1. TAX BASICS YOU MUST KNOW
FILING STATUS
DEDUCTIONS
CHILD TAX CREDIT (CTC)
EARNED INCOME TAX CREDIT (EIC)
DIFFERENT INCOME TYPES
OBAMACARE

2. FILING STATUS MARRIED NOT MARRIED
The FIRST step to determine a customers filing status is asking if they are:
The filing status effects the deductions and credits available to them
The customer does not have a choice of what their filing status is
MARRIED
NOT MARRIED

3. MARRIED Married Filing Joint (MFJ) Married Filing Separate (MFS)
This is the best filing status that will be used
Even if the spouse does not work
Married Filing Separate (MFS)
a. You will rarely use this filing status.
b. It gives the lowest standard deduction.
c. The taxpayer does NOT receive EIC using this status

4. NOT MARRIED
Head of Household (HOH) Paid over half the cost of keeping up a home for a QUALIFYING person Single No QUALIFYING dependents and is not legally married

5. Standard Deductions and Itemized Deductions
If the taxpayer has more money from itemized deductions than their standard deduction amount, then they’ll qualify to use itemized deductions
If you are unsure which is higher just enter the amounts on the Itemized Deduction (Schedule A) form in the program.

6. STANDARD DEDUCTION If your filing status is: Your deduction is:
Married Filing Joint $12,600
Married Filing Separate $6,300
Head of Household $9,300
Single $6,300
Qualifying Widow $12,600
A standard deduction is a dollar amount that reduces the amount of income on which you are taxed

7. ITEMIZED DEDUCTIONS Mortgage interest Real estate taxes
Charitable contributions
Ad valorem taxes (car tags)
A portion of medical expenses
A portion of job expenses
State tax paid from W-2’s
Gambling losses up to gambling winnings

8. CHILD TAX CREDIT (CTC) Up to $1000 per child
Child must be 16 or under (2000 or later)
Amount of credit is based on taxable income and other factors
If someone has a taxable income of $0 then they do not receive CTC
Not everyone will receive this credit

9. EARNED INCOME TAX CREDIT
A refundable tax credit for people who work and have earned income under $53,930
EIC is available to families and individuals that qualify. The credit can be as much as $6,318 with 3 qualifying dependents
To claim it, you MUST have earned income. You must have been employed at some part of the year

10. QUALIFICIATIONS FOR EIC
1. The taxpayer must have a valid Social Security Number….(NOT start with 9)
And ONE of these 3:
Dependent must be 18 or under Or
23 or under and a full time student
Permanently and totally disabled
AND
The relationship of the qualifying dependent must be…..
No niece, nephew, etc…

11. QUALIFYING A DEPENDENT
Son, daughter, grandchild, foster child
Brother, sister, niece, nephew, whom the taxpayer cares for as their own child
Dependent must have lived with the taxpayer in the U.S. more than half the year

12. EIC Chart Total Earned Income $5500 $4500 $3000 $6000 $5500 $5000
$4000
$3500
$3000
$2500
$2000
$1500
$1000
$500 $0
$5500
$4500
$3000
3 Children
2 Children
1 Child
0 Children
$0 $5000 $ $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000
Total Earned Income

13. ObamaCare Basics Also called the Affordable Care Act (ACA)
Law requires all citizens to have healthcare coverage or be fined a tax penalty
There are 20 exemptions that can be used to waive the penalty if you qualify
Fee for not having insurance in 2015 is $695 per adult and $ per child or 2.5% of taxable income, whichever is greater!
You can’t be denied health insurance coverage
Don’t stress, just use LIVE HELP for more information!

16. EIC Due Diligence

17. EIC Due Diligence Must Do’s
Understand the basics of EIC
Ask all the right questions
Document the answers as you go
Keep your records on file

18. Lets take a look at the different EIC Interview Sheets

21. EIC Due Diligence Interview Sheet TIPS
If the biological parent is NOT claiming the dependents, where is the parent? If you have personal (family, friend etc..) knowledge as to why, make note of that on the interview sheet!
If they are a long time loan customer note that as well.
If you are uncomfortable at all you MUST make further inquiries until you are.
Make sure the taxpayer has supporting documents if audited by the IRS. You don’t need them!
You MUST print your name and the taxpayer needs to sign and date.

23. Self Employed EIC Interview Sheet TIPS
Do you feel comfortable that the taxpayer can prove the income and expenses? If you have any doubts you should not proceed until you feel comfortable.
Does the taxpayer have a 1099-Misc? If so, you need to enter that on a 1099-Misc in the program
No round numbers! This is a big red flag that the IRS will be looking at this year. For example we will call the office if we see exactly $15,000 in income!
You must print your name and the taxpayer must sign the interview sheet.
If there are further questions always use LIVE HELP!!

24. OTHER INCOME 1099-MISC 1099-R Unemployment Social Security W-2G
Some Taxpayers will receive income other than W-2 income. Most common are…
1099-MISC
1099-R
Unemployment
Social Security
W-2G
Dividends
Interest

26. 1099 BUSINESS MISC
Income received for NON W-2 jobs such as contractors, lawn workers, painters etc..
This income is subject to self employment tax and will lower the refund, however:
They can deduct expenses incurred to do their job, this will lower the tax due
Explain that software does this calculation for them.

27. 1099-MISC

28. 1099-R
Distributions from pensions, annuities, K plans or individual IRA plans
Pay special attention to the code in box 7, this will determine if there is a 10% penalty on the distribution IN ADDITION to the tax
Most often 1 is a penalty and 7 is not
The program figures this out, just enter what’s on the form

29. 1099-R EXAMPLE

30. UNEMPLOYMENT Issued on 1099-G Taxed the same as regular income
This income is not used to increase the taxpayers EIC amount

31. SOCIAL SECURITY ISSUED ON 1099-SSA
Only the taxpayer and spouse’s is relevant not the dependents social security
Social Security is not tax free. Usually it is BUT:
It CAN be taxed if the taxpayers income is over a certain amount for their filing status

32. DIVIDENDS AND INTEREST
FORM 1099-DIV
FORM 1099-INT
Taxed as regular income
Dividends are usually from stock holdings
Interest is from bank accounts or bonds

33. GAMBLING WINNINGS Usually if someone has won MORE than $600
Issued on W2-G
Taxed as regular income
Gambling losses can be deducted up to gambling winnings.