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  • The following tax topics will be discussed:
    • Income: Wages (W-2), Social Security (SSA-1099), Retirement (1099-R) and Interest (1099-INT)
    • Adjustments: None
    • Standard Deduction
    • Credits: None

Thomas Andrews: Single Senior Taxpayer

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Income

  • Taxable vs Non-Taxable: NTTC 4012 Pages D-3 to D-4

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  • Earned vs Unearned: NTTC 4012 Page I-3
    • W-2 income is earned income
    • Interest and unemployment are unearned income

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Income

Page 2 of Intake/Interview & Quality Review – Form 13614‐C

Income: Wages on W-2

NTTC 4012 pages D-8 to D-11

NTTC 4491 pages 8-2 to 8-5

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Check and correct all auto‐filled information to match Form W‐2

ENTER

ENTER

ENTER

ENTER

ENTER

ENTER

ENTER

ENTER

ENTER

ENTER

CHECK

CHECK

CHECK

Enter or Check and correct if auto-filled

CHECK

CHECK

CHECK

CHECK

Check appropriate box

Verify current tax year

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W-2 Box 12 Codes

  • 26 possible codes (NTTC 4012 page D-11)
  • Often seen codes
    • D – Elective deferrals to a section 401(k) (Codes E through H are elective deferrals to other qualified plans)
    • DD – Cost of employer-sponsored health coverage

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What on W-2 makes a return Out of Scope?

  • Return Out of Scope with W-2 Box 12 codes R, T or Q
  • Ministers/church workers (special tax rules)
  • Very high earned income that is subject to the Additional Medicare tax and/or Net Investment Tax
    • MFJ: >$250,000
    • MFS: >$125,000
    • S, HoH or QW: >$200,000

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Interest Income�NTTC 4012 pages D-18 to D-20�NTTC 4491 pages 8-9 to 8-12�

  • All interest must be included in the return
  • All interest is taxable except interest from state or municipal obligations
  • Tax-exempt interest must be reported since it can impact other calculations.
  • Credit Unions often report “dividends”, but these are interest and will be found on 1099-INT

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Interest Income is Unearned Income

  • Indicated on Page 2 of Intake/Interview & Quality Review – Form 13614‐C
  • Found on 1099-INT, 1099-OID, Brokerage Statement, and Schedule K-1
  • Taxpayer will not have tax form from payer when:
    • Interest less than $10
    • Seller financed mortgage interest income
    • Private or foreign payer

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Example of Interest Form 1099-INT �

FATCA is out of scope

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Sample Brokerage Statement with 1099-INT (Davenport Case)

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Income: Social Security�NTTC 4012 pages D-52 and D-68�NTTC 4491 pages 14-1 to 14-3

  • A taxpayer can have Social Security income as:
    • A retirement benefit (most common)
    • A disability benefit
    • A survivor benefit (parent/spouse/children)
  • Social Security income must be reported on the return
  • Benefits are reported on Form SSA-1099 or RRB-1099 (for retired railroad employees)
  • Social Security benefits can be taxable depending on AGI (maximum taxable: 85% of benefits)

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  • Medicare premiums�carry to Schedule A
  • Withholding is not common and can be missed

Social Security: SSA 1099

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Income: IRA Distributions�NTTC 4012 pages D-53 to D-55 and D-62�NTTC 4491 pages 11-1 and 11-4 to 11-7

  • Four types of IRAs
    • Traditional
    • Roth
    • Savings Incentive Match Plans for Employees (SIMPLE)
    • Simplified Employee Pension (SEP)
  • Types of Distributions
    • Regular
    • Required minimum distribution (RMD)
    • Trustee to trustee transfer (not taxable)
    • Rollover (not taxable if done correctly)

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Income: IRA Distribution - Interview

  • Traditional IRA
    • Did taxpayer ever make non-deductible contributions?
    • If early distribution, is there an exception to avoid additional tax? (Form 5329 must be completed)
    • If self-rollover was made, was it timely?
      • Taxpayer receives funds and redeposits in qualified account within 60 days
      • Reported on Form 1099-R with taxable code
      • IRA self rollover limited to one in a 12-month period
    • Was a qualified charitable distribution (QCD) made?

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1099-R Box 7 has a code for the type of distribution

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Income: IRA Distribution – Box 7 Codes

  • Review NTTC 4012 Tab D-63 to D-64 for list of 1099-R Distribution Codes
  • Most commonly seen:
    • 1 – Early Distribution (10% penalty applies unless exception)
    • 3 – Disability
    • 4 – Death
    • 7 – Normal Distribution
    • G - Rollover

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1099-R Advanced Topics�(should be handled by experienced volunteer)

  • Qualified charitable distribution (QCD)
  • Rollover of IRA or qualified retirement account funds
  • Non-deductible IRA contributions

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Adjustments

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Total Income – minus Adjustments =

Adjusted Gross Income (AGI)

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(We will discuss adjustments in other exercises)

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Standard Deduction and Itemized Deduction

  • Subtractions from a taxpayer’s adjusted gross income (AGI)
  • Reduces amount of income taxed
  • Most taxpayers have a choice
    • Standard deduction
    • Itemized deduction (covered for Davenport Case)
  • >95% of our taxpayers will use Standard Deduction

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Standard Deduction�NTTC 4012 pages F-3 to F-4�NTTC 4491 pages 19-1 to 19-3

  • Fixed reduction of AGI based on:
    • Filing status
    • Age (65 or older)
    • Blindness
    • Dependency
  • Amount of standard deduction subject to change each year
  • TaxSlayer will calculate amount of Standard Deduction based on entries in the “Basic Information” section

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Credits: Reduce tax dollar for dollar

  • Non-Refundable credits can only be used to offset income tax
    • Examples: Retirement Savings Credit, Lifetime Learning Credit
  • Refundable credits can be refunded even if taxpayer has no tax liability
    • Example: Earned Income Credit