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Adjustments to Income. Pub 4491 – Page 171 Pub 4012 – Tab E. Total Income minus Adjustments = Adjusted Gross Income (AGI). Adjusted Gross Income. Intake/Interview. In-Scope Adjustments. Educator expenses Health Savings Account* Self-employment tax Early withdrawal penalty Alimony paid.

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Adjustments to income

Adjustments to Income

Pub 4491 – Page 171Pub 4012 – Tab E

NTTC Training – 2013


Adjusted gross income

Total Income minus Adjustments =

Adjusted Gross Income (AGI)

Adjusted Gross Income

NTTC Training – 2013


Intake interview
Intake/Interview

NTTC Training – 2013


In scope adjustments
In-Scope Adjustments

  • Educator expenses

  • Health Savings Account*

  • Self-employment tax

  • Early withdrawal penalty

  • Alimony paid

  • IRA contributions

  • Student loan interest

  • Tuition and fees deduction

  • Jury duty pay given to employer

* Optional certification

NTTC Training – 2013


Adjustments to income1
Adjustments to Income

Out-of-Scope

NTTC Training – 2013


Educator expense line 23
Educator Expense – Line 23

  • Up to $250 for classroom educational materials for taxpayer and $250 for spouse (if both educators). Ask about this if educator(s)

  • Must be K–12 teacher, counselor, principal or aide

  • Must work at least 900 hours during school year

  • Claim entered on 1040 Wkt 2

NTTC Training – 2013


1040 wkt2 in taxwise
1040 Wkt2 in TaxWise

NTTC Training – 2013


Health savings accounts
Health Savings Accounts

  • Counselors may obtain special certification to work with Health Savings Accounts (HSAs)

  • Counselors must pass Advanced test before testing on HSA

  • Course and test are in Pub 4942 or online at Link & Learn

NTTC Training – 2013


Portion of self employment tax line 27
Portion of Self Employment Tax – Line 27

  • SE Tax = Social Security and Medicare tax for Self-Employed

  • Adjustment comes from Schedule SE

  • Schedule SE automatically generated from Schedule C

  • Details in later lesson

NTTC Training – 2013


Early withdrawal penalty line 30
Early Withdrawal Penalty – Line 30

  • Penalty for withdrawal of funds from time deposits, such as CDs

  • As reported on 1099-INT or 1099-OID

  • In TaxWise, flows from Interest Statement

NTTC Training – 2013


Alimony paid line 31a
Alimony Paid – Line 31a

  • Allowed if paid under Divorce/Separation Agreement

  • Must provide recipient’s Social Security No.

  • Recipient must claim as income

  • Link to Alimony Paid Worksheet from Line 31 if paid to more than one ex-spouse

  • Child Support not deductible

NTTC Training – 2013


Ira contribution line 32
IRA Contribution – Line 32

  • Can contribute lesser of $5,500 ($6,500 if age 50 or over) or taxable compensation

  • Taxable compensation

    • Wages, tips, bonuses, Sch C income, alimony

    • Not interest, dividends, pensions, social security

  • Actual amount depends on Taxpayer/ spouse retirement plans, modified AGI, age and filing status

NTTC Training – 2013


Ira contribution line 321
IRA Contribution – Line 32

  • Age limits

    • For traditional IRA – under 70½

    • For Roth IRA – no age limit

  • Note: Roth IRA contribution is not deductible and will not show on line 32

NTTC Training – 2013


Ira contribution link to ira worksheet
IRA Contribution – Link to IRA Worksheet

These data entered automatically


Ira contribution cont
IRA Contribution (cont)

  • Enter Traditional IRA contributions on line 10

  • If part nondeductible, TW generates Form 8606

  • Enter Roth contributions on line 20

  • Can be a mixture so long as limit is not exceeded

NTTC Training – 2013


Non deductible contributions
Non-Deductible Contributions

  • If client participates in employer’s plan and AGI is too high

    • Some or all of Traditional IRA contribution may be nondeductible

  • Client might prefer a Roth IRA instead of a Traditional IRA

NTTC Training – 2013


Non deductible contributions1
Non-Deductible Contributions

  • TW adds Form 8606 to form tree

    • Part I is in scope

    • If not carried forward, input beginning of year basis on line 2 (from 2012 Form 8606 line 14)

  • TaxWise carries the deductible amount, if any, to Line 32

NTTC Training – 2013


Student loan interest line 33
Student Loan Interest – Line 33

  • Intake and Interview Sheet – Part V, Q8

  • If > $600, should receive Form 1098-E

NTTC Training – 2013


Student loan interest line 331
Student Loan Interest – Line 33

Pub 17, Ch 19

  • Interest paid on qualified student loan for post secondary education expenses

  • Qualified Loan:

    • Expenses of taxpayer, spouse, or dependent (when loan originated)

    • For education expenses paid within reasonable time since loan was opened

    • For education provided during academic period when eligible student

NTTC Training – 2013


Student loan interest line 332
Student Loan Interest – Line 33

  • Qualified Loan (cont)

    • Loan cannot be from relative

    • Taxpayer cannot be filing MFS

    • Taxpayer cannot be claimed on someone else’s return

    • Loan cannot be from qualified retirement plan

    • Taxpayer must be liable on the loan

NTTC Training – 2013


Student loan interest line 333
Student Loan Interest – Line 33

  • Maximum $2,500 per year

  • Phases out as AGI increases

  • Link to 1040 Wkt 2

NTTC Training – 2013


1040 wkt2 in taxwise1
1040 Wkt2 in TaxWise

NTTC Training – 2013


Tuition and fees line 34
Tuition and Fees – Line 34

  • Up to $4,000 adjustment allowed

  • For qualified education expenses of higher education

  • One of several choices for education benefits

    • Will cover details in education benefits lesson later

NTTC Training – 2013


Jury duty pay given to employer
Jury Duty Pay Given to Employer

  • Show Jury Pay received on Line 21, Other Income

  • Enter amount turned over to employer on Line 35

NTTC Training – 2013


Quality review adjustments
Quality Review – Adjustments

  • Does 1040 page 1 reflect Adjustments properly

  • Compare with Intake/Interview Sheet

  • Compare with last year’s return

  • Were other forms generated that should be addressed

NTTC Training – 2013


Adjustments to income2
Adjustments to Income

Questions?

Comments…

NTTC Training – 2013


Let s practice in taxwise
Let’s Practice In TaxWise

  • Open return for Kent in TaxWise

  • From Pub 4491W page 67, enter adjustments

  • Verify tax liability

NTTC Training – 2013


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