Tax Preparer Resource Manual

Transcription

1 Tax Preparer Resource Manual Prepared by Rochester C.A.S.H. Coalition Filing Season 2016 for Tax Year 2015

2 The 2015 C.A.S.H. Volunteer Training Manual is a work product of the Greater Rochester C.A.S.H. Coalition, and cannot be used, reproduced, or distributed without the express written consent of the: C.A.S.H. Coalition Empire Justice Center 1 W. Main Street, Suite 200 Rochester, NY Copyright December

3 PART I: IMPORTANT C.A.S.H. INFORMATION... 7 Volunteer Protection Act:... 7 New For TY 2015, Drop Off Service at Super Sites... 7 PART II: TAX PREPARER PROCESS... 8 Overview... 8 The Client s Experience... 9 Tax Preparer Process Common Definitions PART III: INCOME PART IV: FEDERAL ADJUSTMENTS, DEDUCTIONS & CREDITS Adjustments Deductions Schedule A Deductions Chart: Federal Credits: Refundable And Non-Refundable Child And Dependent Care Credit Earned Income Tax Credit Affordable Care Act Summary Of Rules For Qualifying Child For Various Credits Summary Chart of Tax Rules as They Apply to Children Education Credits PART V: NYS ADJUSTMENTS, DEDUCTIONS AND CREDITS INCOME TAX Basics Of State Income Tax Common Adjustments Required For NY State Tax Return Retirement Contributions 414H State Income Tax Refunds from Prior Year Pensions, Social Security, and Annuity Income Government Bonds Standard or Itemized Deduction Exemptions NYS Credits: Refundable Empire State Child Credit Form IT NYS Child And Dependent Care Credit Form IT NYS Real Property Tax Credit Form IT Filling Out Form IT

4 NYS Earned Income Credit Form IT NYS Non-Custodial Parent Earned Income Credit Form IT College Tuition Credit Form IT NYS Volunteer Firefighter /Ambulance Worker Credit Form IT Other Considerations Amended Returns Helpful Hints New York State Only Returns Tax Computation, Credits And Other Taxes PART VI: FINISHING THE RETURN Level I. Preparer Review Refund Splitting Level II. Designated Quality Reviewer Check Level III. Client Review Final Completion Steps For Paper Filed Returns PART VII: TAX INFORMATION FOR COMPLEX RETURNS Federal Form 8453: Individual Income Tax Transmittal Form: Innocent Spouse Federal: Form 8857 (Request for Innocent Spouse Relief) State: Form IT-280 (Non-Obligated Spouse) Injured Spouse Federal: Form 8379 (Injured Spouse Allocation) State: Form IT-280 (Non-Obligated Spouse) PART VIII: AMENDED AND PRIOR YEAR RETURNS Amended Tax Returns - Form 1040X and NYS IT 201 X Steps for Amended Returns Prior Year Returns Highlights for Highlights for Highlights for Estimated Tax Return - Form 1040ES Extensions PART IX: TOOLS AND RESOURCES References Materials Provided During Training:

5 Instructions for Link and Learn; Taxwise Training and IRS Certification Test: Web and Phone References New York State Dept. of Taxation IRS OTHER RESOURCES Student Loan Interest 1098-E Tuition Statement 1098-T

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7 PART I: IMPORTANT C.A.S.H. INFORMATION Volunteer Protection Act: The Volunteer Protection Act generally protects unpaid volunteers from liability for acts or omissions that occur while acting within the scope of their responsibilities at the time of the act or omission. It provides no protection for harm caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer. C.A.S.H. Staff and Contact Information C.A.S.H. staff is here to help you. Feel free to contact them with suggestions or concerns. Name Title Phone Berta Rivera Director brivera@empirejustice.org Tracy Merlau Outreach & Volunteer Mgr tmerlau@empirejustice.org Susan Bonkowski Administrative Assistant sbonkowski@empirejustice.org Website: Training Website: New For TY 2015, Drop Off Service at Super Sites This service provides clients the ability avoid long wait times by dropping off (scanning) their tax information and picking up their completed return at a later date. Super Sites will be closed to the public on Wednesdays to allow for preparation of these returns. Below is a flow chart that explains the Drop-Off Service for clients. The Drop Off Service will be explained in more detail during training. Client Process for Drop Off Service Client completes Intake Paperwork and meets with Drop Off Coordinator (DOC) Volunteer DOC reviews paperwork and completes CASH Advisor checklist to assess eligibility, certification level, and relevant tax documents. YES Is client eligible for Drop Off Service? NO DOC reviews Drop Off Authorization Form and pickup instructions with client. DOC scans all necessary tax documents and returns originals to client. Client picks up return at a later date. DOC makes appointment for client to return for Tax Prep ONLY. 7

8 PART II: TAX PREPARER PROCESS Overview Successful Tax Preparers are able to make people feel welcome and at ease while engaging in conversation that includes probing questions to gather the information required to prepare a complete and accurate tax return. They are comfortable with people from diverse cultural and socio-economic backgrounds. The role of the Tax Preparer includes all of the following: Follow the Volunteer Standards of Conduct (Pub 4012) Use the IRS and C.A.S.H intake sheets and the taxpayer s documents to complete a thorough, probing interview of the client to ensure all relevant information is available. Consult a site manager if the accuracy of the information provided by the client is open to question or to verify if the tax return is within the VITA scope. Use Publication 4012, Volunteer Resource Guide, and Publication 17, Your Federal Income Tax, and the NYS TP-300 New York State Quick Reference Desk Guide throughout the tax preparation process to assist in making the proper tax law determination and ensuring the completion of an accurate tax return. Collect important information about C.A.S.H. clients by entering data from the C.A.S.H. Intake Sheet into the Preparer Use Fields. Encourage clients to engage in asset building. Explain the advantages of opening a checking or savings account with one of our partner banks or credit unions. Close the deal with the Cash Advisor and the Asset Building Specialist by encouraging saving part of the refund in long-term savings products such as savings bonds. Follow the procedures established by C.A.S.H. to complete a quality review for every return prepared. Review all C.A.S.H. updates throughout the tax season. They contain important tax law updates. 8

9 The Client s Experience 9

10 Tax Preparer Process 1. Sign into TaxWise on-line. See Pub 4012, Sec N for instructions. 2. Pick up return from front desk and verify it is within scope of your training certification: Basic, Advanced, etc. IF UNSURE, CONTACT SITE MANAGER 3. Meet the client, introduce yourself, and explain the process. 4. Review the C.A.S.H. and IRS Intake Sheets and all the tax documents. a. Verify picture ID and Social Security cards for client(s) and all dependents b. Check if tax documents are current year and complete. c. Make sure there is a reason to file. d. Type the information from the Intake Sheet into the TaxWise Main Info Page: Make sure you have a phone number. Verify Filing Status and Dependent Information: o Ask about dependent care expenses (Day Care). o Always check EIC box in TaxWise. Make sure to input bank information if appropriate; if no Bank Info, ask client about setting up account or getting a pre-paid card. 5. Review income tax documents against Part III of the IRS Intake Sheet. 6. Review adjustments, expenses and/or deductions against Part IV of the IRS Intake Sheet. 7. Review return for possible credits such as: EIC, Child Care, Education, Retirement. 8. Review Part V of the IRS Intake Sheet for other related tax events. 9. Review Part VI for ACA information for Premium Tax Credit and Minimum Essential Coverage. 10. Check p. 2 of 1040 to see if it makes sense. 11. Open NYS Return (IT-201). Double check page 3 of C.A.S.H. Intake Sheet to make sure there are no additional credits to input. a. Input County and School Code (Use Desktop Icon). b. Check for any NY additions or subtractions. Pay special attention to 414HSUB contributions. c. Check for NY credits: Education (NYS Form IT-272 if client has education credits on Fed Return) Child Care (NYS Form IT-216) Property Tax Credit (NYS Form IT-214) Non-Custodial (NYS Form IT-209) Empire State Child Care Credit (NYS Form IT-213) 12. Verify the NYS withholding amount has been inputted correctly. Complete the return and get 10

11 the red out. 13. Enter the answers from C.A.S.H. Intake Sheet into Preparer Use Fields in TaxWise 14. Complete three levels of review by following the detailed instructions listed in PART IV: FINISHING THE RETURN section of this manual. Common Definitions Term Adjustments AGI Credits (Non-Refundable) Credits (Refundable) Deductions Dependent Exemption Income Non-Resident Aliens Resident Aliens Definition Items that may be subtracted from income to arrive at the taxpayer s Adjusted Gross Income. Adjusted Gross Income Items which can be used to reduce one s tax liability to zero. Items which can be used to reduce one s tax liability, and will result in a refund if they are greater than the tax liability. Either a standard amount based on one s filing status or an itemized list of qualified items which may be subtracted from the AGI before calculating taxes. Person (other than spouse) who is supported by the taxpayer and meets the specific criteria to be a qualifying child or a qualifying relative. A person who is a dependent can also have his or her own tax return and be the taxpayer on that return. If that is the case, this person will need to file as a dependent and will NOT be able to claim the personal exemption. Amount of money per qualifying person (taxpayer, spouse, dependents) that may be subtracted from income before figuring taxes Money received by the taxpayer. Chart on Taxable vs. Nontaxable income can be found in reference book 4012 on Tab D. Individuals in the U.S. on a temporary basis (students and others without visas or green cards.) They need to have an ITIN to be included on an income tax return. Citizens who are married to nonresident aliens typically file Married Filing Separately to avoid complications. See your site manager for help with all non- resident alien returns as these require Advanced Certification. Individuals who are not U.S citizens but who are lawful, permanent residents of the U.S. They have an alien registration card (green card) and generally a Social Security card and follow the same tax laws as U.S. citizens including reporting worldwide income on their tax returns. 11

12 Social Security And Social Security Disability (SSD) Income The taxpayer will receive a pink edged SSA 1099 form and the income must be reported. Both SSD and Social Security income of the taxpayer and the spouse can be taxable depending on how much additional income they have. Social Security benefits received by children are NOT reported on the parents tax return, and normally the child does not have enough income to have to file his or her own return. Children receive benefits because a parent has died, a parent is disabled, or the child is disabled. Spouse Supplemental Income (SSI) Security Husband or wife of the taxpayer Federal government program that provides stipends to very lowincome people who are either aged (65 or older), blind, or disabled. Although run by the Social Security Administration, SSI is funded from the U.S. Treasury general funds. SSI is NOT TAXABLE and taxpayers will not get a pink SSA1099 form. SSI is considered income when determining eligibility for the New York Real Property Tax Credit. You must ask about it when you prepare NYS Form IT 214. Taxpayer Person whose name appears first on the tax form (1040) Totally And Permanently Disabled Person cannot engage in substantial gainful activity because of a physical or mental condition. A doctor has certified the condition has lasted or will last continuously for at least a year or will lead to death. 12

13 PART III: INCOME PUB 4012 TAB -D Income is considered taxable or non-taxable. NOTE TO VOLUNTEERS CERTIFIED AT BASIC LEVEL If you see anything on the IRS Intake Sheet marked with an (A), the return should only be done by someone with Advanced Certification. Special Notes About Other Income On Line 21 On Form Common types of Income on Line 21: o Gambling winnings from Form W-2G o Form 1099-MISC Volunteers certified at basic level MUST consult Site Manager before inputting any information from this form. Line 1 (if from Monroe County DSS) Line 3 Line 7 for self-employment income (Advanced Preparers ONLY: see below) Self-Employment Income-Advanced Preparers Only Most income that is reported in BOX 7 of 1099-MISC must be reported as selfemployment income: Reminders of VITA Scope for Self Employment Income: o Businesses can t have employees. o Businesses can t show a loss. o Businesses can t have inventory. Use Schedule C-EZ for businesses with expenses less than $5,000. Use Schedule C for business with expenses between $5,000 & $10,000. CALL A MANAGER IF THERE ARE SITUATIONS THAT ARE QUESTIONABLE OR DON T MEET ABOVE CRITERIA 13

14 PART IV: FEDERAL ADJUSTMENTS, DEDUCTIONS & CREDITS Refunds Are Increased And/Or Taxes Are Lowered In Three Main Ways: Exclude money that is normally taxed (exemptions, adjustments, and/or deductions) Non-refundable credits Refundable credits Adjustments PUB 4012 TAB - E Adjustments to income are entered after all income has been entered. They are special items that are subtracted from total reportable income to arrive at Adjusted Gross Income (AGI) which is used to compute various deductions and credits on the tax return The most common adjustments are Student Loan Interest (limited to $2,500) and the deductible part of self-employment tax. Deductions PUB 4012 TAB - F PUB 17, CHAPTER 20 Deductions are other items that reduce the taxpayer s taxable income. Taxpayers can either use the standard deduction or claim itemized deductions (see Schedule A Deduction Chart on next page). Most C.A.S.H. clients take the standard deduction because it is more than the total of their itemized deductions. However, always check the possible total of itemized deductions if a client owns a home 14

15 Schedule A Deductions Chart: PUB 4012, P F-7 Deductible Not Deductible Medical Insurance Premiums (including long term care insurance premiums and Medicare premiums) Doctor Co-Pays Prescription Drugs And Insulin Amounts reimbursed by insurance or paid with pre-tax dollars (cafeteria plans) Non-prescription drugs (over the counter drugs) Medical Devices such as wheel chairs and crutches Payments to Dentists & Nurses Eyeglasses Mileage driven for medical purposes Charity Contributions whether cash or non-cash. Charity must qualify and you must have documentation. If non-cash donations are over $500, return is OUT OF SCOPE. Money given directly to individuals; Political Donations are NOT deductible State and local income taxes paid OR sales taxes paid including those on automobiles, RV's, boats, and airplanes Real estate taxes on the home Interest paid on home mortgages or home equity loans, including "points" Casualty or theft losses - return is OUT OF SCOPE Gambling losses only to the extent of the winnings Other interest such as credit card or personal loan interest Those covered by insurance payments Losses without winnings Safe deposit box rent Other investment costs such as IRA account fees Union dues, job travel, tools, safety glasses Commuting; items reimbursed by employer Clothes purchased for the job if they would not ordinarily be worn "on the street" 15

16 Federal Credits: Refundable And Non-Refundable PUB 4012 TAB G and I Credits directly reduce the amount of taxes owed (as opposed to deductions which reduce the amount of income taxed.) There are two types of tax credits: non-refundable and refundable. Refundable credits are treated in a manner similar to tax payments. The credit is used to reduce the client s tax liability and any amount in excess of the tax liability is fully refunded. Non-refundable credits are credits that are only available to decrease income taxes paid to zero. If the non-refundable credits are greater than the amount of tax owed, this excess is not refunded to the client. Because many C.A.S.H. clients have income low enough to avoid any income tax, these credits sometimes are not used. Below are the types of credits that commonly appear on C.A.S.H. returns: Non-Refundable Refundable Child and Dependent Care Credit* Earned Income Tax Credit Child Tax Credit* Additional Child Tax Credit Lifelong Learning Education Credit* American Opportunity (40%) American Opportunity Education Credit ACA Advanced Premium Tax Credit (40% refundable)* Retirement Savings Credit Energy Credits *Refundable in New York Child And Dependent Care Credit Note: ALWAYS complete this form even if the taxpayer gets no federal credit, because he/she WILL get a New York refundable credit. Parents may claim a non-refundable credit for child care expenses. There is a limit of $3,000 for child care expenses per child; $6,000 for two or more children. This credit may also be taken for care of one s spouse or other relatives who are incapable of self-care and are the taxpayer s dependent. The credit is claimed by the completion of Form 2441, Child and Dependent Care Expenses. Marking DC for the qualifying child on the Main Information Screen makes the form a required entry. 16

17 Earned Income Tax Credit PUB 4012 TAB- I The Earned Income Tax Credit (EITC) is a refundable tax credit designed for low-income working people. This credit benefits around 40% of C.A.S.H. clients. It is particularly beneficial for families with children. Clients may receive a refund even though they never paid any tax or had any tax withheld. A tax filer must have earned income or self-employment to receive a benefit. The EITC credit amount rises with earned income up to a specified income amount and remains the same for a specified additional amount of income; then the credit is reduced until it is zero at the maximum AGI and earned income level that qualifies for a credit. Affordable Care Act PUB 4012 TAB-ACA New for 2014 Tax Year 2 components of Affordable Care Act: o Premium Tax Credit o Minimum Essential Coverage Summary Of Rules For Qualifying Child For Various Credits Note: Younger than 24 only applies if the child is a student. Child Care Credit Until the age of 13 (birthday). MUST have custody. Child Tax Credit Dependents Younger than 17 years old at the end of the tax year. MUST be a dependent; Do NOT need custody. Younger than 19/24 years old at the end of the tax year. Do NOT need custody but must have Form Education Credits EITC Head of Household Younger than 24. MUST be a dependent Younger than 19/24 years old at the end of the tax year or permanently disabled MUST have custody. MUST have custody. Does NOT need to be a dependent. 17

18 There Are 7 Potential Tax Breaks For Children 1. Exemption for dependency 2. Child tax credit 3. Education credit 4. Head of Household eligibility 5. Dependent care (day care) 6. Exclusion for dependent care benefit (day care taken out of paycheck pre-tax) 7. Earned Income Credits Divorced or separated parents can split tax breaks child related according to these rules: 1. A parent who has physical custody AND claims the child as a dependent is eligible for all seven tax breaks. 2. The parent who claims the child as a dependent, but does not have custody is eligible for 3. #1, 2 and 3 only. 4. The parent who has custody but has released the claim for dependency is eligible for #4, 5, 6, and The non-custodial parent who wishes to claim a child as a dependent must attach Form 8332 or a similar statement, signed by the custodial parent, whose only purpose is to release a claim for exemption Note: If the child meets the conditions to be the qualifying child of more than one person who is NOT a parent, then only 1 person can claim the child for all the tax breaks. (For more details, see Pub. 501.) 18

19 Summary Chart of Tax Rules as They Apply to Children ALL THOSE KIDS THE BASICS * means different rules if not a child **means different rules if divorced/separated AGE RELATIONSHIP RESIDENCY SUPPORT CHILD CARE CREDIT Child must be taxpayer s Child must be under age child, stepchild, legal foster 13 or disabled at the child, sibling, step sibling or time of the child care descendant of any of these Child must live with taxpayer for more than half the tax year. Some temporary absences are allowed Child did not provide over ½ of his/her own support. Special rules for divorced parents. CHILD TAX CREDIT Child must be under age Child must be taxpayer s 17 at the end of the child, stepchild, legal foster year. (No exception for child, sibling, step sibling or disabled children) descendant of any of these **Child must live with taxpayer for more than half the tax year. Some temporary absence allowed. Child did not provide over ½ of his/her own support. Must be a dependent. Child must be under 19 at end of year; under DEPENDENCY age 24 if full time EXEMPTION* student; any age if disabled Child must be taxpayer s child, stepchild, legal foster child, sibling, step sibling or descendant of any of these **Child must live with taxpayer for more than half the tax year. Some temporary absences allowed. Child did not provide over ½ of his/her own support. EDUCATION CREDITS* Child must be under age 24 and a half time student. (Except Lifetime Learning Credits) Child must be taxpayer s child, stepchild, legal foster child, sibling, step sibling or descendant of any of these Child did not provide over ½ of his/her own support. Must be a dependent EITC Under 19 at end of year; Child must be taxpayer s under 24 if a full time child, stepchild, legal foster student; any age if child, sibling, step sibling or disabled descendant of any of these Child must live with taxpayer for more than half the tax year. Newborns still qualify if less than 6 months old. Some temporary absences allowed. No support test. (Married child cannot provide over ½ of his/her own support) Child must be under 19 at end of year; under HEAD OF age 24 if full time HOUSEHOLD* student; any age if disabled Child must be taxpayer s child, stepchild, legal foster child, sibling, step sibling or descendant of any of these Child must live with taxpayer for more than half the tax year. Some temporary absences allowed. Child did not provide over ½ of his/her own support. Taxpayer must provide over half the cost of maintaining household. 19

20 Education Credits PUB 4012 TAB J You must go to the following Education Credit forms in the tax tree: Federal - Form 8863 NYS - Form IT-272 Below is a useful chart to compare the credits and how NYS relates to the Fed Return. AMERICAN OPPORTUNITY LIFETIME LEARNING NYS EDUCATION CREDIT Qualifying Institution Any college, university, vocational school or other post-secondary educational institution eligible to participate in student aid Any college, university, vocational school or other post- secondary educational institution eligible to participate in student aid Any institution recognized by Regents of Univ. of NY or nationally accrediting agency recognized by the Regents. Enrollment Requirement At least half-time in a program leading to a degree or certificate; available for first 4 years post-secondary education Need not be in a degree Need not be attending full program nor attending halfor half- time: available time or more; can be used for under- graduate or graduate for undergraduate courses work only Other conditions Qualifying expenses Non-qualifying expenses Excluded expenses For whom No felony drug conviction Tuition, fees and course materials (includes necessary books, supplies and equipment) Room & Board, medical, transportation, personal living expenses Courses involving sports, games, hobbies unless part of the degree program Expenses paid by Pell, TAP, employer, veteran's assistance, tax-free scholarship or fellowship; refund of qualified Taxpayer, spouse, dependent. Student; cannot be a dependent on another return. Courses to acquire or improve job skills Tuition, fees and course materials if required and paid Tuition only to the institution (school bookstore, not on-line) Room & Board, medical, transportation, personal living expenses Expenses paid by Pell, TAP, employer, veteran's assistance, tax-free scholarship or fellowship; refund of qualified expenses SAME Must be full year NY resident Room & Board, medical, transportation, personal living expenses, necessary books, supplies & equipment Expenses paid by Pell, TAP, employer, veteran's assistance, tax-free scholarship or fellowship; refund of qualified expenses SAME 20

21 PART V: NYS ADJUSTMENTS, DEDUCTIONS AND CREDITS INCOME TAX Basics Of State Income Tax NYS PUB TP-300 TaxWise does most of the work in preparing the state income tax returns. Most entries on Form IT-201 and other state income tax forms come from the Federal Information that needs to be entered: o School district information (Form IT-201 page 1) o Refund/balance due information (Form IT-201 page 4) Residency: TaxWise will enter NY as the state of residency. If the client lived in another state for part of the tax year, we can complete the federal return and a partial year for New York. See your site manager for help on NY partial year returns. C.A.S.H. does not prepare returns for any other state. School District Information: The school district name and code must be entered in the top information area of Form IT-201. Be sure that the client tells you the name of the district. Do not assume that the address is the name of the district, e.g. clients with a Greece address can be in any of three different school districts, each with its own 3 digit code. The list of school districts is available as an icon on the tax preparer s desktop. Common Adjustments Required For NY State Tax Return Retirement Contributions 414H In New York, state and federal pensions are tax-exempt when paid out (except for early withdrawals.) New York collects the taxes when the contributions are made. Therefore taxpayer contributions to NY state pension funds must be entered properly to change them from taxexempt (federal) to taxable (NYS). When inputting the information from the W-2, be sure to look at Box 14 and enter 414HSUB and the amount. TaxWise will then make this amount taxable on the New York return. These contributions do not qualify for the federal Retirement Savings Credit. State Income Tax Refunds from Prior Year If the client itemized deductions on the prior year s federal return and received a NYS tax refund and used the state income tax as a deduction, the IRS considers part of the state refund to be taxable income. NYS does not treat this as taxable income and a subtraction will be made on the NYS return automatically by TaxWise. 21

22 Pensions, Social Security, and Annuity Income NYS does not tax Social Security income. NYS grants a $20,000 exclusion for all private qualifying pension and annuity income. It grants a complete exclusion for many public (New York State and local plus all federal) pensions. These exclusions cause NYS taxable income to be less than federal taxable income. To be sure that 1099R income is treated appropriately for NYS returns, the preparer must mark the appropriate $20,000+ box correctly when inputting 1099R data. Box 1 is for private pensions; Box 2 is for public (government) pensions 22

23 Government Bonds Interest income on U.S. government bonds is not taxable in New York State and is subtracted from income. On both the interest and dividend schedules there is a box called State adjust amount. Fill out the Schedule B Worksheet on the tree but be sure to mark the State adjust amount box to subtract (minus sign) the amount in box 3. Schedule B Use - Sign for Govt Bonds 23

24 Standard or Itemized Deduction The NYS standard deduction is much higher than the federal standard deduction. Many clients who benefit from federal itemized deductions may find that the NYS standard deduction is more than the total of their itemized deductions for NYS purposes. TaxWise will automatically use the more beneficial amount. Exemptions NYS does not have personal exemptions. NYS Dependent Exemptions are $1000. NYS Credits: Refundable Empire State Child Credit Form IT-213 This refundable NYS credit is similar to the Federal Child Tax Credit. Dependent children who are ages 4-16 qualify for the credit. The amount will be a 33% of the federal Child Tax Credit or $100 per qualifying child, whichever is greater. Like Form IT-214, this refundable credit is available to people who would otherwise not need to file a tax return. Even people who receive no taxable income ( receive Public Assistance, SSI, etc.) can receive $100 per qualifying child. The form cannot be filed by itself and must be part of a New York State tax return. If there is income, you will not need to do anything to make sure the credit is included in the return. TaxWise calculates the eligibility and amount of the credit and includes it in the return. If there is no taxable income, you will need to complete a brief tax return. Complete the Main Information sheet. Check that an e-file is to be created even though the federal return will not be submitted. Then go to page 1 of the 1040 and answer No to the itemized deductions question. Then go to page 1 of Form IT-201. The demographic information has transferred and TaxWise will calculate the tax credit. NYS Child And Dependent Care Credit Form IT-216 This credit is refundable even if the Federal Child and Dependent Care credit did not result in any money for the taxpayer. The amount will vary from 20% to 110% of the federal credit amount (or what the federal amount would have been.) This credit can be claimed by the custodial parent, even if the other spouse is claiming the child as a dependent. To claim the credit, complete the Federal Form The information will carry through to Form IT-216 for the New York credit. All taxpayers who paid child care and have the information about the provider will get this credit as long as the forms are completed correctly. NYS Real Property Tax Credit Form IT-214 Eligibility To qualify for the credit, the following conditions must be met: Household income must be $18,000 or less The taxpayer must live in New York State for the entire year ( TaxWise checks this) The taxpayer must live in one residence for at least six months of the year and that property must not be totally exempt from property taxes 24

25 The taxpayer cannot be claimed as a dependent What is the household? Household members include all who share your residence and its furnishings, facilities and accommodations, whether they are related to you or not. For homeowners The taxpayer or spouse must have paid the property taxes The property must be valued at less than $85,000 For renters You or someone in your household must have paid rent The adjusted average monthly rent paid must be $450 or less You cannot live in public housing exempted from property taxes (see list below) Public Housing Not Eligible for Credit Taxpayers living in one of the following Rochester Housing Authority properties may NOT claim Form IT-214 credit because these are public housing and the properties are not on the tax rolls: Lake Tower 321 Lake Avenue, Rochester, NY Lexington Court 6 Christopher Court, Rochester, NY Glenwood Gardens 41 Kestrel Street, Rochester, NY Danforth Tower East 140 West Avenue, Rochester, NY Danforth Tower West 160 West Avenue, Rochester, NY University Tower 625 University Avenue, Rochester, NY Blackwell Estates 5 Antoinette Drive, Rochester, NY Kennedy Tower 666 S. Plymouth Ave, Rochester, NY Hudson/Ridge Tower 401 Seneca Manor Drive, Rochester, NY Parliament Arms 2126 St. Paul Street, Rochester, NY Lena Gantt Estates 86 Vienna Street, Rochester, NY There are also smaller sites within the community. Ask if rent is paid to the Rochester Housing Authority or any other public housing authority. If it is, the person lives in public housing and is NOT eligible for this credit. Filling Out Form IT-214 Note: This is the only stand-alone form New York State will accept. It may be e-filed or mailed. For a paper return, only Form IT-214 is required. For e-filing, follow the directions listed under Form IT-213. Open Form IT-214. (Note: There will not be a yellow exclamation point next to the NY-214 on the tree.) 25

26 Part 1 This information will be auto filled by TaxWise. Part 2 - Determine eligibility, answer questions 1-6. If the answers to questions 1-6 are not as listed below, the client does not qualify for the Real Property Tax Credit. Line 7: If the client is 65 years of age or older, line 7 will be filled out by the system. If the client has a household member 65 years or older, fill out line 7 for that person. If there are multiple 26

27 household members 65 years or older, only one name needs to be entered on line 7. Note: if the 65 year old household member is listed as a non-dependent on the Main Info page, TaxWise will carry the name and year of birth to line 7. Line 8: TaxWise will complete for all dependents on the Main Info page. Part 3 Determine household gross income TaxWise carries over any taxable income reported in the return. The tax preparer must enter all other household income on lines

28 Income After the household composition has been determined, some income may need to be added to Form IT-214. TaxWise will carry over the Federal AGI, the New York State adjustments and any Social Security for the taxpayer or spouse that was entered on the It will subtract any Medicare payment amounts if they were entered on the Social Security worksheet. But many other types and amounts of income not otherwise reported on a tax return are listed on Form IT-214. Lines 11 through 15 are used for this reporting. Line 11 should list the total of Social Security benefits for other members of the household (usually children.) Line 12 is used to report SSI benefits received by any member of the household. Pensions or annuities for other household members are listed on line 13. Line 14 is used to list the yearly amount of Public Assistance benefits received by all household members. Any other income would go on line 15. Most common examples would be child support or worker s comp. Note: This is the only stand-alone form New York will accept. It may be e-filed or mailed. For a paper return, only Form IT-214 is required. For e-filing, follow the directions listed under Form IT-213 above. SSI. No 1099 is sent to the SSI recipient and no statement from Social Security is required for CASH to prepare Form IT-214. Public Assistance Grant is issued to low-income families with children or low-income individuals who do not qualify for SSI. A grant is composed of a basic allowance (for food, clothing, and basic necessities), utility and heat allowances and a shelter allowance. Note: It may well be that the person does not receive anything twice a month the entire grant may be used to pay the rent. In that case, the amount sent to the landlord is both the rental amount and the income amount. 28

29 Part 4 - Compute real property tax Renters: Enter the total rent paid for the year on line 19. Renters may qualify for the credit if the adjusted monthly rental amount is $450 or less. However, if all utilities are included in the rent, a rental amount of up to $560 per month may still qualify for the credit Section 8 is a rental subsidy program in which the tenant pays a portion of the rent to the landlord and Rochester Housing Authority pays the remainder. A taxpayer with this type of subsidy may qualify for Form IT-214 credit. Only the amount of rent paid by the tenant is used to compute the credit. Homeowners: Enter the total amount of property tax paid during the tax year. If the person doesn t know how much tax was paid the amounts can be checked with the City Assessor, County Treasury and Town Tax Assessor offices. 29

30 Part 5 Compute the Credit Amount Part 5 is completed by TaxWise Avoid the Most Common Form IT-214 Error The most common error made in computing Form IT-214 is that the income listed is lower than the amount of the rent paid. Usually line 12 or 14 has been left blank. Make sure the income equals or exceeds the rent paid. If you don t, the e-file will be accepted (TaxWise doesn t recognize this error) and a few weeks later, the taxpayer will receive a letter from NYS that the credit has been disallowed. The return will then need to be amended and paper return submitted. NYS Earned Income Credit Form IT-215 Taxpayers who claim the federal EIC are eligible to claim a NYS Earned Income Credit. This refundable credit is calculated at 30% of the federal credit. Form IT-215 will automatically link to the NYS return and no further action by the volunteer is needed. This form cannot be filed as a stand-alone, but must accompany Form IT-201. NYS Non-Custodial Parent Earned Income Credit Form IT-209 The client may be entitled to claim this refundable credit if they: did not claim the New York State earned income credit (EIC), were a full-year New York State resident, were at least 18 years of age, are a parent of a child (or children) who did not reside with them and under 18 yrs old, have an order in effect for at least one-half of the tax year requiring them to make child support payments payable through a support collection unit, and have paid at least the court-ordered amount of child support during the tax year. Form IT-209 must be completed as part of a NY tax return. Open page 1 of Form IT-209. Questions 1, 2, and 6 are auto filled by TaxWise. Answer questions 3, 4, 5, and 7. Question #3 asks for the name, relationship, SSN and year of birth of the child who does not live with the taxpayer and for whom support was paid. If the taxpayer does not have and cannot obtain the SSN for the child, leave that space blank. The return may still be e-filed, but it will take longer than usual to process without the child s social security number. 30

31 College Tuition Credit Form IT-272 Do NOT fill out this form for Graduate Students. This is for UNDERGRADS only. The NY tuition credit is refundable, so always complete it even if the Federal 8863 did not result in a credit to the taxpayer. This is another credit that can be claimed with no taxable income. It can be easy to overlook Form IT- 272 form because it doesn t have a red exclamation mark next to it. If the American Opportunity Credit was claimed on the federal return, Form IT-272 will appear on the tree and the name and Social Security number of the student will have carried over. You will have to enter the name, address and EIN of the school plus the amount of qualified tuition expense. Students should have a 1098-T form from the school which will have all this information. If they do not, to get the EIN for the school, look at the icon on desktop to get a list OR the student can log into his/her student account with the school and get this number. The student will also have to provide the amount paid for undergraduate tuition only. If a student attended more than one school in the tax year, enter only the last one, but put in the total amount of tuition paid for all the schools in that tax year in that space. Use one column only for each student. Books are not allowed as part of the credit. The qualified expenses for the NYS credit are different from the federal ones. For New York State, only tuition for undergraduate courses is allowed. The person does not have to be in a degree program. It could be for a trade or technical school that awards a certificate or licenses. Also a person may have a degree but be taking additional undergraduate courses which qualify for the NYS credit. If the Lifetime Learning Credit was claimed on the 8863, you will have to get Form IT-272 and open it. Then check the top box on page 1 (see below) so you can enter the name of the student, the SSN, the school name, address, EIN, and the amount of qualified tuition expenses. NYS Volunteer Firefighter /Ambulance Worker Credit Form IT-245 This refundable credit is available to volunteer firefighters and volunteer ambulance workers who were active for the entire tax year. File Form IT-245 with Form IT-201. The credit is $200 per volunteer. If the person got a property tax exemption under the Real Property Tax Law, Article 4, Title 2 that person cannot take this credit. Other Considerations IRA and Roth Conversions. Our program will not prepare returns with these situations. NYS College Choice Tuition Savings Program: Known as QTP or 529 Plans, contributions for future college expenses may reduce the client s taxable income. NY State additions and subtractions may both be necessary. Consult with your site manager for completion of entries related to these plans. 31

32 Amended Returns As is the case with Federal returns, a client who wishes to amend a NYS return has three years to do so. These must be filed as paper returns. We will only do amended returns if: The original return was prepared by C.A.S.H. The amended return must be done at the same site as the original return. Amended returns are done in March. Full instructions are found in the Amended Return Section of this manual Helpful Hints Double check the 1099-R for Box 1 or Box 2 (Box 1 is Private and Box 2 is Public (NYS or Fed Pension). Links you must make yourself: CHILD CARE and EDUCATION CREDITS People with no taxable income may qualify for Forms IT-213, IT-214 and IT-272. New York State Only Returns This occurs when the client does not have taxable income and only wants to claim the property tax credit (Form IT-214) or the Empire State Child Credit (Form IT-213). Open a new return in TaxWise just as though you were going to do both Federal and State returns. On the Main Information Sheet, under "State Information", be sure NY is entered in the full year resident box. Mark it for a paper return so no Federal Return will be e-filed. On Page 4 of the New York State Form IT-201 where it says "Do you want to electronically file this return? mark the YES box. Prepare both the Federal and State returns On the outside of the C.A.S.H. envelope, mark NYS ONLY RETURN. Tax Computation, Credits And Other Taxes Household Credit The household credit is a general, non-refundable credit allowed to low income NYS taxpayers. TaxWise will automatically calculate this credit based on the Main Information Sheet information and the federal AGI. Long Term Care Insurance Credit. New York offers a credit of about 20% of premiums paid for long term care insurance. If taxpayer s itemize on the federal return and include this in medical expenses, it will flow through to the New York return to Form IT-249. If the taxpayer is not itemizing, just fill out Form IT-249 directly for the credit. State Sales or Use Tax. Unpaid sales tax frequently occurs when a purchase is made over the internet or ordered from a TV source. The volunteer should explain that NYS has the legal right to collect sales tax (state and local) for all purchases for which the tax was not collected or was paid at a lower rate in another state. An amount must be entered on this line. TaxWise will default this amount to 0, but the volunteer should ask clients if they made purchases over the internet. Note: We are not the sales tax police, but volunteers should explain that failure to report a truthful amount or the guideline amount could result in a challenge from the NYS Department of Taxation. 32

33 PART VI: FINISHING THE RETURN Every return must go through three levels of review before the return is complete: Level I: Preparer Review Level II: Designated Quality Reviewer Check Level III: Client Review Note: If the return is NOT complete (missing information), and the client is planning to come back, click on the Return Summary icon in the tool bar at the top of the TaxWise screen and click on Incomplete. Make sure you give the taxpayer ALL of their paperwork including the Intake Sheet and envelopes. Help them arrange a time to return to finish the tax return. Level I. Preparer Review BEFORE YOU TELL THE CLIENT ABOUT THEIR REFUND OR BALANCE DUE, WAIT UNTIL THE QUALITY REVIEW HAS BEEN COMPLETED. 1. Review IRS (13614-C) and C.A.S.H. Intake sheets. Make sure that all questions are answered and all income, adjustments, deductions and credits are on the tax forms. 2. Make sure C.A.S.H. Preparer Use Fields are filled out. 3. Get the Red Out. Review the tree on the left side for forms that are red. A form that is red is not complete. Open the unfinished form and find the item that has not been entered by scrolling down the form. 4. Run Return Diagnostics. Go to TOOL BAR and select RUN DIAGNOSTICS. TaxWise will display errors and potential problems. Do NOT create the e-file. If an e- file is needed, the Quality Reviewer will create the e-file. Electronic Filing Errors These are critical errors that will prevent the IRS from accepting the return for electronic filing. Electronic filing errors must be resolved. Failure to correct an e- file error will prevent e-filing and delay the client s refund. They may also cause a paper file to be rejected by the IRS. The error will be listed in red. Click on the red words to go where it is in the return. If you do not understand the error, ask your site manager or a quality reviewer. Example of an error: You have marked children for EIC on the Main Information Sheet, but have not completed Schedule EIC, page 1. Either complete Schedule EIC, page 1, or unmark the box(es) on the Main Information Sheet. Warnings Diagnostics will also give you warnings for potential problems. These will not prevent the return from being accepted. It may be something that you forgot, or something that will cause a problem during IRS processing. Example of a warning: There is a refund on the tax return and no direct deposit information has been filled-in. Is this correct? 5. Return Summary. This function provides a helpful overview of the Federal and New York State income, credits and refunds. You may want to let the taxpayer know what you think the refund will be at this point, but let them know that is not final 33

34 until it is checked by the quality reviewer. 6. Taxpayer Diary. When additional information needs to be recorded or if there is any unusual aspect to the client s situation, enter your notes in the client diary. These informal notes may be needed later. Go to the TOOL BAR to open the taxpayer diary. Click on the icon to start a new entry. When finished, click on save button. Click on the close button to close the diary. Here are some sample diary entries: 03/16/16, Wednesday, 10:26:34: Jolene says that she only paid for day care for one son. The other son stayed with her neighbor for free. 02/12/16, Friday, 20:01:44: Tonya states her only income if from doing hair extensions. She has no documentation for income or expenses. Explained this could subject her to audit. The taxpayer diary entries become part of the return file and are helpful if there are questions about how the return was prepared. The diary is not part of the tax return that is transmitted to the IRS. 7. Review both Fed and State Returns. Do you see all of the income, withholding, adjustments, and credits that you anticipated? o Page 1 of the 1040: Check that all the income and adjustments are entered. Page 2 of the 1040: See if all the deductions and credits appeared. o Page 1 of Form IT-201: Make sure that all questions specific to NYS are answered. o Page 2 of Form IT-201: Make sure that all NYS adjustments flowed correctly from the Federal Return. o Page 3 of Form IT-201: Verify all entries o Page 4 of Form IT-201: Verify all credits. Note especially Education Credit if applicable. Does the amount of the refund or balance due seem reasonable? If the client s return for the previous year is available, compare the refunds. If the amount doesn t look right, review the return, particularly the credits. Encourage clients to save a portion of their tax refund. Clients can split their refund between checking and savings accounts. Clients can also purchase US Savings Bonds with their tax refund. Refund Splitting Pub 4012, Tab K-2 Complete Form 8888 if the taxpayer wants to split their federal refund or buy US Savings Bonds. NOTE: If Form 8888 is used on the Federal return, you must select deposit in a different account for the NY State return. Enter the bank info in two places on p. 4 of Form IT-201. US Savings Bonds Option: Taxpayers can request that their refund (or part of it) be used to 34

35 buy up to $5000 in paper U.S. Series I Savings Bonds. A total of three different bond holders may be requested. Each bond amount must be a multiple of $50 and cannot exceed $5,000 (or the refund amount, whichever is smaller). Only two of the three bonds may be purchased for someone other than the client. If the taxpayer (or spouse) is buying a bond for him or herself, enter just the amount of the bond on line 4 of Form The bond will be issued in the name(s) shown on the return. If the bond is for someone else, enter that amount on line 5a or 6a. Then enter the person s name on 5b or 6b. Make sure bond holder names are entered First Last and spelled correctly. There is no need to enter any account numbers for the bonds. A co-owner or beneficiary for each one may be entered on line 5c or 6c. If the person entered is a beneficiary (gets the money only when the bond holder dies), be sure to check the small box at the end of 5c or 6c. Make sure the amounts are in multiples of $50. Level II. Designated Quality Reviewer Check Once you have checked all your work, a site manager or a quality reviewer must check every tax return before printing and filing. The quality reviewer will review the return at the computer, talk to the client to clarify matters, and ask the preparer questions. The following items must always be checked: 1. Spelling of all names on the return 2. Address including zip code 3. Phone number we can t do a return without at least a message phone number 4. Social Security numbers and birthdates of everyone on the return 5. The correct filing status must be used. 6. All dependents must be listed. 7. The correct boxes for dependents must be checked (Child Care, EIC, months in home). 8. W2s must be entered completely and correctly including EINs, withholding, state tax, etc. 9. Taxpayer should be asked if there is any other income. 10. All adjustments and deductions should be entered correctly. 11. All applicable credits have been claimed. 12. The refund/balance due makes sense. 13. All applicable documents provided by the taxpayer have been entered. 14. Taxpayer has been asked about direct deposit, splitting the refund, and savings bonds. 15. If any of the above were chosen, routing and account numbers must be verified and 8888 Form checked. 16. Ask the taxpayer if they have any questions. 17. Explain what will happen next, printing etc. 18. Complete the Quality Review Sheet on the reverse side of the Cover Sheet. 19. If the return will be e-filed, the Quality Reviewer will create an e-file. NOTE: If the return is opened or edited AFTER the e-file was created, the e-file must be 35

36 recreated. Otherwise the e-file for this return will disappear!! Balance Due or Refund? Once the quality review is complete, provide the client with the amount of their refund or the balance due. Returns With A Balance Due Federal Balance Due: When a client has a federal balance due, TaxWise will print a 1040-V payment voucher. This must be sent with the client s payment whether the payment is sent with the return or made at a later date. Any balance due must be paid by April 15th to avoid penalties. State Balance Due: When a client has a NYS balance due the 201-V payment voucher will print. Any balance due must be paid by April 15th to avoid penalties. The client may also opt to have the balance due withdrawn from their account. If the client cannot pay the balance due by the due date, give them the sheet RETURNS WITH A BALANCE DUE that explains payment options. Form 9465, Installment Agreement Request - Use form to request a monthly installment plan if you cannot pay the full amount you owe shown on your tax return (or on a notice we sent you). Returns With A Refund: If there is a refund, review refund options with the client. Direct deposit Splitting their refund to save part or buy US Savings Bond Clients without an account for direct deposit can apply for an account while at C.A.S.H. The Assistant Site Manager can help with this step clients can choose from savings, checking and/or prepaid card accounts. NYS offers taxpayers the option of a state-administered prepaid debit card for their NYS tax only getting a New York refund. This option can be chosen on page 4 of IT-201. No new account paperwork is necessary. Level III. Client Review PUB 4012, N-14, N-15 After the return is printed, ask the client to review it. 1. Instruct the client to pay close attention to the SSNs, names, spelling of last names, birth dates, address, and bank account information. 2. Review every page of the return with the client, summarizing income, showing the deductions and credits. Suggest what could be done to improve the financial situation for next year. If you uncover errors while reviewing the return, make the corrections, recreate the e-file, and reprint the entire return. 36

37 Final Completion Steps For E-Filed Returns 1. Have the client sign Form 8879, Form TR 579, and any pages associated with new prepaid card accounts. Signatures must be in ink. Both husband s and wife s signatures are required on a joint return. 2. Staple the signed Form 8879 to the client s copy of Federal return. Staple the signed TR- 579 to the client s copy of the State return. 3. The client must receive the following (place in the client s envelope) a. One complete copy of their Federal return (including signed Form 8879) b. One complete copy of their NYS return (including signed TR-579) c. One copy of the federal Form 8453 (if required for this return). d. All other copies of W-2s, 1099s, forms attached with Form 8453, and ALL other documents the client brought to you. 4. Forms to be kept by C.A.S.H. Place the following items in the master envelope retained at the site: a. Form C and the C.A.S.H. Intake Sheet. b. One copy of each W-2, 1099 and any other document showing withheld taxes. (Make copies if client has only one copy.) These will be used for reference by the site manager until the return is accepted. c. Fill out the form stapled to the master envelope in a legible format. Make sure both the Quality Reviewer and you have signed the form. d. Once the return is accepted by the IRS and NYS, these documents will be securely destroyed. DO NOT retain extra copies of W2s, 1099s, etc. return them all to the client. Be sure that client has copies of all these forms for their records. e. File the C.A.S.H. Envelope as designated by the Site Management Team. Final Completion Steps For Paper Filed Returns If the client is filing a paper return. Make sure the client understands it is their responsibility to mail the tax returns to the IRS and NY State. Mention that the envelopes may require extra postage. Paper returns are REQUIRED in the following cases: MFS if the SSN of the spouse is unknown. MFJ if both spouses are not present to sign. Check with site manager to see if taxpayer can take return home and have spouse sign and bring signed copy back for e-filing. Non-custodial dependent WITHOUT a release form. All amended returns. All prior year returns. 1. Complete the Preparer Review, Designated Quality Review Check, and Client Review. 37

38 2. Make sure that return is classified as Paper Return for both Federal and State, so that all necessary forms will print. (If you do not, some of the pages will be missing, and the return will not be accepted.) a. Federal: Near the bottom of the Main Information Sheet under Type of Return, click on paper return. It is a little above the banking information. b. State: Page 4 of the NYS Form IT-201under the question Do you want to electronically file this return?, check NO. PRINTING PAPER RETURNS IS COMPLICATED and may generate errors. It is recommended that the QR person help with printing and assembling paper returns. 3. Print 2 copies of the tax return. One copy is for the client records. The second copy is to be mailed out to the IRS and NYS in pre-addressed envelopes provided at the site. a. Federal return (Form1040 and necessary attachments.) Staple the W2s and any 1099 s with withholding to page one of the 1040 where indicated. Staple entire return together. Fold return and put in the pre-addressed envelope for the client to mail. b. State return (Form IT-201 and required attachments). W-2s and 1099s are placed at the back of the NYS return, do not staple. Fold return and put in the pre-addressed envelope for the client to mail. 4. Show the client where to sign and have them do so. If the client is taking the forms home for the spouse to sign and mail, mark where the spouse signs with an X. (Where to sign on the NY form is especially confusing.) 5. Make sure client knows they have to mail the Federal and State returns. 6. Place the client copies and all other paper work in a C.A.S.H. envelope and give to client. Remind ALL clients to safely retain copies of their tax returns. Note: C.A.S.H. is not required to retain any paperwork when the return is paper filed. 38

39 PART VII: TAX INFORMATION FOR COMPLEX RETURNS The topics discussed in this section cover issues that occur infrequently. DO NOT attempt to prepare a tax return that is beyond your training. Consult a site manager to determine if the tax return is outside the scope of services offered by C.A.S.H. If necessary, the client will be advised to see a paid preparer. Do NOT send anyone away without consulting the site manager. Federal Form 8453: Individual Income Tax Transmittal Form: This form is used to send any required paper forms or supporting documentation to the IRS. The IRS requires additional documentation for specific tax situations listed on the front of the form. Its most commonly used for a C.A.S.H. client who is a non-custodial parent that claims a child as a dependent and needs to provide the IRS with proof. Instructions for this specific tax situation are listed below. Consult your site manager for any other tax situation that requires this form. 1. The client must have a copy of Form 8332, Release of Claim of Exemption, or a signed statement from the custodial parent releasing the dependency. If the client does not have one of these documents with them, the return cannot be e-filed. In that case, a paper return can be prepared for the taxpayer to mail to the IRS with the required documentation. 2. Return to the Dependent Section of the Main Info screen. In the area labeled Noncustodial Parent, check the appropriate box. 3. If the return will be e-filed, make a copy of the client s document, staple it to Form 8453, and put it in the envelope that C.A.S.H. retains. Be sure that the client has a copy of each form. 4. Before the client leaves, ask your site manager to check that everything has been properly completed. Innocent Spouse An innocent spouse is one whose name appears on a previous year s tax return for which money is owed, but is innocent of the wrongful filing. Generally, this occurs when income and expenses were incorrectly reported. A taxpayer may file an innocent spouse claim to seek relief from an outstanding tax obligation. This form applies to a Married Filing Jointly return. Seek advice from your site manager before beginning this process. Federal: Form 8857 (Request for Innocent Spouse Relief) For instructions refer to Pub 971 available through TaxWise Help. State: Form IT-280 (Non-Obligated Spouse) inform the clients that it will take NYS up to 11 weeks to issue the refund if it is e-filed, and about fourteen weeks if it is paper filed. 39

40 Injured Spouse An injured spouse is taxpayer whose spouse owes a past-due amount. The past-due amount is typically related to money owed for a period before the couple was married; child support, student loans, or past taxes. Often, married couples faced with this situation believe they would be better off if they filed Married Filing Separate. However, in order to qualify for most tax credits (IETC, education credits, etc.) they must file a joint return. See below for Federal and State instructions. Remember to seek advice from your site manager before beginning this process. Federal: Form 8379 (Injured Spouse Allocation) 1. Open Form 8379 and answer the questions provided on the form. At the end of the form check the box that corresponds with the name of the injured spouse. 2. Page 2 of Form 8379, make any necessary changes to allocations listed for each spouse. See below for important tips related to child care credits. a. Child Tax Credits - ensure the Child Tax Credit amount is included in the column for the injured spouse. TaxWise sometimes assigns them to the noninjured taxpayer. i. EITC - The IRS will determine the allocation. 3. Ask your site manager to review your work. State: Form IT-280 (Non-Obligated Spouse) inform the clients that it will take NYS up to 11 weeks to issue the refund if it is e- filed, and about fourteen weeks if it is paper filed. 40

41 PART VIII: AMENDED AND PRIOR YEAR RETURNS Amended Tax Returns - Form 1040X and NYS IT 201 X Taxpayers have three years from the due date to file an amended return. For example, most taxpayers have until April 15, 2015, to file an amended return for tax year This time period may be extended if the client had a balance due that was paid late or if the IRS made an additional assessment to the return after it was filed. We will do returns for the oldest year that can be filed or amended (2011 this year) through the end of tax season. C.A.S.H. Amended Returns Eligibility Guidelines: Original return was prepared at a C.A.S.H. site. Taxpayer should return to the C.A.S.H. site where the original return was prepare. Must be prepared by a volunteer certified in that specific tax year. Preparation of amended returns starts March 1 st. IF THERE ARE ANY QUESTIONS, CALL A MANAGER. Reasons for an Amended Returns: Client receives additional tax information New income information (extra W-2; interest form) New expense form (child care receipt) New credit information (education credit) Steps for Amended Returns 1. Open the original return 2. Open the 1040X and NYS-201X a. Using the Add Form icon, find the 1040-X and click on page 1 to open it. Click on add form and find 1040X and NY 201 X 41

42 Make sure to check the box that overrides entries. This will make the 1040 X update correctly. b. Then open Form NY201-X check the box to lock entries. Make sure to check the boxes on the NY 201X that sets the original entries so that the amended entries can be carried forward correctly. 3. BE SURE TO COMPLETE CHECK BOX TO LOCK ENTRIES BEFORE CHANGING OR ADDING ANY INFORMATION. Warning: Everything you enter after checking these boxes changes the return. Be sure that you have the original return entered correctly. Check it against the paper copy the client has provided. 4. Go to the Main Info page and select Paper Return. Go to page 4 of Form IT-201 and select paper return. This is very important, if you don t select paper return, some of the NYS pages will not print, and NYS will reject the amended return. 5. Go into the 1040 and/or 201 and make any changes or additions necessary including the Main Information Screen if items such as dependents are affected. Be sure to resolve any red indicators on the 1040X and 201X. TaxWise will make all the necessary adjustments and re-calculate the income tax and credits. 42

43 6. There are 3 columns on the 1040X: the original amount, the corrected amount, and the net change. If the taxpayer owes additional money, the amount will show at the bottom of page. 7. If there is an additional refund, that amount will be listed a couple of lines lower on page. 8. Enter the date and type in the reason for the amendment. 9. The IT 201X has 5 pages, and looks like a new Form IT-201. If there is a larger refund, the amount will appear on page 4. If the taxpayer owes money, the amount also appears on the page. Make sure page 5 is complete including the reason for amending and the date. 10. Amended returns must be filed as paper returns. 11. Forms that must be mailed include: Federal: o 1040X and any new or changed supporting forms. o New W-2 s must be stapled to the 1st page. Forms should be stapled in the same order they appear in the tree in TaxWise. New York: o An entire copy of the amended New York return, including the signed IT-201X, and all supporting forms whether they were changed or not. DO NOT staple NYS returns. If you print two copies of the NYS amended return, one for the taxpayer and one to be mailed, you will have all the necessary forms for the amendment. (It will also print out the four page Form IT-201 which you can discard.) 12. Be sure to have the taxpayer sign and date both FEDERAL AND NYS FORMS. 13. Put the ones to be mailed into addressed mailing envelopes and remind the taxpayer to mail them. Remind them to make sure there is enough postage. Put the taxpayer copies in their large envelope marked with the appropriate year. 14. The taxpayer takes all paperwork with them. C.A.S.H does not keep any paperwork for paper returns. 43

44 Prior Year Returns C.A.S.H. prepares returns for the last 3 tax years in March when time permits. We do the expiring year (2011) until the end of tax season. Tax preparers should only do returns for tax years in which they were certified as the laws and procedures change each year. These will all be paper returns. Each year should be prepared, quality reviewed, printed and signed before doing the next year. Please get help from your quality reviewer to assemble the printed returns to make sure the client has all the pages needed, especially NY IT2s. If a client needs only a New York return, we must have a copy of the federal return that was filed. Highlights for 2012 Not able to use computer for American Opportunity Credit unless a condition of enrollment (not just required for course). NYS no longer uses IT-2 for wages. Have to attach a W-2 to tax forms. Change in Form Return to Schedule C-EZ for self-employment income. Highlights for 2013 Able to use Schedule C within Schedule CE-Z limitation if business expenses are between $5,000 and $10,000. Highlights for 2014 First year of ACA. Have to make sure everyone has MEC Health Ins. Must Reconcile form 1095-A if client got Ins through Market Place Estimated Tax Return - Form 1040ES We do not prepare the Form 1040ES, but the client should be advised about this form. Certain taxpayers who expect to have income tax liability not covered by withholding must pay quarterly estimated tax payments during the tax year. A taxpayer needs to pay estimated taxes for the next tax year if they expect both of the following: A balance due of more than $1,000 and the total of withholding and credits will be less than the smaller of a) 90% of next year s tax, or 100% of tax shown for this year on the Extensions Federal individual income tax returns are due April 15. If a client has a filing requirement and cannot secure all necessary information by April 15, advise the client to file Form 4868, Application for Automatic Extension to File. This gives the client six more months - until October15. You should also file the corresponding NYS Form IT-370 Application for Automatic Six- Month Extension. The extension does not give the client more time to pay a balance due. The tax -even if it is an estimate - must still be paid by April 15 to avoid penalties and interest. Ask Site Manager for assistance. 44

45 PART IX: TOOLS AND RESOURCES If you have any questions while you are working at the sites, your best resource is usually the site manager or a volunteer quality reviewer. Don t hesitate to look things up. No one can remember all the details of tax preparation. Check everything, especially things you only do occasionally. Watch for Tax Tip Updates and IRS Bulletins. These will be posted at each site. Check these each time you volunteer. References Materials Provided During Training: C.A.S.H Resource Manual: This manual is used to enhance training materials provided by the IRS and NYS. C.A.S.H. Review Problems: This will be used to help volunteers understand TaxWise and forms used in Income Tax Preparation. IRS Publication 17 (Pub 17): Detailed answers to federal income tax questions. (available at sites in January). Volunteer Resource Guide (Pub 4012): This guide has a number of charts which can be very helpful. It is an essential desk reference. I.R.S. Pub 4491 VITA/TCE Training Guide: This guide provides detailed explanation of IRS guidelines. I.R.S. Pub 4491-X VITA/TCE Training Guide provides updates to IRS guidelines. TP-300 NYS reference guide. 45

46 Instructions for Link and Learn; Taxwise Training and IRS Certification Test: Link and Learn Instructions BEFORE using Link and Learn make sure your web browser allows pop-ups or it may not work properly. To see link and learn, use Internet Explorer or Google Crome. Go to You will see the following screen. Everything you need to complete the training and take the test can be found on this page, specifically the Quick Links Section. Link to Certificatio n Tests Including VOS And Intake/QR Basic and Advanced Training Courses Note: You may do the training course if you want or need to. This will teach or review the tax law and provide many exercises/questions to answer. You can jump to any topic in the course to review a specific topic. 1. Under the Quick Links section, click on Link & Learn Taxes Lessons. 2. A new window will open and the following screen will be displayed. 3. Click on the Certification Paths tab and answer the questions. You will need to complete only the test for the Certification you want. Basic or Advanced. You will need to also pass Volunteer Standard of Conduct and Intake/Interview exams. 46

47 4. Review the necessary modules and use TaxWise Training Site to prepare a practice returns. (Instructions for TaxWise Training on-line can be found in section labeled TaxWise Practice Returns). Pick what certification path you would like and then complete the training and test. The test follows along with Pub 6744 but uses both test and retest questions. TaxWise Training link 1. is the URL that takes students to TaxWise Training software. 2. This is the training version of the software that will be used at the site. It is also the same software that is used during Classroom training at MCC. 3. When training materials are received, the following information will be available 4. ClientID : Username: zstudentxxx where xxx is a number, ex zstudent300 Password: Initial Password will be username this will need to be changed. Put in the client ID, Username and password as assigned/set up during training. 5. Once logged in you can click on the New Return icon in the upper left hand corner to begin a practice return. 6. The Social Security number to use for practice returns are in this format: 1 st 3 digits are your student ID number: ex Student666, All SS numbers for this students practice returns would start with 666. The Social Security Numbers for practice for this student would be 666- XX All the SS numbers must end in XX can be whatever the student wants have to be unique for each new return. Returns are stored in TaxWise Practice so student can return to incomplete return. 47

48 IRS Certification Tests 1. Go to and click on Create Account and fill out the required information. If returning sign on with password from last year or create a new account. 2. To Create and Account : Group: Choose 01 Site Coordinator: No (In most cases) Training Source: Link and Learn Then complete rest of form setting up ID and Password. Group: 01 Volunteer and Training Source: Link and Learn taxes (e-learning) 48

49 3. After registering, you will be taken to the following page. Click on which certification path you want. You will have to take VSC and Intake test before you can complete certification test. You can click on additional certifications once you complete the first set of tests. 4. Complete the following 3 exams: (HSA exam is optional and NOT required) Volunteer Standards of Conduct Exam Intake/Interview Exam Basic OR Advanced Exam 4. Once you ve completed all three exams, you will need to print your Volunteer Agreement NOT your certificate. Check the box to electronically sign your agreement. Then click the link and a new window will open with your agreement. 5. Give your printed agreement to the Test Monitor or bring to NYS Review Class. It will have your name, address, and all your test scores on it. C.A.S.H. has to keep this form on file for IRS audits. Helpful hints and tips: You may want to complete both the test and retest questions in the booklet before you do the online version of the test because the questions will go back and forth online. Read the questions very carefully. Questions come from the test and retest in the Test booklet and will be worded differently. For example, a test question might be true/false, and the retest question is fill in the blank. 49