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Part 1 – Certifications and Filing Basics . 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. Review .

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Describe the:

  • Course levels and certification process
  • Responsibilities of a VITA/TCE volunteer
  • Process at the site
  • Form 1040—line by line—Federal Law
  • 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
student certification paths
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)
  • 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
certification non tax preparer roles
Certification—Non Tax Preparer Roles
  • Greeter and scheduler
    • Must have Volunteer Standard of Conduct certification (ethics exam)
volunteer protections responsibilities
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
maintaining taxpayers trust
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
volunteer resources
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
process at the site taxpayer to preparer
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.
process at the site return completed
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.
filing basics1
Filing Basics
  • Who Must File
  • Who Should File
  • Verifying Taxpayer Identity

Lesson 3 – Filing Basics

verifying taxpayer identity
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
filing basics taxpayer identification number
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.
filing basics who must file
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?
filing basics2
Filing Basics
  • TaxWise: Main Information Screen
form 1040
Form 1040
  • Volunteers should always use Form 1040
    • Appropriate for all taxpayers
    • Default TaxWise form
    • Default-site identification number
    • Default-client ID number
potential pitfalls
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)
filing status1
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.
impacts of filing status
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
filing status2
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
  • 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
married filing jointly mfj
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
married filing separately mfs
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
married filing separately mfs1
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
head of household hoh
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…
qualifying widow er with dependent child
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
single or head of household
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?
married and living apart with dependent child
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
filing status taxwise screen shot
Filing Status – TaxWise Screen Shot
  • TaxWise: Main Information Screen, Filing Status and Exemptions
  • 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
  • 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
rules for taxpayer
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
personal exemptions1
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.
rules for spouse
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
spouses continued
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
entering personal exemptions
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)
summary personal exemption
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
dependency exemptions1
Dependency Exemptions
  • TaxWise: Main Information Screen, Dependents/Nondependents
  • If more than 4 dependents, see 4012, tab for TaxWise online—Adding Forms.
  • 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
qualifying child tests
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
qualifying relative tests
Qualifying Relative Tests
  • Four tests for a qualifying relative, in addition to dependent taxpayer, joint return, and citizen or resident:
    • Not a qualifying child
    • Member of household or relationship
    • Gross income
    • Support
  • Review Pub 4012 (Tab C), Interview Tips for Qualifying Relative
  • Pub 4012 (Tab C), Worksheet for Determining Support
children of divorced or separated parents
Children of Divorced or Separated Parents
  • Special rules apply
  • What is the difference between custodial and noncustodial parent?
  • See table in Pub 4012 (Tab C), Children of Divorced or Separated Parents or Parents Who Live Apart
  • Custodial parents can revoke a release of claim to exemption they previously provided to the noncustodial parent on Form 8332
summary dependency exemption
Summary – Dependency Exemption

Conditions for taxpayer to claim a dependency exemption:

  • Taxpayer must not be claimed as a dependent by another taxpayer.
  • Cannot claim a married person who files a joint return unless:
    • Joint return is only to claim refund, and
    • No tax liability for either spouse on separate returns.
  • Dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, for some part of the year.
  • Dependent must be taxpayer’s qualifying child or qualifying relative.
unique filing status and exemption situations

Unique Filing Status and Exemption Situations

Eliminate/Identify through screening at appointment level

key terms
Key Terms
  • Green card test-permanent resident.
  • Nonresident alien
  • Resident alien—must have a green card or meet substantial presence test.
  • Substantial presence
determining alien status
Determining Alien Status
  • Nonresident aliens taxed differently from resident aliens
  • See Pub 4012 (Tab A), Determining Residency Status decision tree
  • Green card test
    • An individual with a green card is, for tax purposes, a resident alien
determining alien status1
Determining Alien Status

Substantial presence test – physically present in the U.S. at least:

  • 31 days during the current year, and
  • 183 days during the 3-year period that includes the current year and the two years immediately before, counting:
    • All days in current year
    • 1/3 of days in previous year
    • 1/6 of days in second year before current year

An individual who meets these requirement is, for tax purposes, a resident alien

exemption for nonresident alien spouse
Exemption for Nonresident Alien Spouse
  • What are two ways a citizen or resident alien who is married to a nonresident alien can claim the personal exemption for their spouse?
    • Treat the spouse as resident alien on a joint return, or
    • Treat the spouse as a nonresident alien on a Head of Household or Married Filing Separately return.
  • Taxpayers must declare in writing that they are choosing to treat a spouse as a resident alien on a joint return.
    • See the table in Pub 54 on Ending the Choice
exemption for nonresident alien spouse1
Exemption for Nonresident Alien Spouse

There is an exception that allows taxpayers who live with their nonresident alien spouses to file as Head of Household. All of the following requirements must be met:

  • The taxpayer is a U.S. citizen or resident alien for the entire year, and meets all the "considered unmarried" rules for Head of Household except for living with a nonresident alien spouse.
  • The nonresident alien spouse chooses not to file a joint return.
  • The taxpayer must have a qualifying person to be eligible for this filing status. The spouse is not a qualifying person for head of household purposes.
  • Follow the interview tips in Pub 4012 (Tab B) to see if the citizen spouse qualifies to file as Head of Household.
dependency exemptions2
Dependency Exemptions
  • The dependency tests for a qualifying relative or qualifying child apply in the same way to citizens or resident aliens
  • There may be unique issues with the support test and the citizen/resident test. Refer to:
    • Pub 4012 (Tab C) Personal Exemptions Interview Tips
    • Pub 17, Chapter 3, Citizen or Resident Test
    • Interactive Tax Assistant: Who Can I Claim as a Dependent? and How Much Can I Deduct for Each Exemption I Claim?
  • Special rules for children born overseas and adopted children

Lesson 7 – Unique Filing Staus and Exemption Situations

out of scope for this lesson
Out of Scope for this Lesson:
  • Taxpayers with F, J, M, or Q visas, unless there is a volunteer at your site with Foreign Student certification
  • Unmarried nonresident aliens who do not meet the green card or substantial presence test