Software Training – Sample Tax Scenarios

Purpose of Self-Study After watching the orientation ad introduction videos for tax preparation, please complete these tax training scenarios to learn the basics of a tax return with MyFreeTaxes.

Scenario 1 After you create your training account, give your taxpayer a date of birth of September 12, 1973 and a filing status of Single with no dependents. On the Income Checklist screen, choose the first option, “Employment Wages” to enter wage income from the W-2 on the following slide.

12-3123123 Your Employer 1234 Main St. Philadelphia PA 19104 555-55-XXXX 12-3123123 $10,325 $1,124 Your Employer 1234 Main St. Philadelphia PA 19104 $10,325 $434 $10,325 $150 Your Taxpayer’s Name Address City, State Zip

Continue through the tax return and take the Standard Deduction, but make an adjustment to your income of $400 in student loan interest from Sallie Mae. After you’ve gone through the Credits, Taxes, and Federal Wrap-Up sections of the return, answer the following questions (answers are located on the last slide): What is the taxpayer’s Earned Income Credit? What is the taxpayer’s federal refund amount?

Scenario 2 Go back to the Personal Information section and change your taxpayer’s status to Head of Household and add three dependents, all of whom are your children as well as U.S. citizens who lived with you all year. Choose a name for each dependent and use the following dates of birth: January 7, 2007 August 13, 1993 (this dependent has no income, does not attend college, and is not disabled) December 14, 2009

On the Income Checklist screen, if Employment Wages is still checked from the previous scenario, leave it selected. Also select Interest Income. Then edit your existing W-2 record with the information shown on the following slide (if you deleted your previous W-2 record, create a new one).

12-3123123 Your Employer 1234 Main St. Philadelphia PA 19104 555-55-XXXX 12-3123123 $25,436 $3,206 $25,436 $1,068 Your Employer 1234 Main St. Philadelphia PA 19104 $25,436 $369 Your Taxpayer’s Name Address City, State Zip

Then enter the following Interest Income: Your Bank Address City, State Zip 300 Your Taxpayer’s Name Address City, State Zip

Continue through the tax return and take the Standard Deduction, with no adjustments to income. Claim the Earned Income Credit for both qualifying children. 3. What is the taxpayer’s Earned Income Credit? Although the forms for the Child Tax Credit and Additional Child Tax Credit are not available yet, the software has still calculated those amounts. 4. What is the taxpayer’s CTC? 5. What is the taxpayer’s Additional CTC? 6. What is the taxpayer’s total federal refund?

Scenario 3 Now go back to your taxpayer’s personal information and change your date of birth to November 23, 1944. Remove the three dependents you created in the last scenario, and in the income section, remove your wage and interest income from Scenario 2 (un-checking the boxes in the Income Checklist will delete those records). Then check the boxes for Retirement Plan (1099-R) and Social Security (1099-SSA) income.

Enter the following retirement income for an ordinary pension with a regular distribution: Your Pension Fund Address City, State Zip 10,000 10,000 1,079 7

Then enter the following Social Security Income: Your Taxpayer’s Name 555-55-XXXX $5,000 $5,000

7. From the Income Checklist – how much Social Security income was counted as taxable income? 8. How much is the taxpayer’s federal income amount if the Standard Deduction is taken and no credits are claimed? See Next Slide for Answers.

Answers $280 $1,385 $3,417 $184 $1,816 $8,439 $0 $1,079