State Income Tax Refunds

Transcription

1 State Income Tax Refunds Form 1040 Line 10 Pub 4491 Part 3 Lesson 9 Pub 4012 Page D 12 The Interview Point of awareness From 2016 returns 2 1

2 State Income Tax Refunds Form 1099-G State or local income tax refund (in CA, this is a postcard) 2016 only 3 State Income Tax Refunds Tax benefit rule: Taxable in year received if it gave tax benefit in year deducted Taxable amount is limited to amount that gave tax benefit 4 2

3 No Tax Benefit if... Tax Benefit rule: No benefit if standard deduction was used in 2016 must have 2016 return to know. No benefit if sales tax was used for line 5 of Schedule A in 2016 No benefit if negative taxable income (Line 41 minus line 42) when stated as a positive number is more than the income tax deduction on 2016 Schedule A 5 No Tax Benefit? Take no action in TaxSlayer. Note not taxable and why on the intake sheet. 6 3

4 Limited Benefit Amount: Standard Deduction Versus Itemized Deduction Look at 2016 Form 1040 Page 2 Line 40 Taxable amount (benefit) is limited to the difference between Line 40 and standard deduction amount 7 Limited Benefit Amount: Income Tax Versus Sales Tax Look at 2016 Schedule A Line 5 Taxable amount is limited to difference between income tax claimed and sales tax that COULD have been claimed. 8 4

5 If Necessary, Determine Sales Tax Amount for 2016 Start with AGI -on 2016 Form 1040, Line 37 Add income not taxed (e.g. nontaxable SS, SSI, VA benefits) Go to IRS.gov Sales Tax Deduction Calculator 9 Possible Tax Benefit? Go here in TaxSlayer to enter benefit amount (taxable income) 10 5

6 TaxSlayer Worksheet Enter refund Enter total itemized deduction Enter income taxes withheld or paid Enter sales tax that COULD have been deducted Pub 4012, page D TaxSlayer Worksheet Doesn t Cover All Situations If there were Unused tax credits State estimated payments (2017) Other recoveries Go to worksheet at cotaxaide.org/tools Enter results here 12 6

7 COTaxAide.org/tools Answer all questions; print the worksheet Results will be here 13 Quality Review State Income Tax Refunds Confirm tax refund was for 2016 Review prior year s return Itemized? Income tax used on Sch. A? Negative taxable income? Any unused credits? Review entries in state tax refund worksheet (TaxSlayer or printed) 14 7

8 State Income Tax Refunds TaxSlayer carries taxable portion of state and/or local income tax refund to 1040 Pg 1 Line Taxpayer Summary State Income Tax Refunds Show taxpayer portion of refund that is taxable, if any 16 8

9 Sta State Income Tax Refunds Questions? Comments 17 Alimony Income Form 1040 Line 11 Pub 4012 Page D 1, 3 And E 5 Pub 4491 Part 3 Lesson 9 9

10 Alimony Received Pub 4012 Page E-5 What is alimony? Spousal support under separation or divorce instrument Usually stops if recipient remarries, may stop sooner Not subject to change based on factors such as age of a child Child/family support is NOT alimony Alimony received increasesincome; alimony paid decreases income 19 The Interview Point of awareness 20 10

11 Alimony Received Taxpayer needs to provide the actual amount received in the current tax year We take their word for this Look at prior year s return (reality check) 21 Alimony Received Not earned income for EIC Not earned income for child tax credit Not earned income for dependent care credit But IS compensation for IRA Contributions 22 11

12 Alimony Received In TaxSlayer: Type Alimony Received in Enter the Form Number, or Find in Federal Section > Income 23 Quality Review Alimony Received Does taxpayer want to make an IRA contribution, if otherwise eligible? Retirement saving credit? IRA covered in Adjustments Lesson Retirement saving credit covered in Miscellaneous Credits Lesson 24 12

13 Taxpayer Summary Alimony Received Alimony income can cause a balance due on return Increase withholding? Estimated tax payments for next year? 25 Alimony Received Comments? Questions? 26 13

14 Other Income Pub 4012 Tab D Pub 4491 Lesson 16 Form 1040 Line

15 In-Scope Examples Pub 17, pg 94 (1) Reported on 1099-MISC, in Box 3 (or reported in Box 7, but not a business ) (2) Gambling winnings, including lotteries and raffles (3) Cancellation of non-business credit card debt (4) Other: Jury duty pay and poll worker pay (not on W-2) Prizes and awards Medical study subject pay 29 Income > Other Income Select type of income 30 OOS if any is taxable International certification required See Wages lesson See K-1 lesson OO S OO S OO S 15

16 Out-of-Scope Examples Pub 17, pg 94 Bartering income property or services exchanged for property or services Activity not entered into for profit Hobby income Rental income, even if just to help cover the costs, if paid by other than a member of taxpayer s household 31 Out-of-Scope Examples Pub 17, pg 94 Cancelation of debt other than nonbusiness credit cards Sale of main home Student loans Taxable distributions from Education savings account ABLE account 32 16

17 Other Income Does NOT include 1099-MISC income that is business income Report on Sch Cinstead Does NOT include rent or royalty income Report on SchEor on Sch C if from personal services DOES include income not reported on other lines of Form (1) 1099-MISC - TaxSlayer Only box 3 to Other income (line 21) see Pub 4012, D-16 Box 7 that is not a business: Must input income as Other Income (as if Box 3) Click on line 21 in 1040 view for income not on 1099-MISC 34 17

18 (2) Gambling Income (W-2G) Select W-2G in TaxSlayer Copy data from tax form Losses are manually computed and entered as itemized deduction on Schedule A (cannot exceed total winnings) 35 (3) Cancelation of Debt Lenders must issue Form 1099-C if they cancel $600 or more of debt Less than $600 must also be reported as income by taxpayer Canceled debt, if income, is reported on Form 1040, Line

19 (3) Form 1099-C In box 2 Credit card debt only if nonbusiness 37 (3) Cancelation of Debt Credit Card Pub 4012 pg D-32 Credit card debt nonbusiness only Taxpayer must be solvent immediately before debt canceled Value of assets exceeds total amount of liabilities Not in bankruptcy Otherwise out-of-scope 38 19

20 (3) Cancelation of Debt Credit Card If 1099-C received, enter taxable amount and data from tax form If no 1099-C received, use Other Income (discussed above) 39 (4) Other Income Not Reported Elsewhere Use Federal Section > Enter Myself > Income > Other Income for Gambling not on W-2G Jury duty pay, prizes, etc

21 Income Quality Review The final question with respect to income to always ask the taxpayer: Did you have any other income? 41 Other Income Comments Questions 42 21