Exploring Filing Status and More Example Immersion Lesson Filing Status and More 9/18/2018 Exploring Filing Status and More Instructor Note The purpose of this presentation is to review how Filing Status can affect the return. Additionally, some elements of the Form W-2 are explored including deferred income and the Retirement Savings Credit. Volunteers will be able to practice entering basic information in TaxSlayer. Sample 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. The Instructor does not need to prepare the return in parallel with the volunteers because the results have already been determined and entered into the presentation. This presentation can be used as a refresher for returning volunteers in the classroom setting. For new volunteers, this presentation can reinforce tax law information and software data entry after the volunteers have had lessons on Filing Status, Dependents, Wages, and EIC. The lesson will introduce new volunteers to refundable and non-refundable credits including the Retirement Savings Credit, the Child Tax Credit, and EIC. October 28, 2016 LC & Instructor Training

Immersion Exercise Log onto your TaxSlayer Account Begin a new return for David Smith

Begin a new return for David Smith Manager at Walmart Single

Make a Table On a sheet of paper create the following table: Filing Status AGI Refund EIC Note

Example Immersion Lesson Filing Status and More 9/18/2018 David’s W-2 (EIN 45-6000000) shows the following: Box 1 = $31,200 Box 2 = $4100 Box 3 = $31,200 Box 4 = $1934 Box 5 = $31,200 Box 6 = $452 Box 12a = Code DD and $2600 Box 13 = Retirement Plan checked Instructor Note Direct the volunteers to enter the W-2 in TaxSlayer. October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 Instructor Note Direct volunteers to enter the 1099-INT in TaxSlayer October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 Single What is David’s AGI? Refund? EIC? Filing Status AGI Refund EIC Note Single $31,209 $1,432 $0 Instructor Note After each data entry, have the volunteers record their results in their table before showing the results. October 28, 2016 LC & Instructor Training

Earned Income Credit (EIC) Example Immersion Lesson Filing Status and More 9/18/2018 Earned Income Credit (EIC) Why is David’s EIC zero? Where are the rules? Open Pub 4012 to Tab I and let’s review Instructor Note Hear is an opportunity to generate discussion by asking questions and having the volunteers find the answer in Pub 4012. Examples: Which of the following are considered earned income: Tips, Workers Compensation, Alimony, Union Strike benefits? At what income was David’s EIC phased out? How much interest can person earn and still be eligible for EIC? What if David had an ITIN? October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 David’s W-2 (EIN 45-6000000) shows the following: Box 1 = $31,200 Box 2 = $4100 Box 3 = $31,200 Box 4 = $1934 Box 5 = $31,200 Box 6 = $452 Box 12a = Code DD and $2600 Box 13 = Retirement Plan checked Answer: Cost of employer sponsored health coverage. What do the letters “DD” indicate? How does this affect David? October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 W-2 Box 12 Codes Where can you find the codes? Pub 4012 Tab D Back of the Form W-2 Look up Code DD Cost of employer sponsored health coverage Does that mean David has MEC? Instructor Notes Give volunteers time to find answers before displaying. What probing questions should be asked about the entry for code DD? It may not be MEC. October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 $30,2000 David’s W-2 (EIN 45-6000000) shows the following: Box 1 = $31,200 Box 2 = $4100 Box 3 = $31,200 Box 4 = $1934 Box 5 = $31,200 Box 6 = $452 Box 12a = Code DD and $2600 Box 13 = Retirement Plan checked D $1,000.00 Code D is voluntary contribution to a 401K What if there was a code D with $1000? What is Code D? How would that change his W-2? What other Box 12 Codes show deferred income? October 28, 2016 LC & Instructor Training

Update Make those changes to David’s W-2

David’s W-2 (EIN 45-6000000) shows the following: Box 1 = $31,200 $30,200.00 David’s W-2 (EIN 45-6000000) shows the following: Box 1 = $31,200 Box 2 = $4100 Box 3 = $31,200 Box 4 = $1934 Box 5 = $31,200 Box 6 = $452 Box 12a = Code DD and $2600 Box 13 = Retirement Plan checked D $1,000.00

Example Immersion Lesson Filing Status and More 9/18/2018 Single with 401K What is David’s AGI? Refund? EIC? Filing Status AGI Refund Note Single $31,209 $1,432 $0 $30,209 $1,682 Ret. Svg. Credit What changed on his Form 1040? October 28, 2016 LC & Instructor Training

Retirement Savings Credit Example Immersion Lesson Filing Status and More 9/18/2018 Retirement Savings Credit What is David’s Retirement Savings Credit? $100 What type of credit is it? Open Pub 4012, find the tab and let’s review the rules Instructor Note Discussion can be prompted by asking questions. Examples: What probing questions do you ask to determine if David is eligible for this Credit? At what income would David’s credit be phased out? At what age do you become eligible for the credit? What is the maximum credit for any taxpayer? If David withdrew funds from his 401K two years ago, how would that effect his credit? October 28, 2016 LC & Instructor Training

Retirement Savings Credit Form 8880 Note change in percentage with change in filing status

Add a Dependent Dependent Daughter DOB 4/5/2007 Lived w/TP 0 months Note the changes to David’s return

What changed on his Form 1040? Single with Dependent What is David’s AGI? Refund? EIC? Filing Status AGI Refund EIC Note Single $31,209 $1,432 $0 $30,209 $1,682 Ret Svg Credit $3,290 Exemption, CTC What changed on his Form 1040?

Example Immersion Lesson Filing Status and More 9/18/2018 Dependency Rules Still no EIC – Why Find dependency rules. What page in 4012? C-3 Find rules for child of divorced or separated parents. What page? C-8 Instructor Note This can be an opportunity to have the volunteers explore the QC/QR Tri-Fold if desired Discussion can be prompted by asking questions. Examples: What probing questions do you ask David about his daughter? What benefits are the custodial parent entitled to? What is the difference in the “support rule” between Qualifying Child and Qualifying Relative? October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 Child Tax Credit (CTC) What is David’s CTC? $1,000 What type of credit is it? What are the rules? Find the Tab in Pub 4012 – Let’s review Instructor Note Instructors can stress that volunteers be alert to note when a child is approaching age 17 so they can advise taxpayers when they are about to lose this credit. October 28, 2016 LC & Instructor Training

Example Immersion Lesson Filing Status and More 9/18/2018 Change What if Mary lived with David for all of 2016? What probing questions do you ask? Open pub 4012 to Tab B-6, let’s review Make appropriate changes to return October 28, 2016 LC & Instructor Training

What changed on his Form 1040? Head of Household What is David’s AGI? Refund? EIC? Filing Status AGI Refund EIC Note Single $31,209 $1,432 $0 $30,209 $1,682 Ret. Svg. Credit $3,290 Exemption, CTC HoH $5,367 $1,450 What changed on his Form 1040?

Example Immersion Lesson Filing Status and More 9/18/2018 What if? David is married? Wife ran off January 31, 2016, leaving Mary with David. What changes would you make to the return? NONE Why no changes? What if Mary was his niece? Discuss chart on B-1. What if Mary was a niece? Right-hand side of chart includes child, step-child or foster-child only. October 28, 2016 LC & Instructor Training

What if? David’s wife died January 31, 2017 How would that affect the return?

Make appropriate changes Deceased: January 31, 2017 No income

What changed on his Form 1040? Married Filing Joint What is David’s AGI? Refund? EIC? Filing Status AGI Refund EIC Note Single $31,209 $1,432 $0 $30,209 $1,682 Ret Svg Credit $3,290 Exemption, CTC HoH $5,367 $1,450 MFJ $7,388 $2,336 Many Changes What changed on his Form 1040?

Look at all the changes! Standard Deduction $6,300 to $12,600 Exemptions $8,100 to $12,150 Ret Svg Credit $100 to $500 CTC $1000 down to $48 But Add’l CTC $0 to $952 EIC $1,450 to $2,336

Child Tax Credit Revisited Why is David’s CTC only $48? What are the rules for Additional CTC? Find the Tab in Pub 4012 – Let’s review

What if? David’s wife died January 31, 2015 How would that affect the return?

What changed on his Form 1040? Qualifying Widow(er) What is David’s AGI? Refund? EIC? Filing Status AGI Refund EIC Note Single $31,209 $1,432 $0 $30,209 $1,682 Ret Svg Credit $3,290 Exemption, CTC HoH $5,367 $1,450 MFJ $7,388 $2,336 Many Changes QW $5,697 What changed on his Form 1040?

Example Immersion Lesson Filing Status and More 9/18/2018 Questions Questions… Comments… October 28, 2016 LC & Instructor Training