Basic B volunteer training Tax year 2014

Federal nonrefundable and refundable credits NEW: Premium Tax Credit and related credit “reconciliation” Exemptions to the ACA insurance coverage requirement Other federal taxes and related tax issues Financial services at the tax site BASIC B TRAINING OVERVIEW

Affordable Care Act (ACA) and the 2014 tax return

ACA THE BASICS The ACA created the Health Insurance Marketplace – Minnesota has it’s own marketplace, MNsure MNsure marketplace is where Minnesotans find information about health insurance options, purchase health insurance and enroll in public health plans Taxpayers must report whether he/she (and family) had insurance coverage for the year on their tax return

THE TAX RETURN A new tax credit, the Premium Tax Credit (PTC), is available to help eligible taxpayers pay for coverage Taxpayers could elect to claim the PTC throughout the year to help pay monthly insurance premiums – Advanced Premium Tax Credit (APTC) The ACA also includes the individual shared responsibility provision, which requires individuals to have health insurance coverage for their family Form 8962, Premium Tax Credit (PTC), Form 8965, Health Coverage Exemptions, and Form 1095-A, Health Insurance Marketplace Statement

LINE 46: EXCESS ADVANCE PREMIUM TAX CREDIT Must have purchased health insurance through MNsure marketplace Advanced payments of the Premium Tax Credit to help taxpayer pay their 2014 monthly insurance premiums Advanced payments were based on the estimated income the taxpayer entered on their MNsure application Complete Form 8962 to “reconcile” their payment – comparing what they estimated their income would be and what their actual income was for 2014 – did they receive too much advanced payment Must have Form 1095-A to complete the return

LINE 61: HEALTH CARE, INDIVIDUAL RESPONSIBILITY Taxpayer and each family member must have – A.Health coverage, B.Qualify for a health coverage exemption, or C.Make a shared responsibility payment (SRP) on their tax return

WHAT YOU NEED TO DETERMINE Did everyone listed on the return have insurance coverage? – Yes, is the insurance coverage considered MEC and what months was the taxpayer (family) insurance in 2014 – No, is the taxpayer (family member) required to file a return or eligible for an exemption from insurance coverage

YES, THE TAXPAYER (FAMILY) HAS HEALTH INSURANCE Is the health insurance considered minimum essential coverage (MEC)? If the taxpayer (family) had MEC insurance coverage all year, check the “full coverage” box on line 61, click your heels and shout hooray! If the coverage was not all year, complete Worksheet 8 in TaxWise

NO, THE TAXPAYER (FAMILY) DID NOT HAVE HEALTH INSURANCE Check the federal filing requirement threshold to determine whether the taxpayer is required to file a return Determine whether the taxpayer (family) may qualify for an exemption from the penalty

MINIMUM ESSENTIAL COVERAGE Insurance through employer Insurance purchased through private company Insurance purchased through MNsure marketplace – must have Form 1095-A to complete the return Student health plans Government-sponsored

EXEMPTIONS TO THE PENALTY Taxpayer (family) may be eligible for more than one exemption Find the exemption that is least complicated Undocumented taxpayers are exempt from the penalty (exemption code C) Some exemptions require approval from the federal marketplace Taxpayer can elect to take the penalty without claiming an exemption

LINE 69: NET PREMIUM TAX CREDIT Credit based on MAGI and family size To be eligible must have purchased insurance through MNsure marketplace Must have Form 1095-A from MNsure If taxpayer elected to receive the APTC, then the portion used during the year will be deducted from the calculated PTC amount

10 MINUTE BREAK

Topic 7: Nonrefundable Credits

LINE 48: FOREIGN TAX CREDIT Enter the amount shown in box 6 of 1099-DIV or 1099-INT directly on line 48 If required to use Form 1116 then it is out- of-scope

LINE 49: CHILD AND DEPENDENT CARE CREDIT Max credit: $3,000 for 1 qualifying person, $6,000 for 2+qualifying persons Cannot be married filing separately Must have earned income Expenses must be paid by the taxpayer to work or look for work Form 2441

QUALIFYING PERSON Child under age 13 and claimed as an exemption Person who is physically/mentally incapable of self-care and couldn’t be claimed as exemption because income was $3,950+ Spouse who is physically/mentally incapable of self-care

QUALIFYING EXPENSES Paid by the taxpayer (spouse) to work or look for work Child in nursery school or pre-school for children below level of KG qualify for the credit Overnight camp does not qualify Day camp may qualify if the camp specializes in a particular activity such as computers or soccer

QUALIFYING PROVIDER Payments cannot be made to the taxpayer’s (spouse) dependent If payments are made to a taxpayer’s (spouse) child, he/she cannot be a dependent and must be age 19 or older by the end of the year If the provider refuses to give EIN/TIN, the taxpayer can still claim the credit, see Pub 17, “provider refusal”

LINE 50: EDUCATION CREDITS American opportunity credit, max credit $2,500 per student Lifetime learning credit, max credit $2,000 per return Cannot use both credits for the same student Form 8863

CANNOT CLAIM THE CREDIT Claimed as a dependent on another person’s tax return, such as the taxpayer’s parent Filing status is married filing separately Was a nonresident alien for any part of 2014 (nonresidents are out-of-scope for Tri-CAP)

EDUCATION DOCUMENTATION Can be shown on Form 1098-T or annual statement from the institution or receipts for books and equipment Reduce expenses by amounts received from scholarships and grants shown in box 5 of Form 1098-T

AMERICAN OPPORTUNITY CREDIT 40% of the credit may be refundable Available for the first 4 years of post secondary education Pursuing a degree or recognized educational credential Enrolled at least half time No felony drug convictions

NOT ELIGIBLE FOR THE REFUNDABLE AMERICAN OPPORTUNITY CREDIT 1.Taxpayer is (a) under age 18; or (b) age 18 and their earned income was less than ½ of their support; or (c) FT student over age 18 and under 24 and earned income was less than ½ of their support; AND 2.At least one of his/her parents was alive at the end of the year; AND 3.Taxpayer is not filing a joint return

LIFETIME LEARNING CREDIT Nonrefundable Available for an unlimited number of years Do not to be pursuing a degree Can take one or more courses Felony drug convictions are permitted

EXPENSES Qualifies: tuition, required enrollment fees and course-related materials such as books, supplies and equipment American opportunity credit: books, supplies and equipment do not have to be purchased from the school Lifetime learning credit: books, supplies and equipment must be purchased from the school Does not qualify: computer tech fees, student activity or athletic fees, insurance, room and board, transportation

CALCULATING EXPENSES Scenario 1 Tuition $12,500 Course-related materials $650 Scholarships and Grants ($5,000) Eligible expenses for credit $8,150

LINE 51: RETIREMENT SAVINGS CREDIT Taxpayers qualify if they made contributions to an eligible plan Contributions to employer-sponsored plan are shown in box 12, Form W-2 Contributions to a traditional IRA or Roth IRA Must be age 18 or older and cannot be a FT student Form 8880

LINE 52: CHILD TAX CREDIT Nonrefundable credit up to $1,000 per child Taxpayers not claiming the full amount may be eligible for the refundable Additional Child Tax Credit Must have a Qualifying Child, determined by info entered on TaxWise Main Information Sheet Form 8812

LINE 53: RESIDENTIAL ENERGY CREDITS Expired provision

Topic 8: Other taxes

Line 57: self-employment tax Line 59: additional tax on IRAs, other qualified retirement plans – early distributions subject to 10% penalty Line 60b: 1 st time homebuyer credit repayment Line 61: health care, individual responsibility

10 MINUTE BREAK

Topic 9: Payments

Line 64: federal income tax withheld reported on W-2s and other income statements Line 65: 2014 estimated tax payments and amount applied from 2013 return to 2014 taxes

Topic 10: Refundable credits

LINE 66A: EARNED INCOME CREDIT Part A – Rules for everyone Must have valid social security number Cannot file married filing separately U.S. citizen or resident alien all year Cannot file Form 2555 or 2555-EZ No investment income $3,350+ Cannot be a qualifying person of another person

LINE 66A: EARNED INCOME CREDIT Part B – Rules with a qualifying child Meet rules for everyone in Part A Have a qualifying child Cannot be the qualifying child of another person Qualifying child cannot be used by more than one person

LINE 66A: EARNED INCOME CREDIT Part C – Rules with no qualifying child Meet rules for everyone in Part A At least age 25 but under age 65 as of December 31 Cannot be the dependent of another person Lived in the U.S. more than ½ the year Cannot be the qualifying child of another person

EARNINGS NOT ELIGIBLE FOR EIC Income received for work while an inmate Income received from work experience and community service programs for welfare recipients, generally reported in box 3 of Form 1099-MISC Disability insurance payments reported in box 12 of Form W-2 with code J Any nontaxable income received from someone for services performed Unemployment compensation

EIC AND ITIN Taxpayer with an SSN is claiming a child with an ITIN Taxpayer qualifies for EIC, but no EIC for child Taxpayer with an ITIN is claiming a child with an SSN No EIC for taxpayer or child Taxpayer with an SSN and spouse with an ITIN is claiming a child with an SSN No EIC for taxpayers or child Taxpayer with an SSN is claiming a child with an SSN and a child with an ITIN The child with the SSN qualifies the taxpayer for EIC, but the child with an ITIN does not

A refundable credit is the unused portion of the child tax credit Taxpayer with more than $3,000 of taxable earned income may be eligible regardless of the number of qualifying children Taxpayer with 3+ children may be eligible regardless of income FORM 8812 LINE 67: ADDITIONAL CHILD TAX CREDIT

Line 68: American Opportunity Credit Line 69: Net Premium Tax Credit

Topic 11: Refund or tax owed

LINE 76: REFUND AMOUNT There are 4 options… 1.Apply it to 2014 taxes 2.Direct deposit 3.Receive a paper check 4.Purchase U.S. savings bonds Refer taxpayers without direct deposit to the Financial Services staff to learn about prepaid debit cards and savings accounts.

YOUR ROLE You spend the most amount of time with each customer You are the customer’s most trusted advisor THUS, YOU…. Refer customers without direct deposit to financial services staff Reveal the expected refund amount Make the savings pitch Alert financial services staff of potential savers

WHY A SAVINGS CAMPAIGN? Tax time can be the most savable moment Saving is a priority for the majority of customers yet few do save at tax time Want something that customers and volunteers can rally behind

# customers who intended to SAVE some of their refund in 2014 # who actually saved at the tax clinic last season CLOSING THE GAP: FROM INTENTION TO ACTION

1.Customers save at least $50 of their federal refund 2.Tri-CAP staff enters savers into promotion to have 100 chances to win $100 weekly prizes during tax season 3.Optional: customer can submit a photo on their own to be eligible for a contest to win $25,000 grand prize.

HAVE FUN! Help customers reach their savings goals Site competitions Pizza or bagel parties Bragging rights Recognition on P+P social media “I believe in the power of savings. Also, I found the goals and measuring the goals as a good motivator.” — P+P volunteer

NOTICE OF ACCOUNT INFORMATION Financial services staff provide form with product’s routing and account numbers

SERIES I U.S. SAVINGS BONDS Bonds make great gifts - Can purchase up to two Series I U.S. savings bonds each tax season Bonds are easy – Can split federal tax refund by buying a bond. The rest can be directly deposited or mailed as a check.

SERIES I U.S. SAVINGS BONDS Bonds are flexible - Purchase bonds starting at $50 in $25 increments up to $5,000 (ex. $50, $75, $100, etc.). Bonds are safe - An investment backed by the U.S. Treasury Department with very low risk of default. They never lose value. Purchase savings bonds regardless of credit or banking history.

REVEALING THE REFUND “We’re almost done. Your return will go through quality review to check my work and the amount may change. Right now, it looks like you’ll be getting $X in tax refunds today! How much would you like to save?” Reveal the expected refund to prompt savings decision Write refunds (or amounts due) on preparer checklist Make the savings pitch to all customers receiving a refund

CREATE YOUR SAVINGS PITCH Ask everyone receiving a refund if they would like to save Frame the savings pitch as the default or norm Keep it simple. For example: “Let’s get you entered to win 100 weekly prizes of $100. How much of your refund would you like to save?” “If your refund allowed, what would you save some for?” “How much should we put in a savings account?”

NEW: FINANCIAL COACHING PROGRAM Money Mentors Selected participants work with a volunteer financial coach 4—8 months to take steps to reach their financial goals.

KEY TAKEAWAYS Our customers are experts in their own lives and make the best decision for their situation The majority of Tri-CAP customers want to save Our role is to provide info about direct deposit and savings opportunities to all customers Everybody at Tri-CAP plays a role in making financial capability possible for our customers

LINE 78: AMOUNT OWED Option 1: Pay in full within 60 to 120 days with no fee, interest and penalties charged on payments after April 15. Option 2: Set up an installment agreement with the IRS. Option 3: Taxpayer should file their return by the deadline and pay as much as they can. Do not complete Form 2210, IRS will calculate any penalty.

Topic 12: Related tax issues

POWER OF ATTORNEY (POA) Power of Attorney is the taxpayer’s written authorization for a representative to act on their behalf in tax matters The representative must have Form 2848 Follow the steps outlined in the Volunteer Tax Manual – ask your tax site manager for assistance

INJURED SPOUSE ALLOCATION MFJ taxpayers and one spouse owes past-due federal or state debt The “injured spouse” is the spouse that does not owe the past-due debt Complete Form 8379 to allow the “injured spouse” to receive their “portion” of the federal refund Minnesota does not have an “injured spouse” program

AMEND PRIOR YEAR TAX RETURNS May need to amend return to correct errors or omissions on a return they have already filed The IRS may file on the taxpayer’s behalf if the return is not filed. The taxpayer can amend the IRS-filed return Amended returns cannot be e-filed Refer customers needing an amended return to Tri-CAP’s main office.

RESIDENT ALIEN OR NONRESIDENT ALIEN? What do you do if an individual may be attending school in the U. S. on a student visa and/or an individual has checked the “No” box on Form C indicating they are not a U. S. Citizen? Use Determining Residency Status decision tree to determine whether individual is a resident alien or nonresident alien If you determine the individual is a resident alien, complete Form If the individual had a “green card,” they are eligible for tax credits If you determine the individual is a nonresident alien, refer them to their college’s international student program as this is out-of-scope for Tri-CAP

HOMEWORK Basic certification, use paper Form 6744 booklet to complete questions 1 – 13 Advanced certification, use paper Form 6744 booklet to complete questions 1 – 7 Consider viewing the health savings account training online at Tri-CAP’s volunteer site and certifying at the HSA level