AARP Tax-Aide Counselor Reference Manual This contains all changes to be applied to the 9/23/2009 version. This will then be version 3 Cover- Cross out CA2 in the title. Add Tax Year 2009. This manual is now being used by all sub-states in California. Because of this change, we have reviewed this manual s conformity with the National and Sub-State out-of-scope items and were required to make most of the following changes to conform. Page ii Table of Contents Line 29- Self Employment Heath Insurance. Add out-of-scope Line 53- Alternative Vehicle Credits. Add out-of scope Line 67 Cross out First Time Page 1 The TaxWise (UTS) phone number has been changed for us, It is now 1-800-411-6391 Page 2 Tax documents which may be brought in by clients. 1099-LTC Long Term care Benefits. Add out-of-scope Foreign Pension Income/social Security. Add out-of-scope IRA contribution/conversions - Cross out conversions which are out-of-scope Page 3 Federal Tax Forms and Schedule We Can Prepare Cross out the following or mark as out-of-scope 8396 Mortgage Interest Credit 8606 Non Deductible IRA Distributions and Contribution 8853 LTC Insurance Contracts 8891 Canadian Registered Retirement Plans 8901 Child Tax Credit for Non-Dependent Child 8910 Alternative Motor Vehicle Credit 8919 Uncollected Social Security Tax Page 4 What is out-of-scope - Add the following Lump Sum Social Security distribution (except when all taxed in current year) Foreign Pensions and Social Security (except for Canadian Social Security) Statutory Employees IRA distributions and Contributions requiring a Form 8606 Canadian Registered Retirement Plans Mortgage Interest Credit Form 8396 Child Tax Credit for non-dependent child Alternative Motor Vehicle Credit LTC Insurance contract Distributions Uncollected Social Security Tax After Foreclosure, Cancellation of debt, or Bankruptcy Add: Form 1099A, 1099C, 982 After Distributions from Archer.. Add: Form 1099SA
After AMT. Add: Form 6251, unless no AMT appears on return After Tax for Children with Investment Income Add: Form 8615 After Reporting Childs Interest/Dividends on parents return Add: Form 8614 After Qualified Adoption Expense Add: Form 8829 After Installment Sale Income Add: Form 9465 Page 5 Under Delete all Returns Change TaxWise Explorer to Return Explorer Page 7 Under Pull down Menus, just below the third solid bullet View should have been a solid bullet Page 8 Under Screen Layout, Left Side, forms Tree The check mark is missing from the parenthesis before Blue check mark Page 12 organizing your work The shortcut for Main Info is now Main Page 15 under Filing Status second bullet change first sentence to read A married taxpayer, whose spouse and dependents reside outside of the US and who do not have social security numbers or ITIN s, is married and must file as MFS or MFJ. Write NRA (Non-Resident Alien) in the SSN field and paper file as MFS. MFJ requires ITIN s and election to be treated as resident- out of scope) Page 16 Under State Information, third bullet Change CA2 policy is to to read We should Page 16 Preparer s use fields, second bullet While Box 2 is no longer used for data retention, it may be used for local purposes or for Quality Reviewers initials. Page 17 W2-Employers ID, Name and Address Second indented bullet under The Employers identification number Chan E IN to EIN Employee SSN when filing under ITIN second sentence, change to read The SSN on the TaxWise input form W2 line d. Employee SSN correct second sentence, change to read., do not change the SSN on the TaxWise W-2 input form to mathc the paper W-2
Page 17 Under W2-Dollar Value Boxes Add: For 2009, TaxWise calculates the correct amounts for line 3, 4, 5, and 6 if entries are made on line 12 or line 7. The procedure shown in the second bullet is not required. Page 18 Box 13 Cross out, or mark the sentences referring to Statutory Employees as out-ofscope Page 22 Chart for K1 For K1 line 3 and 4a, the Enter on Form column should say Sch D Pg 1 Page 25 Completion of Schedule C-EZ Under For Gross receipts reported on 1099-MISC Cross out the third bullet referring to Statutory employees Page 26 Under Completing the worksheet, Date acquired Third hollow bullet Change When Inherit and Various are to read When Inherit or Various is. Page 30 1099R Exclusion Worksheet (for IRA s) Cross out, or mark out-of scope the last three hollow bullets on the page that refer to form 8606 Page 34 Foreign Government Pensions Cross out, or marks as out of scope this whole section except the third bullet that refers to Distributions from the Canada Page 36 Lump Sum payments of Social Security Cross out, or mark as out-of-scope everything except the first line that reads Enter total Social Security received in the normal manner Page 37 Other Income Without a supporting IRS form In the examples, cross out Foreign Government Pensions Page 38 Distributions from LTC insurance plans-form 1099 LTC Cross out, or mark this whole section as out-of-scope Page 39 Line 29 Self Employed Health Insurance Deduction Mark this as out-of scope Page 40 Line 32 IRA Deduction Cross out or mark as out-of-scope the fourth bullet regarding form 8606
Page 40 Line 34 Tuition and Fees Third bullet change reference to Line 50 to Line 49 Page 42 under Sch A-Line 5 Taxes Paid Cross out 2005 in the second square bullet Page 42 Under CA Sales Tax Rates Add The blended tax rate for California in 2009 is 8.0034% Page 43 Sch A Add new: Sch A Line 7 New Motor Vehicle Taxes This entry will come from the Sales Tax worksheet Page 43 Sch A Line 7- Vehicle License Fee Change to read Line 8 Change first line to read: Vehicle License Fee (VLF) should be listed under Other taxes with DMV in the type field Page 44 After Line 28- add: Sch A Page 2 New Motor Vehicle Tax Worksheet No entries will be made on this form. Enter the new motor vehicle sales tax on the Sales Tax worksheet Line 8 a, b, c Page 46 Line 49 Education Credit, second bullet Hope/ AOTC Credit At the end of the sentence, change course materials to Books, supplies and computers Add: do not use Hope Credit in part ll of Form 8863 Page 47 Line 52 Residential Energy Credit Mark second bullet as out-of scope Page 47 Line 53 Alternative Vehicle Credits Mark as out-of-scope Page 48 Line 57 Unreported social Security and Medicare Tax Cross out the part of the sentence referring to 8919 as this is out-of-scope Page 48 Line 58 Additional Tax on IRA s. Cross out the following :.unless an exception to the penalty is claimed. And the next sentence. Form 5329 is out-of-scope Page 50 Line 63 Making Work Pay - change to read as follows: Taxpayer(s) who received Social Security, Railroad Retirement, Veterans Benefits, or SSI in Nov-Dec 2008 or Jan 2009 will have received the Economic Recovery Payment of $250. If their benefits started after that time they do not qualify for an ERP, however they
may qualify for the Making Work Pay credit if they have earned income. (Note: This is not to be confused with the 2008/2009 Stimulus Payment Program.) For Individuals who received Social Security, Supplemental Security Income, Railroad Retirement, or Veterans Disability or Pension Benefits, click Yes on line 10 and enter $250 for each person receiving benefits. If they did not receive benefits, click No on line 10. If one or both spouses did not receive the Economic Recovery Payment and received a pension or annuity 1099 in 2009 for services performed as an employee of the U.S. government or any U.S. state or local government, click Yes on line 11 and enter $250 for each individual receiving a government pension but not the $250 economic recovery payment. If they did not receive a government pension, click no on line 11. An individual who can be claimed as a dependent on another s tax return is not entitled to a Making Work Pay Credit. Tax Wise will not allow the credit if they are not entitled to their own exemption. Page 50 Line 66 Refundable Education Credit- first sentence Change may be refundable to will be refundable Cross out if tax has been reduced to zero Page 50 Line 67 Home Buyers Credit revise to read: A credit of up to $8,000 is available to first time homebuyers ($6500 for repeat homebuyers who qualify) for a principal residence purchased in 2009 or before April 30 2010. Link to form 5405 and enter home address and acquisition date. Complete Part l and General and Part II Credit. If there is a Form 5405, the return cannot be filed electronically. 2008 homebuyers, who received the loan which must be repaid starting in 2010, will have to complete Part lll of Form 5405 if there has been a disposition of the property, including death of a joint owner or a divorce. Page 53 Interest Income-first bullet Direct obligations backed by the US Government include Federal Land Banks and Federal Home Loan Banks. They do not include Fannie Mae and Freddie Mac Page 53 Social Security, Railroad Retirement Benefits, Canada OAS In the second bullet mark Foreign Pensions as out-of-scope Page 54 IRA Basis Difference change to read as follows: In 1975 when no CA IRA deduction was allowed, and in 1982 through 1986 when CA IRA deductions were limited to 1500 or 1750 or not at all if the taxpayer was an active participant in a qualified or government retirement plan or contributed to a tax sheltered annuity, there would be a California basis if the Federal deductible contribution exceeded the allowable California Deductible amount. The Client would have to produce records showing amount contributed for each of these years and the amount deducted for Federal and California (if allowed). The California basis would be applied to reduce the
amount of taxable IRA distribution on the CA CA. If the taxpayer does not have these detailed records, there will be no adjustment of the taxable IRA distribution. See CA pub 1005. Page 54 Under Deductions and Credits not Allowed by CA Add: Making Work Pay Credit Homebuyers Credit although California has their own credit- see next page. Page 55 Child and Dependent Care Credit-Refundable (CA 3506) Insert second bullet: Answer question, Was care provided in California Change the former third bullet to read: Part ll The telephone number and location of the care provider is required to e-file the return Page 57 Direct Deposit add: SAVINGS BONDS DIRECT DEPOSIT For Federal refunds, the client can now request a portion of their refund to buy up to $5,000 in U.S. Series I Savings Bonds The amount requested must be a multiple of $50 and the bonds will be issued in the name of both taxpayers if this is a joint return Bank account information must be available for deposit of any refund not used to purchase bonds A check cannot be issued If the refund is an exact multiple of $50 and the entire refund is to be used to purchase bonds, the bond routing number can be entered on the main information sheet and 1040 page 2. Use Form 8888 for deposit of part of the refund to Savings Bonds. 1a Enter a multiple of $50 on line 1a, but not more than $5000 1b Enter 043736881 as the routing number 1c Check the Savings box 1d Enter BONDS in the account number 2b, c, d Enter the account information for the remaining refund Client can contact Treasury Retail Securities at 1-800-245-2804 to check status of their bonds Page 62 Estimated CA Tax payments First bullet- cross out See CA 540 instructions for details Add fourth bullet-california estimates are distributed 30%-40%-0% and 30% to the four quarters. There will be no voucher for the third quarter. Page 64 Power of Attorney Under Deceased person signature requirements Cross out the lines for Personal representative and person other than since these require a Form 1310 which is out-of-scope Page 67 OTHER RETURNS under Before Making changes - Federal Return Third bullet change above Income and Deductions to at top of form
INDEX Page 82 Forms The list of Out-of-Scope items, on Page 4, originally referred to Form numbers. These were eliminated and changed to descriptions as most are not familiar with the form numbers. However the index was created with the form numbers, and we have Forms in the Index referring to page 4, but you will not find those form numbers on Page 4. Add a note as follows: Page 4 references will find descriptions, not Form numbers