterling Fall

47 Timothy and Nicole Sterling Fall 2017 Objectives Prepare MFJ return for retired couple, one possible dependent, disabilities No new income types, but pension requires Simplified Method Enter US Bond interest, stock sales Determine MA Circuit Breaker for renter Interview Notes - adapted from Pub 4491-W Social security cards provided: Timothy A. Sterling Nicole S. Sterling Christina Summers Timothy and Nicole have been married for over 40 years. Timothy retired from the International Brotherhood of Electrical Workers on January 1, 2009 and elected to take a joint and survivor annuity at that time. Nicole was hit by a car and severely injured. She was granted Social Security Disability as a result of her injury. Timothy s sister, Christina Summers, lived with them all year. She is totally and permanently disabled and relies upon her brother for her support. She received $250 per month in social security benefits. Nicole has less than 20/200 vision in both eyes. She provided a doctor s statement that she is legally blind.. They itemized deductions last year, but did not receive any state refund. Timothy, Nicole, and Christina were on Medicare for the entire year. Return is partitioned in two parts, second part builds on first. Part 1 Enter the following: Basic information, filing status, and dependents, Social Security (SSA- 1099); pension (1099-R), interest (1099-INT), dividends (10990DIV), health care information 8-3

48 Timothy and Nicole Sterling Fall

49 Timothy and Nicole Sterling Fall

50 Timothy and Nicole Sterling Fall

51 Timothy and Nicole Sterling Fall 2017 Part 2 Timothy and Nicole have been married for over 40 years. Timothy retired from the International Brotherhood of Electrical Workers on January 1, 2009 and elected to take a joint and survivor annuity at that time. Timothy s brokerage statement shows that he purchased 100 shares of Domestics stock on March 12, 1984 for $12,000. This is a non-covered security (means the cost basis was not reported to the IRS). He sold the stock on March 23 of this year. He received $15,000 net of commissions on the sale. The Sterlings rent their apartment, paying $1500 per month. Enter the following: Pension (1099-R) and perform Simplified Method Brokerage statement (1099-B) Rent deduction in MA and determine eligibility for Circuit Breaker 8-7

52 Timothy and Nicole Sterling Fall

53 Albert and Lois Meadows Fall

54 Albert and Lois Meadows Fall

55 Albert and Lois Meadows Fall 2017 Objectives Prepare MFJ return for retired couple with son living with them Enter 1095-A for Marketplace purchased insurance; determine impact on return Use Simplified Method on pension; handle alimony paid, enter student loan interest Interview Notes adapted from the NTTC workbook Albert and Lois show you the following social security cards: Albert Lois Warren Lois and Albert have no mortgage and their real estate taxes are not high enough for them to itemize deductions. This is a two-part problem. Part 1 Albert retired on December 1, 2013 after 30 years of service. He is under 65 and not disabled and does not yet receive social security. His pension was set up as a joint/survivor. For Part 1, assume Albert has full-year health insurance from his former employer for the entire family. Their MA 1099-HC shows their subscriber numbers as (Albert) and (Lois). The EIN for Acme Insurance is Enter the following: Basic information, filing status, and dependents Wages (W-2) Interest (1099-INT) with early withdrawal penalty Dividends (1099-DIV), with foreign taxes paid IRA (1099-R). There were no prior contributions made while a MA resident. Pension (1099-R) assume it is all taxable Health care information 9-3

56 Albert and Lois Meadows Fall

57 Albert and Lois Meadows Fall

58 Albert and Lois Meadows Fall

59 Albert and Lois Meadows Fall 2017 Part 2 Lois attended Woodbury Community College several years ago where she took teaching certification classes that were necessary for her job. She shows you a 1098E with student loan interest. Albert was married previously to Eleanor Meadows and he pays her $ a month alimony. Change health care information to indicate they have insurance purchased from the Marketplace because Albert turns out is not eligible for health insurance coverage from his former employer and his wife Lois is not offered insurance at her place of work. Albert purchased health insurance through the Marketplace for himself, his wife, and his son several years ago and continued to do so this year. When Albert purchased health insurance for the family he estimated their household income at $2,000 per month. Their MA 1099-HC showed their subscriber numbers as (Albert) and (Lois). EIN is Enter the following: Adjust amount taxable pension income using simplified method Enter student loan interest Enter alimony Enter 1095A 9-7

60 Albert and Lois Meadows Fall

61 Jeremy and Janice Clark Fall

62 Jeremy and Janice Clark Fall

63 Jeremy and Janice Clark Fall 2017 Objectives Prepare MFJ working couple return with two sons as possible dependents Enter typical income types Determine impact of spouse having no health insurance federal and MA penalties and affordability questions Interview Notes adapted from the NTTC workbook Jeremy and Janice were married two years ago. Jeremy says he had health insurance that meets MEC through his work for himself and his two sons Thomas and Sean. Janice was not eligible for health insurance through her job and did not apply for any marketplace exemptions. Jeremy shows you his MA 1099-HC showing he has Blue Cross Blue Shield insurance, EIN , subscriber number They currently live with Jeremy s widowed mother in her home and pay no rent or real estate taxes. They did not itemize last year and will not itemize this year either. Jeremy and Janice show you the following social security cards: Jeremy Janice Thomas Sean The calculated MA penalty is $732. To answer the MA affordability questions in TaxSlayer, use the instructions for MA Sch HC in the Form 1 Instructions. Assume the Clarks live in region

64 Jeremy and Janice Clark Fall

65 Jeremy and Janice Clark Fall

66 Jeremy and Janice Clark Fall

67 Mark Austin Fall

68 Mark Austin Fall

69 Mark Austin Fall 2017 Objectives Prepare return for taxpayer, separated from spouse; did not live together Determine filing status, impact for MA state refund, standard vs itemized deduction Discuss Railroad Retirement income types and enter data Determine how to handle prior traditional IRA contributions on MA return Handle first time homebuyer repayment Interview Notes adapted from Pub 4491-W Social Security numbers provided: Mark Austin Andrea Austin Mark and Andrea Austin have been separated since They have not lived together since the separation, but their divorce is not finalized. Andrea s birthday is 6/17/1940. This is a two-part problem. Part 1 Andrea has already filed her tax return and she itemized her deductions. Mark itemized deductions last year and received a refund from the MA department of revenue for $171. Mark itemized because Andrea did the same. His itemized deductions total $13,750 his taxable income was $8,549. The amount from last year s Schedule A, line 5a (income taxes) was $423. His general sales tax was $350. Mark retired on 15 January 2005 and began taking annuity payments from the Railroad and now works part-time as a machinist. His annuity does not make provisions for a joint and survivor annuity. He had Medicare for minimum essential coverage all year. Enter the following: Basic information, filing status, and dependents. Railroad retirement income (RRB-100/RRB-1099-R) Wages (W-2) Dividends (1099-DIV) IRA (1099-R); assume all is taxable in MA Health care information 11-3

70 Mark Austin Fall

71 Mark Austin Fall

72 Mark Austin Fall 2017 Part 2 Mark contributed a total of $12,000 to his IRA while he was a MA resident and has taken $1350 since he turned 70 ½. His church contributions were $1,700 (per statement from the church). Mark itemized deductions last year and received a refund from the MA department of revenue for $171. Mark itemized because Andrea did the same. His itemized deductions total $13,750 his taxable income was $8,549. The amount from last year s Schedule A, line 5a (income taxes) was $423. His general sales tax was $350. Mark purchased a new home on April for $134,000. He received $7,500 for his First Time Home Buyer Credit. The IRS sent him a CPO3A reminding him about the repayment of the annual $500 that needs to be included on his tax return. He repaid the minimum $500 on all tax returns since 2010 and will do the same this year. He paid $125 in car excise taxes this year. 11-6

73 Mark Austin Fall 2017 Enter the following: MA refund Itemization First time home buyer credit Prior IRA contributions in MA 11-7

74 Mark Austin Fall 2017 This page left blank. 11-8

75 Sean and Stacey Graham Fall

76 Sean and Stacey Graham Fall

77 Sean and Stacey Graham Fall 2017 Objectives Prepare return for MFJ working couple with children and mother No new income types; itemize deductions with gambling losses Enter adjustments for student loan interest, paid alimony Calculate education credits for son and mother Calculate MA Circuit Breaker Credit and Safe Harbor tax Enter direct deposit bank information Interview Notes adapted from Pub 4491-W and the MA additions by Peter Viles Social Security cards provided: Sean Graham Stacey Graham Jeremy Graham Joshua Graham Gail Forsyth Sean and Stacey Graham are married, have two children living with them, and want to file a joint return. Stacey s mother, Gail Forsyth, lived with Sean and Stacey for the entire year. Gail s entire income consists of $2,500 earned as a teacher s aide, $360 in interest, and $4,200 in Social Security benefits. Sean and Stacey provided over half of Gail s total support. She is a US Citizen and is widowed. Both Sean and Stacy are covered by Blue Cross Blue Shield of MA. The EIN is , subscriber numbers and -2. Both children are covered under the same policy. Gail had Medicare A and B coverage all year. This is a three part return. Part 1 Enter basic information, filing status, and dependents Enter all income Enter health care information 12-3

78 Sean and Stacey Graham Fall

79 Sean and Stacey Graham Fall

80 Sean and Stacey Graham Fall

81 Sean and Stacey Graham Fall 2017 Part 2 Sean and Stacey want to itemize their deductions this year. They provide the following information with supporting documentation. Medical insurance premiums paid by Stacy $3520 Hospital bills, unreimbursed $ 315 Doctor bills, unreimbursed $ 540 Dentist bills, reimbursed by insurance $4200 Antihistamine (over the counter) $ 190 Gail s prescription drugs (unreimbursed); Stacey paid $ 650 Life insurance premiums $ 385 Insulin (unreimbursed) $ 250 Excise tax on vehicles $ 565 Mortgage interest (paid to Beringer FCU) $5656 Real estate taxes $1300 Credit card interest $ 900 Church contributions paid by check $7550 Union dues $ 875 Safety Deposit Box for investments $

82 Sean and Stacey Graham Fall 2017 Sean paid his ex-wife, Elaine, $250 per month, all year, in alimony. Elaine s SSN is Stacey paid $500 in interest on student loans for her Master of Science Degree in Elementary Education. Sean and Stacey own their own home. In 2015, their home was assessed at $251,000 and their water and sewer charges for the year were $ Stacey does a lot of on-line shopping and wishes to take the Safe Harbor use tax on the MA return. Stacey went to Reno Nevada with friends and won $1,000 playing poker. She purchases MA lottery tickets, but had no winnings. She says she incurred $1,500 in gambling losses and says she has a written record to support those losses. Enter the following: Itemization Adjustments to income Safe harbor tax Circuit breaker Part 3 If Sean and Stacey are due a refunds, they want the refund deposited directly into their check account at the Local National Bank in their town. If they owe on either Federal or MA returns, they want the amount owed debited. The Local National Bank routing number and checking account number are: and , respectively. Jeremy started college and was in his first year. He has not been convicted on any felony crimes. His college, Campbell University, issued a 1098-T for his education costs and scholarship. The Grahams wrote a check for $7,000 to Campbell, which is located at 15 Morgan Drive, Your town, state and zip code. Campbell s EIN is Gail paid $800 for a college course at Campbell University to improve her classroom management skills. Enter the following: Education credits/adjustments Bank information 12-8

83 Charles and Chelsea Rivers Fall

84 Charles and Chelsea Rivers Fall

85 Charles and Chelsea Rivers Fall 2017 Objectives Prepare return for MFJ retired couple with self-employment income, military pension and out-of-state (PA) government pension Determine how to handle MA and PA municipal bond interest Determine how to handle MA short term and long term carryover losses Enter federal estimated payments and carryover MA refund to current year Interview Notes Originally prepared by Bill Long, District 18 Charles Rivers and his wife, Chelsea, are a retired couple who provide you with the attached Interview Sheet, and Social Security cards whose numbers are for him and for her. They also bring paper copies of their prior year US and Massachusetts tax returns. They have been full-time residents of Massachusetts since their move from Pennsylvania. They live together, file jointly, and have no dependents. Part 1 The Rivers rent their main and only home, paying $1000 per month to Falmouth Properties, Incorporated, a non-subsidized apartment complex. Not much of a gambler, Charles won a lottery prize, on a one-dollar ticket received as a gift on Father s Day; he has given you a W-2G reporting this win. He also tells you he lost $50 in slots at a Connecticut casino. Mr. Rivers also gives you a receipt from UMass Dartmouth, for payment of tuition on behalf of his grandson, Hudson Rivers, in the amount of $3000. The Rivers did not itemize deductions on their prior year Federal return and will not do so this year either. When you request evidence of health insurance, the Rivers present a pair of BlueCross/BlueShield cards, showing Federal ID provider , and subscriber numbers of A (her) and B (him); they also lament the cost of this insurance, $2,500 per year for each of them, hoping they can deduct it on the Massachusetts return. Charles says YES to both the Federal and Massachusetts campaign funds, while Chelsea says NO to both. Enter the following: Basic information and filing status Interest income (1099-INT), dividend income (1099-DIV), gambling income Pension income (1099-R) from DFAS and Middlesex Savings IRA Health care information 13-3

86 Charles and Chelsea Rivers Fall

87 Charles and Chelsea Rivers Fall

88 Charles and Chelsea Rivers Fall

89 Charles and Chelsea Rivers Fall 2017 Part 2 Mrs. Rivers retired from a long-term teaching career in Pennsylvania. She comments to you that Pennsylvania does not tax Massachusetts public teachers pensions. Charles 1099R from the Middlesex Savings Bank indicates an IRA distribution. You ask him for some details about the history of that IRA account. He tells you that he has maintained a record of his contributions and distributions, and he refers to his prior year Massachusetts Form 1, Schedule X, Line 2 Worksheet. You learn that the total amount of his contribution to the IRA during his working years was $25,000. In each of the eight years preceding the current year he had taken distributions of $3000 per year. None of those distributions qualified as charitable IRA donations. All his contributions to this IRA were made during the time he has lived and worked in Massachusetts. Charles worked a few evenings per week during the summer as a gate tender for an exclusive community in Falmouth. For this part-time effort he received $7500 in wages, documented in the 1099-MISC that he has given to you. He incurred no reportable expenses in the performance of this job. Considered a member of the community security staff, he tells you his job has been coded on tax returns in prior years. Enter the following: Pennsylvania pension Self-employment income (and schedule C) Make MA IRA adjustment for prior contributions 13-7

90 Charles and Chelsea Rivers Fall

91 Charles and Chelsea Rivers Fall 2017 Part 3 To cover the taxes on this self-employment income, Charles made four estimated tax payments of $300 each to the IRS, on April 15th, June 15th, September 15th, and December 15th. From his prior year Massachusetts return, Form 1, Line 46, you learn that he also applied $100 of his overpayment to his current year Massachusetts estimated tax. They offer you two statements from their broker, where they have a portfolio of municipal bonds. They tell you they are uncertain whether or not the information is pertinent to their tax return. The statements are for the following: City of Worcester, Massachusetts, bond interest: $ City of Altoona, Pennsylvania, bond interest: $ In checking the Rivers prior year Federal return, you find no indicated capital losses to carry forward to the current US return. However, looking over the prior year Massachusetts return, you find these entries: Schedule B, Line 40, Available short-term losses for carryover: -$283 Schedule D, Line 23, Available long-term losses for carryover: -$444 Enter the following: Municipal bond interest Estimated federal tax payments Carryover MA refund Carryover MA losses Rent of $1000/month 13-9

92 Charles and Chelsea Rivers Fall