1. Tax Payments Form 1040 Lines 61-71 Pub 4012 Tabs H, 6 Pub 17 Chapter 36 LEVEL 2 TOPIC 4491-29 Payments v1.0 VO.ppt 11/30/20101NJ Training TY2010 v1.0

2. Objectives Amounts that can be applied against tax liability: Federal income tax withheld from W-2s, Federal income tax withheld from 1099s Estimated tax payments Amounts applied from prior year’s return Various refundable credits Payments made with a request for extension 11/30/2010 2NJ Training TY2010 v1.0

3. Estimated Payments Means of payment for: Self-employed Those with Investment Income Projected tax due with return >$1,000 Payments made periodically by taxpayer Need to know “When” and “How Much” for each payment 11/30/2010 3NJ Training TY2010 v1.0

4. Estimated Tax Payments – TW Link from 1040 Line 62 to “F/S Tax Pd” and insert estimated payments for both Federal and State Report in box “From Last year” Overpayment from prior year applied to current year Estimated taxes State: Insert estimated payments and also State taxes paid this year applicable to prior year(s) State estimated taxes paid in January current year for prior year Tax Wise includes latter two amounts in State Taxes Paid on Federal Schedule A, Itemized Deductions 11/30/2010 4NJ Training TY2010 v1.0

5. Federal Estimated Tax Payments 11/30/2010 5NJ Training TY2010 v1.0

6. Overpayment From Prior Year Can elect to have refund applied to next year’s return Ask TP if prior year refund was applied to current year taxes 11/30/2010 6NJ Training TY2010 v1.0

7. Making Work Pay Retiree Credits (Schedule M) Refundable Credit Making Work Pay Must have earned income 6.2% of earned income – Max of $400 ($800 MFJ) Phase-outs based on income T/P claimed as dependent not eligible Economic Recovery Payment S/S, SSI, Railroad Retirement and Vets Disability $250 ($500 MFJ) Vast majority already received this in TY2009, but there may people who got it late (in TY2010) Look at TY2009 return Sch M – if shown, then done Otherwise - Can lookup on IRS website Making Work Pay Credit, if any, reduced by Economic Recovery Payment received (See Sch M) 11/30/2010 7NJ Training TY2010 v1.0

8. Refundable Education Credit (Form 8863) Entitled to this credit if T/P did not get full benefit of non-refundable American Opportunity (Hope) credit Refundable credit is 40% of unused portion of non-refundable credit – Max of $1,000 Taxwise will automatically calculate 11/30/2010 8NJ Training TY2010 v1.0

9. First-Time Homebuyer Credit Refundable credit up to $8,000 Settlement must be between 04/09/2009 and 09/30/2010 (inclusive) Note: Must have binding contract by 04/30/2010 “First Time” means did not own principal residence in 36 months prior to purchase Credit must be repaid if home ceases to be TP’s principal residence within 36 months of purchase Credit for purchase made in 2010 can be claimed on 2010 or 2009 tax return Credit reduced or eliminated for high income TPs Form 5405 to claim credit (documents must be attached so NO E-FILE allowed) 11/30/2010 9NJ Training TY2010 v1.0

10. Credit for Long Time Homeowner Buying a Replacement Home Refundable credit up to $6,500 “Long Time” means owned principal residence for any 5-year consecutive period during 8 years ending on date of replacement home purchase See previous slide for other conditions (dates, repayment, no e-file, etc.) 11/30/2010 10NJ Training TY2010 v1.0

11. Payments Made With Extension To File Taxpayer requests extension to file Must pay estimated Balance due with extension Amount paid with Extension reported on final return, Form 1040, line 68 11/30/2010 11NJ Training TY2010 v1.0

12. REFUNDABLE CREDITS QUIZ #1 Which of the following are automatically calculated in TaxWise: Federal Income Tax Withholding Estimated taxes Making Work Pay Credit Earned Income Credit Additional Child Tax Credit Refundable American Opportunity Credit First Time Home Buyer Credit Answer: It depends on your definition of “calculated” – discuss as appropriate… 11/30/2010 12NJ Training TY2010 v1.0