1. Payments
Pub 4012 Tab H
Pub 4491 – Lesson 28

2. AARP Intake Booklet Discuss with taxpayer Estimated tax payments
2017 refund applied to 2018 return
Any payment made with request for extension
If available carry forward can provide this information
2017 tax return can also provide some information
Still important to question taxpayer
NTTC Training - TY2018

3. Types of Payments Federal income tax withheld Estimated payments
Amounts applied from prior year
Earned income credit
Child tax credit
American opportunity credit (see Education Benefits lesson)
Premium tax credit (see ACA lesson)
Payments made with request for extension
Excess social security or tier 1 RRTA tax withheld
Other credit (for repayment of income)
NTTC Training - TY2018

4. Tax Withholding Sources
Employment:  W-2
Social Security:  SSA 1099, RRB 1099
Pensions, IRA distributions:  1099-R, RR 1099-R
Capital gains, interest, dividends:  Broker Statement, INT/DIV
Unemployment compensation:  1099-G
Gambling winnings:  W-2G
 Ensure all sources are entered into TaxSlayer
Verify during quality review
NTTC Training - TY2018

5. Estimated Payments Estimated payments typically made if:
Self-employed
Investment income
Projected balance due more than $1,000
Payments made periodically by taxpayer
No form – ask taxpayer if payments made 
“When” and “How Much” for each
Check last year’s Form 1040-ES
Taxpayers who owe over $1,000 can be assessed a tax penalty. The federal income tax system is a “pay as you go” system. Taxpayers owing over $1,000 should be advised they may receive a letter from the IRS with an additional amount owed. 
NTTC Training - TY2018

6. Overpayment from Previous Year
Ask taxpayer if 2017 refund was applied to 2018 return
Review 2017 return
TaxSlayer will carryforward  
NTTC Training - TY2018

7. Reporting in TaxSlayer
NTTC Training - TY2018

8. Reporting in TaxSlayer
From prior years return
Enter amount from taxpayer's records
NTTC Training - TY2018

9. Amount Paid with Extension
Enter amount paid with extension form 4868
NTTC Training - TY2018

10. Excess Social Security Payments
Excess Social Security Payments occur when earnings exceed maximum amount subject to Social Security taxes
TaxSlayer automatically adjusts when excess calculated from multiple W-2s
Taxpayer must contact employer when excess calculated on single W-2
Excess Social Security withholding rarely occurs with a single W-2. Typically occurs when higher income wage earners change jobs during the year.
NTTC Training - TY2018

11. Refundable Credits TaxSlayer calculated refundable credits
Child Tax Credit
Earned Income Credit
American Opportunity Credit refundable portion
Excess Social Security
Premium Tax Credit
Other credit (for repayment of income – at end of this lesson)
NTTC Training - TY2018

12. Quality Review Verify estimated payments entered correctly
2017 refund applied to 2018 return
States if applicable
Confirm all taxes withheld entered as payments
Verify actual estimated payments paid in 2018
Actual payments may not match 2018 Form 1040-ES
NTTC Training - TY2018

13. Summary with Taxpayer Review estimated tax and other payments
Confirm taxpayer understands 1099-ES (estimated tax payment forms) 
IRS mailing address
Payment schedule
Payment amounts
Suggest taxpayers enter estimated payment schedule on their 2019 calendar.
NTTC Training - TY2018

14. Payments
NTTC Training - TY2018

15. Comprehensive Topic Repayment of Income
Not Business Income or Capital Gain Income
Local instructors may limit training in this area to experienced Counselors
New volunteers should be made aware if the issue and advised to refer the return to a trained Counselor

16. Repayment of Income Declared taxable income in a prior year
Repaid some or all of that income in 2018
Treatment based on where originally reported:
Schedule C: take a 2018 Schedule C deduction
Capital gain: report as 2018 capital loss (same short or long as originally declared)
Wages, unemployment, or other non-business: two choices (maybe)
Covered in this lesson
NTTC Training - TY2018

17. Repayment of $3,000 or Less
Pub 525
Itemized miscellaneous deduction subject to 2% of AGI threshold
All 2% deductions suspended 2018 – 2025
Check state for possible deduction
NTTC Training - TY2018

18. Repayment of More Than $3,000
Pub 525
Select best of two options when repayment over $3,000
Miscellaneous deduction not subject to 2% rule (Method 1)
Many taxpayers will not be able to itemize so maybe no benefit OR
Tax credit equal to amount of tax paid on inclusion in the prior year (Method 2)
TaxSlayer 2017 does not allow an entry on proper line 73 – will need a workaround; TaxSlayer 2018 TBD
NTTC Training - TY2018

19. Repayment of More Than $3,000
Method 1 is easy
Taxpayers not itemizing will not receive a benefit
Method 2 more beneficial, but TaxSlayer workaround necessary
Two workarounds to choose from
NTTC Training - TY2018

20. Repayment of Income: Method 2
Compute credit amount
Open prior year return in TaxSlayer
Note federal and state tax, if any
Reduce income by the amount of repayment
Restore income and close return
Step 4 less step 2 is the credit amount
NTTC Training - TY2018

21. Method 2 – Workaround A – File and Amend 2018
Prepare current year Form 1040 (and state) return without repayment (e-file as normal)
Prepare current year amended return to claim repayment credit
Taxpayer should wait to file amended return until original return processed
Confirm state rules
NTTC Training - TY2018

22. Method 2 – Workaround A – File and Amend 2018
Report credit amount on Form 1040X, line 15 specify: “I.R.C. 1341”
Note the type and amount of income repaid in the explanation of changes section
NTTC Training - TY2018

23. Method 2 – Workaround B – Paper File
1040 Instructions
Paper file the return
Enter amount of repayment credit as having been paid with Extension (see slide #9)
Confirm correct state treatment
Manually cross off the extension payment amount and enter it on the correct line (line 74 for TY 2018)
Check box d and note “I.R.C. 1341”
Does the state return need fixing?
NTTC Training - TY2018

24. Refund of Other Taxes Due to Repayment of Income
Pub 525
If wages are repaid (originally subject to Social Security and Medicare taxes)
Taxpayer can file a claim on Form 843 to get a refund of those taxes
Form 843 is out of scope for Tax-Aide
If the Additional Medicare Tax was paid (wages over $200,000), the return is out of scope
NTTC Training - TY2018

25. Repayments of Income
Questions…
Comments…
NTTC Training - TY2018