1. TAX-AIDE Adjustments to Income Pub 4491 – Page 171 Pub 4012 – Tab E NTTC Training – 2013 1

2. TAX-AIDE Adjusted Gross Income Total Income minus Adjustments = Adjusted Gross Income (AGI) NTTC Training – 2013 2

3. TAX-AIDE Intake/Interview NTTC Training – 2013 3

4. TAX-AIDE In-Scope Adjustments ● Educator expenses ● Health Savings Account* ● Self-employment tax ● Early withdrawal penalty ● Alimony paid ● IRA contributions ● Student loan interest ● Tuition and fees deduction ● Jury duty pay given to employer * Optional certification NTTC Training – 2013 4

5. TAX-AIDE Adjustments to Income Out-of-Scope NTTC Training – 2013 5

6. TAX-AIDE Educator Expense – Line 23 ● Up to $250 for classroom educational materials for taxpayer and $250 for spouse (if both educators). Ask about this if educator(s) ● Must be K–12 teacher, counselor, principal or aide ● Must work at least 900 hours during school year ● Claim entered on 1040 Wkt 2 NTTC Training – 2013 6

7. TAX-AIDE 1040 Wkt2 in TaxWise NTTC Training – 2013 7

8. TAX-AIDE Health Savings Accounts ● Counselors may obtain special certification to work with Health Savings Accounts (HSAs) ● Counselors must pass Advanced test before testing on HSA ● Course and test are in Pub 4942 or online at Link & Learn NTTC Training – 2013 8

9. TAX-AIDE Portion of Self Employment Tax – Line 27 ● SE Tax = Social Security and Medicare tax for Self-Employed ● Adjustment comes from Schedule SE ● Schedule SE automatically generated from Schedule C ● Details in later lesson NTTC Training – 2013 9

10. TAX-AIDE Early Withdrawal Penalty – Line 30 ● Penalty for withdrawal of funds from time deposits, such as CDs ● As reported on 1099-INT or 1099-OID ● In TaxWise, flows from Interest Statement NTTC Training – 2013 10

11. TAX-AIDE Alimony Paid – Line 31a ● Allowed if paid under a Divorce/Separation Agreement ● Must provide recipient’s Social Security No. ● Recipient must claim as income ● Link to Alimony Paid Worksheet from Line 31 if paid to more than one ex-spouse ● Child Support not deductible NTTC Training – 2013 11

12. TAX-AIDE IRA Contribution – Line 32 ● Can contribute lesser of $5,500 ($6,500 if age 50 or over) or taxable compensation ● Taxable compensation Wages, tips, bonuses, Sch C income, alimony Not interest, dividends, pensions, social security ● Actual amount depends on Taxpayer/ spouse retirement plans, modified AGI, age and filing status NTTC Training – 2013 12

13. TAX-AIDE IRA Contribution – Line 32 ● Age limits For traditional IRA – under 70½ For Roth IRA – no age limit  Note: Roth IRA contribution is not deductible and will not show on line 32 NTTC Training – 2013 13

14. IRA Contribution – Link to IRA Worksheet These data entered automatically NTTC Training – 2013 14

15. TAX-AIDE IRA Contribution (cont) ● Enter Traditional IRA contributions on line 10 ● If part nondeductible, TW generates Form 8606 ● Enter Roth contributions on line 20 ● Can be a mixture so long as limit is not exceeded NTTC Training – 2013 15

16. TAX-AIDE Non-Deductible Contributions ● If client participates in employer’s plan and AGI is too high Some or all of Traditional IRA contribution may be nondeductible ● Client might prefer a Roth IRA instead of a Traditional IRA NTTC Training – 2013 16

17. TAX-AIDE Non-Deductible Contributions ● TW adds Form 8606 to form tree Part I is in scope If not carried forward, input beginning of year basis on line 2 (from 2012 Form 8606 line 14) ● TW carries the deductible amount, if any, to Line 32 NTTC Training – 2013 17

18. TAX-AIDE Student Loan Interest – Line 33 ● Intake and Interview Sheet – Part V, Q8 ● If > $600, should receive Form 1098-E NTTC Training – 2013 18

19. TAX-AIDE Student Loan Interest – Line 33 ● Interest paid on qualified student loan for post secondary education expenses ● Qualified Loan: Expenses of taxpayer, spouse, or dependent (when loan originated) For education expenses paid within reasonable time since loan was opened For education provided during academic period when eligible student Pub 17, Ch 19 NTTC Training – 2013 19

20. TAX-AIDE Student Loan Interest – Line 33 ● Qualified Loan (cont.) Loan cannot be from relative Taxpayer cannot be filing MFS Taxpayer cannot be claimed on someone else’s return Loan cannot be from qualified retirement plan Taxpayer must be liable on the loan NTTC Training – 2013 20

21. TAX-AIDE Student Loan Interest – Line 33 ● Maximum $2,500 per year ● Phases out as AGI increases ● Link to 1040 Wkt 2 NTTC Training – 2013 21

22. TAX-AIDE 1040 Wkt2 in TaxWise NTTC Training – 2013 22

23. TAX-AIDE Tuition and Fees – Line 34 ● Up to $4,000 adjustment allowed ● For qualified education expenses of higher education ● One of several choices for education benefits Will cover details in education benefits lesson later NTTC Training – 2013 23

24. TAX-AIDE Jury Duty Pay Given to Employer ● Show Jury Pay received on Line 21, Other Income ● Enter amount turned over to employer on Line 35 NTTC Training – 2013 24

25. TAX-AIDE Quality Review – Adjustments ● Does 1040 page 1 reflect Adjustments properly ● Compare with Interview form ● Compare with last year’s return ● Were other forms generated that should be addressed NTTC Training – 2013 25

26. TAX-AIDE Adjustments to Income Questions? Comments… NTTC Training – 2013 26

27. TAX-AIDE Let’s Practice In TaxWise ● Open return for Kent in TaxWise ● From Pub 4491W page 67, enter adjustments ● Verify tax liability NTTC Training – 2013 27