Adjustments to Income

Transcription

1 Adjustments to Income Health Savings Account select to open Form (HSA Certification required) Must be Certified for Military. Check the box near the top of the form to indicate an Armed Forces PCS move. Flows over from input of Form INT in Interest Income. If the taxpayer paid alimony to more than one person, add a second payee after entering the first. Student Loan Interest paid is entered here See Education Benefits Tab for additional information. Note: Military reservists who must travel more than 100 miles away from home and stay overnight to attend a drill or reserve meeting may be able to deduct their travel expenses as an adjustment to income rather than as a miscellaneous itemized deduction. NTTC 12/28/2016 E-1

2 Educator Expenses Don t rely on this table alone. Refer to Publication 17 for more details. Question What is the maximum benefit? Who can claim the expense? What are qualifying expenses? What are non qualifying expenses? What other issues apply? Answer $250 (If the taxpayer and spouse are both eligible educators, they can deduct up to $500, but neither can deduct more than their own expenses up to $250). Taxpayers may be able to deduct expenses that are more than the limit as a miscellaneous deduction on Schedule A. Eligible Educators an eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Qualifying expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Additionally, professional development expenses. Expenses for home schooling or non athletic supplies for courses in health or physical education. Taxpayer must reduce qualified expenses by Excludable U.S series EE and I savings bond interest from Form 8815 Non taxable qualified tuition program earnings or distributions Non taxable distribution of earnings from a Coverdell education savings account Any reimbursements received for expenses that weren t reported on the Form W-2 Note: Professional development expenses include courses related to the curriculum in which the educator provides instruction. E X 12/2016

3 ($1,000 per person over 55) Replaced entire page: 4491X 12/2016 NTTC 12/28/2016

4 Publication 4885 Screening Sheet for Health Savings Accounts (HSA) NOTE: Only volunteers with Health Savings Account Certification may assist taxpayers with HSA issues. Instructions: This Screening Sheet will help you identify HSA issues that are within the scope of the VITA/TCE program. Use the Determine HSA Eligibility section to determine if taxpayer is eligible for an HSA; use Part I for contributions/deduction; use Part II for distributions. References: Publication 969, Form 8889 and Instructions Determine HSA Eligibility (To set up an HSA or make contributions to an HSA) TO QUALIFY: An individual must meet ALL the following requirements: Be covered under a high deductible health plan (HDHP) on the first day of any month of the year. Have no other health coverage except for allowable other health coverage. (Publication 969, Other health coverage ) Not be claimed as a dependent on someone else s tax return. (Publication 969, Qualifying for an HSA ) Not be covered by Medicare (but the individual can be HSA eligible for the months before being covered by Medicare) NOTE: If the taxpayer doesn t qualify, but contributions have been made to an HSA, the taxpayer should be referred to a professional tax preparer. PART I HSA Contributions and Deduction 1 If eligible, were contributions made to an HSA? YES Complete Form 8889, Part, I, lines 1 and 2. Go to Step 2. NO GO TO PART II. 2 Was the taxpayer enrolled in the same HDHP coverage for the entire year? (Answer Yes, if last-month rule applies, and see Form 8889 Instructions) Caution: If line 2 is more than line 13, the taxpayer must withdraw the excess contribution to avoid an additional tax. If the excess is not timely withdrawn, refer the taxpayer to a professional tax preparer. (Refer to Form 8889 Instructions, line 13). YES Complete Form 8889, Part I, lines FOR YES OR NO: Lines 4 and 10 are out of scope. NO Refer to Form 8889 Instructions for additional information on completing line 3. PART II HSA Distributions 1 Did the taxpayer receive distributions from the HSA trustee (whether or not Form 1099-SA received)? YES Complete Form 8889 Part II, Line 14a, 14b, if applicable, and 14c. Go to Step 2. NO STOP, do not complete Part II. 2 Did the taxpayer use all or part of the distribution to pay or get reimbursed for qualified medical expenses during the year that were incurred after the HSA was established and were for qualified persons? YES Enter the amount on line 15 and complete line 16. Go to Step 3. NO Enter zero on line 15 and complete line 16. Go to Step 3. 3 If any part of the distribution is taxable, was the distribution made after the taxpayer died, became disabled or turned 65? YES Check box on line 17a and complete 17b. NO Taxpayer will be subject to an additional 20% tax. Publication 4885 (Rev ) Catalog Number 55732V Department of the Treasury Internal Revenue Service E-4 NTTC 12/28/2016

5 TIP Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments AREN T alimony if any of the following are true: Payments are required by a divorce or separation instrument. Payer and recipient spouse don t file a joint return with each other. Payment is in cash (including checks or money orders). Payment isn t designated in the instrument as not alimony. Spouses legally separated under a decree of divorce or separate maintenance aren t members of the same household. Payments aren t required after death of the recipient spouse. Payments aren t required by a divorce or separation instrument. Payer and recipient spouse file a joint return with each other. Payment is: Not in cash, A noncash property settlement, Spouse s part of community income, or To keep up the payer s property. Payment is designated in the instrument as not alimony. Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. Payments are required after death of the recipient spouse. Payment isn t treated as child support. These payments are deductible by the payer and includible in income by the recipient. Payment is treated as child support. These payments are neither deductible by the payer nor includible in income by the recipient. IRA Deduction Note: Taxpayer s age must be 70½ or younger to contribute to a traditional IRA; if married filing separately, couldn t have lived together any time during the year. Contributions can be made until the filing deadline (generally April 15) of the year following the tax year. Note: compensation for purposes of an IRA contribution includes alimony received. TaxSlayer Hint: If the taxpayer made a traditional IRA contribution, select Adjustments from the Deductions menu, then select IRA deduction, shown below. Don t enter a Roth IRA contribution on this screen. Enter it in the Credits section. If eligible, the software will calculate a Retirement Savings Contributions Credit. Be sure to enter any applicable retirement plan distributions. See the Nonrefundable Credits tab for more information on this credit. CAUTION: If the total of traditional and Roth IRA contributions exceed the lesser of total compensation or the annual limit, the taxpayer must withdraw the excess before the filing deadline or a penalty will apply and the return will be out of scope. 4491X 12/2016 NTTC 1/28/2017 E-5

6 TIP Student Loan Interest Deduction at a Glance Caution: This table is only an overview of the rules. For details, see Publication 17. Feature Description Maximum benefit You can reduce your income subject to tax by up to $2,500. Loan qualifications Student qualifications Time limit on deduction Phaseout Your student loan: Taxpayer must be legally liable for the loan. must have been taken out solely to pay education expenses, and can t be from a related person or made under a qualified employer plan. The student must be: you, your spouse, or a person who was your dependent when you took out the loan, or would ve been your dependent except you were a dependent, or had gross income over the exemption amount, or filed MFJ. enrolled at least half-time in a program leading to a degree, certificate or other recognized educational credential. You can deduct interest paid during the remaining period of your student loan. The amount of your deduction depends on your income level. If student loan interest is paid by someone who isn t legally liable for it, the payment is treated as received by the person who s legally liable, and the person legally liable is allowed to take the adjustment. E-6