Example Immersion Lesson Filing Status and More 9/12/2018 Exploring Form 1099-R Instructor Note The purpose of this presentation is to review how some of the common Box 7 codes on a 1099-R affect the return. Volunteers will be able to practice entering information in TaxSlayer. Discussion questions are included to help reinforce the tax law associated with retirement income and the volunteers will be directed to review key pages in publication 4012. October 28, 2016 LC & Instructor Training

Let’s Explore Log onto your TaxSlayer Account Begin a new return for Harriet Jones

Begin a new return for Harriet Jones Lawyer Single One Dependent Daughter Candace Jones SSN: 564-00-0011 Date of Birth 03/13/2002 Single, high school student

Example Immersion Lesson Filing Status and More 9/12/2018 Filing Status What is Harriet’s best Filing Status? Why? Open Pub 4012 to the Tab where this is found Tab B-6 Instructor Note If desired Instructors can present various scenarios to prompt volunteers to further explore the filing status Tab. Examples: What if Harriett’s husband passed away last year? Two years ago? What if Harriett says that she is separated from her husband and in the process of getting a divorce? What probing questions must you ask? What If Harriett is divorced but the divorce decree states that her ex-husband is allowed to claim the daughter on his return? October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Make a Table On a sheet of paper create the following table: Block 7 AGI Refund October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 2 What does Code 2 mean? Where can we find the Codes? Back of the form (very small print) Pub 4012 (Check the Table of Contents) Then turn to the Tab October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Pages D-36 and D-37. Review chart and rules with class. October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 2 What is Harriet’s AGI? What is Harriet’s refund? Fill in your table Block 7 AGI Refund Code 2 $33,600 $1,829 October 28, 2016 LC & Instructor Training

Commercial Annuity If Harriet had bought the annuity, what would look different? Her own money coming back would be in Block 5 and would be the difference between Block 1 and Block 2.

In some situations, the taxable amount can even be zero. Do NOT enter this form today.

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 3 What if Block 7 was Code 3? What probing questions would you ask? Why? Harriett tells you the minimum retirement age is 57 Edit the 1099-R to make these changes October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 3 What is Harriet’s AGI? What is Harriet’s refund? Block 7 AGI Refund Code 7 $33,600 $1,829 Code 3 $2,735 What changed on her Form 1040? October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Let’s Discuss Harriett says she expects her interest income to double next year and wants to know how that will affect her return? Her AGI would increase and she would lose EIC Why? Open Pub 4012 to Tab I-3 and review October 28, 2016 LC & Instructor Training

Let’s Check It Out Edit the 1099-INT by doubling the interest to $5200 Note the change to the Refund Change it back to $2600

Let’s Discuss Something Else Example Immersion Lesson Filing Status and More 9/12/2018 Let’s Discuss Something Else What if her 1099-R (code 3) had an entry in block 9b, how would that affect her return? No effect – Why? Taxpayers do not begin to recover their contributions until they reach the minimum retirement age and the disability pension becomes a normal pension See Pub 17 Chapter 5 Disability Pensions Instructor Note Be sure to pause so the class can discuss before showing them the answer October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 1 What if Block 7 was Code 1? What probing questions would you ask? Why? What are some exceptions to the 10% penalty? Open Pub 4012 to Tab H-2 and let’s review Instructor Note This is a good time to review the rules for the exceptions. Remember when the money is withdrawn and when the exception occurs does not always have to happen at the same time. For example, if the money is withdrawn in February to pay some normal household bills and then in September they incur several medical expenses in excess of the Schedule A threshold, the exception still applies. Note however, that would not be the case if the person became disabled in September. October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 1 Harriett tells you she needed to money to pay normal living expenses Edit the 1099-R to make these changes October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 1 What is Harriet’s AGI? What is Harriet’s refund? Block 7 AGI Refund Code 7 $33,600 $1,829 Code 3 $2,735 Code 1 Payment Due $1,271 What changed on her Form 1040? October 28, 2016 LC & Instructor Training

Block 7 Code 1 Self-Rollover Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 1 Self-Rollover What if Harriett said she withdrew the money but changed her mind and put it back into an IRA? What probing questions would you ask? Why? Open Pub 4012 to Tab D-34 and let’s review the rules Instructor Note A “self rollover” occurs when a person withdraws money from a qualified plan and then puts all or part back into another IRA as opposed to the financial institution transferring the money directly to an IRA and issuing the 1099-R with a code G. They must do this with in 60 days and can only do this once a year. October 28, 2016 LC & Instructor Training

Block 7 Code 1 Self-Rollover Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 1 Self-Rollover Your interview indicates that Harriet met all the self- rollover rules Edit the 1099-R to make these changes October 28, 2016 LC & Instructor Training

Block 7 Code 1 Self-Rollover Example Immersion Lesson Filing Status and More 9/12/2018 Block 7 Code 1 Self-Rollover What is Harriet’s AGI? What is Harriet’s refund? Block 7 AGI Refund Code 7 $33,600 $1,829 Code 3 $2,735 Code 1 Payment Due $1,271 Code 1 Rollover $2,600 What changed on her Form 1040? October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Two Odd-Looking 1099-Rs Railroad Retirement Board Treat like Social Security Treat like a Form 1099-R (3 copies) Usually requires the Simplified Method October 28, 2016 LC & Instructor Training

Usually has an entry in block 2a even with an entry in block 9b Two Odd-Looking 1099-Rs Office of Personnel Management (OPM) Block 5 usually is health insurance premium Enter on Sch A or as PSO deduction if appropriate Usually has an entry in block 2a even with an entry in block 9b

One Last Thing - Scope Which of the following Box 7 Codes are out of scope? 1, 4, 6, 8, A, 7D, G, K, Q, U

Example Immersion Lesson Filing Status and More 9/12/2018 One Last Thing - Scope Which of the following Box 7 Codes are out of scope? 1, 4, 6, 8, A, 7D ??, G, K, Q, U Open Pub 4012 Tab D-34 Are there conflicts to the above? Where do you go to be sure? Instructor Notes 7D is a maybe must check the D code rules to see if it is in scope. This is the time for Instructors to discuss the difference between the Pub 4012 and the AARP Scope Manual and point out that Tax-Aide has some things that are in scope that are not in scope for other volunteer programs (e.g. VITA). October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/12/2018 Scope Manual Instructor Note Many Districts place a link to a copy of the scope manual on the desktop of site computers and LCs maintain a hard copy at the site. October 28, 2016 LC & Instructor Training

Questions?