1 of 43

Other Income�TY 2025

Pub 4012 – Tab D

Pub 4491 – Lesson 15

2 of 43

Introduction

Determine how to report other types of income

Alimony
Medicaid Waiver Payments
Gambling, jury duty, medical trial participation pay, etc.
Cancellation of Debt; Credit Card and Principal Residence
Long Term Care Payments

NTTC Training – TY2024

2

3 of 43

Alimony

Spousal support under separation or divorce instrument
Usually stops if recipient remarries, may stop sooner
Not subject to change based on factors such as age of a child

Child/family support is not alimony

3

4 of 43

Alimony Rules

Alimony under pre-2019 orders are grandfathered

Alimony received continues to be taxable
Not earned income for EIC
Not earned income for child tax credit
Not earned income for dependent care credit
But is “compensation” for IRA Contributions
Alimony payments continue to be deductible

4

5 of 43

Alimony Rules

Alimony under new or modified* orders after December 31, 2018

Alimony received not taxable

Not compensation for IRA purposes

Alimony payments not deductible

* Modification must specifically state that new 2019 law provisions apply

5

6 of 43

Alimony Received

Verify information in Intake Booklet
Look at prior year return

Alimony income?

Confirm “required by divorce decree or separation instrument” and payment not child support
Taxpayer needs to provide information of actual amount received in the current tax year.

Federal>Income>Alimony Received

6

7 of 43

Excludible Medicaid Waiver Payments (MWP)

Paid by state, county, or authorized provider
Paid to caregiver to provide nonmedical support services to an individual
Care provider and care recipient live in same home
Care for no more than 10 children or 5 adults (19 or older)
Note: MWP are fully taxable when care provider and care recipient do not live in same home

7

Comp

Pub 4012 Tab D

8 of 43

MWP and Refundable Credits

Taxpayer may choose to exclude qualified MWP from gross income
Taxpayer may choose to include qualified MWP in calculation of Earned Income Credit (EIC) and Additional Child Tax Credit (ACTC)

Even if MWP excluded from gross income (some exceptions)

Taxpayer must include or exclude all or none of MWP in refundable credit calculation

8

Comp

9 of 43

Medicaid Waiver Payments - Income Documents

Document reporting requirements vary by state

W-2 (may be in Box 1 or not)
1099-MISC Box 3 or Box 6
1099-NEC
Not reported (Taxpayer must provide records of payments if no tax document)

Federal>Income>Form W-2 scroll down to Box 14 and enter amount and earned income selection

See Entering Medicaid Waiver Payments in Pub 4012 Tab D, and Pub 4491 Section 15-4.

9

Pub 4012 Tab D

Comp

10 of 43

Lesson Topics

Core Topics

Form 1099-MISC box 3 other income
Form W-2G gambling winnings
Form 1099-C cancellation of credit card debt and Forgiveness of Student Debt
Income not reported elsewhere

Comprehensive Topic

Long-term care payments

NTTC Training – TY2024

10

11 of 43

Other Less Common Income

Review Intake Booklet for Other Income hints - Cancellation of Debt, Other Income, etc.

Review Less Common Income pages in Pub 4012 Tab D-77

Income that is not included elsewhere in the return
May or may not have a tax document or form (e.g., Jury Duty Pay)
Often self-reported by the taxpayer - Ask “Did you have any other income?

NTTC Training – TY2024

11

Pub 4012 Tab D

12 of 43

Where to Find “Other Income” hints on the Intake Form

12

13 of 43

In vs Out of Scope

Review Tax-Aide Scope Manual – Identifies In vs Out of scope items (AARP Portal)

Log in to Volunteers.aarp.org
Use search tool: Tax-aide Scope Manual
This is a 25-page document sorted by Form # (e.g., F 1099-NEC)

NTTC Training – TY2024

13

14 of 43

In-Scope Examples

Income reported on Form 1099-MISC box 3
Gambling winnings including lotteries and raffles (Form W2G)
Taxable amount of long-term care (Form 1099-LTC)
Cancellation of non-business credit card debt (Form 1099-C)
Other examples: jury duty pay, prizes and awards, medical study subject pay, inherited royalties from another person’s services (e.g., inherited from an author or composer)

NTTC Training – TY2024

14

15 of 43

Out-of-Scope Examples

Bartering income (services performed in exchange for services)
Activity not entered into for profit (e.g., hobby income)
Cancellation of debt other than nonbusiness credit cards

Except: excludible cancellation of qualified principal residence indebtedness or excludible cancellation of student debt

Taxable distributions from qualified education programs (1099-Q) or ABLE accounts (1099-QA)
Any illegal activities

NTTC Training – TY2024

15

16 of 43

Form 1099-MISC

NTTC Training – TY2024

16

17 of 43

1099-MISC Data

Do not include Form 1099-MISC income that is business income - you have to ask client – Input as 1099-NEC instead
Do not include rental income (report land rent via Income>Schedule E) - rental income that involves depreciation is OOS
Do not include royalties from minerals, oil, gas, etc. (use Income>Schedule E) or from the taxpayer’s own personal services (use Income>Schedule C)
Do not include compensation for wrongful incarceration
Do include compensation for income earned from incarceration (TS-Other Income)

NTTC Training – TY2024

17

A “wrongfully incarcerated individual” is either:

1) An individual who was convicted of a criminal offense under federal or state law, who served all or part of a sentence of imprisonment relating to such offense, and who was pardoned, granted clemency, or granted amnesty because of actual innocence of the offense, or

2) An individual for whom the conviction for such offense was reversed or vacated and for whom the indictment, information, or other accusatory instrument for such offense was dismissed or who was found not guilty at a new trial after the conviction was reversed or vacated

This PATH provision applies to tax years beginning before, on, or after the date of enactment
Note: claims for 2012 and prior had to be filed by December 19, 2016 – special exception to statute of limitations for this compensation
If improperly reported on Form 1099, enter and remove with a negative offsetting other income amount
Amended return needed for prior year if included in taxable income

18 of 43

1099-MISC Data

Box 3 Other Income (Form 1099-MISC required when amount paid $600 or more)

Prizes and awards
Sweepstakes (no wagers involved) - not Gambling
Medical research studies
Honorarium

NTTC Training – TY2024

18

19 of 43

Gambling Winnings

Normally reported on Form W-2G depending upon

Type of gambling
Amount of the gambling winnings
Ratio of winnings to wager

Federal>Income>Other Income>W-2G

If the W-2G reports gross winnings, show the cost wagered to get those winnings, not to exceed those winnings, as a negative entry in Other Income

Federal>Income>Other Income>Other Income Not Reported Elsewhere>Other Income

NTTC Training – TY2024

19

20 of 43

Form W-2G

NTTC Training – TY2024

20

Be Sure to Enter the State Information on Form W-2G

Report Cost of Wager as negative income

21 of 43

Forgiveness of Student Debt 2021 - 2025

Forgiven Student Loan Debt is excluded from gross income (see Tab D-83)

If taxpayer qualifies to exclude the student loan debt, the return is In Scope.
If the taxpayer has any other type of debt forgiven or was insolvent at the time of debt forgiveness, the taxpayer should be referred to a professional tax preparer
Form 1099-C may be issued through the educational institution or directly to the borrower.
Education organization loan not considered forgiven if in exchange for services

NTTC Training – TY2024

21

Good for 5 years

22 of 43

Forgiveness of Student Debt 2021 - 2025

If taxpayer can’t get a corrected 1099-C that deletes the amount forgiven, then input as Federal>Income>Other Income>Cancellation of Debt (Form 1099-C) and again as a negative amount in Federal>Income>Other Income>Other Income-Income Not Reported Elsewhere>Other Income Description choose Other Income and enter the Description “Student Loan Forgiveness”

NTTC Training – TY2024

22

Good for 5 years

23 of 43

Other Income - Wages

Include income for a household employee under $2,400 not reported on a W-2

Shows up in line 1 Wages of 1040
Self employment taxes do not apply if not a trade or business

Federal>Income>Other Income>Other Compensation>Household Employee Income

NTTC Training – TY2024

23

24 of 43

Other Income Not Reported Elsewhere

Used for income with no tax document
Usually self-reported – may have letter or check stub with information
Examples:

Jury Duty pay
Poll Workers (when no W-2)
Prizes, awards, one-time honorarium (no Form 1099-MISC)

Federal>Income>Other Income>Other Income Not Reported Elsewhere>Other Income Description

NTTC Training – TY2024

24

25 of 43

Cancellation of Debt �TY 2025

Lesson 26

Pub 4012 – Tab D-83

Pub 4491 – 15-9�

Comp

26 of 43

Cancellation of Debt – Credit Card

Usually a 1099-C if more than $600

May be other documentation if less than $600

Out of scope scenarios:

Debt is related to a business
Box 6 is marked Code A (Bankruptcy)
Taxpayer was not solvent before cancellation

Federal>Other Income>1099-C, 982>Cancellation of Debt – (Form 1099-C)

NTTC Training – TY2024

26

Comp

27 of 43

NTTC Training – TY2024

27

1099-C Cancellationof Debt

Event Code A = Bankruptcy

Out of scope

Nonbusiness credit card debt only in scope

Taxable amount

28 of 43

28

Entries

29 of 43

Cancellation of Debt - Principal Residence

Determine if In Scope:

Home was used as loan collateral and never used in a business or as rental property
Debt was not canceled because taxpayer filed bankruptcy
Taxpayer is not in bankruptcy when he/she comes to site
Form 1099-C does not include interest in Box 3
Debt used only to buy, build or improve primary residence, not pay off credit cards, medical expenses, vacations, etc.
Debt canceled is not more than the exclusion limit ($750,000 for MFJ or $375,000 for MFS). This limit is good thru 2025.

NTTC Training – TY2024

29

Comp

30 of 43

Form 1099-A – Information only

NTTC Training – TY2024

30

Home was disposed

Comp

31 of 43

Disposition – Recourse Debt

Enter 1099-C in TaxSlayer to report Cancellation Of Debt Income (CODI)

Federal>Income>Other Income>1099-C, 982>Cancellation of Debt

Complete Form 982 to be attached to return

If home was disposed, complete only 1e and amount to exclude
This excludes the income reported on 1099-C
No income will be reported on 1040 Schedule 1, line 8c

Fill out Form 8949 to report sale of home

Federal>Income>Schedule D/Form 8949>Stocks, Mutual Funds, etc

NTTC Training – TY2024

31

Comp

32 of 43

Example 1: Disposition with Recourse Debt

Gail Oliver:

Bought her main home in June 2017 for $175,000
A mortgage loan was used to buy her home
Lost her job and stopped making payments on her recourse mortgage
Moved out of the home in June

On Oct 15, 2021 the bank foreclosed on the home and canceled the remaining amount owed on the home
At time of foreclosure: fair market value was $100,000 and debt balance was $150,000 (no proceeds paid to Gail)

NTTC Training – TY2024

32

Comp

33 of 43

Example 1: Form 1099-C

NTTC Training – TY2024

33

Comp

Sales Proceeds is usually the fair market value

34 of 43

Example 1 : �Gail’s Form 982 Part I

NTTC Training – TY2024

34

Select who received Form 1099-C

1099-C Box 2 Amount

Comp

35 of 43

Gail’s Form 8949 – Gains and Losses

NTTC Training – TY2024

35

Loss is not deductible

Comp

Use date from 1099-C Box 1

36 of 43

Long-Term Care Payments

Comprehensive Topic

Comp

37 of 43

Long-Term Care Payments

Long-term care (LTC) insurance contracts - 1099-LTC

Reimbursements not taxable - no need to input
Reimbursements do not normally exceed actual costs
Per diem payments up to an aggregate limit of $420 a day in 2025 ($153,300 for the year) are non-taxable. Complete Form 8853, Section C, for per diem payments to ensure that payments did not exceed IRS allowance. Section A and B are OOS.

If multiple payees under the insurance contract, refer the taxpayer to professional preparer

NTTC Training – TY2023

37

Comp

38 of 43

Accelerated Death Benefits

Reported to taxpayer on Form 1099-LTC - Long-Term Care and Accelerated Death Benefits
Insured certified by a physician as terminally ill

Fully excludible

Certified as chronically ill

Treat the same as paid under a qualified long-term care insurance contract

NTTC Training – TY2023

38

Comp

39 of 43

Form 1099-LTC

NTTC Training – TY2023

39

Box for Year

Comp

40 of 43

Long-term Care on Form 8853

Entering in TaxSlayer

Use Pub 4012 Tab D “Form 1099-LTC” for detailed Instructions and Navigation aid

Other parts of Form 8853 are Out of Scope
Usually non taxable

Federal>Deductions>Adjustments>MA MSAs,Archer MSAs and Long-Term Care Insurance Contracts– scroll down to Long term Care Section

NTTC Training – TY2023

40

Comp

41 of 43

Income

The final question with respect to income to always ask the taxpayer:

Did you have any other income?

NTTC Training – TY2024

41

42 of 43

Other Income

NTTC Training – TY2024

42

Comments ...

Questions?

43 of 43

Other Income

NTTC Training – TY2023

43