Preparing Taxes with TaxSlayer

Preparing Taxes with TaxSlayer Changes to Tax Law for ty 2017 What we all forget year to year Affordable Care Act New York Returns NJ non-resident returns 1 NTTC Training - TY2016

Review all docs before keying in even one number After Your Review: Four Options Begin to prepare taxpayer s return Advise taxpayer to bring missing documents another day and come to you directly Hand off to another Counselor if not in your comfort zone or within your training After consultation with ERO advise taxpayer that return is out of scope and why Return intake sheet and all other documents to taxpayers 2 NTTC Training - TY2016

Use TaxSlayer to Help You 1040 View Summary/Print good place to look Use Notes to record important info Use TAGS to flag return 3 NTTC Training - TY2016

VIEW/PRINT FORMS - New 4 NTTC Training - TY2017

Navigation Logging Out of Return Preparation Pages 5 NTTC Training - TY2017

Entering Income Data Review these areas where we may forget to enter data correctly 6 NTTC Training - TY2016

Identity Theft Entering IRS Identification PIN in TaxSlayer IRS Identification Pin 7 NTTC Training - TY2016

Taxpayer with ITIN Can claim dependency exemption for dependents Can claim child tax credit if child is a resident Can claim child/dependent care credit Cannot claim earned income credit 8 NTTC Training TY2016

Interest Income Screen If from U.S. obligations, subtract for your state (select state) 9 NTTC Training - TY2016

Schedule C - Limitations On Scope No net loss THIS IS BIG. Intake counselor may not have known to ask if loss. Apologize to taxpayer. Say OOS If loss, think about whether taxpayer needs to report that loss maybe it makes no difference. Business expenses of $25,000 or less per Schedule C Can have more than one Sch C if more than one business Do not combine businesses If more than one business, need more than one Sch C One business can have several income sources. Not necessary to create 2 Schedule Cs because taxpayer has cash + 1099MISC Personal Royalties go on Schedule C, not Schedule E 10 NTTC Training - TY2016

Interview Business Income Due diligence Does the taxpayer s business sound reasonable? Whole $ amounts like $12,000, are unlikely! Where is the written backup??? Records, even simple one, are required. For new taxpayers, work with them If necessary return to Intake Counselor to create records. If you have valid concerns that are not satisfied, You can decline to prepare return Speak privately with your ERO first if that s what you decide Remember the Intake Counselor may not have asked the right questions. 11 NTTC Training - TY2016

1099-MISC where the data goes Schedule E You decide Line 21 OOS OOS Schedule C OOS OOS OOS OOS OOS OOS OOS OOS OOS OOS 12 NTTC Training - TY2016

Business Expenses NO HOME OFFICE not even using the quick calculation Mixed-use cell phone Prorate cost based on business use probably 50/50 Equipment up to $2500 (otherwise must be depreciated OOS) 13 NTTC Training - TY2016

Capital Gains/Losses - Summarize Broker Transactions per Pub 4012 Tab D page 37 TaxSlayer > Capital Gains/Loss Worksheet: Create one record EACH for Short Term Cost Basis Reported to IRS Short Term Cost Basis NOT Reported to IRS Long Term Cost Basis Reported to IRS Long Term Cost Basis NOT Reported to IRS 14 NTTC Training TY2016

Data Entry for Each Summary Line on the Brokerage Form Date Acquired: Use alternate option (various long, various short, inherited) Date Sold: ALWAYS 12/31/2017 Sales Price: use Summary Sales $ Cost: Use Summary Cost (are all costs provided on the brokerage statement?) Enter only W adjustments: $ from statement: Wash sale loss disallowed 15 NTTC Training TY2016

1099-R What is this form telling you? 16 NTTC Training TY2016

Some codes need special action 1 Let taxpayer know that 10% penalty will be added in other taxes Go to form 5329 to see if exemption exists (RARE) 3 determine if taxpayer could still be working if not disabled. Yes? Click on disabled section at bottom of form 17 NTTC Training TY2016

Retirement Box 7 Distribution Codes Possible double letter codes Look up each letter Example G4 rollover distribution to beneficiary upon death of account holder Code D is purchased Annuity **** No exclusion for NY Return 18 NTTC Training TY2016

Retirement: Do the Math for the NY Return Now NY permits 100% exclusion from income for pensions from Federal, NY State or NY Municipalities NY also permits up to $20,000 exclusion for non-public pensions if 59 1/2 Create a note on TaxSlayer with the totals per taxpayer. Refer to that note in preparing the NY return. NO EXCLUSION FOR CODE D 19 NTTC Training TY2016

Taxable Distributions on Pensions Either Payer reports taxable portion of distribution in Box 2a on Form 1099-R Or Taxable amount not determined checked Retirement plans are funded by either beforetax or after-tax contributions Before-tax entire distribution will be fully taxable After-tax distributions partially taxable (box 9b Form 1099-R) Use Bogart Annuity Calculation, OR Use the TaxSlayer SIMPLIFIED METHOD to determine the taxable amount 20 NTTC Training TY2016

Two Ways To Calculate Taxable Amount Use Bogart s Pension Calculator only cotaxaide.org/tools Enter the taxable amount from completed Bogart on to 1099-R taxable amount box 2b Do not enter anything in TaxSlayer Worksheet Use TaxSlayer Simplified General Rule Worksheet (TS SGRW) in conjunction with Bogart. Let Bogart do the calculations Enter Bogart data into the TaxSlayer Worksheet Advantage: TS SGRW preserves the data used to calculate the return 21 NTTC Training TY2016

Special situation Rent <15 Days From Pub 17: If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. 22 NTTC Training - TY2016

Schedule K-1 In-scope K-1s contain ONLY Interest income (taxable and taxexempt) Dividends (ordinary and qualified) Capital gains or losses (long or short) Royalty Income Foreign Tax paid for passive activities Anything else is Out-of-Scope 23 NTTC Training 2016

Itemized Deductions Pub 4012 F-3 Medical or dental expenses records!!! Medical expenses over 7.5% of AGI Taxes State/local; general sales tax; property tax Mortgage Interest Gifts to charity REQUIRE PROOF Noncash gifts over $500 total need form 8283 NEED MORE INFO THAN USUALLY AVAILABLE Miscellaneous expenses subject to 2% Miscellaneous expenses not subject to 2% 24 NTTC Training TY2016

Taxes Don t Forget General Sales Tax for those with little state and local taxes. 25 State and local taxes Income tax OR General sales tax (for people like retirees who may not pay state income tax General Sales Tax Calculated based on Income and State/Local Tax rate Use IRS Calculator. Remember to find MAGI Or use TaxSlayer General Sales Tax NTTC Calculator Training TY2016

Child/Dependent Care: Remember! Fill out two parts: caregiver and dependent. The amounts must match! Taxpayer must pay expenses so that taxpayer and spouse can work or look for work Expenses paid for care not education Both taxpayer and spouse (if MFJ) must have earned income (unless taxpayer or spouse is disabled or a full-time student) For Qualifying Child, Dependent, under age 13 26 NTTC Training TY2016

Education Credits Two Credits: Details at J-2, 3 American Opportunity designed to cover first four years of college etc. Lifetime Learning designed to cover the rest of your life 27 Do Not Use Adjustment to Income NTTC Training TY2016

American Opportunity Credit Credit worth up to $2,500 per student 100% of first $2,000 of expenses 25% of second $2,000 of expenses Generally 40% refundable* *Not refundable if student under age 24 and meets certain requirements (Page J-9) 28 NTTC Training TY2016

Form 1098 T REQUIRED for American Opportunity Credit Look at J-6 for your answers What was actually paid (box 1) rather than billed (box 2). Ask for bursar statement if unsure. Sometimes it s on the back of the 1098T Were scholarships received (box 5)?. Subtract from paid amount Was student at least half-time? (box 8) Was student graduate student (box 9). If yes, doesn t qualify for AOC. Use Lifetime Learning. Remember getting a student loan to pay for school is PAYING. The student will have to repay that loan. 29 NTTC Training TY2016

Child Tax Credit = Two Credits #1: Child Tax Credit Nonrefundable If no amount on 1040 Line 47 as Income Tax due, will go to a Refundable credit Up to $1,000 per qualifying child 30 NTTC Training TY2016

Two Credits #2 Additional Child Tax Credit Refundable Maximum Credit 15% of earned income over $3,000 Up to unused portion of child tax credit TaxSlayer calculates both credits 31 NTTC Training TY2016

Refundable Credits All calculated by TaxSlayer as long as your entries are correct: Additional Child Tax Credit Earned Income Credit Refundable part of American Opportunity Credit Excess Social Security paid Premium Tax Credit 32 NTTC Training - TY2016

Earned Income Tax Credit : Rules if Taxpayer has a QC Child must meet tests: Relationship Age Residency Not filing MFS Note: Support test does not apply. Child need not be YOUR dependent. 33 NTTC Training TY2016

Qualifying Child Chart: 34 NTTC Training TY2016

Affordable Care Act Pub 4012 Other Taxes

Three Main Elements 1. Everyone should have health insurance (MEC) 2. If you don t have health insurance, you should have an exemption (see ACA Exemption Document) 3. If you don t have insurance or an exemption, you must pay a shared responsibility payment (SRP) 36 NTTC Training TY2017

Fourth Element 4. There is a premium tax credit (PTC) for some people If you buy insurance from the marketplace, and Have AGI between 100% and 400% of federal poverty level Look for Form 1095A These are the two main criteria; there are other rules that apply, discussed later 37 NTTC Training TY2017

What is Minimum Essential Coverage (MEC)? Pub 4012 ACA-4 More than limited coverage, generally Pub 4012 p. H-5 93% of all Tax-Aide taxpayers had MEC for 2016 Can rely on taxpayer s good faith representation no need for proof Taxpayer may bring 1095 B, C, D but these are not required 38 NTTC Training TY2016

When Everyone Has MEC All Year (not Mkt policy) A few quick clicks in TaxSlayer Health Insurance section Any coverage? - yes From Mkt? - no 39 NTTC Training TY2016

When Everyone Has MEC All Year (not Mkt policy) Verify just click continue (do not add anyone) All months? - yes 40 NTTC Training TY2016

When Everyone Has MEC All Year Confirm result on Summary / Print page 2 Box will be checked on Line 61 done! 41 NTTC Training TY2016

NTTC 42 Training TY2017 Exemptions for those that don t have Coverage

Look for an Exemption A. Marketplace exemption certificate or application pending B. Easy tax return exemption C. Affordability exemption (not so easy but Bogart can help) D. Request a hardship exemption (Do not choose this option. Requires taxpayer to interact with ACA. Unrealistic) 43 NTTC Training TY2017

Filing Threshold Exemption Gross Income Computed by TaxSlayer TaxSlayer says taxpayer qualifies Check no don t need another exemption filing threshold exemption applies to everyone all year 44 NTTC Training TY2017

Easy Exemption: Short-Gap in Coverage Gap must be less than 3 consecutive months Exemption does not apply if gap is 3 months or more Look back (to 2016) but no need to look forward (to 2018) If a month is covered by another exemption, it is treated as having coverage and that month is not a gap month 45 NTTC Training TY2017

Easy Exemption: Noncitizens or Citizen Living Abroad Not a U.S. citizen, not a U.S. national, and not lawfully present in the U.S. Includes DACA immigrants Most often seen scenario for this exemption code 46 NTTC Training TY2017

Easy Exemptions in TaxSlayer: Tax Return Exemption Which individual? If not a Marketplace exemption, which one? 47 NTTC Training TY2017

NTTC 48 Training TY2017 Affordability Exemptions

Affordability Calculator cotaxaide.org/tools Great tool if used properly Read all line instructions carefully Computes Household income/ Gross Income and tests for filing threshold exemption based on entries Keep the Bronze and Silver Costs close. 49 NTTC Training TY2016

NTTC 50 Training TY2017 Premium Tax Credit (PTC)

Fourth Element 4. There is a premium tax credit (PTC) If you buy insurance from the marketplace, and Have AGI between 100% and 400% of federal poverty level. 51 NTTC Training TY2017

Premium Tax Credit Premium Tax Credit ( PTC ) a refundable credit Marketplace estimates PTC at time of purchase PTC can be paid in advance ( APTC ) to insurance company OR applied as refundable credit on federal tax return Must be reconciled on tax return Must file to reconcile APTC even if not otherwise required to file Use Form Form 1095-A information 52 NTTC Training TY2016

PTC Eligibility If marketplace has granted APTC, persons listed on Form 1095-A are eligible for PTC We do not second guess! 53 NTTC Training TY2016

Premium Tax Credit in TaxSlayer Form 1095-A Must have 1095-A 54 NTTC Training TY2017

Premium Tax Credit in TaxSlayer Entering 1095-A Data Checking that months are the same opens annual fields 55 NTTC Training TY2017

Premium Tax Credit in TaxSlayer Entering 1095-A Data Checking that months are different opens monthly fields 56 NTTC Training TY2017

PTC in TaxSlayer Copy data from 1095-A into TaxSlayer input form Annual totals if all months are the same Monthly amounts if not Hint: Ctrl-C on field to copy contents and use Ctrl-V to past down each month 57 NTTC Training TY2016

PTC End Result: Form 1040 Repay excess credit line 46 or claim more credit line 69 58 NTTC Training TY2016

ACA Summary - MEC Taxpayers are responsible for MEC for themselves and their dependents The preparer can help determine if the taxpayer can claim an exemption, if needed If taxpayer doesn t have MEC and doesn t have an exemption, they owe a SRP 59 NTTC Training TY2016

New York State/New York City Tax Year 2017 TaxSlayer Training

Basic Information Section County district information dropdown list School district information dropdown list Permanent home address Complete only if physical address is different from address on the return Taxpayers who list a PO Box on return but may be eligible for IT-214 or NYC- 208

Additions to Income Section Interest Income on Other States Bonds and Obligations. This addition to NY Income must be made on the Federal Tax Exempt Income Screen Enter amount of any federally tax exempt bond that is not NYS tax exempt (e.g. muni bond for Pennsylvania) If NY addition is made correctly on the federal return it will automatically show as a NY addition. Other Additions TaxSlayer will automatically add Public Employee Retirement Contributions 414H NYC Flexible Benefits Program IRC125 If you made the correct entry on the W-2

Subtractions to Income Section - Pensions Certain Pension income is excluded from NY taxable income DO NOT INCLUDE RAILROAD RETIREMENT PENSIONS Enter the total taxable pensions received from NYS, local and federal governments: PUBLIC PENSIONS Enter other taxable pensions (not included above) received from the time you turned 59 ½ to the end of the year. (Do not enter more than $20,000): called PRIVATE PENSIONS

Private Pension Exclusion Facts All IRA s are considered Private Pensions for this purpose. Payments from NYC or NYS deferred compensation plans (e.g., FASCO) are PRIVATE Pensions for this purpose Pension from another country, even if it is not shown on 1099-R Qualifies for $20,000 exclusion, as though it were a 1099-R Pension 1099-R Distribution Code 3 (disability) Code 3 pension amounts is reported as wages on line 7 of the federal return. Cannot claim as both pension exclusion and IT-221 (disability) exclusion

Private Pension Exclusion Facts Married taxpayers who both receive qualified income are each entitled to the maximum $20,000 exclusion (i.e., $40,000 total). A married taxpayer cannot claim any unused portion of a spouse s exclusion. A person receiving their own pension and a deceased spouse s pension is entitled to a maximum of $20,000 exclusion. The maximum exclusion allowable from the total of ALL SOURCES that qualify for the non-public exclusion may not exceed $20,000 per individual.

Pension Exclusions Code 4 Death 1099-R Distribution Code 4 (death-survivors benefit) Receiving survivor benefits the exclusion is based on the decedents entitlement, subject to the decedents age if he/she were alive/amount limitation The descedent, independent of the survivor is entitled to a $20,000 exclusion If taxpayer transfers death benefit into their own name, then they must qualify for the $20,000 exclusion and must add this pension to their own pension for purposes of determining the amount of the limitation

Pension Exceptions 1099-R Distribution Code D [part of 7D or D7] (Annuity Not Qualified for Exclusion) If you see a code D No exclusion. Purchased annuities Do not qualify for exclusion Certain NYPD and FDNY line of duty disability pensions are totally tax free and do not get reported on the federal return so no exclusion is taken on the state return, Manhattan deems these OOS because no proof on the 1099R.

Subtractions to Income Section - Other New York s 529 College Savings program deduction $5,000 ($10,000 MFJ) Long Term Residential Care Deduction(S-105) Attributable to cost of long term care Table of limitations in TaxSlayer Volunteer Firefighter/Ambulance Length or Service Award (S-130) Railroad Retirement Board Tier 2 Annuities or Pensions (Green Form)

Itemized Deductions Section Standard Deduction on Federal - Must use the Standard Deduction on NY State Itemized Deductions on Federal may need to add or subtract certain items Additions to Federal Itemized Deductions None apply Subtractions to Federal Itemized Deductions Subtract any Long-Term Care Premiums included on Federal Schedule A, Line 1

Credits - automatically calculated Household Credit - NY credit Empire State Child Credit (IT-213) NY credit Family Tax Relief Credit (IT-114) NY Credit NYS and NYC Earned Income Tax Credit (IT-215) If Taxpayer gets EITC on Federal Return NY Child & Dependent Care Credit (IT-216) If Taxpayer gets Federal Dependent Care Credit NYC School Tax Credit (NYC-210) if you make proper entries Credit for Taxes Paid to Another State or Canada reduces NY State Income Tax if shown on W-2 (IT-112-C/IT-112-R)

Credits not Automatically calculated NY Long Term Care Insurance Credit (IT-249) College Tuition Credit (IT-272) Noncustodial Parent NYS Earned Income Credit(IT-209) Real Property Tax Credit (IT-214) NYC Enhanced Real Property Tax Credit (IT-208) Other Refundable Credits

IT-249 Claim for Long-Term Care Insurance Credit Paid premiums for a qualifying long-term care insurance policy Credit is 20% of premiums paid : Non-refundable Can be used to reduce tax to $0 Unused credit amounts can be carried over to next year

IT-272 Claim for College Tuition Credit or Itemized Deduction Full-year New York State resident Undergraduate student who paid qualified tuition expenses; qualified expenses don t include scholarships or financial aid, room and board, books, equipment, and activities. Aren t claimed as a dependent on another person s tax return Credit can be as much as $400 per student Maximum itemized deduction is $10,000 per eligible student

IT-209 Claim for Non-custodial Parent EIC Full-year resident At least 18 years of age Parent of a minor child who doesn t reside with you Have a child support order in place for at least ½ of the year payable through the NYS Support Collection Unit and be current with payments

IT-214 Claim for Real Property Tax Credit Don t need to file a return can file credit form alone Full-year resident Occupied the same New York residence for 6 months or more Household gross income $18,000 or less INCLUDING SSI + SOCIAL SECURITY Residence was not completely exempted from real property taxes (taxpayer lives in NYCHA houses = no credit) Paid $500 or less in monthly rent

NYC-208 Claim for New York City Enhanced Real Property Tax Credit Homeowners You or your spouse paid real property taxes. Any rent you received for nonresidential use of your residence was 20% or less of the total rent you received. Renters You or a member of your household paid rent for your residence. Challenge: Roommates or Family apartments. Rent paid by all? Must include income from all for credit to be calculated. Roommate situation is easier. Each roommate viewed independently

NYC-208 continued Claim for NYC Enhanced Real Property Tax Credit You qualify if you meet ALL of the following conditions: household gross income is less than $200k INCLUDING SSI you occupied the same NYC residence for six months or more you were a New York City resident for all of 2016 you can t be claimed as a dependent on another taxpayer s federal income tax return your residence was not completely exempt from real property taxes (NYCHA)

Common Errors Failure to add amount from W-2 box 14, listed as 414(h) Failure to add amount from W-2 box 14 listed as IRC 125 Failure to subtract Savings Bond Interest from New York Income. These are NOT taxable for New York Failure to add bonds invested outside of New York - taxable for New York and must be added as a New York State addition

NY Requirement Drivers Lic doc # In order to assist in discovering fraudulently filed returns, taxpayers are asked for a Drivers License or Non Drivers License In the efile section. Ask for drivers license. Any state is OK. If NY license must also add first 3 digits of document number for on drivers licenses and non drivers licenses. If taxpayer does not have license, check off box to indicate Continue with return. Refund may be delayed for a short time if no license.

Tasks that the Preparer performs Assure that any important information is highlighted on the Tax Record Envelope or on a note for the Quality Reviewer. Use Notes to tell QR important facts Ask the taxpayer(s) if there is any other income to report. COMPLETE the Efile Section. Mark the Return Ready for Review If return is complete, review return with taxpayer(s) and answer any questions they may have. Online 1040 is good method. Remind taxpayer that QR will review all figures so yours are preliminary 80 NTTC Training TY2016

Tasks The Quality Reviewer Performs Perform a complete Quality Review: filing status, dependents, income, credits. Print one copy of return for taxpayer (2 copies if a paper return or amended return is necessary) Make sure taxpayer(s) understand that they are responsible for the accuracy of their federal and state filings 81 NTTC Training TY2016