Other Income Pub 4012 – Tab D Pub 4491 – Lesson 16 #2 added text #6 removed reference to box 6 in first bullet; removed speaker notes (related to Medicaid waivers) #7 added re wrongfully incarcerated income exclusion #9 changed to reflect that every 1099-MISC must be input into TaxSlayer

Intake/Interview Qualified home mortgage debt forgiveness is covered in Lesson 23a Medicaid waiver payments are covered in Lesson 23b An effective interview is critical Income reported by TP should make sense – need to inquire about sources of income NTTC Training – TY2016

Form 1040 – Line 21 Many types of income will end up on line 21 NTTC Training – TY2016

In-Scope Examples Reported on 1099-MISC, Box 3 Pub 17, pg 94 Reported on 1099-MISC, Box 3 Reported on 1099-MISC, Box 7 – but “not a business” Gambling winnings including lotteries and raffles Taxable amount of long term care (1099-LTC) Cancellation of debt (credit card or main home only) Other: Jury duty pay and poll worker pay (not on W-2) Prizes and awards Medical study subject pay Income from all sources must be reported, unless specifically excludible Includes: Illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C if from your self-employment activity A free tour from a travel agency for organizing a group of tourists must be included as income Refund or reimbursement of an item deducted in an earlier year (Form 1040) must generally be included as income in the year received, subject to the tax benefit rule Whether or not reported on Form 1099-MISC Form 2555 exclusion of foreign earned income is in scope with International certification only NTTC Training – TY2016

Out-of-Scope Examples Pub 17, pg 94 Bartering income – property or services exchanged for property or services Activity not entered into for profit Hobby income Rental income, even if “just to help cover the costs” Cancelation of debt other than nonbusiness credit cards or qualified main home Taxable distributions from Education savings account ABLE account NTTC Training – TY2016

Other Income Does NOT include 1099-MISC income that is business income Report on Sch C instead Does NOT include rent or royalty income Report on Sch E, or on Sch C if from personal services, instead DOES include income not reported on other lines of Form 1040 If the taxpayer receives less than $2,000 and is properly considered a household employee, the income may be reported as household employee income (Form 1040 Line 7) – see slide deck #12 NTTC Training – TY2016

Other Income Does NOT include civil damages, restitution, or other monetary awards that the taxpayer received as compensation for a wrongful incarceration Amended return needed for prior year if included in taxable income 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 1099, enter and remove with a negative offsetting other income amount NTTC Training – TY2016

Entering Other Income in TaxSlayer Form 1099-MISC (for box 3 only) Quick File Taxpayer profile (if set up) Form search box Summary/Print view (click line 21) for all other types of income Summary/Print is easiest to get to Other Income screen In Quick File, select W-2G for gambling income Most other will be 1099-MISC In TaxSlayer Form 1099-MISC, box 3 is “Other Income” NTTC Training – TY2016

1099-MISC TaxSlayer takes only box 3 to Other income (line 21) 1099-MISC box 7 that is not a business Must input income in TaxSlayer Form 1099-MISC “Other Income” (as if Box 3) All other income, click on line 21 in 1040 view All taxpayer 1099-MISCs must be input in TaxSlayer Form 1099-MISC 1099-MISC with box 3 USUALLY is NOT a business – must interview to determine If box 3 income relates to a business, input on “Nonemployee compensation” on TaxSlayer Form 1099-MISC 1099-MISC with box 7 USUALLY IS a business – must interview to determine If box 7 income does not relate to a business, input on “Other income” on TaxSlayer Form 1099-MISC e.g. cash tips, report on Sch C not on Line 21 See NTTC training slide presentation “23c Income Form 1099-MISC TY16 Rel 2” NTTC Training – TY2016

Income > Other Income See Wages lesson Select type of income OOS if any is taxable OOS OOS See K-1 lesson OOS International certification required NTTC Training – TY2016

Other Income Not Reported Elsewhere Use Federal Section > Enter Myself > Income > Other Income for Gambling not on W-2G Jury duty pay, prizes, etc. NTTC Training – TY2016

Gambling Income (W-2G) Select W-2G if reported on that form Copy data from tax form Losses are manually computed and entered as itemized deduction on Schedule A (cannot exceed total winnings) Gambling winnings are generally determined on a per-session basis Taxpayer must keep detailed records If no W-2G received, enter on prior screen – Other income Be sure to limit Sch A L 28 gambling losses to no more than net gambling winnings reported in Line 21 Must be done manually Taxpayers must keep detailed records of their gambling sessions and winnings or losses Sessions that result in losses may be deducted, if itemizing, enter on Sch A Line 28 (not subject to 2%) Note: states may tax gambling income differently and limit losses differently NTTC Training – TY2016

Other Compensation Covered in wages lesson NTTC Training – TY2016

Long Term Care Payments Reported to taxpayer on Form 1099-LTC Complete Form 8853, Section C Sections A and B remain out-of- scope Must enter taxpayer separately from spouse, if both are receiving LTC benefits NTTC Training – TY2016

Long Term Care Payments LTC Insurance Contracts Generally, reimbursements are not taxable (reimbursements do not normally exceed actual costs) Per diem costs up to an aggregate limit of $340/day are non-taxable NTTC Training – TY2016

Accelerated Death Benefits Insured has been certified by a physician as terminally ill Fully excludible Certified as chronically ill Treated the same as paid under a qualified long-term care insurance contract NTTC Training – TY2016

Long Term Care Payments 1099-LTC XX Review form contents Gross paid Whether per diem or reimbursed actual Qualified contract (not required) Whether chronically or terminally ill NTTC Training – TY2016

Long Term Care Payments If there are multiple payees under the insurance contract, refer the taxpayer to a paid preparer NTTC Training – TY2016

Long Term Care Payments Complete Form 8853 LTC section Search 8853 Unreimbursed medical expenses can be deducted on Schedule A if itemizing Note: searching for 1099-LTC or long term care do not work in Practice Lab NTTC Training – TY2016

Form 8853 LTC Section Usually, none is taxable NTTC Training – TY2016

Cancelation of Debt Income (CODI) Lenders must issue Form 1099-C if cancel $600 or more of debt Less than $600 must also be reported as income by taxpayer Canceled debt income is reported on Form 1040, Line 21 NTTC Training – TY2016

Credit card debt only if nonbusiness Form 1099-C In box 2 Credit card debt only if nonbusiness An amount in box 3 can be ignored as it is included in box 2 Because only nonbusiness credit card debt is in scope, any interest forgiven is also income. NTTC Training – TY2016

Cancelation of Debt Income (CODI) In-Scope Nonbusiness credit card debt Main home exclusion of debt forgiveness (see separate lesson) NTTC Training – TY2016

Cancelation of Debt – Credit Card Pub 4012 – pg D-32 Credit card debt – nonbusiness only Taxpayer must be solvent immediately before debt canceled Value of assets exceeds total amount of liabilities Not in bankruptcy Otherwise out-of-scope Generally, if a debt for which a taxpayer is personally liable is canceled or forgiven, the taxpayer must include the canceled amount in income. There is no income from canceled debt if the cancelation or forgiveness of debt is a gift or bequest. NTTC Training – TY2016

Form 1099-C – Taxable Income If 1099-C received, enter taxable amount and data from tax form If no 1099-C received, use “Other Income” (discussed above) NTTC Training – TY2016

Income – Quality Review The final question with respect to income: Did you have any other income? Remember, all income is taxable (unless the law says it’s not) NTTC Training – TY2016

Other Income Comments Questions NTTC Training – TY2016