Part 1 – Certifications and Filing Basics

1. Part 1 – Certifications and Filing Basics

2. Objectives: Describe the: • Course levels and certification process • Responsibilities of a VITA/TCE volunteer • Process at the site • Form 1040—line by line—Federal Law

3. Review • All volunteers must complete Volunteer Standards of Conduct Training (Form 13615, VSC or ethics), available in: • Form 6744-Volunteer Test/Retest • VITA/TCE certification test website • Form 13615 must be completed • Volunteers’ ability to prepare accurate returns is measured by: • Certification process • Taxpayer interview and verifications of Form 13614-C, Intake/Interview & Quality Review Sheet • Quality review of all tax returns • Random IRS review of tax returns

7. Student Certification Paths • Certification Paths: • Basic • Intermediate—complete schedule C or C-EZ, simple pension income • Advanced—complete mutual fund & stock sales • Military • International • Optional specialty courses: • Cancellation of Debt (COD) • Health Savings Accounts (HSA)

8. Certification • Steps to Certification: • Complete tax law courses • Complete Volunteer Standards of Conduct (VSC) Training, pass the test, complete and sign Form 13615 • Pass at least certification test (80%) if preparing tax returns

9. Certification—Non Tax Preparer Roles • Greeter and scheduler • Must have Volunteer Standard of Conduct certification (ethics exam)

10. Volunteer Protections/Responsibilities • Protection from personal liability applies if the volunteer: • Acted within scope of responsibility • Was trained and certified • Committed no willful, criminal, reckless, grossly negligent, or conscious, flagrantly indifferent acts • Volunteer Protection Act of 1977 • Volunteers may not accept payment of any kind! • Follow the six Volunteer Standards of Conduct (VSC), listed on Form 13615

11. Maintaining Taxpayers’ Trust • Protect taxpayers from identity theft – treat all taxpayer information as confidential. • Maintain taxpayer trust • Refer to Pub 4299, Privacy, Confidentiality, and Standards of Conduct– A Public Trust • Taxpayer civil rights include: • Freedom from discrimination • Reasonable accommodation for disabilities

12. Volunteer Resources • Additional references: • Form 13614-C Job Aid-(inside Pub 4012) • Pub 17-Your Federal Income Tax • Pub 596-Earned Income Tax Credit • Pub 972-Child Tax Credit • Pub 4012, Volunteer Resource Guide • Step-by-step procedures for electronic return prep under the yellow tabs • Link to TaxWise tax preparation software and tutorials

13. Process at the Site—Taxpayer to Preparer • Taxpayer makes an appointment by phone or online • Greeter checks in taxpayer for appointment. Screens for eligibility. • Preparer goes to “check in area” get next taxpayer.

14. Process at the Site—Return Completed • Tax preparer completes returns. Check work. • Ask the taxpayer to verify name, address, and SS# (2 monitors). • Ask shift supervisor to conduct a quality review. • Print return for taxpayer. 1 copy for e-filed returns. 2 copies for mailed returns. • Review/Explain return to taxpayer. • Staple the return. Give taxpayer a copy for records. • Give site supervisor copies of documents retained at the site. Take the docs to the site coordinator if supervisor is not in the room. • DO NOT LEAVE TAXPAYERS DOCUMENTS AT YOUR STATION.

15. Filing Basics

16. Filing Basics • Who Must File • Who Should File • Verifying Taxpayer Identity Lesson 3 – Filing Basics

17. Verifying Taxpayer Identity • What are acceptable identity documents to verify identity? • U.S. Driver’s License, Picture ID-employer, school, military, visa, passport • See the Tip in Pub 4491 • What are acceptable TINs—Taxpayer Identification Numbers • Social Security Number/card; • ITIN-Individual Taxpayer Identification Number • ATIN-Adoption Taxpayer Identification Number? • Enter names and identification numbers accurately • Mistakes in data entry can result in processing delays • See Pub 4012 (Tab 1), Main Information Screen, for ID entries

18. Filing Basics—Taxpayer Identification Number • Social Security Number • ATIN - adoption taxpayer identification number • Dependents — someone who meets tests for being claimed on return • Gross Income - allincome not exempt from taxes • ITIN - individual taxpayer identification number. Not eligible for social security card. (999-88-9999). Digits 4&5 range from 70-88.

19. Filing Basics--Who Must File • What determines if an individual must file? • Age. • Gross Income • Filing status • Dependent Status • Blindness • Form 13614-C very important in this stage of the process Resources to Reference • Refer to Pub 4012, Charts A, B, and C or 1040 Instruction booklet • Internet resources for determining filing requirement • Interactive Tax Assistant: Determine if you have to file a return • Tax Tips Video: Do I have to File a Tax Return?

20. Filing Basics • TaxWise: Main Information Screen

21. Form 1040 • Volunteers should always use Form 1040 • Appropriate for all taxpayers • Default TaxWise form • Default-site identification number • Default-client ID number

22. Potential Pitfalls • Be alert for possible indications of fraudulent activity • Form W-2 that is typed or handwritten or has noticeable alterations • Form W-2 from a company that looks different from other Forms W-2 issued by the same company • A suspicious person accompanying the taxpayer (who has been observed on other occasions) • Multiple refunds directed to the same address or P.O. box • Employment or earnings that are a basis for refundable credits, which are not well-documented • Similar returns (e.g., same amount of refund, same number of dependents, or same number of Forms W-2)

23. Filing Status

24. Filing Status • Determine the most beneficial filing status allowed for the taxpayer • DO NOT rely totally on the way the taxpayer completes Part II of the Intake/Interview Form. Ask questions to determine and verify the correct status.

25. Impacts of Filing Status • Filing status impacts: • Calculation of income tax • Amount of the standard deduction • Allowance or limitation of certain credits and deductions Resources to Reference • Pub 4012 (Tab B), Determination of Filing Status Decision Tree • Pub 17, Chapter 2, Filing Status provides details • TaxWise Online helps in the online interview form

26. Filing Status • The five filing statuses • Requirements for each filing status • Single • Married Filing Jointly • Married Filing Separately • Head of Household • Qualifying Widow(er) with Dependent Child

27. Single • On the last day of the year: • Not married • Legally separated or divorced, or • Widowed before first day of tax year, not remarried within the year • May qualify for more beneficial tax status • Pub 4012 (Tab B), Filing Status Interview Tips

28. Married Filing Jointly (MFJ) • This filing status generally the most beneficial • One return is filed covering both spouses • On the last day of the year: • Married and live together • Live apart but not legally separated or divorced • Live together in recognized common law marriage • Separated but divorce decree not final • Widow(er) not remarried during the year • Pub 4012 (Tab B), Filing Status Interview Tips

29. Married Filing Separately (MFS) • Analysis of living situation is critical: • Marital status as of 12/31 • Others living in the home and their relationship/dependency • Who paid >50% cost of home upkeep • If widow(er): date of death of spouse and if there are any dependents • Taxes are generally higher for this status • Some credits unavailable, some reduced

30. Married Filing Separately (MFS) • Some taxpayers file separately to avoid potential refund offset due to spouse’s outstanding debts • Suggest Form 8379, Injured Spouse Allocation • For the complete list of special rules, see Pub 17, Filing Status

31. Head of Household (HoH) • A taxpayer may qualify if he or she: • Is unmarried or “considered unmarried” on last day of tax year, and • Paid >50% cost of keeping up a home for the tax year, and • Had a qualifying person living with them more than half the year (except for temporary absences) • Qualifying person: • Can be child, parent, or other relative • See Pub 4012 (Tab B), Who is a Qualifying Person…

32. Qualifying Widow(er) with Dependent Child • As beneficial as Married Filing Jointly (see standard deduction amount) • Available for only two years following the year of spouse’s death • Taxpayer would use Married Filing Jointly or Married Filing Separately in the year of spouse’s death (if not remarried) • Dependency qualifications apply to child

33. Single or Head of Household? • A taxpayer may qualify for Head of Household status if the spouse is a nonresident alien • Interactive Tax Assistant: What is My Filing Status?

34. Married and Living Apart with Dependent Child • Some married taxpayers may be “considered unmarried” for filing Head of Household if they: • File a return separate from their spouse • Paid >50% cost of keeping up their home • Lived apart from their spouse during the entire last six months of the tax year (July to December) • Provided the main home for more than half the year of a qualifying dependent child, stepchild, or authorized foster child

35. Filing Status – TaxWise Screen Shot • TaxWise: Main Information Screen, Filing Status and Exemptions

36. Summary • There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependent Child • Filing status selection can impact the amount of tax, credits, and deductions • Choose the filing status that results in the lowest tax

37. Personal Exemptions

38. Exemptions • Exemptions (Personal or Dependency): Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. An exemption is a dollar amount that can be deducted from an individual’s total income, thereby reducing the taxable income. Indexed annually for inflation. • Personal exemptions • Claimed for self (and possibly spouse) • Dependency exemptions • Claimed for qualifying dependents

40. Rules for Taxpayer • Can anyone claim you or your spouse as a dependent on their tax return? • Answer must be “no” to claim personal exemption • Resources: • Pub 4012 (Tab C), Personal Exemption Interview Tips • Interactive Tax Assistant: Personal and Spousal Exemptions

41. Personal Exemptions • TaxWise: Main Information Screen, Exemptions • Problem Area—Students say NO and parents have already claimed on their tax return. Explain and ask questions to make sure students understand what you are asking. Conflicting information= a REJECT.

42. Screen shot of TWO with filing status 4 highlighted.

43. Rules for Spouse • A spouse may be claimed as a personal exemption if: • Married as of December 31 of the tax year, and • Spouse cannot be claimed as a dependent on another person’s tax return, and • Taxpayer files a joint return, or files a separate return and the spouse had no income and is not filing • Resources: • Pub 4012 (Tab C), Personal Exemption Interview Tips • Interactive Tax Assistant: Personal and Spousal Exemptions

44. Spouses (continued) • Divorced, Separated, and Common Law • Taxpayers cannot claim an exemption for a (former) spouse from whom they are divorced or legally separated • Rules for common law marriages vary by state • Deceased spouse can be claimed as a personal exemption if taxpayer: • Did not remarry by December 31 of the tax year, and • Was not divorced or legally separated from their spouse on the date of death, and • Would have been able to claim the exemption under the rules for a joint or separate return • Pub 17, Chapter 3, Personal Exemptions and Dependents

45. Entering Personal Exemptions • Lines 6a and 6b of Form 1040 • TaxWise automatically: • Fills in the entries and “Number of boxes checked on 6a and 6b” • Checks the Exemptions box for the taxpayer (and spouse if Married Filing Jointly)

46. Summary – Personal Exemption • Two types of exemptions: Personal and Dependency • Exemptions reduce taxable income • Taxpayers can claim a personal exemption for: • Themselves, if they are not another taxpayer’s dependent • Their spouse, if filing jointly and the spouse is not another taxpayer’s dependent • Their spouse, if filing separately and the spouse had no income, is not filing, and is not another taxpayer’s dependent

47. Dependency Exemptions

48. Dependency Exemptions • TaxWise: Main Information Screen, Dependents/Nondependents • If more than 4 dependents, see 4012, tab for TaxWise online—Adding Forms.

49. Dependents • A taxpayer can claim one exemption for each qualified dependent, thereby reducing their taxable income • Who may be claimed as a dependent? • Qualifying child • Qualifying relative • Three tests apply to both qualifying child and qualifying relative: • Dependent taxpayer – person who is a dependent on someone else’s tax return cannot claim a dependent exemption • Joint return – person filing a joint return cannot be claimed as a dependent • Citizen or resident – dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico

50. Qualifying Child Tests • Five additional tests for a qualifying child: • Relationship • Age • Residency • Support • Qualifying child of more than one person • Review Pub 4012 (Tab C), Interview Tips for Qualifying Child