EKS 1 SCENARIO-BASED TRAINING

IN THIS SCENARIO YOU WILL LEARN Who must file Filing Status Exemptions: personal exemption Income- taxable v. nontaxable W-2 income Standard deduction Refundable and nonrefundable credits -EITC ACA- full year coverage through employer Direct Deposit

LET’S GET STARTED This will be you!

1. SCENARIO WILLIAM WASHINGTON Let’s meet the taxpayer

I AM WILLIAM WASHINGTON Hello! I AM WILLIAM WASHINGTON I love working at Kaizi. We’re a startup. We’re a new social media site that can order & deliver you food, drive you places and stream your favorite tv shows. Our catered lunches are sick (in a good way).

INTERVIEW NOTES I’m a Pisces. I’m 27. My birthday is March 11. I’m not married. I’m still looking for “the one”.

FACTS ABOUT ME: I only work part time, but they still give me health coverage. I love startups! I had interest from my savings account, but it was less than a $1.

2. SCENARIO 1 WILLIAM WASHINGTON Let’s look at the Intake/Interview Sheet

What questions should we ask William?

What forms should we look for?

What do we do with grey box?

INTERVIEW NOTES No 1095-B Direct Deposit Did not itemize Has insurance but can’t find the form. Direct Deposit If he gets a refund, he wants to deposit it in his checking account. He brought the numbers. Did not itemize He took the standard deduction last year.

BEFORE DIVING IN... Does William need to file? Is the return in scope?

WHO SHOULD & MUST FILE MUST FILE Your filing requirement depends on filing status, age, and gross income. SHOULD FILE Sometimes a taxpayer does not meet the filing requirements, but they should file anyway. A1-3

IS THE RETURN IN SCOPE OUT OF SCOPE Scope varies by certification. Generally Rental Income, Cancellation of Debt, Married Filing Separately and Small business income with employees, inventory, depreciation and more than $25,000 in expenses. IT DEPENDS Many things are in scope but have caveats – see notes in 4012. 9 – 11

A SIMPLE WAY TO DECIDE Did you learn how to do it in class or was there a test question about it? If not, then don’t do it! Ask your Site Coordinator.

3. SCENARIO 1 WILLIAM WASHINGTON 1040 Step by Step

FILING STATUS Filing status is based on marital status and family situation and determines the rate at which income is taxed. A taxpayer may be eligible for more than one filing status. The taxpayer should choose the filing status that results in the lowest tax. B1

5 FILING STATUSES Married Filing Jointly Married Filing Separately Legally married people file together Married Filing Separately Legally married people file separately Single Not married, never been married, legally divorced Head of Household An unmarried or considered unmarried person with a qualifying dependent Qualifying Widow/Widower A taxpayer whose spouse has died in the prior two tax years AND they have a qualifying dependent.

What is William’s filing status? B1

Exemptions reduce the taxpayer’s taxable income PERSONAL EXEMPTION Exemptions reduce the taxpayer’s taxable income

PERSONAL EXEMPTIONS Two types of exemptions - personal exemption and dependency exemption Each exemption is worth $4,050 for each person for the 2016 Tax Year C1-2

Can William claim a personal exemption?

WATCH instructor Enter William’s Personal Information, Filing Status and Personal Exemption K8

Now you try Enter William’s Personal Information, Filing Status and Personal Exemption K8

INCOME Taxable Non-taxable Wages Cash Income Lottery winnings Jury Duty Payments Interest & Dividents Non-taxable SSI Child Support Veteran’s Benefits TANF D1

Scenario 1 Wages

WATCH instructor Enter William’s W-2 D9-10

Now you try Enter William’s W-2 D9-10

DEDUCTIONS Deductions reduce your taxable income. TaxSlayer calculates the Standard Deduction for you.

ITEMIZED vs. STANDARD DEDUCTIONS A fixed dollar amount based on filing status. Taxpayers born before 1951 or blind may be eligible for a larger standard deduction Itemized Uses your qualified expenses like mortgage interest, medical or dental expenses, charitable contributions F

Which deduction should William claim? F1

Let’s look at William’s Standard Deduction

REFUNDABLE vs. NON-REFUNDABLE Refundable credits allow taxpayers to lower their tax liability and receive as a payment once liability is zero. Non-Refundable Nonrefundable credits allow taxpayers to lower their liability to zero.

REFUNDABLE vs. NON-REFUNDABLE Additional Child Tax Credit American Opportunity Tax Credit – Education Credit Earned Income Tax Credit Non-Refundable Child & Dependent Care Credit Lifetime Learning - Education Credit Retirement Savings Credit Child Tax Credit Less common: Credit for Elderly or the Disabled Foreign Tax Credit

EARNED INCOME TAX CREDIT A credit for people with earned income…and it’s refundable! .

EARNED INCOME TAX CREDIT Part A Rules for Everyone Part C Rules if you do not have a qualifying child Taxpayers & qualifying children must all have SSN that is valid for employment Must be at least age 25 but under age 65 as of December 1 Filing status cannot be married filing separately Cannot be the dependent of another person Must be a US Citizen or resident alien all year Must have lived in the United States more than half the year Cannot file Form 2555 or Form 2555-EZ (re: foreign income) Cannot be a qualifying child of another person Investment income must be $3,400 or less I-2

WATCH instructor Enter William’s EITC I-6

Now you try Enter William’s EITC I-6

AFFORDABLE CARE ACT Every taxpayer is required to have health coverage and report that coverage on their tax return

ACA Under the Affordable Care Act (ACA), the federal government, state governments, insurers, employers, and individuals share responsibility for improving the quality and availability of health insurance coverage in the United States. The ACA reforms the existing health insurance market by prohibiting insurers from denying coverage or charging higher premiums because of an individual’s preexisting conditions.

ACA The ACA also creates the Health Insurance Marketplace. The ACA requires individuals to have qualifying health care coverage (called minimum essential coverage, or MEC) for each month of the year, qualify for a coverage exemption, or make a shared responsibility payment (SRP) when filing their federal income tax returns.

THREE OPTIONS MEC Exemptions SRP Minimum Essential Coverage Taxpayers will receive 1095-A, 1095-B or 1095-C as proof of coverage. Only A is required if covered through the marketplace. Exemptions Some taxpayers are exempt from having coverage SRP Shared Responsibility Payment ACA

Enter William’s ACA information WATCH instructor Enter William’s ACA information ACA 1-3 F1

Enter William’s ACA Information Now you try Enter William’s ACA Information ACA 1-3

SAVINGS IS A BIG PART OF TAX TIME Ask every taxpayer if they want to save part of their refund.

Would you like to save part of your refund today? Tax time is the perfect time to save for an emergency, a college savings account or another life dream you have.

SAVE SOME. SPEND SOME. Use Form 8888.

WITH FORM 8888 THERE ARE OPTIONS Checking Account Savings Account Savings Bond

WHAT DOES WILLIAM WANT TO DO WITH HIS REFUND CHECK Mailed check can take several weeks. DIRECT DEPOSIT Usually deposited in 7-10 days. You need the bank account and routing numbers. . K14-15

Enter William’s Direct Deposit Information WATCH instructor Enter William’s Direct Deposit Information K14-15

Enter William’s Direct Deposit Information Now you try Enter William’s Direct Deposit Information K14-15

4. SCENARIO 1 WILLIAM WASHINGTON Finishing the return

CHECK YOUR WORK QUALITY REVIEW Review entries: Basic Information - filing status & exemptions Income: W-2 Credits: EIC ACA: MEC Do we have matching AGI & refund?

AGI (2015 calculations) Federal Refund (2015 calculations) $13,280 AGI (2015 calculations) $243 Federal Refund (2015 calculations)

FINISHING THE RETURN Ask the custom questions All returns must be Quality Reviewed Print returns (Federal and State) for Taxpayer Review return with taxpayer Have Taxpayer and Spouse sign 8879s for Federal and State Remind them they are responsible for their return and by signing, they are agreeing it is accurate – 1 for the taxpayer, 1 for the VITA site Not sure if this is really true in taxslayer

YOU DID IT! Any questions?

WORKOUT Filing Status Exemptions EITC

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