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TWO/TWD vers. - Arizona AARP Tax-Aide

1. 56 DIREGR DEBIT Ene 58 EE 58 ESTIMATED TAX PAYMENTS FOR NEXT YEAR 2 0 0 2 7 FEDERAL ESTIMATED TAX 5 0 20 000000000 0 00080 58 CA ESTIMATED TAX PAYMENTS 540ES 02 010 0000000000000000000 55 59 PRINTING BLANK ESTIMATE FORMS 200000 60 FINAL STEPS IN TAX RETURN PREPARATION 0 2 7 0 0 COMPLETE PREP USE FORM 60 8 60 RUN DIAGNOSTICS 60 nct 61 PRE QUALITY REVIEW 61 RETURN STAGES 61 OUALITY 61 REVIEW RETURNS WITH 00 0000 001 62 PRINTING RETURNS 8 62 SIGNATURES AND DISTRIBUTION OF COPIES 63 PAPER RETURNS des du lech e
2. 20 8812 enses ee EH RH 51 Identity Verificaton eene 10 8853 ci d GU e eet eie 39 Income nan tees 47 26 ng H 63 ANTIDUILIeS 30 18 48 Business 26 688 ieee ind ae ae ee 57 CA Lottery sais cte he a 38 8889 c RU uere Het aee tp gt 39 CA Non Bonds eee 21 9930 eei tees 29 Capital Gain Distribution 24 6962 esee eb FERE ee talon 45 Capital Gain or 055 27 8005 ee eed 50 Capital Loss 29 9405 65 1 23 ACH 1040 58 Family Leave Aene eee 36 AC3500 nt ete Dd tenia 54 Farm ue aerea 36 an et RHODE 68 Gambling 38 e wu RS 65 Household 20 CA 48036 Hol nete 52 Indian Tribal Income 20 CA SAO ES e eese http emp 59 Interest c ott dete ent Ea 20 CASIO X iii bas esten rU Er 67 IRA 2 30 CA S803 2s acte epe eate
3. LINE 57 SELF EMPLOYMENT TAX 49 LINE 58 UNREPORTED SOCIAL SECURITY AND MEDICARE TAX 49 LINE 59 ADDITIONAL TAX ON IRA OTHER QUALIFIED PLANS eene 49 LINE 60 HOUSEHOLD EMPLOYMENT TAXES 50 LINE 60B FIRST TIME HOMEBUYER CREDIT REPAYMENT FORM 5405 50 LINE 61 HEALTH CARE INDIVIDUAL RESPONSIBILITY c cce 50 LINE 62 OTHER TAXES a 50 PAYMENTS AND REFUNDABLE LINE 64 FEDERAL INCOME TAX WITHHELD 2 2 2 2 1 0000001000000000000000000000000088 50 LINE 65 AND 540 LINE 72 2014 ESTIMATED TAX 50 LINE 66 EARNED INCOME CREDIT 51 LINE 67 ADDITIONAL CHILD TAX CREDIT sees nennen enne eterne nen 51 LINE 68 AMERICAN OPPORTUNITY 2 51 LINE 69 NET PREMIUM TAX 1 00 0000000000000000000000000000000000000003 52 LINE 70 AMOUNT PAID WITH REQUEST FOR EXTENSION TO FILE eee 52 LINE 71 EXCESS SOCIAL SECURITY sees nennen reser R nnne 52 LINE 72 FEDERAL TAX ON FUELS FORM 4136 OUT OF SCOP
4. 10 Casualty and Theft 055 8 44 Charitable Contribution Carryover 44 Charitable Contributions ees 44 Charitable Contributions Noncash 44 Child Care Expenses eee 46 Child Tax Credit ig tenete 48 Additional CTC eee 51 Client Letter ce e ettet 63 Codes 099 BOX eec eae 31 5329 Exceptions to the Penalty 32 49 Business Sch 26 TWO Colorie ertet Egg 4 W 2 Box 12 eee eet 17 Color C Odes x de be 4 Cost Basis Inherited Property eese 28 Create a Return Template 71 Create 61 Credits Additional Child Tax 222 2 2 22 51 American Opportunity esee 51 Child amp Dependent Care 46 Child amp Dependent Care CA 54 Child Tax Credit ne eet 48 Dependent Parent Credit CA 54 Earned Incoine oie eie qe 51 Ed catioti neari iae 47 Elderly amp Disabled 48 First Time Homebuyer Repayment 50 Foreign Tax ue RD 46 Joint Custody HoH Credit CA 54 Renter s 2 2 2 2021 55 Retirement Savings 222 21 48 Senior CA sse 55
5. Jeuye Jo4 4 2 sep pied jou si e jo UOMO ejqexe upao uone3np3 10 pesn jou sesuedxe 5591 o1ez SSB jou sep sjueiD ajqexey 310 q 210 15 ay uey ou upaso uone3np3 JO esuedx3 ypas SY 10 sesuedxe uo pur Keuoui 101 Sueo Syib snjd Asuow sje edxe g v 5 1 paj2ujsa ssa sesuedx3 sesuedxe DuiAienb 0 paj2u1sal sjugJc sesuedxe reor Joou2s su woy Anq no 599 3 syooq Aue 2 104 m tye aow ayer xe st gm ses les 8 uper Anunuoddo uesuauy y pue esuedx3 pue Aem ues eu ejejduio2 s jueugsn pe sae j uogin pex Jeujeuw Jeep jou SI j esn pue y JO Jejjeq s uoruw suwaq ejqexey Bunjnsai y pue jueugsn pe Jo ppa JO sesuedxe eu 2 uunjo esn diysuejoyuss ejqexej Bunjnsai y pue 10 JayUS sesuadxe sjejn3 e g 10 y SULUNJOD asn 7 2 uuinjo asn uat sueo siu mouy j useop pue siu jo doo e
6. ten 26 1099 ete hn 39 1099 MISC Other Income 38 1099 OID cet eit 23 109920 casino etna as ER Reese 39 10 14 14 1090 30 38 1099 R CS A OPM 34 CA Ote Ey RP ee een 38 1090 8 eee eee ere ina 30 LOSSOS E 38 39 German 1 35 1116 retten 25 46 GIOSSaEy d ree tror tet ret eese 73 1310 tiet petentes 13 Head of Household 4803 52 pna 46 Health Savings Account 2048 2 5 ie tease ag eee 63 nee an nels 40 AVS Hains Anais a Ale 20 49 Distributions 39 4852 oett EU 19 ye E 54 4868 eR etes celi iege eap iet eset eed 68 Interest INCOME 2 21 E 49 IRA Rollover i 33 5329 Exception to the Penalty 32 EUN E 18 5405 Disposition eee 50 Help 8283 E tatum tee petes 44 Currency Exchange 36 83325 c aH ERE Re ted ee 14 Hotline Numbers eere 1 BITO 56 TWO HPS 70 8006 esed eel 32 33 SUS es amp ER 09 14 Household Employee
7. CA does not conform to this provision and all benefits received are taxable Enter an adjustment on CA L 21f and describe as 1099 R 1099R State Section e If provided on the 1099 R enter the state ID without dashes or spaces TaxWise truncates the carryforward for the following year after 9 numbers o The state ID number is NOT the same as the federal ID number o If the State ID is blank on the paper 1099 R enter six nines 999999 not required if there is no State withholding e The payer may or may not complete the state section CA follows the federal rules for taxability for all CA residents for employer plan distributions IRA Basis Difference on page 53 if taxpayer made contributions that were not deductible If the state distribution is blank it is presumed to be the same as the federal gross distribution e ONLY IF the state amount on the 1099 R is different than the federal amount o Override Box 14 and enter CA distribution amount o TaxWise does not take the difference to CA CA a manual adjustment is needed Go to CA CA and enter the adjustment on line 15 or 16 as appropriate using a Scratch Pad 1099R Exclusion Worksheet e The exclusion worksheet is used to input the amount that will not be taxable or to transfer the distribution information to form 8606 as necessary e Before starting and when finished check line 15 or line 16 on 040 Pg J to make sure entries produce the correct result e
8. sse 63 Power of Attorney esee 63 Simplified Method esses 33 Site OSS i eie tiere S 68 Site Specific TWO 71 Social Security Excess Tax Payments 52 Income nee 36 Lump Sum Prior Year Payment 37 STe AA 36 Social Security Number Verificaton 10 Starting a New Return eese 10 State 2222221 1 1 14 State Tax Deduction eee 42 State Tax Refund eese 25 Stock eere er A n es 8 Student Loan Interest 222 41 10 14 14 78 Submission D ni et eet etras 61 Substitute 19 Tax Payments CA Estimated 2402422 1 21 51 Estimated Taxes ettet 50 Excess Social Security Tax 52 With EXtenstOn 52 Withholding eee 50 Tax Aide Program eee 2 tene 16 Telephone Numbers eene 1 Third Party 2 2 2 2 2 15 M 20 Troubleshooting 70 Trust 23 TWO 7 Confusing 1
9. Indian Tribal Income e Tribe members may work for the tribe or at the tribe s casino for which they will receive a W 2 e Always taxable for federal Note Indian Tribal Income is exempt from CA taxes ONLY WHEN the recipient is living and working on Indian tribal land o An adjustment on CA CA is required if exempt from CA taxes o Enter an adjustment on CA CA L 7 with a Scratch Pad Tip Income e Employers include reported tips in taxable wages on W 2 Box 7 social security tips added to Box 3 should equal box 1 wages e Alternatively employers may report allocated tips on which no social security or Medicare tax has been withheld o Use 4 37 to compute social security and Medicare tax due e When the W 2 has an amount in Box 8 allocated tips o If the employee keeps a detailed tip log they may report the actual amount of tips which may be more or less than the allocated tip amount Go to 4 37 and use a Scratch Pad to adjust L 4 to the actual amount of tips received may need to use F8 to override the L 4 amount o Unreported tips of less than 20 per month are deemed included in the allocated tip for income tax purposes but are not subject to social security or Medicare tax Enter the unreported tip amount not more than 20 per month on 41371 5 e If Allocated Tips W 2 box 8 is zero which means that reported tips are included in box 1 wages o Unreported tips must be added to income using 4 37 o Add 4 37 and complete the
10. 4 000000 20 22 Early Withdrawal Penalty 22 Foreign axes sci cai een 25 Government Bonds sse 21 Interest Stmt eee e cette ertet eee 21 x stb HM 23 Prepaid Funeral Plans 23 Seller Financed Mortgage 21 Vax Exempt entere 21 Interview Mode sere 10 Interviewing the Client sese 9 IRA CA Basis Difference sss 53 Contribution sees 41 Distribution oen eee 32 Early Distribution eese 32 Exclusion Worksheet esses 32 Failure to take RMD add n to tax 49 Nondeductible Contributions 33 Rollover uos ERE 33 Roth Conversion eene 33 TT anster eie t ettet ette tee 32 DD Nee cc ettet tete teen 69 TO99 R avn Ses 31 No SSN 1 22222 69 SSN After Filing with 69 Walla aee eee erts 69 sosta e rie ete t tantes 17 Jury Duty Pay tetigi 37 Given to 41 14 Late Paling RR ete 65 Lifetime Learning Credit 47 Mailing Addresses ee
11. Client Letters allows you to select the Client Letter to print for the return if set up Return Summary monitors key filing status e filing status federal and state return data Forms List displays a list of forms that can be added to the return SCREEN LAYOUT Left Panel Refund Monitor if activated indicates federal AGI and refunds amounts owed on current return o Turn on off by clicking the double caret in the Refund Monitor title bar o Clicking on the Check Return Status link will open a window with the Return Summary Functions at or below the Loaded Forms title bar o Leftand right green arrows next to Loaded Forms allows you to move up or down in the Tree o Add adds a new form to the Tree and the work area This is the same as clicking Forms List on the toolbar o Print Form displays a list of all forms in the current return and allows you to print one form 10 14 14 6 TAX WISE ONLINE PROCEDURES Delete displays a list of forms in the current return and allows you delete one e Loaded Forms Tree o Turn on off by clicking the double left right arrowheads at the top between the left panel and the main working area o Highlights the form currently in the Work Area on the right side of the screen Provides listing of forms that have been pre loaded and added o Identifies status of forms listed Yellow exclamation mark and form name is red form is incomplete Green check mark and form number is gr
12. jouueo juepnis J pied asam sesuedxe juaJejip U YM peu 0025 gaexe nof siu UIU JUBWWA E s jo doo e ue sjuepnis 1S0 sesuedxe Durgijenb uou JO pesn uauj yey y uo ed pue sesuedxe y Joy JO sueo siu asn eDejue pe xe e s y jeuuoN sesuedxe uoiuMw JO pesn seuruuejep JUSPNYS OS y joouos oj euoui siu pied esiwueujo Jo sjueJb se jjam se sueo juepnjs p euruuejeQ SdIHSHV IOHOS d 18VXv L ANY 5 S3SN3dX34 JO NOIL V IO TIVO EIOZ 1894 uonne 10 14 14 79 CALIFORNIA INCOME TAX INTERVIEW WORKSHEET Use in conjunction with Federal Form 13614 C 9 18 13 Name County Married Single To be completed by all Taxpayers Were you and your spouse if filing a joint return a California resident for the entire year 2014 Was any of your income taxed by another state or local government or did you pay taxes to a foreign country 3 Do you or your spouse if filing a joint return have a filing responsibility in another state for example you have a rental property or you worked in another state during the year Did you reside on Indian tribal land Did you work on Indian tribal land 5 Did you take any IRA withdrawals and previously mad
13. 64 EXITING RETURN BEFORE 00 64 SUBMIT B2HILES TET 65 UNABLE TO PAY LATE FILING cse seske eode sapos PNE OTHER RETURNS Ree AERE PRIOR YEAR RETURNS ede terere ex eee s v Ee dye coded EE sted 66 AMENDED Sd ARDI aN 66 REQUEST FOR EXTENSION OF TIME 68 REPORTING amp SITE LOGS eerie evoaFe br pia Ce FEnEo Ee ERAT UR ed us ER INDIVIDUAL TAXPAYER IDENTIFICATION NUMBER ITIN TROUBLESHOOTING AND TIPS PER e FEo e e pae oe Foe En Etna Ra PEE n ph RAE SITE SPECIFIC TWO ENTRIES E RESP OP FON GLOSSARY edat Au 5 EDUCATION BENEFITS sse eee CALIFORNIA INCOME TAX INTERVIEW WORKSHEET iii 10 14 14 ESSENTIAL INFORMATION Where to Mail Returns and Payments Internal Revenue Service CA Franchise Tax
14. 7 Data BBtEy ators 4 Help ue iia oe inte ian eee 7 Keyboard Shortcuts esses 5 Reference Materials sess 8 Screen Layout 2 tetuer petite oes 6 Shutdown Procedures esses 3 Start of Shift 3 Toolbars sess teet ge 6 Uset oerte eerte 3 U S Savings Bonds 57 Unable to 65 Underpayment of Tax Penalty 56 Unemployment Income esee 36 Use Tax on Purchases 2 2 56 W 2 Multiples ccc etre 19 Substitute ient E pete ed 19 16 CA Different eere erede 18 Web a eR a eter 8 Where to File 1 Withholding c 55 ee ene aepo 50 Zip Codei xus usas Repo 12 EDUCATION BENEFITS WORKSHEET 6100 1894 asje suoAue Aq e se pawie JOULIED jJe edxe y si juepnis y AjuO juepnis ay Aq pred sJeujo Aq pred sesuedx3 JeAedxe y Aq pred aq sesuedxe jueurjsn pe s334 uon Jje edxe eui Aq UBD juapnis Aq pred sjuaredpugjD H a suaujo Aq pred
15. A diagnostic message will alert you to the problem o Add another one of that flavor and assign a sequential number to each including the first one o Rerun diagnostics and repeat until the error message is cleared Note basis is not on the 1099 or broker s statement or if an adjustment to basis is needed it is recommended that transactions be input on the Cap Gn Wkt Notrecommended Modify the broker s statement to include the correct information enter the summary information with Code M and any other applicable code in alphabetical order the total amount of adjustment and attach the statement with 8453 or as a scanned pdf Completing the Cap Wkt Description of Property the number of shares and the name or stock symbol ticker of the security abbreviated as required o Number of shares enter only whole shares Use 1 or FS if the transaction is a fractional share less than one full share 1099 Enter Code or C in the 1099 column to indicate source of basis TaxWise will determine whether long or short term based on the dates entered and flow to a properly coded 8949 Date Acquired o If the taxpayer has made several purchases of the same security or mutual fund over time VARIOUS can be entered Group the short term sales and enter on one line override in the S L column will be needed Alternatively select one date to list the purchases so that the program will treat as short term gain
16. TaxWise will complete 8872 LINE 53 Reserved LINE 54 OTHER CREDITS Schedule R Credit for the Elderly and Disabled e This credit applies ONLY if the taxpayer or spouse 1 was age 65 or older at the end of the tax year OR 2 retired on permanent and total disability had taxable disability income AND was under the mandatory retirement age o Income limitations apply based on filing status types of income and AGI e Many Tax Aide clients are over age 65 and are collecting social security and therefore DO NOT qualify for this credit however with SS retirement age increasing we may see more Schedule R s e Refer to Pub 17 to determine if a client is qualified for this credit 10 14 14 48 e Ifthe taxpayer s have no social security income Tax Wise will automatically calculate the credit e Ifthe taxpayer s is on permanent disability which is indicated by checking the box on the Main Info form under Taxpayer Information o Complete Sch R Pg Part Statement of Permanent and Total Disability o Enter the amount of non taxable veterans pension or any other pension annuity or disability income that is excluded from income e Hint Make sure all social security payments 1099 SSA and RRB 1099 have been entered to avoid generating an incorrect credit All other L 54 credits are out of scope Form 3800 General Business Credits Form 8396 Mortgage Interest Credit Form 8859 DC first Time Homebuy
17. 11 10 14 14 STEPS TAX RETURN PREPARATION Current mailing address enter the taxpayer s street address fractions allowed or post office box CA Note If the street address contains an Apartment Number or PMB and it doesn t fit on the CA address line CA 540 Pg 1 will turn red and the first box on CA 540 Pg 1 will be red Update the CA address now so that is not overlooked e The FTB database stores addresses using a shorter field format from that of the IRS database If the entire address does not show in the limited field on CA 540 Pg 1 wants a breakout of apartment and suite addresses numbers into three separate fields street address type of unit and unit number If this is necessary you must Check the Check here to change the address box at the top of CA 540 Pg 1 o Inthe field to the right of the federal address line enter or BLDG RM SP STE UN o Inthe field below enter the apartment or other number o Remove the partial apartment or other information from the state address leaving just the street address e ZIP code entering the ZIP code automatically fills the city and state however you may need to overtype the city if the ZIP code is shared by multiple cities Ifyou get a popup box for a new ZIP code make sure that you have typed a valid ZIP code e Foreign addresses are entered in a separate section lower this form E Mail Address If the taxpayer has prov
18. cccscscscscscscscssscscscscscscscscscsescscseseseseecs 9 INTERVIEWING THE CTIEBTE 9 ORGANIZING YOUR 2029000000000000100000000000000000000 9 STARTING A NEW RETURN nana eR TRUE RT IIR 10 DATA CARRYEORW ARD ips steterit perder be eH PEE e Fess 10 e A 11 PREPARER USE FORM TERI S T Saa Mas 16 PREPARER NOTES 16 FAXPAYER DIARY ERR RR ERA 16 LO BLUE DM Q 16 LINE 7 WAGES SALARIES AND TIPS ccsessccccccccscsesessececececeeeesesseaeceseceesceessseaeeeeess 16 LINE 8 TAXABLE INTEREST 20 LINE 92 DIVIDENDS eee tees ee aee ea ee eee o ees eee 23 LINE 47 FOREIGN TAXES PAID ON INTEREST OR DIVIDENDS eee 25 LINE 10 TAXABLE STATE INCOME TAX REFUND 25 LINE 11 ALIMONY RECEIVED eese eese een 26 LINE 12 BUSINESS INCOME csesscscccsccecssssssecececccsesesensececesecseseneaaeceseeeeseeesseaeeeeees 26 LINE 13 CAPITAL GAIN OR 055 27 LINE 14 OTHER GAINS OR LOSSES OUT OF SCOPE 30 LINE 15 16 PENSIONS AND ANNUITY
19. e does not recognize HSAs nor the trust that is created for federal tax purposes o This can impact many parts of a return e W2 contributions made by an employer to a Health Savings Account and shown in box 12 code W of the W 2 are not federally taxable but they are taxable by California and must be manually added to L7 Wages on CA CA o Goto CA L7 and link to a Scratch Pad in the Additions column o Describe as HSA employer contribution and enter the amount as a positive figure e Interest or other income earned in an HSA account is currently taxable for CA o Addaline for HSA on the nterest Stmt or the Dividend Stmt and enter a in the state adjust column and enter the adjustment amount e Capital gains or losses within the HSA trust are recognized for CA o Goto D and add the sale transaction o Note this may result in a different capital loss carryover for CA purposes Make a note on the Main Info sheet or in Taxpayer Diary e If there are HSA distributions in excess of qualified medical expenses Tax Wise includes the distribution in income for federal but it is not taxable for CA o TaxWise does not make the CA adjustment o Goto and enter a subtraction on L 21f for the HSA distribution include 1040 Pg 1 L 21 e TaxWise transfers medical expenses reimbursed by the HSA and not deducted on federal Schedule as shown on 8889 Pg 1 L 15 to CA A so no manual adjustment should be needed CA ONLY CREDITS Child and
20. transfer is a DIRECT transfer of funds or securities from one qualified account to another e g no money passes through the hands of the taxpayer The taxpayer can do this as often as they wish there is no limit 10 14 14 32 INCOME o Box 7 ofthe 1099 R should be coded and the amount will show as non taxable on line 15b or 16b o No further entry is needed A rollover is a distribution from a qualified account followed by a recontribution of some or all of the distribution to another qualified account WITHIN 60 DAYS A taxpayer is limited to one rollover from an IRA in any 12 month period regardless of how many accounts there are Note the IRS will not enforce the once a year limit until 2015 Aconversion of a traditional IRA to a Roth IRA is out of scope Line 1 Enter the amount that was rolled over it may be less than the amount of the gross distribution o Goto 1040 Pgl Line 15b or 16b TaxWise checks the Check if rollover box o ForanIRA rollover click on the red box to the left of the L 15b amount field press F9 to link to the New form 1040 IRA Rollover Explanation worksheet and explain the rollover e g IRA rolled from bank ABC to bank DEF Line 2 Reserved Line 3 amount rolled over to an HSA out of scope Line 4 Retired Public Safety Officers PSO qualified health or LTC plan o APSO includes a law enforcement officer firefighter chaplain or member of a rescue squad or ambulanc
21. Credits CA Only Child amp Dependent 54 Dependent Parent esee 54 Joint Custody HoH Credit 54 a PENIS 55 Senior HoH Credit sess 55 Currency Exchange Rates 36 Cyber Tax iini ie ett ehe eee etie ga 2 Deceased 13 Representative imet eise 63 SIgnAt te code eu Reges 13 Deductions eee tree ente 41 Charitable Contribution 44 Charitable Contributions 44 Gambling 2 38 Interest Paid ren 43 Itemized 2 eene 42 Medical nnm 42 Medicare 2 37 44 Mortgage Insurance 43 Noncash Charitable Donation 44 Other TAXE Sia nns egere 43 Personal Property Tax DMV 43 Real Estate Taxes eene 43 Standard 41 State Taxes sen 42 Unrecovered Pension Investment 45 Dependent Care 46 Dependents ne Rete 14 More Than Four eee 14 Standard Deduction sees 40 Taxpayer as a Dependent 14 Diagnostics eee erre 60 D
22. PAYERS STREET 2014 UNITED STATES RAILROAD RETIREMENT BOARD ait 844 RUSH ST CHICAGO IL 60611 2092 5 Contrixtons PAYER AL IDENTIFYING NO STATE AND ZIP CODE See F1 Help on the state return for use of these boxes Instructions vary by state Check if applies f f Box 1 Q Box 2 B Q SIPIEN Be al Railroad retirement 7 Gross 36 3914600 I xi Puvee Cote 4 Cortttutory Amour Pars 5 Vested Dual Benefit 8 9 Fececal come Tax wired 10 Pte of Tax FORM RRB 1099 R DO NOT ATTACH TO YOu Amounts on the RRB 1099 R Enter TaxWise on 7099R EIN 36 3314600 Payer s ID Box 3 Employee Contributions Box 9B and simplified method L 1 Box 4 Contributory Amount Paid Not entered Box 7 Total Gross Paid Box 1 sum of boxes 4 5 amp 6 Enter 7 in Box 7 Disability box Check the box if the recipient is disabled and below normal retirement age Box 8 repayment of benefits included in a prior year There may be a claim repayment deduction if itemizing see Miscellaneous Deductions 2 and not 2 below starting on page 44 Box 9 Federal Income Tax Withheld Box 4 Box 12 Medicare Premium Total Schedule A Detail CA Note In TaxWise 099R to the left of boxes 12 to 17 are a series of boxes You MUST click Railroad Retirement as th
23. The TYPE Field e All types of other income are entered 1040 Wkt 7 e Ifa preprinted line is used the first such used line description will carry to 1040 Pg 11 21 e preprinted line is used manually enter an appropriate description in 7040 Pg 1 L 21 TYPE field e Be sure to verify that the total shown on Line 21 is correct and all other income amounts have been reported LINE 22 TAXWISE EARNED INCOME e TaxWise adds the amounts from 7040 Pg 1 L 7 wages etc and 1040 Pg I L 12 Sch e Ifthe Taxpayer can be claimed as the dependent of another the standard deduction of 900 can be increased by earned income up to the regular standard deduction amount o If there is an amount in Line 21 and that amount is earned income you will need to add a Scratch Pad entry to increase the amount of earned income for correct calculation of the standard deduction e Note Earned income for EIC is limited to taxable 7040 Pg L 7 wages etc and self employment income Sch e Note IRA deductions are limited to compensation see Line 32 IRA Deductions below at page 41 ADJUSTMENTS TO INCOME LINE 23 RESERVED LINE 24 CERTAIN BUSINESS EXPENSES out of scope Limited exception for Military returns if certified LINE 25 HEALTH SAVINGS ACCOUNT Note HSA s are out of scope unless the Counselor and Reviewer are certified in the area e Refer to Pub 4012 E 1 e Enter amount contributed to HSA on 8889
24. You will also need to Create e File s again PRE QUALITY REVIEW Before QR the Counselor is recommended to review the returns on screen Do the entries agree with the SS cards W 2s 1099 Rs tax withheld etc Does any item seem strange you don t understand where it came from Did the taxpayer get all the credits that you expected them to get Review the CA 540 return especially form CA Sch CA Are all the CA differences you expected to see present e Any surprises should be checked out RETURN STAGES e Setting the return stage is a very important step in the return process e Setting the correct return stage lets the ERO know the status of the return consequently making his her transmitting job easier and more accurate e The counselor should ALWAYS set the return stage when finishing the return and the quality reviewer should check that it was set as part of the review of the return e Return stage entries are set by State District or Site check with your site manager e The Return Stage be set in two ways o Click on Return Summary on the Toolbar Under E file status click the down arrow next to Return Stage and set the appropriate value o With the return closed and viewing the Active Returns or any other return View set the Return Stage by clicking the down arrow under the Stage column on the row with the taxpayers name QUALITY REVIEW e Every return prepared at a Tax Aide site must be quality reviewed
25. preloaded you will have to click the New tab If you want to go to an existing form you will have to click the Existing tab REFERENCE MATERIAL Existing New la Scratch Pad Scratch Pad e Clicking on the Help icon or pressing F1 while in a return takes you to the TWO Help Center There you ll find numerous links to program help TaxWise support reference materials IRS and state websites etc e get back to the return close the help center browser tab RESEARCH A TOPIC Steps to follow in researching a topic e Question the client thoroughly to ascertain all pertinent facts while reviewing their Intake Interview sheet and tax forms e Begin your research by using Pub 4012 which provides quick access to most common questions in a format with which we are familiar e Consult the instructions to the form Help Center gt IRS Forms Help Center gt State Tax Sites e Consult Pub 17 use a key word search in the electronic version or in the paper version start in the index looking under a main heading first and then a subheading You will find that you will be able to locate information more readily if you become familiar with the topics covered e found check with a more experienced counselor e Use Volunteer Hotlines listed on Page 1 e California Pubs o 1001 Supplemental Guidelines to California Adjustments o 1005 Pension and Annuity Guidelines e Peruse each CyberTax bulletin as it is received so that you
26. 540 with payment Franchise Tax Board P O Box 942840 Sacramento CA94240 0001 CA 540 Franchise Tax Board P O Box 942867 Sacramento CA94267 0001 CA 540X with payment Franchise Tax Board P O Box 942840 Sacramento CA94240 0001 CA 540X Franchise Tax Board P O Box 942867 Sacramento CA 94267 0008 form CA 540ES Nothing to file Franchise Tax Board P O Box 942867 Sacramento CA 94267 0008 form CA 3519 with payment Mail to address specified in letter with 1040X if needed documentation and any payment required Response to CP2000 letter Internal Revenue Service amp Franchise Tax Board Toll Free Numbers Do not share Volunteer Hotline numbers with taxpayers IRS NUMBERS FTB NUMBERS M F 6am to 5 30pm Sat 6am to 2pm PST M F 8am to 4 00pm PST Volunteer Hotline 800 829 8482 Volunteer Hotline 800 522 5665 Tax Information 800 829 1040 Volunteer Coordinator 916 845 6237 Automated Refund Info 800 829 1954 General Number 800 852 5711 Tax Forms amp Publications 800 829 3676 Automated Service 800 338 0505 ID Protection Specialized Unit 800 908 4490 ID Theft Resolution Coordinator 916 845 3669 CA Note Paper file for California The FTB will contact the taxpayer regarding discrepancies The CA ID Theft Resolution Coordinator should be contacted only after a federal ID theft case has been set up Tax Wise Tax Wise CCH 1 800 411 6391 M F 4 30am to 9 00 pm PST Sat 5 30 to 3 00 Sun 10 00am 1 00pm TaxWise
27. Board What Electronic filing with balance due mail payment amp voucher ONLY Paper return with balance due mail signed return and payment Paper return with nothing due or refund mail signed return Amended return with balance due paper filing mail signed return and payment Amended return with nothing due or refund paper filing mail signed return Estimated payments mail payment and voucher Automatic six month extension no payment mail form Automatic six month extension with payment mail form and payment Internal Revenue Service P O Box 7704 San Francisco CA 94120 7704 form 1040V Internal Revenue Service P O Box 7704 San Francisco CA 94120 7704 1040 with 1040V and payment Department of the Treasury Internal Revenue Service Fresno CA 93888 0002 1040 Department of the Treasury Internal Revenue Service Fresno CA 93888 0422 1040X with 1040V and payment Department of the Treasury Internal Revenue Service Fresno CA 93888 0422 1040X Internal Revenue Service P O Box 510000 San Francisco CA 94151 5100 form 1040ES Department of the Treasury Internal Revenue Service Fresno CA 93888 0045 form 4868 Internal Revenue Service P O Box 7122 San Francisco CA 94120 7122 form 4868 with payment Franchise Tax Board P O Box 942867 Sacramento CA 94267 0008 form 3582 Franchise Tax Board P O Box 942867 Sacramento CA94267 0001 CA
28. Broker name and 1099B in the description field o Enter the amount withheld CA Note does not recognize HSA trusts gains and losses incurred in the trust are currently reportable for CA see Health Savings Accounts in CA below starting at page 54 CA Note CA withholding Boxes 13 15 on Form 1099 B should be entered on CA 540 Pg 3 L 71 last entry field as 1099 and the amount should be linked to a Scratch Pad that details the payer s name and state number so that the FTB can more easily match the withholding TaxWise automatically completes Sch D Pg 2 using information from other forms and schedules If there is a capital loss carryover make sure that the Sch D Wkt 2 is printed for reference by next year s preparer Capital Loss Carryover From Prior Year s Schedule D Go to Sch D Pg 1 TaxWise will carry forward the capital loss carryovers if your site prepared the return last year Otherwise you need the prior year s return or a copy of the appropriate worksheet to correctly report any loss carryover Capital loss carryovers are separated between short term and long term for federal Enter verify if carried forward the amounts from the prior year capital loss carryover Sch D Wkt 2 o OnSchD Pg 1 L6 for short term o OnSchD Pg 11 14 for long term TaxWise will create a new carryover worksheet for any balance over the maximum allowable loss of 3 000 1 500 if MFS For clients with income near or close to the standard
29. COPY F S a Hoopers Name Svei Address City State and Zip Code Workers Compensation Offset in 2006 LR PR LM ERR LRL LR 7 Socal Security Equivalent Benefit Portion Tier 1 Paid for 2005 OWATD700012007 0542321 180 0642755 r ANNA M DONLY Security Equi alert Beret 15 CONDI AV Portion of Tier 1 for 2004 SAN FRANCISCO CA 94126 Equivalera amp 9 Sec rry Berta Portion of Tier 1 Paid for Years Price t0 2004 odoraj Income Tax FORM RRB 1099 DO NOT ATTACH TO YOUR INCOME TAX RETURN 11 Medicare Premium Total e Note This is equivalent to Social Security and it is not taxed by California Tax Wise makes the adjustment Lump Sum Payments of Social Security e Enter total social security received in the normal manner e When payments are received in the current year that are attributable to prior years there is an alternate calculation of the amount that can become taxable o The amount computed as taxable is includible in the current year s return not the prior year o If including the entire amount received in the current year s return does not make any of the social security taxable STOP you do not need to complete the Lump Sum Wkt e there is a lump sum payment for a prior year AND the prior year tax return is available proceed as follows o Goto lum
30. DECEASED is the appropriate entry if the taxpayer or spouse died during or after the tax year Deceased person signature requirements o A Power of Attorney POA expires at time of death A surviving spouse will sign the return and add as surviving spouse after their name personal representative or executor will sign their own name with their title Form 1310 refund due a deceased taxpayer will be required if the return is filed by other than a surviving spouse and there is a refund Deceased taxpayer returns take extra IRS processing time Married Filing Separately or Head of Household for Legally Married Individual Before considering MFS make sure they do not qualify as HOH Determining whether or when the community has ended is a difficult legal determination If the community exists for any portion of the year the spouses must split their community income which itself is another difficult legal determination Preparing a return with MFS status or HoH status when the individual was legally married during any part of the tax year is therefore very limited for the Tax Aide program Tax Aide can prepare the return ONLY WHEN the spouses are not communicating e g abandoned Additionally all 4 of the following conditions must be met o Couple has separated lived apart the entire year AND there was no intention to reconcile throughout the tax year and such intention continues o Nocommingling of funds Name and social security numbe
31. DIV 1 or a substitute for any of these Foreign taxes shown on any other document e g royalty statement are not eligible for the simplified election A full Form 1116 is needed to claim a credit for such taxes which is out of scope e Input in the Simplified Limitation Election field at the top of the form The return is out of scope if the client wants to use the full Form 1116 or the total foreign tax amount to be credited EXCEEDS 300 600 for a joint return Taxpayer may choose an itemized deduction for the foreign taxes instead of a foreign tax credit if there is a tax liability the credit will normally produce a better result e Note if there are foreign tax credits greater than the amount of tax liability 7040 Pg 2 L 46 no carryback or carryover of the unused foreign tax credits is allowed if the simplified credit is elected In such cases the client should be referred to a paid preparer if they wish to preserve the carryback over opportunity by filing a full Form 1116 LINE 10 TAXABLE STATE INCOME TAX REFUND e California uses a post card sized document to report prior year state income tax refunds The amount reported is the California refund that may be taxable in the year received It is NOT taxable if there was no benefit to the income tax deduction in the prior year e Check the YES box 1040 Pg 1 above L 10 ONLY IF the taxpayer s itemized deductions AND deducted State Income tax not sales
32. EZ Pg 1 1040SS Pg 1 US PR Additional Child Tax Credit Pg 1 1040V Balance Due Payment Voucher 1040XPg 1 Amended Individual Income Tax Pg 1 ACH 1040 ES Ach Debit of Balance Due Estimate E file 7 10 14 14 Field is yellow resulting from linking error Follow the link to the form and delete it by clicking the x next to the form in the Tree Close the return and re open it to restore the field to its pre error condition Taxable Income but nothing below line 43 on 1040 page 2 If the capital gain and qualified dividends taxed at zero rate are greater than the taxable income shown on line 43 all the following entries may be zero and zero is not printed Unintentional Override If you make an entry in a field and then link from that field the field is automatically overridden and the original entry will remain the link entries from the subordinate form will not show As a ReturnPreparer you will have to get help from a user with a role that allows them to un override that entry e g a SuperUser or Reviewer Your site manager can identify those counselors Interest Dividend worksheet Before making an entry you must tab once to get to the first field Existing ites or click in the first field Linkin 2 Link to a form When you link to a form you may not see any forms to link to in the dialog box That is because you are on the wrong tab there is an Existing tab and a New tab If the form hasn t been
33. Elderly amp Disabled Credit 48 Employer ID 1099 R State Tax 32 WI eet estet 17 WENT COR utere tret tee SUE 18 End of Shift eae oinari 66 Equipment lost or stolen sess 1 ERO Envelope ette 66 Estimated Tax 50 Estimates for Next 58 Extensions andes ese 68 Failure to Eie x iuum 65 Family Leave Income eee 36 Federal Tax Withheld sss 50 Filing Status cente erede 12 Head of Household CA 52 Final Steps Tax 60 First Time Homebuyer Credit Repayment 50 Foreign accounts or assets 20 Foreign Government Pensions 35 Foreign axes etit etre rebote 25 Forms 1040 Sch Asie tete 42 1040 Sch B edge 21 1040 Sch sie Vs at ies ted t ete 26 1040 Sch D aint etienne 27 B oi ete ete 35 LO40 SCH ener 48 1040 ES n aet iet p dtes 58 eet teet 67 teet 43 1098 1 oett eee 19 47 1099 B ete e eet p nns 27 1099 deo I Re eee 39 099 eiecit Rei een 23 1090 3 uo tb He B eet 36 21
34. INCOME amp IRA 8 30 LINE 17 RENTAL REAL ESTATE ROYALTIES TRUSTS LIMITED eer 35 LINE 18 FARM INCOME 36 LINE 19 UNEMPLOYMENT COMPENSATION 36 LINE 20 SOCIAL SECURITY AND RAILROAD RETIREMENT 36 LINE 21 OTHER 22 37 LINE 22 TAX WISE EARNED 40 5 6 cosest 40 LINE RESERVED edo tide Uo Pate 40 LINE 24 CERTAIN BUSINESS EXPENSES 0 40 LINE 25 HEALTH SAVINGS ACCOUNT cccssssssecesececeesessnseceeeseceesenenseseceseceeseeensaeaeeesecs 40 LINE 26 MOVING EXPENSES OUT OF SCOPE eee eene then 40 LINE 27 DEDUCTIBLE PART OF SELF EMPLOYMENT TAX eene 41 1 10 14 14 Table of Contents LINE 28 SELF EMPLOYED SEP SIMPLE PLANS OUT OF SCOPE ene 41 LINE 29 SELF EMPLOYED HEALTH INSURANCE OUT OF SCOPE eee 41 LINE 30 PENALTY ON EARLY WITHDRAWAL OF SAVINGS ccce 41 LINE 31 ALIMONY PAID ies ettet v e E eret o os MEER DRE 41 LINE 32 IRA DEDUCTION Peter re ees Er a
35. IRA contribution is entered on W2 or IRA wkt e This credit is available to taxpayers who made elective contributions to IRAs Roth IRAs and other qualified plans IF their adjusted gross income was below certain maximums the amount of the credit decreases as AGI increases e Entries of qualified retirement plan information from box 12 of W2 or IRA contribution on JRA Wkt will transfer to 8880 which will then appear red on the Tree e Answer the questions about the plan distributions use F3 to confirm a zero distribution o Distributions from some not all plans should be included for the current year and the two prior years To be included the plan must have been one that contributions to it would have been elective and qualified for the credit o Plans that require contributions are not elective e Refer to the instructions 8680 or Pub 17 LINE 52 CHILD TAX CREDIT e This credit is for taxpayers who have a qualifying child under age 17 Itis in addition to the child and dependent care expenses and earned income credits e TaxWise places an next to the dependent name on the Main Info form once a date of birth is entered for a dependent who was under the age of 17 as of the end of the tax year e If the CTC applies TaxWise creates and completes form 040 Wkt3 Note If the client s tax liability is less than the allowable Child Tax Credit the client MAY be eligible to claim the refundable Additional Child Tax Credit
36. LINE 18 FARM INCOME out of scope LINE 19 UNEMPLOYMENT COMPENSATION Go to 1099G Unemployment Compensation is fully taxable for federal Check the appropriate box at the top to indicate if payment was made to the taxpayer or spouse Do not enter CA on Line 6 state tax withheld unless there was CA tax withheld The California form has two parts Unemployment and Family Leave are reported on Line 19 as unemployment If you have both add a new 1099 G to enter the Family Leave Amounts repaid for the current year will reduce the taxable income for the current year Any amount repaid for a prior year must be deducted on Sch A as a miscellaneous deduction subject to 2 floor if 3 000 or less and cannot offset the amount received for the current year CA Note Unemployment or family leave payments are NOT taxable by CA o TaxWise makes the adjustment LINE 20 SOCIAL SECURITY AND RAILROAD RETIREMENT BENEFITS Up to 85 of the social security payments may be taxed Computationally if AGI plus tax exempt income plus one half of social security is less than 25 000 32 000 for MFJ none of the social security is subject to tax Tax implications of social security payments o Benefits received by children of a deceased taxpayer are NOT taxable on a parent s return Disability Income SSDI SSD is NOT taxable and the taxpayer should not have received SSA 1099 for such payments if they have a 1099 form it is pot
37. Main Info sheet TAXPAYER DIARY e The Taxpayer Diary can be accessed from within a return on the Toolbar or with no return open from the list of returns viewed e The Taxpayer Diary allows notes by the preparer or reviewer e When the Taxpayer Diary is used an icon is displayed on the list of returns alerting the user to its existence e While it is possible to empty the contents of the Taxpayer Diary click to add a note then delete what is no longer needed it is not possible to remove the icon from the list of returns after it has been used e The Taxpayer Diary icon and the contents of the Taxpayer Diary carryforward which should be updated as needed INCOME LINE 7 WAGES SALARIES AND TIPS Go to W2 W2 Top Section e Select either Taxpayer or Spouse at the top of the form required only for MFJ e The Check if W 2 is handwritten altered or appears not to be a true W 2 should be used ONLY IF the W 2 is truly suspect e Check the appropriate box for address information If the taxpayer s current address is not the address shown the paper W 2 the Check and make changes box allows you to overwrite and change the address field to agree with the address shown on the W 2 o If no address is shown on the paper W 2 leave the default address here e Use the lower portion in this section for a foreign address e Verify withholding box lights up when withholding is greater than IRS expects if due diligence with
38. TWO Hang Up If this condition lasts for more than 15 seconds following are some procedures to use to recover in the order they should be used Press the F5 key to reload the form Press the Backspace key in Internet Explorer Close the return and re open it Log out of TWO and log back in Close Internet Explorer and re start it and TWO Close TWO and re boot the computer Printing in TWO A multi step procedure o First a PDF file is created by clicking Print Return o Then you must click the link to display it in a separate browser tab and o Finally you send the entire output or selected pages to the printer Note The pdf file created in the separate browser tab may NOT be saved to an unsecured drive and cannot be given to the taxpayer Printing a form s click the Print Form icon above the Tree Print one form at a time This can be tedious in the case where for example you have printed the return and then remembered to add the quarterly estimated tax vouchers Rather than print the four vouchers one by one you can create the PDF file by clicking Print Return Then find the page numbers of the vouchers and print only those pages rather than the whole return This is much faster than printing each form separately 10 14 14 70 SITE SPECIFIC TWO ENTRIES Saving e TWO automatically updates and saves the data as it is entered e TaxWise auto refreshes the screen at each entry o If Classic Mode display is u
39. a joint return or in the name of just one spouse or for others and a co owner or beneficiary can be designated o can contact Treasury Retail Securities at 1 800 245 2804 to check the status of their bonds If there is a federal refund and a CA refund CA 540 Pg 5 must have the appropriate box checked to have the refund deposited in o The same account as the federal do not enter bank account info on CA form o different account or 57 10 14 14 ESTIMATED TAX PAYMENTS FOR NEXT YEAR Mailed e If there is no federal refund but there is a CA refund or if the CA refund is to go to a different account check the second box on CA 540 Pg 5 o Account 1 bank information below the check boxes will now turn red o When you enter the bank information another set of boxes further down will turn red and must have verification entries o Itis not necessary to enter the bank information on the Main Info 1040 Pg 1 or any place that is not red e The CA refund can be split between two bank accounts This is entered on CA 540 Pg 5 o If splitting between accounts enter the amount to be deposited in each account e If direct deposit is selected answer the question on CA 540 Pg 5 regarding whether the financial institution is in the U S DIRECT DEBIT Federal e When a taxpayer has a federal balance due they may request direct withdrawal from their bank account o Go to Main Info above the Practitioner PIN enter the bank account
40. above on page 51 If the return is on extension enter the extension payment in the 2 part of L 72 on CA 540 Pg 3 55 10 14 14 REFUND OR BALANCE DUE CA USE TAX e CA 540 Pg 4 L 95 is used to report the amount of CA use tax due on purchases of goods from out of state sellers e Use tax on items of 1 000 or more must be calculated using the use tax worksheet found in the 540 instruction booklet e fall use taxable goods are each less than 1 000 the estimated use tax look up table may be used e Credit for another state s sales tax may be claimed to the extent of the applicable CA use tax e Note goods purchased outside the U S carried into the U S not shipped and declared for customs purposes are subject to use tax to the extent they exceed 800 CA ONLY VOLUNTARY CONTRIBUTIONS e California allows the taxpayer to make contributions to any special funds listed on the form e Unlike the federal presidential fund a CA contribution increases the amount due or decreases a refund REFUND OR BALANCE DUE UNDERPAYMENT PENALTIES e Calculation of estimated tax penalties is out of scope e the client owes the IRS more than 1 000 or CA more than 500 they may be billed for the penalty at a later date e Inform the Taxpayer of potential penalty ies e Advise them that we are taking the penalty ies off the return e The IRS FTB may calculate a penalty and bill them accordingly Clear Federal Penalty e This may not be necessary if
41. any remaining red fields e Explain each change separately and in detail Item being changed o Amount previously reported and corrected amount o Reason change was needed note any documents that are attached supporting the change Print the amended return s e In addition to Forms 1040 and 540 X any form or schedule that has been changed from the return as originally filed should be attached to the amendment o E g if the return is amended to add 1099 for interest income Federal 1040 Sch B if required and any other form that changed e g Sch if medical deductions changed 540 X copies of CA and federal pages that changed Write as amended at the bottom of each page that is being re filed as part of the amended return e Click the print return icon on the Toolbar e If your ERO set up the program properly two copies of the 1040 and 540 X will print e If not then you will have to manually print the second copy 67 10 14 14 REPORTING amp SITE LOGS Attach all supporting forms and schedules for items changed make sure all info on the revised schedule including payer names is shown Federal The taxpayer s must sign and mail one copy of the 1040 X with all revised supporting forms and schedules o Attach any corrected W 2s and 1099s if there is withholding CA The taxpayer s must sign and mail one copy of the 540 X with the revised CA forms or schedules any changed federal schedules and documents support
42. are familiar with its content e Make notations on your copies of reference materials or file updates as quickly as possible e addition there are web sites that have useful information Tax Preparation Assistance Sites To locate tax basis Historical Stock Quotes Big Charts http bigcharts marketwatch com historical Stock Information and Historical Quotes http finance yahoo com List of qualified charities http www irs gov Charities amp Non Profits or Pub 78 Salvation Army donation value estimates http www satruck com donation value guide 10 14 14 8 STEPS TAX RETURN PREPARATION All States Public Records Search Useful for real estate taxes paid for other counties as Tax Preparation Assistance Sites http publicrecords onlinesearches com well as State and County information Education credits searchable database of all https fafsa ed gov FAFS A app schoolSearch localezen EN accredited schools Simplified method calculator for pensions http aarp bogarthome net Annuity Pension 20Calculator htm IRS Web Site Publications forms and http www irs gov answers to tax questions Franchise Tax Board State of California Web Site Publications forms and answers to questions myFTB Get information on estimated tax http www ftb ca gov payments made balance due CA wage and withholding information requires p
43. as possible by April 15 e The Taxpayer may contact the IRS at 800 829 1040 or go online at IRS gov and request a Short Term Pay Agreement of 30 60 90 or 120 days e This will stop the tracers and the placement of the account in collection status e Ifthe balance due can be paid within 4 months do not request an installment agreement o Print enough voucher forms as the taxpayer may need or o Direct the taxpayer to go to IRS gov for direct pay e The taxpayer will owe interest at the federal rate plus a late penalty of 0 5 per month after the due date Pay by Credit Debit card See Pub 4012 at page K 3 and IRS gov for information on the payment of taxes by credit debit card Pay on Installment Agreement Should be considered only if the taxpayer cannot pay their balance due within 4 months 9465 is used to request an installment agreement The return can be e filed with this form There is a one time set up fee of 120 which can be reduced to 52 by agreeing to pay by direct debit or 43 by filing form 13844 not available on TaxWise for low income households The taxpayer can choose the monthly due date and payment amount and may arrange to have the funds withdrawn directly from a bank account e They will owe interest and a late payment penalty of 0 25 of the balance due each month e While on an installment agreement the taxpayer may amend the agreement including adding additional years if necessary on IRS gov No
44. associated with the SIDN that was entered on the Main Your EFIN Information Page and lock the entry e bottom of the form in the Electronic Return Originator ERO Information section e Date field entry will automatically be Bectronic Return Originator ERO Information entered when a return is started ERO s ID Aso paid preparer Date e Print as signature checked ERO signatire 7 PTN 0 eirca E e IRS only checked resins name RARP FOUNDATION TAX AIDE H e field enter your site s unique eight Zip code mo E digits SIDN o The letter S will automatically be entered in the left hand box e Firm name field enter your site s name as shown on the confirmation sheet that came with the Tax Wise software AND the SIDN Example Anywhere Senior Center 570050000 e Firm Address field enter the site s physical address e Zip code field enter either the 5 or 5 4 digit code for the site o If the auto filled city information is incorrect enter the correct information Phone field enter the site s phone number e Lock the entries e All the other boxes should be blank e Turn the red off in any boxes that are still red using the key 10 14 14 72 CASDI CCH COD CODI CTC DC DHS EFIN EIC EITC EIN FEIN ERO HoH HSA ITIN L LC LTC MAGI MAGI M
45. client reveals no suspected problems F3 to clear the red Do not check the box labeled Check to take calculations off lines 3 4 5 and 6 at the upper left until the entire W 2 has been completed and it is necessary to manually enter these values e Ifthe Taxpayer uses an ITIN the SSN on the paper W 2 must be entered see Employee SSN when filing under ITIN below DoNOT enter anything in the Control number field e Check the Corrected W 2 W 2 C box if it is checked on the taxpayer s copy of form W 2 10 14 14 16 INCOME See W2 State Section below if state wages in box 16 are different federal wages in box 1 W2 Employer s ID Name and Address The employer s tax identification number EIN If the EIN is missing the tax return cannot be e filed o Do not create a bogus number or enter a social security number as the return will be rejected o The taxpayer must contact the employer to get a valid EIN number If the computer has encountered this EIN on another return during the current season the name and address information will be filled in by Tax Wise o Make any changes necessary so that the information on W2 matches the taxpayer s copy o Ampersand amp hyphen and slash are allowed in the employer name field W 2 s issued by California In Home Supportive Services will show the name of the person being cared for often a relative as the employer show an address in Roseville and a CA tax ID assigned
46. e OID interest income is regular interest e Note that OID adjustments are out of scope e Enter the total OID interest received in the Box 1 or 3 amount column Note If 1099 OID shows an amount in box 8 US Treasuries enter a state adjustment to make it nontaxable for CA Simple K 1s and Prepaid Funeral Plans e Pre Paid Funeral Burial plans report income earned on the prepaid funds on either a K 1 or 1099 INT e Income reported on a K 1 is from partnerships S corporations trusts and estates o These are out of scope for Tax Aide however an exception is made if income consists only of interest dividends royalties capital gains losses and associated foreign tax credits Because of Tax Wise peculiarities it is strongly recommended to NOT use the TaxWise K form It is advisable to input all items from a K 1 at one time so that none is overlooked Entries into TaxWise shall be done as follows Show payer as name of payer K 1 Hint Line numbers vary by form 1041 K 1 1065 K 1 or 1120S 1 go by line description This Entry on K 1 In This Place Interest Interest Stmt pg 22 Box 1 or 3 Amount If tax exempt Fed amp Cal Interest Stmt pg 22 E in NAEOB amount in NAEOB amt and Amt in State Adjust Amt same line Total Ordinary Dividends Dividend Stmt pg 23 Total Dividends Qualified Dividends Dividend Stmt pg 23 Qualified Dividends And If tax exempt Fed only Interest Stmt pg Net Short term Capita
47. e g where the amount is not taxable for federal but is taxable for state or vice versa see examples and E below enter or to indicate whether the amount is or is not subject to state tax and the amount e If there are entries for Box 9 AMT PAB Alternative Minimum Tax Private Activity Bonds enter them and then make sure there is no Alternative Minimum Tax 1040 Pg 2 L 45 which would make the return out of scope e Early penalty any early withdrawal penalty as shown in Box 2 on the 1099 INT This is transferred to 1040 Pg 1 L 30 e Federal Withholding enter any federal withholding shown in Box 4 on form 1099 INT Note withholding Boxes 11 13 on Form 1099 INT should be entered on CA 540 Pg 3 L 71 last entry field as 1099 and the amount should be linked to a Scratch Pad that details the payer s name and state I D number that helps the FTB match the withholding Examples of Interest Income Payer Box 1 or 3 j Federal Amount TSJ withheld CHASE BANK 2000 m BANK OF AMERICA US GOVERNMENT BONDS B ase s Example A 2 000 ordinary interest from Chase Bank reported on form 1099 INT box 1 substitute 1099 INT or brokerage statement o Taxable on both the federal and CA returns o Enter 2000 in the Box 1 or 3 Amount column Example B 100 interest from Bank of America Box 1 with early withdrawal penalty of 40 in Box 2 reported on form 1099 INT substitute 1099 INT or brokerage s
48. has a Knowledgebase that can be consulted for commonly asked questions Reporting Lost or Stolen Equipment In the event that the laptop computer in your custody is lost or stolen you must report the loss theft to your local coordinator AND AARP National Office 800 424 2277 ext 6021 or 6027 10 14 14 WHAT TAX AIDE AND CANNOT DO AARP Volunteer Information e AARP Foundation Tax Aide counselors should NOT act on information contained in IRS Quality Alerts Tax Aide will redistribute relevant alerts as CyberTax messages which are automatically sent to all Tax Aide volunteers with an email address in VMIS e Volunteering with AARP Foundation Tax Aide direct interested persons to www aarp org taxaide 888 687 2277 or put them in contact with your district or local coordinator AARP programs Reverse Mortgages Senior Community Service Money Management etc direct to ww w aarp org or 202 434 2044 e Donations Tax Aide counselors cannot accept money o Donors can send a donation to AARP Foundation Tax Aide Program 601 E Street NW B4 640 Washington DC 20049 put Tax Aide CA on the memo line of the check WHAT TAX AIDE CAN AND CANNOT DO The AARP Foundation Tax Aide Program is limited in scope Our Mission is to provide high quality free income tax assistance and tax form preparation to low and moderate income taxpayers with special attention to those ages 60 and older All references to Tax Aide are s
49. information o Go to 1040 Pg 2 just below Amount you Owe check the Yes box to have the funds automatically withdrawn in the Electronic filing only section do not enter the bank information o Goto ACH 1040 ES Estimate which TaxWise added to the Tree Enter the bank account information for verification on ACH 1040 ES Estimate Enter the amount the client wants debited Specify the withdrawal date April 15 can be the withdrawal date If they might be subject to an underpayment of estimated tax penalty you should suggest immediate payment to reduce penalties CA e Electronic funds withdrawal is also an option for CA balance due Go to CA540 Pg 5 Direct Deposit of Refund or Electronic Funds Withdrawal of Balance Due section Select the first Electronic Filing Only button Enter the date the taxpayer wants the funds withdrawn Enter the amount of funds to withdraw o Enter the bank account information for this withdrawal in Account 1 Required even if the same account as federal o Re enter the bank account information in the following section for verification of the account numbers e If ACH withdrawal is selected answer the question on CA 540 Pg 5 regarding whether the financial institution is in the U S DIRECT PAY e Taxpayers may go to IRS gov for a new service to pay either a balance due on a return or a quarterly estimated payment e It is functionally the same as direct debit it comes out of the bank account e There is
50. no fee e It is easy to use ESTIMATED TAX PAYMENTS FOR NEXT YEAR FEDERAL ESTIMATED TAX PAYMENTS Go to 1040ES Pg 1 Pre printed IRS payment vouchers are no longer furnished by the IRS if the prior year return is e filed Ifa client expects a balance due of 1 000 or more for the next year and wish to avoid penalties they may o Increase withholding from their paychecks using form W 4 o Increase withholding from their retirement income using form W 4P o Increase withholding from federal payments e g social security using W 4V o Make estimated payments 10 14 14 58 ESTIMATED TAX PAYMENTS FOR NEXT YEAR e Quarterly payments of estimated tax must be mailed separately from the 1040V or tax return e The taxpayer address used on the vouchers does not have to be the same as the address on the tax return There is a box on Voucher 1 that allows you to change the name or address e There are two ways to compute estimated taxes Option I e You can estimate taxes at a level to avoid underpayment penalty 90 100 or 110 of the current year s liability refer to Pub 17 to pay the total amount due or to generate a refund e substantial change in income is expected for the following year look at this year s return and discuss the option of paying more or less based on the current year s result OR On the estimate desired L 20 at the bottom of the first section of 7040 ES Pg 1 enter the total estimated tax amou
51. or Form 8939 for assets inherited in 2010 The Cap Gains Wkt permits entry of transactions in random order Tax Wise will separate short term and long term transactions e Do not leave blank lines between entries use Ctrl I to insert a row or Ctrl R to delete row Each Cap Gn Wkt can hold 50 transactions add more as needed e If there are numerous transactions shown on a gain loss statement from a broker program or self prepared that has ALL the required information including basis information input can be short cut o GotoSchD Pg1 27 10 14 14 Check the box at the top to attach a substitute list with Form 8453 If scanning and attaching the substitute list check the next box and select the pdf file to attach o Goto Cap Gn Wkt enter summary information Break down as per the original document Short term and code A B and or C Long term and code A B and or Enter XYZ stmt XYZ broker name for Description and Code M in column f Select any sale date for this entry and a date acquired of Various for long term Select Jan 1 of the current tax year for the short term See Using 8453 or Scanning PDF Attachments on page 64 If there are numerous transactions that are input and the number of transactions that would go to a single 8949 exceed 17 the transactions will not be reflected in the return until additional 949 pages have been added remember there can be up to 6 flavors of 8949
52. the account information has not been verified in the event that the funds are misdirected as a result of the information provided by the taxpayer The preparer must make a note at the bottom of the Main Info sheet regarding the source of bank account information if other than a pre printed check Never use information from a deposit slip and never take numbers over the phone Omit spaces dashes and special symbols DO NOT enter the check sequence number which will match the check number on the upper right corner of the check and may appear either before or after the account number John Dos Mary Doe 1234 Main Street Anytown DA 92095 Pa TO THE ORDER OF DOLLARS ANY TOCNVH BAME Fa ACCOUN Antoan DA coc number Federal CA The bank account information must be entered in two 2 places for verification 1 Near the bottom of the Main Info sheet above the Practitioner PIN and 2 Near the bottom of 1040 Pg 2 o The information must match If it does NOT you get an error when running diagnostics but not when it is entered Federal refunds be split among three accounts in which case complete 8888 and leave the information blank on the Main Info and 1040 Pg 2 On 8888 the taxpayer can designate a portion of their federal refund to buy up to 5 000 in U S Series I Savings Bonds o amount requested L 4 must be a multiple of 50 00 The bonds can be issued in the name of both taxpayers if this is
53. 1 for additional information e Box 2 if the annuity starting date is after July 1 1986 but before November 19 1996 the taxable amount box may show unknown In this case complete the simplified method worksheet as detailed above e 5 on this form can be o The amount of the employee s basis recovered this year CSA 1099R box 1 minus box 2 OR o Health insurance premiums that are deductible as medical on A Detail if the amount includes only premiums for FEHB FEP and Medicare B and or D If the retiree is having dental vision or LTC insurance premiums deducted they will not be included in box 5 10 14 14 34 INCOME o The only way to see these other premiums is to see the taxpayers Form RI 38 38 Notice of annuity adjustment codes are shown on the back of the form 4215 Federal Dental Insurance 4315 Federal Vision insurance 45 is a catchall that includes LTC o Voluntary Contributions If the TP is receiving additional payments resulting from voluntary contributions to the retirement fund the additional portion of the annuity due to the voluntary contributions must be reported separately for tax purposes and is shown at the bottom of the 1099 R statement Remember that CA standard deduction is lower and taxpayer may itemize for CA and not for federal RRB 1099 R green form non Social Security and Tier 2 This is treated as a pension see Pub 575 or annuity and is not taxed by California
54. 15 Are any of your funds commingled 16 Were you a full year resident of California 17 Name of spouse print 18 Spouse s Social Security Number 19 Is spouse US Citizen National or Resident 20 Is your Spouse taking the standard deduction 21 Spouse s address if known print If you are married filing separately did you pay for the support of a dependent parent credit code 173 Local Coordinator or Quality Reviewer must approve Married Filing Separately status 10 14 14 80 22
55. 52 Foreign Income Tax Deduction 43 Foreign Pensions 2 36 HSA Deduction eee 40 HSA Distributions 2 39 HSA Employer Contributions 18 dene 54 HSA Investment Income 21 24 10 14 14 74 Includible Income eese 53 Indian Tribal Income 20 38 Inherited Property 2010 29 IRA Basis 01 53 Other State Bond 21 Pensions 86 87 3 Yr 34 Public Safety Officer Benefits 32 Railroad Retirement Green Form 35 Railroad Tier 1 Blue Form 37 State Tax Refund sese 25 U S Municipal Fund Dividends 24 U S Bond 22222 1 1 21 Unemployment Income esse 36 Wages State Wages differ 18 CA Voluntary Contributions sss 56 Canadian Pensions eee 35 Cancellation of Debt sess 39 Capital Gains amp Losses 27 Capital Loss 29 Adjustment eee esee 53 Carryforward Prior Year s Data
56. 86 87 Difference 34 Canadian RRSP 35 Foreign CA 36 Foreign Government eese 35 Simplified General Rule 33 Unrecovered 45 Personal Propety Tax 43 Phone Number 1 PIN Practioner 6 2 15 Power of Attorney 63 Een HER 16 Prep Use Borm ie eee 16 Presidential Campaign ees 12 Printing Amended Return sess 67 Blank Estimates for Next Year 60 Blank o epe eee eerie 62 Individual Forms esses 62 ee 62 Simplified Method sess 34 Suppressing Federal or CA 62 Prior Year Retumis ebenian 66 Public Safety Officer Health Insurance 1099 R box 5 33 Survivor Benefits Exclusion 32 Quality 61 Real Estate Tax 43 Refunds Deadline to Claim Overpayment 66 eere 35 Renter s Credit 55 R
57. 99 MISC carefully to determine the type of income o Boxes 5 and 8 15 are out of scope 1099 MISC income for boxes 3 and sometimes 7 if it is not business income is reported 1040 Wkt 7 L 2 and linking to 1099 MISC Do not use the 7099 MISC under schedule C except for amounts reportable on Sch C Pg 1 Copy the information from the paper 1099 MISC to TaxWise 1099 MISC Indian Tribal Income reported on 1099 MISC Box 3 represents a portion of the profit from a casino or other business on tribal lands o Always taxable for federal not subject to self employment tax o CA Note Indian Tribal Income is exempt for CA ONLY IF the taxpayer lives on tribal land manual adjustment on CA CA Line 21 f is required if exempt from CA taxes Employee Unreported Tip Income Form 4137 Tip income is reported on Line 7 of Form 1040 as part of wages if from employment see instruction for Line 7 above If tips are from the taxpayer s business they should be reported on Sch C Tips should NOT be reported as Other Income 10 14 14 38 INCOME Payments From Qualified Education Program Form 1099 Q e This form reports gross distributions from a qualified tuition program 529 plan or a Coverdell ESA o Coverdell ESA plans are out of scope e If these distributions were used for tuition and fees they not taxable Ifthe distribution exceeds the amount of qualified expenses it is out of scope Distributions From LTC Plans Form 1099 LTC e Goto 8853 P
58. A CA Itemized Deductions SchC CA Business profit or loss e SchCA Adjustments to Income SchD CA Capital Gain or Loss adjustment SchP Page 2 Section B1 certain credits e 540 ES Estimated Income Tax Payments 540 V Payment Voucher for paper returns 540 Amended California Income Tax return e SchW 2 Wage and Withholding Summary not needed for e filed returns e Rent worksheet Non Refundable Renters Credit e 3506 Non Refundable Child Care Credit 3519 Extension Payment Voucher only if payment is due 3567 Installment Agreement Request e 3582 Payment Voucher for E filed returns e e e e 10 14 14 2 TAX WISE ONLINE PROCEDURES What is out of scope Everything Else The following are some of the out of scope items e return that is not an individual return e State returns for part year residents or nonresidents 540 NR or state returns for a state other than CA with the exception of authorized volunteers in the Tax Aide National State Tax Assistance Program When we cannot do the state return we should refer the client to a paid preparer for BOTH the federal and state returns TAXWISE ONLINE PROCEDURES START OF SHIFT e Check with the LC or ERO regarding the network status If your site equipment is hard wired o All network cables must be attached o The router and or network switch es should be turned on and operational before any workstation is turned on only then turn on your comput
59. AARP FOUNDATION TAX AIDE CALIFORNIA COUNSELOR REFERENCE MANUAL CRM For TaxWise Online TAX YEAR 2014 Prepared by the AARP Foundation Tax Aide CA Training Committee The CRM can be ordered from the Franchise Tax Board The CRM can also be found at http www ftb ca gov individuals vita index shtml And at Tax Aide for CA 2 http aarpca2 org forum TABLE OF CONTENTS ESSENTIAL INFORMATION 1 5 25 1 WHAT TAX AIDE CAN AND CANNOT 1 1 1 1 2 TAXWISE ONLINE PROCEDURES 3 START ORSHIET ee Mmm eae 3 SHUTDOWN PROGEDURES 7 ees bo ted Pete ted ote ven oed vert 3 KEYBOARD SCREENS ETC sa hea nang dees i YER IAS 3 KEYBOARD SHORTCUTS cssssssssssssccscssssssssnneesecsessnsnsncceesscsessnssnaceeseceessnsnsaaeaeeessossesnes 5 TOOLBARS eee tee rete de e EE e etude 6 SGREEN TGA VY OWL ss tnr Ant Estate nianu a 6 ADDITONAL FORMS Eder ei IR HELP c 7 CONFUSING SITUATIONS TAXWISE ONLINE 7 REFERENCE MATERIA Dc 8 RESEARCH A TOPIC niacin ciel ita 8 STEPS IN TAX RETURN PREPARATION
60. AGI MEC MFS NTTC OPM PAB POA PSO PTC QW RDP RTN S SC SDI SIDN SPEC SRP ISRP SS SSN TC TWO VI VP VPDI GLOSSARY Patient Protection and Affordable Care Act Additional child tax credit Adjusted gross income Alternative minimum tax American opportunity credit formerly HOPE education credit Advance premium tax credit ACA California state disability insurance Commerce Clearing House publisher of TaxWise Cancellation of debt Cancellation of debt income Child tax credit District Coordinator the individual responsible for all sites in a district Department of Homeland Security Electronic Filing Identification Number a unique number assigned by the IRS to identify each electronic filing site which is used as the electronic address for the site Earned income credit Employer Tax Identification Number the federal ID number for processing employer payroll information Electronic Return Originator Head of household filing status Health savings account Individual taxpayer identification number Line Local Coordinator the individual responsible for one or more tax preparation sites Long term care Modified adjusted gross income For 8965 purposes AGI excluded foreign earned income exempt interest income For 8962 purposes AGI excluded foreign earned income exempt interest income nontaxable SS income but not SSI or SSDI Minimum essential coverage for ACA Mar
61. BLESHOOTING AND TIPS o Taxpayer subsequently obtains valid SSN after submitting one or more federal returns using an ITIN o Prior year ITIN return could not claim EIC but may claim on an amended return o Reason should state Previous return filed with ITIN as well as the addition of EIC or other change Form W 7 out of scope e Application for an ITIN e For specific instructions the applicant s should consult the instructions accompanying the W 7 Ablank W 7 can be printed from IRS gov e The application can be made by mail or at any IRS Assistance Center or Acceptance Agent e Jt generally takes 4 to 6 weeks to receive the ITIN e most cases the applicant must provide the original completed tax return s for which the ITIN is being requested as well as two of the following with the W 7 Valid Passport No other Document required U S Military Identification Card National Identification Card Foreign Military Identification Card U S Driver s License Visa Civil Birth Certificate U S Citizenship and Immigration USCIS photo ID Foreign Driver s License Medical Records dependent only U S State Identification Card School Records dependents and students only Foreign Voters Registration Card TROUBLESHOOTING AND TIPS If TWO Hangs Usually TWO will switch forms and update fields fairly rapidly When Loading form is displayed for an extended time that is commonly referred to as a
62. Charitable Deductions list A Detail Property tax bill car registration Sch A 1098 Mortgage interest Sch A 1098 T Tuition Statement 8863 Pg 2 1040 Wktl 1040 Wkt2 Sch maybe Sch C maybe Payments and miscellaneous Canceled checks estimates paid F S Tax Pd 1095 A Health Insurance Marketplace Statement 8962 or 8965 Any other papers the client brings Various STARTING A NEW RETURN e Click the New Return icon on the Toolbar e The Create New Return dialog box will appear e Enter and confirm the primary SSN for the tax return e If carryforward data exists for the social security number from last year s return a Create New Return dialog box will appear that notes prior year data exists and giving you the options to Use Carry Forward or Create New Return You would normally Use Carry Forward e Enter or click the Go to Tax Forms button e following are acceptable by Tax Aide as social security number verification used in conjunction with a picture ID Social Security Card Note The Social Security Administration may issue a card with the notation VALID FOR WORK ONLY WITH DHS AUTHORIZATION this is a valid social security Social Security Benefit Statement Form 1099 SSA or RRB 1099 A letter from the Social Security Administration An IRS letter or card assigning an ITIN e Interview mode option do NOT use for real returns This is available but should never be used for re
63. Dependent Care Credit CA 3506 CA 540 Pg 3 L 40 e See Line 49 Credit for Child amp Dependent Care Expenses on page 46 Joint Custody Head of Household Credit Code 170 CA 540 Pg 3 L 43 44 e This credit is available to a non custodial parent filing Single or MFS if o under a joint custody agreement a child lives with the custodial parent more than one half the year but noncustodial taxpayer maintains his her home which is the main home for the qualifying child for at least 146 days but less than 219 days and possesses a decree of dissolution or legal separation or a written agreement entered into before the final decree is issued If MFS the taxpayer must have lived apart from their spouse RDP for the entire tax year See Form 540 instructions The credit is input on CA P Pg 2 Section if the taxpayer qualifies click the button on L 14 The credit is 3096 of the tax due CA 540 Pg 2 L 35 limited to a credit of 425 The credit cannot be claimed if the Dependent Parent Credit code 173 is claimed o Properly TaxWise will not permit both credits to be claimed Dependent Parent Credit Code 173 CA 540 Pg 3 L 43 44 e Note see very limited situations where a MFS return be completed in Tax Aide on page 13 10 14 14 54 CA ADJUSTMENTS amp DIFFERENCES This credit is available to a person filing MFS who cannot claim Head of Household status o because they have no dependent child that would qualify them a
64. E eee 52 LINE 73 CREDITS 2439 OUT OF SCOPE eese ener nennen 52 CA ADJUSTMENTS amp DIFFERENCES esee eui et eei PFIEING S TATUS peer ete o Soe uv eere amp 8s 52 INCOME EXCLUDIBLE FOR 0 000000 000000100000000000000000000000 aia aaaea noise nins 52 INCOME INCLUDIBLE FOR 2 1 21 2 7 1 1 14000000000000000000000000000 53 DEDUCTIONS AELEOWED BY CA eS a HERE EIER 54 DEDUCTIONS NOT ALLOWED BY CA cccessesssceseseceseessnsecececececeenensaaeceseceesesesentsaeeesees 54 HEALTH SAVINGS ACCOUNTS IN 54 10 14 14 ii Table of Contents CAON Y CREDITS SE 54 STATE TAX WITHHELD 5 55 STATE ESTIMATED TAX 5 000000000000000000 55 CAM ISE oq IM CES 56 CA ONLY VOLUNTARY CONTRIBUTIONS 56 REFUND OR BALANCE 22 ev eaa bna dE ee eh Sn epa eR CERE eR eura e Vu Rada UNDERPAYMENT 5 nennt sei eese sees 56 INJURED SPOUSE tute ve ele de eee dits 56 5
65. INCOME CALCULATION LINE 40 DEDUCTIONS Standard Deduction e The Standard Deduction is the default See Pub 4012 p F 1 for persons not eligible for the standard deduction e If there is any doubt whether to itemize complete Sch A Note This is particularly important for CA because the standard deduction is less than for federal 41 10 14 14 TAXABLE INCOME CALCULATION Schedule A e TaxWise will make the correct calculations for both federal and state and select the better of the standard deduction or itemized deductions Sch A and A Detail have boxes for TSJ Taxpayer Spouse and Joint and fields for Taxpayer and Spouse mileage These do not have to be checked and all mileage can be entered under taxpayer Sch A Line 1 Medical Expenses RULE Medical expenses deductions are entered on the A Detail worksheet located in the Tree below Sch A e Medical miles o Use the miles driven section for costs associated with a personal vehicle other transportation costs bus parking tolls cab fare airplane tickets etc are entered under other medical expenses e Insurance Premiums o Medicare premiums are entered on social security 1040 Wkt 1 and automatically transfer to A Detail they should not be entered again o Include any other qualifying payments for health insurance premiums do not include pre tax medical o Long Term Care Insurance may be deducted up to certain limits based on the age of the p
66. Letter Clients appreciate the information and professional touch in client letters TCs LCs EROs are encouraged to use client letters with site or district contact information if possible TaxWise client letters are printed separately from the return by clicking on the Client Letters on the Toolbar after you print the return Your ERO must create the Client Letters and give instructions on the use of them Some sites may not use the Client Letter feature but have an alternate procedure You will be instructed on this at your site SIGNATURES AND DISTRIBUTION OF COPIES The taxpayer s signature and spouse s signature are required on all tax returns this is accomplished in different ways depending on how the return is filed If a return is MFJ and only one taxpayer is present use the Practitioner PIN method and o Print 8879 and CA 8879 o Instruct taxpayer to return with the signed 8879 forms both Fed and CA so the return can be filed electronically o Make it clear that the return will not be filed until we witness the signed form Note A married taxpayer can sign for a spouse where injury or disease prevents signing otherwise they must have a power of attorney POA Electronic Returns with Practitioner PIN Electronic Signature Both the federal and returns use electronic signatures The question on CA 540 Pg 5 If electronically filing does the taxpayer want to sign the return electronically must be answ
67. Light gray with black underline non calculated entries Light gray with blue underline overridden entries Light gray with red underline required entry or validation e When a field or button has been designated as entry required or validation required it may be necessary to remove the estimation clear the red first then enter the appropriate data e Use or CTRL Spacebar to remove the red KEYBOARD SHORTCUTS The following table describes the use of Function keys and Shortcut keys in TWO Command Description F1 Program Help in a new browser tab Shift F1 Program Help in a new browser window Toggles the Red on and off in a field Required Not Required Toggles Override or Ctrl Spacebar F8 or Ctrl Enter F9 Links a field to associated form Fil Minimizes maximizes Internet Explorer display Ctrl E Jumps to next required entry Ctrl I Inserts a row Ctrl R Removes row on multi line stmt or wkt When not on a line refreshes the page When in a numeric input field brings up calculator Locks a template entry Admin only Alt Lg to the right of the 10 key pad Ctrl L Moving around on forms Next required red entry Enter or Tab Next entry Shift Tab Previous entry Home or Ctrl UpArrow End or Ctrl DnArrow First character in entry Last character in entry Ctri PageDown Next form in Tree Ctrl PageUp Previous form in Tree Useful Windows sho
68. ONY RECEIVED Alimony received is entered directly on 1040 Pg I LH Child Family support received is NOT alimony and is NOT taxable See Pub 4012 page E 3 for eight tests to determine if payments are alimony Tax Wise handles alimony correctly for these o Alimony is not considered earned income for EIC o Alimony is considered compensation for IRA deduction purposes LINE 12 BUSINESS INCOME Go to Sch C Pg 1 AARP Foundation parameters specify that Tax Aide will NOT prepare business returns Tax Aide may complete Schedule using C EZ limitations to report non employee compensation Self Employment with these exceptions o Total expenses on any single Sch C cannot exceed 10 000 and o Multiple Sch Cs are allowed use one for each business do not combine businesses Tax Aide shall not prepare a return that includes a net loss on Sch C a depreciation deduction including an immediate write off election or office in the home expenses not even the simplified method There is no income limit and all income must be reported Sch C carries to the CA return as part of federal AGI Use Sch C not Sch CEZ o Ifa Sch carries forward transfer the information to Sch and delete Sch CEZ Completion of Sch C Check at the top to indicate whether the form is for the taxpayer or spouse Complete the requested information for Questions A through J Business name and EIN Questions C and D will usually be blank they are NEVER taken from t
69. Pub 4012 starting at p G 3 This MAY apply if taxpayer paid someone else to care for 1 A dependent child who was under age 13 when child care was provided OR 2 Their dependent or spouse who could not care for him herself And 3 so that the taxpayer could work or look for work Note in the year the child turns 13 these expenses can only be for the part of the year before his her 13 birthday The column next to this dependent on the Main Info form must be checked to add 2441 to the Tree UNLESS the person being cared for is the spouse If the dependent is the spouse you must add the 2447 then go to the bottom of the 2447 and check the spouse box and put 12 in the Number of Months Disabled section This will populate item 2a with the spouse s name and SSN otherwise the form will not accept the spouse s name Enter required information about the care provider in this case the SSN or Tax ID will not show dashes o Note Return cannot be e filed if EIN SSN of provider is unavailable o Note If the care provider worked in the taxpayer s home and the total amount paid during the year was over 1 800 Schedule H Household Employment Tax may be required in which case the return is out of scope Enter the information about the person s receiving care If additional space is needed for more care providers or qualifying persons link from the total cell in L 1 a to 2441 Wkt 1 Additional Care Providers and Qualifying Person
70. SJ CA does not require this field leave it blank State Adjustment used for differences between federal and state taxable amounts o Referto the California exemption rule below for fund dividends o does not recognize HSA trusts dividend income earned in the trust is currently taxable for CA following the normal CA rules see Health Savings Accounts in CA below starting at page 54 N Nominee not used by Tax Aide out of scope Capital Gain enter capital gains distributions shown on the 1099 DIV 1250 Gain the 1250 Gain cannot exceed the capital gain amount however TaxWise does not check for this situation and therefore will not prevent you from making an error 28 Gain the 28 Gain cannot exceed the capital gain amount however TaxWise does not check for this situation and therefore will not prevent you from making an error Federal With enter any federal withholding shown on form 1099 DIV Exempt int div if entering amounts here do not include the amount in the Ordinary Dividend column This amount will appear 1040 Pg I L amp b as Tax Exempt Interest o CA Note Enter an adjustment for interest that is not exempt for CA in the State Adj columns AMT PAB Alternative Minimum Tax Private Activity Bonds o Make sure that no Alternative Minimum Tax is shown on 1040 Pg 2 L 45 which makes the return out of scope Non Dividend Distributions are not taxable and should NOT be entered in TaxWise Advise the clie
71. TaxWise Online has several help features e Context Help can be accessed as described before by clicking the arrow head to the right of the field for which you require help e General program help can be accessed by clicking the Help icon on the Toolbar Takes you to the Help Center where you can access a variety of help resources e g Program Help State Help User Guide IRS and State forms and publications business codes etc o To get back to the return you were creating close the Help Center browser tab or click the TWO browser tab Note For help with the CA package click the Help icon gt State Help gt California CONFUSING SITUATIONS IN TAXWISE ONLINE Linking from a yellow field with a default form Some fields may be linked to another form by default e g Sch C L I 1s linked to 099 MISC by default If you need to link to a Scratch Pad you must link by clicking the arrowhead on the right side of the form and then selecting the Scratch Pad It is not necessary to remove an existing link before adding a new one Search For 1040 Form Description 1040 Wki2 Student Loan Education Worksheet 1040 Wkt4 Foreign Earned Income Tax Worksheet 1040 Wkt5 Bonus Depreciation 179 Worksheet 1040A Pg 1 US Individual Income Tax 1040A Pg 1 1040ES Pg 1 2011 Estimated Tax Vouchers Pg 1 1040EZ US Individual Income Tax 1040EZ 1040NR Pg 1 Nonresident Alien Income Tax Pg 1 2 9 1 Nonresident Alien Tax 1040NR
72. University Yes Yes Yes Yes Live Chat Tech Support Yes Yes Yes Yes Help Yes Yes Yes Yes Blog Yes Yes Yes Yes Hot Topics Yes Yes Yes Yes Logout Yes Yes Yes Yes Acknowledgment file showing accepted duplicated or rejected returns Only the Administrator or counselor with Administrator privileges can accomplish these functions Only the Admin user can edit the Admin username properties 3 Only the Administrator or counselor with Administrator privileges has full access to all Program Settings 4 Only the Admin user can accomplish this function Entering Data e TaxWise has a number of ways to perform a function you need to decide which is most convenient for you e g using the mouse versus a navigation key versus an icon e Tax Aide uses TaxWise as a forms based package an Interview mode is available but should not be used as it creates unused forms that can impede e filing e You first complete the Main Info sheet based on the Intake Interview Sheet last year s return and or the carry forward information the necessary information about the taxpayer s and any dependents flows to the individual forms from the Main Info sheet e Then complete each of the forms based on the information that the taxpayer s provides you by selecting the form from the Tree Enter all dates in the format mmddyyyy note four digit years TaxWise will insert the slashes Amounts can be entered with or without cents o If rounding is difficult it is be
73. ach a separate line on the Interest Stmt do not combine the amounts o CA Note State and municipal bond interest from states other than CA which is identified as federally tax exempt is taxable for CA Enter a in the State Adjust column on the Interest Stmt and enter the adjustment amount Note CA does not recognize HSAs interest income earned in the trust is currently taxable for CA following the normal CA rules see Health Savings Accounts in CA below starting at page 54 e If either the NAEOB or State Adj amount field is red and there should not be an entry remove the entry in the field before the red amount field E or e Completing the Interest Stmt o Payer payer name may be abbreviated Box 1 or 3 Amount amount entered will be reflected on both the federal and the CA returns For federally tax exempt interest do not enter an amount in the first Box 1 or 3 column TSJ leave blank it does not apply as CA is a community property state Complete the NAEOB information before entering any state adjustment ONLY code E is in scope Enter the exempt interest amount 21 10 14 14 INCOME HINT Complete the nterest Stmt as if there is only a federal return Then ask the question is the interest treated differently by CA to determine the needed state adjustment if any e State adjustment entries are used for differences between federal and state tax law
74. adjustment amount on CA CA as an addition or subtraction Go to CA CA L 7 Subtractions or Additions column as appropriate and link to a Scratch Pad to make the adjustment Box 19 local tax Box 20 local name do not use for CASDI SDI VPDI VP or VI see next section Instructions For W2 California W2s Only At Bottom Of W2 e Enter the SDI literal and the amount so that TaxWise can calculate the amount to be carried to Schedule A as an income tax deduction and claim a refund for any excess state disability insurance payments on the CA return CA 540 Pg 3 L 74 o Permitted entries are CASDI SDI VD VPDI or VI only 10 14 14 18 INCOME o Note VD VPDI or Vl are included in determining excess SDI contributions but are never carried to Schedule as none is considered a tax TaxWise handles this correctly The maximum amount subject to SDI for 2014 is 101 636 resulting in 1 016 36 withholding o If the maximum is exceeded TaxWise properly computes the allowable credit Multiple W 2s CA extra attention needed TaxWise does not automatically add additional CA W2 forms to match the federal W2 forms For e file returns with more than one W 2 form click on CA W2 in the Tree no hyphen between and 2 to add more CA W2 forms as needed TaxWise will give a diagnostic if there are insufficient CA W2 forms For paper returns instead of attaching the original paper W 2 forms TaxWise uses CA W 2 summary for
75. aid e Interest paid on a mortgage s and any points paid during the tax year in conjunction with the mortgage s up to 1 million is deductible when the loan is used to buy or improve your main home e Interest paid on a new loan to refinance an old loan that was used to buy or improve your main home is deductible points paid on a refi must be spread over the life of the new mortgage Interest paid on mortgages to buy or improve a second home may also be deductible Interest on a home equity loan may also be deducted for loan amounts up to 100 000 50 000 MFS Late payment charges are deductible as interest in situations where the interest is deductible Motor homes and boats that provide basic living arrangements generally qualify as main or second homes Usually reported on form 1098 Total the interest and points paid and enter the total on the line labeled Home mortgage interest and points from Form 1098 not listed above If there are multiple mortgages link to a Scratch Pad to enter each interest item e If home mortgage interest is paid to an individual complete the information at Line 11 e Note nothing is paid on a reverse mortgage so there is no deduction e Refer to Pub 17 for interest deduction rules Sch A Line 12 Points Not Reported On Form 1098 Paid For A Refinance e These can be amortized over the life of the loan to the extent that the interest on the loan is deductible e Divide the points amount by the months of t
76. al Plans Interest Stmt Interest Stmt Dividend Stmt 1116 1099 DIV dividends Dividend Stmt 1099 DIV foreign tax paid 1099 G State Tax Refund postcard 1116 1040 Pg 2 L 47 Link from 1040 Pg 1 L10 to State Tax Refund Alimony Received 1040 Page 11 11 1099 MISC box 3 7 non employee income Business Income Link from Sch C Pg 1 L 1 to 1099 MISC 10 14 14 STEPS TAX RETURN PREPARATION Supporting Document Enter in TWO Form 1099 MISC box 3 7 non business Income 1099 MISC box 2 own service related royalties Link from 1040 Wkt7 L 2 to 1099 MISC Link from Sch C Pg 1 L 1 to 1099 MISC 1099 MISC Box 2 non service related royalties Link from Sch E Pg 1 L4 to 1099 MISC 1099 B Stock sales 1099 S Sale of home Cap Gn Wkt Sch D if all bases reported to IRS Cap Gn Wkt K 1 capital gain or loss Sch D Pg 1 L 5 short term or L 12 long term 1099 R RRB 1099 R green IRA Pensions 1099R 1099 G Unemployment benefits 1099G SSA 1099 Social Security 1040 Wktl RRB 1099 blue Railroad Retirement tier 1 1040 1099 MISC Box 1 rent Link from Sch E Pg I L 3 to 1099 MISC K 1 royalty income Sch EPg1L3 W 2G Gambling Winnings W2G 1099 LTC 8853 Pg 2 Adjustments Alimony Paid canceled checks 1040 Pg 1 L 31 IRA contribution IRA Wkt Lender Statement Student Loan Interest 1040 Wkt2 Itemized Deductions Credits Medical and
77. al returns However it may be used for training Inthis mode you will be led through a series of questions that when answered will populate the Main Info sheet and other input forms access the Interview mode check the box Start Return in Interview Mode on the Enter SSN screen o You can switch between Interview and Tax Forms mode by clicking the icon on the Toolbar DATA CARRYFORWARD e Carry forward data may exist if last year s tax return was prepared by the local Tax Aide site Enter the taxpayer s Social Security Number as prompted 10 14 14 10 STEPS TAX RETURN PREPARATION Achoice will pop up to Carryforward Data from last year s return e Be sure to review any comments on the bottom of the Main Info sheet the Prep Use form or the Taxpayer Diary o Update or remove comments as needed e Data entry will be simplified as the return will be populated with information such as names dates of birth telephone numbers W 2s 1099s payers of interest and dividends etc from last year s return e Only a few dollar amounts such as federal capital loss carryovers prior years Summary form data and 1099R Simplified Method are populated e other dollar amounts must be entered from the current year tax documents The key fields that are carried over will be red as a reminder that you must review the information with the taxpayer either confirming that they are still accurate use or Ctrl Spacebar to remove th
78. anual for other roles In most cases the icons are self evident The Settings and icons at the right hand side of the Toolbar when not in a return do the following o Settings allows the user to make screen display settings o Live Chat lets you participate in a chat with a Tax Wise support person do not use Live Chat unless you have first checked with your LC o Help takes you to the Help Center page o Blog takes you to the TaxWise blog on the Internet o Hot Topics takes you to the TaxWise Support Site COUNSELOR NOT IN A RETURN o Note screen shots below are from the TWO current year training site The current year s production site will have a blue background Prior year production sites will have different color backgrounds burgundy or brown ReturnPreparer or Interviewer X s S New Open Print Settings TaxWise Live Help Blog Hot Return Return Checks University Chat Topics Reviewer Z a View Print Settings TaxWise Live Help Blog Hot Return Return Acks Checks University Chat Topics SuperUser New Open Submit View Print Settings TaxWise Live Help Blog Return Return e files Acks Checks University Chat COUNSELOR IN A RETURN o All Roles Close Print Client Switch To Run Return Forms List Taxpayer Live Chat Help Return Return Return Letters Interview Diagnostics Summary Diary
79. appropriate code and the amount that is NOT subject to additional penalty on 5329 L 2 e For additional exceptions that apply to annuities see Pub 575 5329 Part VIII e If the client says they failed to take their required minimum distribution they may be liable for the excess accumulation surtax 5096 computed in Part VIII o needs to correct the problem by taking the required distribution this will result in a double distribution for the year in which the correcting distribution is taken o A waiver of the 50 surtax may be requested in 5329 Part VIII Enter the amount of the RMD shortfall on the line provided at L 52 Link from the box at L 52 to a new L 52 Form 5329 Line 52 Complete the Line 52 Explanation for Request of Waiver of Tax Describe the circumstances that led to the failure and that the shortfall has been remedied this must be done 49 10 14 14 PAYMENTS AND REFUNDABLE CREDITS 5329 Parts II through VII out of scope LINE 60A HOUSEHOLD EMPLOYMENT TAXES out of scope LINE 60B FIRST TIME HOMEBUYER CREDIT REPAYMENT FORM 5405 e 2008 homebuyers who received the First Time Homebuyer credit 2008 1040 L 68 must repay the credit starting in 2010 o The repayment is spread over 15 years could be 2010 2024 Use of 5405 will track the total repaid when data carryforward is used o Direct entry of the repayment amount is also permissible on 1040 Pg 2 L 60b e Repayment of the un repaid portion
80. by another counselor e The taxpayer s should be present to observe the quality review and answer any questions e The reviewer must o Examine the intake sheet and supporting documents supplied by the taxpayer and compare them with the entries on 040 and CA 540 to check for the accuracy and completeness of data entry o Review the quality review section of the intake sheet during this process o Enter their initials on Prep Use form line 14 e Quality Review is best handled on screen not from printouts o While printing summary worksheets for multiple W 2 s or 1099 R s may be tempting it is not recommended as the reviewer will not see red input fields that need to be addressed e The return is reviewed by looking at all TaxWise sheets that were used in conjunction with all the data submitted by the taxpayer 61 10 14 14 FINAL STEPS TAX RETURN PREPARATION e When the quality review is finished the quality reviewer should update the return stage as needed e The reviewer should enter their initials on the Prep Use form e The reviewer or counselor will need to re run diagnostics and create e files again as the last step before printing REVIEW RETURNS WITH TAXPAYER e You can do this review either from the computer screen OR by printing the returns Decide which works best for you and the taxpayer s o For more complex returns e g having many documents it is often easier to work from a printed copy e Bring the return up for review o Selec
81. ccur because forms that are loaded on the Tree by default are not used These entries are OK and do not need correction e After all corrections have been made click on the Refresh link to re run the diagnostics e When no diagnostic errors are detected TaxWise will indicate that the return is eligible for e filing by showing a Create e Files link e Areturn with no income cannot be e filed e g social Security only 10 14 14 60 FINAL STEPS TAX RETURN PREPARATION If the taxpayer qualifies for a refundable tax credit such as AOC or to help avoid identify identity theft the return should be filed o Goto 1040 Wkt 7 and on Line 16 enter TO ALLOW E FILING and 1 CREATE E FILES Creating the e file assigns the Submission ID to the return that will print on the 8879 s e This should be done EVERY time after there is any change to the return o It updates the e files each time e Click on the Create e Files link on the diagnostics screen menu If errors are presented these must be corrected so that e files may be created Errors are often caused by o Illegal Punctuation amp or extra spaces o Unused forms with stray entries o Other errors that may be hard to trace ask QR or the site coordinator for assistance if needed e TaxWise acknowledges when E files are created successfully e Close the diagnostics panel If a return is changed after an e file is created TaxWise will alert you to re run diagnostics
82. charity name amount and date e Contributions of 250 or more must have bank record AND written acknowledgement which affirms the value of any property or service received e The deductible contribution is the amount given less the value of any property or service received e Enter mileage driven by the taxpayer s for unreimbursed volunteer work or other charitable use o TaxWise will calculate the allowable amount In addition unreimbursed travel expenses parking tolls etc can be itemized e It is not necessary to list each contribution to the same qualifying organization just indicate the total by organization e g Red Cross Boy Scouts United Way etc e If additional space is required o If Addl A Wkt was NOT used for medical link from the last line to NEW Addl A Wkt Medical and Contributions Worksheet otherwise o Open the existing Addl A Wkt from the form Tree Sch A Line 17 Contributions Other than Cash The taxpayer must have an acknowledgment for any contribution of 250 or more Amount of contribution is FMV of the item at the time of the donation Clothing and household items must be in good used condition or better Records of items and amount donated should be retained by taxpayer Non cash contributions whose total exceeds 5 000 make the return out of scope Donations of vehicles are out of scope If the total of all non cash donations is 500 or less list non cash contributions in the appropriate section of th
83. ciated losses If the taxpayer has winnings not reported on a W 2G enter the sum of these gambling winnings on a blank line of 1040 Wkt 7 and describe appropriately Gambling losses to be transferred to Schedule A You input total losses on W2G they do not have to match payer by payer But put CA Lottery losses on the CA Lottery winnings W2G o Gambling losses can be deducted on Schedule A up to the amount of the reported winnings o TaxWise will limit aggregate losses to the maximum of reported winnings Note If you entered gambling winnings and did not use W2G you may need to manually apply the limits on losses For federal enter all gambling losses up to all winnings on Sch A Line 28 by linking to Other Deducts Schedule A Line 28 worksheet o ForCA enter an adjustment to remove California Lottery losses Go to CAA Line 28 and link to a Scratch Pad Enter the unallowable CA lottery losses as a negative amount If the Taxpayer takes the standard deduction the losses cannot be deducted Note If the Taxpayer maintains copious records of their gambling losses from the same session as winnings may reduce the amount of winnings reported but not below zero o Input same session losses 1040 Wkt 7 Line 16 30 Losses from a different gambling session be claimed on Sch A if itemizing only ooo oo 1099 MISC Income Form 1099 MISC can represent several different types of income Look at the 10
84. computes lines 1 2 and 4 in the upper portion Enter any non taxable income such as child support and gifts SSI SSDI on line 3 o Ll should be defaulted to CA in the lower portion L 2 of the lower section is defaulted to NO for CA o L3ofthelower section should be defaulted to Yes or No if there is no local sales tax and your local rate should be entered IfL3 is Yes enter the blended general state sales tax rate of 7 5 Line 4 o Line 8 of the lower section should be completed with any additional sales tax on a motor vehicle aircraft mobile home or building materials e Hint If you don t know the sales tax rate for the taxpayer s city you can use the IRS sales tax calculator at http www irs gov Individuals Sales Tax Deduction Calculator e TaxWise will use the better of income tax or sales tax for federal Sch e If there is a state tax refund which may be taxable next year the preparer will need the sales tax amount for the calculation for next year s return o Note the sales tax deduction amount calculated using the Preparer notes or Taxpayer Diary and or o Handwrite the sales tax amount on the taxpayer s copy of the return 10 14 14 42 TAXABLE INCOME CALCULATION Sch A Line 6 Real Estate Taxes e estate taxes are generally paid in two installments due in November and February but not late until a month later the amount entered should be the amount actually paid in the tax year for the taxes e The
85. d to be answered by the taxpayer Additional filing requirements may apply o FinCen 114 old TD 90 22 1 for foreign accounts is out of scope M Filed separately from the 1040 Generally if value is more than 10 000 at any time during the year Includes signature authority over a foreign account 10 14 14 20 INCOME o Form 3520 for foreign trusts receipt of foreign gifts or bequests is out of scope Filed separately from the 1040 Transactions with or ownership of foreign trusts Certain large gifts or bequests from foreign persons o Form 8938 for specified foreign financial assets is out of scope Must be filed with the return so if this form is required the return is out of scope Jf value is more than 50 000 100 000 MFJ at the end of the year On if value is more than 75 000 150 000 at any time during the year Note are substantial penalties for not filing a required form Seller Financed Mortgages Sch B L 1 Go to Sch B If the taxpayer seller is using an installment sale plan to report capital gains on a sale over a period of time the return is out of scope e If the income is solely from interest fill in the required information about the payer e If the seller has interest income from more than one payer EACH item must be entered on a supporting worksheet o Linkto NEW Seller List Schedule B Seller Financed Mortgages from the far right amount field o Complete the required info
86. deduction the prior year Form 1040 page 1 line 13 will show a 3 000 capital loss but the carryover will not be reduced by the full 3 000 That is correct because no benefit was received from the loss deduction CA Note Capital loss carryover amounts can vary between federal and state due to HSA or other rules o TaxWise will not carry forward the CA amount in any event You must manually enter the total capital loss carryover on the CA return o Confirm that the capital gains and losses on the prior year s returns are the same for federal and CA Go to CAD enter the TOTAL of the federal short and long term carryover amounts on line 6 as a positive number Verify that TaxWise form CA CA shows no subtractions additions on the capital gain or loss line If the prior year s CA gains losses differ from the federal Compute the CA capital loss carryover Enter the CA capital loss carryover on CA D L 6 as a positive number 29 10 14 14 Verify that CA CA shows the correct adjustment on Line 13 o Note if the taxpayer has an HSA and has invested the funds which produced a capital gain or loss this situation can produce a difference between the federal capital loss carryover and the CA loss carryover Sale of Main Home Note Enter the sale information if the taxpayer has received a Form 1099 5 or gain is taxable in part or in full e To claim the exclusion on the sale of a main home the client must meet the owne
87. dule A Do this as a matter of routine so that it won t be forgotten if the taxpayer itemizes deductions o Enter any federal tax withheld in the appropriate boxes o The remainder of the worksheet will calculate automatically and place the taxable amount if any on 1040 Pg 1 L 20 a b e Social security death benefits usually 255 received by spouse or children of a deceased taxpayer are NOT taxable Note U S Social Security or Railroad tier 1 also tier 2 is NOT taxed by California o Verify adjustment on CA CA RRB 1099 blue form Tier 1 social security equivalent Amounts on the RRB 1099 Enter in TaxWise on 7040 Wkt 1 Box 5 Railroad Retirement not social security for taxpayer or spouse Box 10 Federal tax withheld for taxpayer or spouse Box 11 Medicare to Schedule A detail for taxpayer or spouse UNFOLD TO SEE ALL TAX STATEMENT FORMS SEE REVERSE SIDE FOR GENERAL INFORMATION PAYER S NAME STREET ADORESS CITY STATE ZIP PAYMENTS BY THE UNITED STATES RAILROAD RETIREMENT BOARD 2014 RAILROAD RETIREMENT BOARD 844 N RUSH ST CHICAGO iL 60611 2092 3 Gross Security aie PAYERS FEDERAL IDENTIFYING NO 35 3314600 4 T Ciarm Number and Payee Code 4 Soci Securty Equivalent Benet Porton of Tier 1 Repaid to RAB in 2006 2 Recpient s identfica on Number 5 Net Soci Securty Equvasit Benefit Porton cf Tier 1 Paid 2006
88. e A Detail by charity e If total non cash contributions exceed 500 do not enter these contributions on the A detail instead Go to 8283 Pg to list all non cash contributions o Each donation date is listed separately is not allowed Note columns d and f should not be filled in if that donation is under 500 o For column h method used to determine thrift shop value usually applies o 8283 Pg 2 is out of scope Contributions Carryover e There are limits on charitable donations deductions made to certain organizations during any one tax year e Taxpayers affected by the contributions limitation either in the current year or a prior year must be referred to a paid preparer as they are out of scope Sch A Line 20 Casualty and Theft Losses out of scope Sch A Line 21 23 Miscellaneous deductions subject to 2 of AGI reduction e Miscellaneous deductions can be deducted after a 2 of AGI haircut portion not allowed and include Unreimbursed employee expenses tools uniforms union dues etc Includes educator s expenses previously allowed as an adjustment to gross income if any Tax preparation fees Investment expenses Claim repayments of 3 000 or less Unrecovered investment in an annuity if not eligible for Line 28 treatment If the Taxpayer cashed in an annuity they will have received a 1099 R with the amount they received If the investment Box 5 or Box 9b is great
89. e crew o Confirm that the retiree was a PSO before retirement Enter qualified amount up to 3 000 for health and or LTC insurance paid from the retirement plan The amount be in box 5 of the 1099 R or in a letter from the plan Do not duplicate on A Detail medical deductions But if the amount exceeds 3 000 the balance may be input in A Detail Line 5 Excludible amount o If the taxable amount is determined 1099 R box 2b NOT checked and is shown as zero 0 on the 1099 R box 2 enter the entire amount of the distribution on L 5 If the distribution is from a Roth IRA and the payer has used code J or T in box 7 but the taxpayer has satisfied all the requirements so that none of the distribution is taxable enter the entire amount of the distribution on L 5 see Pub 4012 page D 24 o Do not enter an amount in any other circumstances as that would be out of scope The box made nondeductible IRA contributions will add an incomplete 8606 red o Only Part I of 8606 is in scope complete using information from 8606 in the prior year s return The box conversion from a traditional IRA to a Roth would add an incomplete 8606 Part II red o or all of the distribution was converted to a Roth the return is out of scope 1099 Simplified Method lowest part of form If the employee made after tax contributions toward the retirement plan a portion of the payment is not taxable Note If the
90. e 1 Main Info Sheet eee 11 Married Filing Separately 13 Married 13 Medicaid Waiver 39 Medical 42 Mileage BUSINESS o esce negent enn ees 27 Charitable iud meses 44 42 Miscellaneous Deductions 44 Mortgage 43 autein et E eee 43 cie oet iid ea 43 Reverse i eode te 43 NABOB eter rete c Ne 21 Noncustodial Parent esses 14 Notary Fee Income eee 27 Organize Your Work eee 9 Other s oo e eig s 37 Other Tax Deduction eese 43 77 Overpayment Applied to Next 59 PAB deste ceed ote eere 22 Paper Retuims 120 eere eerie 64 Partnership 23 Payments Credit Card nien metes 65 Direct Debit 58 Direct Pay Reset 58 Estimated Tax N 50 Installment Agreement esses 65 CERTE 65 Penalties Late File Payment eee eee 65 Underpayment of Tax 56 PENSIONS eee ipte reet 30 3 Year Rule Before 1986 33 3 Yr Rule
91. e Amounts contributed by an employer are shown the W 2 as code W in box 12 and are transferred to 8889 1 these are not deductible e The client should provide Form 5498 5 that shows the amount of contributions during the year e Contributions may be made up to April 15 2015 if they are designated for 2014 e Note a contribution in excess of the amount allowed as a deduction is subject to a 6 addition to tax using 5329 Part VII which is out of scope Note CA does not recognize HSAs see Health Savings Accounts in CA below starting on page 54 o TaxWise automatically removes the HSA deduction from the CA return on CA CA LINE 26 MOVING EXPENSES out of scope Limited exception for Military returns if certified 10 14 14 40 TAXABLE INCOME CALCULATION LINE 27 DEDUCTIBLE PART OF SELF EMPLOYMENT TAX e This amount is transferred from Sch SE by TaxWise and represents the employer s part of the tax 7 65 of net business income LINE 28 SELF EMPLOYED SEP SIMPLE PLANS out of scope LINE 29 SELF EMPLOYED HEALTH INSURANCE out of scope LINE 30 PENALTY ON EARLY WITHDRAWAL OF SAVINGS e Enter on the Interest Stmt under Early Penalty LINE 31 ALIMONY PAID Refer to Pub 4012 p E 3 for rules Alimony does NOT include child or family support which are NOT deductible Enter both the recipient s social security number and the amount If alimony was paid to more than one individual high
92. e any contributions to your IRA while a legal resident of California that were not fully deductible in California generally prior to 1987 Do you have records of those contributions that were not deducted Did you receive a reward from a crime hotline CA 540 Line 21 B 7 Did you pay rent for your home in California for at least 6 months during the tax year Rent Wkt If you are the noncustodial parent of a child did you maintain your home as the main home for a child that lived with you for at least 146 days but less than 219 days credit code 170 E If over 65 years of age and you have qualified to file as head of household in 2012 or 2013 did your Did you or your spouse receive any Indian Tribal Income during the tax year If no skip to Q 5 qualifying dependent die in either 2012 or 2013 credit code 163 If you sold real estate during the tax year did you receive form CA 593 Did you claim a California credit for a new home purchase If so what year o o 12 Did you purchase taxable property for use in California without paying sales tax at the time of purchase such as purchases by phone over the internet by mail or in person line 95 13 Would you like to make a voluntary contribution to one or more special fund Line 110 Complete only if you want to file Married Filing Separately Yes No 14 Did you live apart the entire year AND do you have intention to reconcile
93. e red or updating them as needed e You will need to remove and or add forms as appropriate e g the taxpayer changed employers and hence received a different W 2 in which case you must delete the W2 for the previous employer and add a W2 for the new employer e You may also need to delete lines rows from a schedule e g a dependent is no longer to be included in the return or interest was not received from a payer used in the prior year e While data carryforward makes completion of the return much faster and more accurate you need to check the return carefully to ensure that any year to year changes have been reflected and that unused entries or forms are not included in the new return Otherwise the sequence of actions to complete the return is the same as though you are doing the return without data carryforward e tis suggested that the Intake and Interview sheet be marked to note that data was carried forward o If there are changes in spouse or dependents or ITIN changed to SSN make a notation so the reviewer can look at the new or changed cards MAIN INFO SHEET e Enter all pertinent information if data carryforward is being used use to clear the red after confirming the information is correct for this year Do not use any punctuation except as noted o Commas ampersands slashes and periods are not allowed o Double spaces are not allowed Name field There are four Name fields e Salutation field is optional Mr Ms
94. ed o Optionally all expenses can be listed in Part V o Referto Pub 4012 F 9 et seq for deductible travel or entertainment expenses Part III Cost of Goods Sold is out of scope 000000 0 10 14 14 26 INCOME e Part IV Information for business use of a vehicle is entered in this section and it carries to L 9 under Part II For 2014 there is just one rate for the whole year e Part V Other Expenses is used for telephone internet and other expenses that are not listed on Part II and carries to L 27 of Part II CA Note e When the federal Sch C is used TaxWise adds a red CA C on the Tree o Open it and check the box at the top of the form if all is correct o There should be no differences between federal and CA Sch Cs in the returns that we do e Note If there is a second federal Sch C you will need to add another CA C o Hover over the first CA C Pg and click the to add the second Schedule C to the return e If you fail to create a CA C to match each Sch C in the federal return TaxWise will give you a diagnostic message Notary Fees e Notary fees are exempt from self employment tax e Notary fees income and expenses are reported on Sch C in the normal manner e Then o Goto Sch SE enter the Exempt Notary Sch C net income amount on L 3 o Go to 1040 Pg 2 check the Exempt Notary box at L 56 Self Employment Tax LINE 13 CAPITAL GAIN OR LOSS Only stocks mutual funds certain bonds and personal residences are in sco
95. educational institution which shows tuition and fees paid or billed as well as scholarships o See Line 7 Scholarships Fellowships amp Grants W 2 or 1098 T on page 19 above if scholarships etc are taxable see final note on Pub 4012 J 5 Expenses used for calculating either credit must be reduced by any scholarship amount designated for those expenses Use the worksheet on page 79 to determine the amounts eligible for either credit Note It may be more advantageous to claim a business related expense on Sch C if the facts fit Note Education expenses in excess of the amounts allowable for either credit may be deductible elsewhere CA Note Since CA has no education credit an adjustment on CA C or CA A may be possible if the facts fit Go to 8863 Pg 2 American Opportunity Credit AOC For 2009 through 2017 this credit is applicable o For the first four years of postsecondary education generally the freshman through senior years of college as determined by the eligible educational institution o When neither the American opportunity credit nor the Hope Scholarship Credit has been claimed by the taxpayer or anyone else for this student for any four tax years before 2014 student is enrolled at least half time student has not been convicted of a felony drug offense Foreign college level study is also counted toward the first four years if the eligible education institution counts that study toward the fi
96. een form is complete Blank form available in Tree but not necessarily required e Use caution as not all forms will be visible use the scroll bar to move down up the Tree e and x next to a form o Clicking allows you to add another copy of an existing form to the Tree Clicking x allows you to delete the form use with caution Right Panel Tax Wise Work Area e Displays the current form which is also highlighted in the Tree e Context sensitive help for the form and or field is activated by clicking the arrowhead on the right of the field ADDITIONAL FORMS e All normally required forms have been preloaded on the Tree look there first if a form is needed e Additional Forms may be accessed in any of three ways o By clicking on the Forms List icon on the toolbar By clicking the Add icon in the Tree title bar em o Byclicking on the in the forms Tree next to the form you wish to add e The first two methods open a search box that lets you enter part of the name of a form The result will then be a list of forms that contain the phrase typed For instance typing 1040 will display Form 1040 Form 1040A Form 1040 Worksheets etc e you can click the Show all forms link to display all forms e 5 forms are loaded they are also added to the Tree o If left unused when the return is closed an added form will be deleted from the Tree and may need to be re added HELP
97. eet Individual Districts Sites may set up their Tree differently If the noted form is on the Tree click on it if the form is not in the Form 15 10 14 14 Tree add the form explained earlier PREPARER USE FORM This form provides several alpha numeric fields all 15 characters wide that can be used by local sites as they wish However e Fields 11 and 12 are for entry of the answers to the statistical questions o This information can be determined from the Intake Sheet or F3 if taxpayer prefers not to answer e Field 13 is reserved for the Counselor s initials e Field 14 is reserved for the Quality Reviewer s initials this field is required for Activity Report Tracking Taxpayer Reminders e At the bottom of the form there is a four line field where free form text can be entered this will appear the next year if data carryforward is used See also Tax Prep Notes at the bottom of the Main Info sheet above and Taxpayer Diary below e Check to see if there are comments from the prior year s return to indicate problems and or an amendment e Remove any notes from the prior year if they no longer apply e Record any pertinent information regarding the current year s return at the bottom of the Main Info sheet overflow can be entered here on the Prep Use form PREPARER NOTES e Prep Notes is a form that is e filed with the return e Do not confuse this with the Prep Use form nor with the return notes on the
98. eiving the scholarship even if they are the dependent of another taxpayer If a W 2 was received usually pay as a TA the whole amount is taxable and cannot be reduced by expenses If a 1098 T was received and the scholarship grant is greater than the expenses shown on form 1098 T you may need to use 1040 Wkt1 top section o The scholarship amount MUST be reduced for tuition fees books and equipment if the scholarship is awarded specifically to cover these expenses scholarship amount MAY be reduced for actual expenses if the scholarship is not specific o 1098 shows only the tuition and fees so the amount spent for books and equipment must be determined by the client o Caution is needed as expenses may be either paid or billed the student should be able to access their account records and reconcile the amounts Note education credit or deduction cannot be claimed for any expense used to reduce the taxable scholarship amount these may overlap calendar years You can use Worksheet 1 1 on page J 1 of Pub 4012 to determine the taxable portion which requires that you ask questions about how the money was used o Pub 4012 also shows taxable non taxable items Also see the Education benefits worksheet at page 79 which can be downloaded from the ShareNet Note Student loans are never income and expenses paid with borrowed funds are eligible for credit or deduction if the requirements are met 19 10 14 14
99. employer information o Enter unreported tips on L 4 o If unreported tips are less than 20 in a month enter that amount in L 5 Tax Wise backs this out of the social security or Medicare tax calculation o Note do not use the old 1 in allocated tips trick to prepopulate 4 37 as it may result in an incorrect calculation of taxable income Household Employee income Ahousehold employee who did not receive a W 2 because the employer paid less than 1 800 for the entire year reports the income on 040 Wkt1 e Multiple employers can be listed as long as each paid less than 1 800 e The amount is transferred to 1040 Pg 1 L 7 with HSH notation e Note household worker income is reported on Schedule C ONLY WHEN the taxpayer has an independent business Work Release or Penal Income e Income earned while an inmate even if on work release with a private employer is not considered earned income for EIC or Additional Child Tax Credit purposes Goto Sch EIC Wkt Figure Your Credit at the bottom of the form and enter the nonqualified income on L e Goto 8812 Pg 1 Part II and enter the nonqualified income on L 4a LINE 8 TAXABLE INTEREST Foreign accounts or assets e When the taxpayer appears to have foreign accounts or foreign financial assets you need to inquire o Confirm they are foreign not U S payers look for an Employer Id No o Confirm the highest value during the year or at year end e Sch B the questions at the bottom nee
100. entially taxable income depends on total income Canadian or German Social Security are treated the same as U S social security for U S persons o Distributions from the Canada Pension Plan CPP Quebec Pension Plan QPP Old Age Security OAS and Germany Social Security received by U S residents should be treated as social security benefits and reported on 1040 Wkt I o CANote These foreign government pensions are taxable on the California return TaxWise does not make the necessary adjustment e Goto CA CAL2If e Enter a description and the amount as an addition IRS publishes Yearly Average Currency Exchange Rates http www irs gov businesses small international article O id 206089 00 html o Other currency exchange rate sources are Wall Street Journal www Oanda com www XE com www X rates com Complete the Social Security And Railroad Tier 1 Benefits section on 1040 Wkt 1 o Both taxpayer and spouse are reported on the same worksheet o Enter amount from SSA 1099 Box 5 as Social Security received this year Ifthe amount is negative the return is out of scope 10 14 14 36 Jf there is more than one SSA 1099 combine amounts on all forms to see if the amount is positive or negative If positive use the net positive number o Enter amount from RRB 1099 blue form Box 5 as Railroad tier 1 received this year o Enter the amount of Medicare B C and D premiums in the box labeled Medicare to Sche
101. ents Alimony Paid eee 41 Certain Business Expenses 2106 40 Early Withdrawal of Savings 41 Health Savings 40 IRA 41 Jury Duty Pay to Employer 41 Moving 40 Self Employed Health Insurance 41 Self Employment 41 SEP SIMPLE Plans eese 41 Student Loan Interest 2222 41 Advance Premium Tax Credit 45 Alimony Alimony Paid eee 41 Alimony Received sees 26 Amended 2 66 American Opportunity Credit 47 Refundable AOC sees 51 Annuities Pensions and Annuities Income 30 Attachments d 14 8453 or PDE reete 64 Broker s Stmt aethere 28 Bank Information eene 15 Business Codes 5 nee onere 26 Business 26 CA Adjustments CA Differences metiri 52 CA Lottery ime ISRIBGW e dent 38 Lottery Losses 38 Capital Loss 29 53 Deductions Allowed 54 Deductions Not Allowed 54 Excludible
102. ependents or nondependents for those that are eligible to be claimed for EIC e there is no EIC qualifying child o is available to taxpayers at least age 25 as of year end and under age 65 as of year end If married filing joint only one taxpayer has to meet the age requirement e If the return qualifies for EIC credit complete the Sch EIC and Sch EIC Wkt which TaxWise has added to the Tree When completing Sch EIC answer only question 4a OR 4b answering both causes the return to be rejected by the IRS e Answer all questions to remove the red on the worksheet e Note Sch EIC wkt L 7 asks if the child is unmarried verify the answer to this question as it is common error LINE 67 ADDITIONAL CHILD TAX CREDIT e Ifa taxpayer s tax liability is less than the allowable non refundable CTC the taxpayer may be eligible to claim the refundable ACTC e TaxWise computes this credit automatically 8812 The ACTC is limited to 15 of any earned income above the current year s limit 3 000 e total of the two credits will be 1 000 or less per eligible child LINE 68 AMERICAN OPPORTUNITY CREDIT e Up to 40 maximum 1 000 of the AOC will be refundable o SeeLine 50 Education Credits at page 47 Date of Payment 51 10 14 14 ADJUSTMENTS amp DIFFERENCES LINE 69 NET PREMIUM TAX CREDIT e Taxpayer must have purchased their health coverage on an exchange e g Covered Ca
103. er o First the printer and then the print server computer the laptop to which the printer is attached if used must be turned on network printer the printer connected to the router if used must be attached to the router and the router and printer turned on e The wireless printer if used should be turned on e Verify you can connect to the Internet e Follow your LC s direction on how to open TWO If necessary open Internet Explorer IE and go to URL https twonline taxwise com o Log in to TaxWise Online with your site s ClientID and your Username and Password e Maximize the screen click the box at upper right then press the F11 key to maximize the IE window by hiding the Windows toolbars pressing F11 again will toggle the toolbars back on e Turn on Caps Lock on your keyboard SHUTDOWN PROCEDURES Logout of TWO by clicking the Logout link at the far right of the TWO Toolbar Follow the proper procedures for shutting down the laptops do not just pull the power and close the lid Doing so runs the battery down to zero and adds extra boot up time for the next user e Shut down the computer using the appropriate Windows commands Waituntil the screen turns completely black and the power switch goes dark before pulling power plug and closing lid e When the power plug is pulled ALL lights on the keyboard should go out o If they don t you have not shut down properly e Replace laptop power cord mouse and mou
104. er Credit Form 8910 Alternative Vehicle Credits Form 8834 Plug In Electric And Electric Vehicle Credit Form 8936 Plug In Electric Motor Vehicle Credit OTHER TAXES LINE 57 SELF EMPLOYMENT TAX e TaxWise completes Sch SE using entries from Sch e If self employment income is from notary business self employment tax does not apply o Goto Sch SE and enter the net profit from the notary business on L 3 Goto 1040 Pg 2L 56 and check the notary box e Self employment tax does not apply to statutory employees FICA and Medicare taxes were withheld on their W 2 e Unique rules apply to the clergy and are out of scope LINE 58 UNREPORTED SOCIAL SECURITY AND MEDICARE TAX This comes from 4 37 tip income not reported on W 2s see Line 7 Tip Income above at page 20 LINE 59 ADDITIONAL TAX ON IRA OTHER QUALIFIED PLANS 5329 Part I This is the 10 surtax calculated on Form 5329 for early withdrawal before age 59 o 25 1 case of a SIMPLE early withdrawal code S in 1099 R box 7 e If there is surtax in 5329 Part I and no exception applies it is not required to print or attach the form to the return e If there is an exception to the penalty check the box to force 5329 10998 27 question below box 7 e Go to 5329 the amount subject to penalty is shown L 1 If an exception applies the codes are listed in Pub 4012 H 2 or o F1 gt Index gt Exception Codes for Additional Tax on Early Distributions Enter the
105. er s copy of the CA return e To print individual forms open the return if not already open o Use the Print Form link in the left panel o Select the form to be printed and a pdf file will be created o Printing any W2 or 099R generates a one page summary of these documents Printing blank forms e TaxWise allows you to print blank forms which may be requested by a taxpayer who is coming to the site only for advice and or assistance with a return he or she has manually prepared When no return is open go to the TWO Home page Click IRS Forms and Publications Look up the appropriate form Print the requested number of copies Suppressing Federal or California Return e In some cases you will not be creating both federal and CA returns e g they don t need or want to file a CA return etc To remove the return remove the in the State Information section of the Main Info sheet e To suppress the federal return not recommended return cannot be e filed if the federal return is not e filed o Change the federal return to a paper return on the Main Info sheet o Change the CA return to a paper return on CA 540 Pg 5 10 14 14 62 FINAL STEPS TAX RETURN PREPARATION o Print just the state return including the copy of the federal return if required to be attached The ERO must be alerted to either of these situations o Make a notation at the bottom of the Main Info sheet or in the Taxpayer Diary Client
106. er than the amount shown in Box 1 the net loss can be claimed as a miscellaneous itemized deduction O O O O 10 14 14 44 Unreimbursed Employee Business expenses be reported 2 06EZ o Refer to Pub 4012 p F 9 et seq for certain employee expenses If partially reimbursed by employer Form 2106 EZ may not be used and return is out of scope Enter items on appropriate lines in the Miscellaneous section of Sch A TaxWise will calculate the 2 of AGI nondeductible portion Sch A Line 28 Other Miscellaneous Deductions not subject to 2 of AGI reduction If you have one item to enter and it does not come from a supporting form you can enter the type and amount directly If you have a second item to enter that does not come from a supporting form link from Sch A L 28 to Other Deduct Sch A Line 28 not a Scratch Pad Tax Wise allows the following entries in the Type Field ONLY see Pub 529 o Gambling Losses see Gambling Winnings Form W 2G at page 38 o Impairment Related Work Expenses for a disabled person o Claim Repayments If the taxpayer had to repay more than 3 000 that they had included in income in an earlier year f 3 000 or less the repayment is listed on line 23 and is subject to the 2 of AGI haircut o Unrecovered Pension Investments includes annuities Ifa deceased person has a pension without survivor benefits any unrecovered pension contributions may be recovered on the final return If the i
107. ered Yes o TaxWise will then print a CA 8879 for the taxpayer to sign o Note If answered No TaxWise prints CA 9453 which is not used by Tax Aide The Self Select and Practitioner PIN section on the Main Info sheet should be completed IRS 8879 and CA 8879 will be generated the taxpayer s must sign both Attach the signed IRS Form 8879 and the signed 8879 to the client s copy of the returns Your ERO will advise what documentation is required to allow them to e file a return Pub 3189 for options The ERO signature is entered automatically on 8879 If attachments to the return are needed see Using 8453 or Scanning PDF Attachments on page 64 Electronic Returns with Self Select PIN Electronic Signature This method is not used by Tax Aide Deceased person signature requirements A surviving spouse will sign the return and add surviving spouse after their name A executor or administrator will sign their own name with their title as per o Copy of the will appointing the executor if there is one o Other authorizing document e g court appointment If there is no document the term executor includes anyone in actual or constructive possession of any property of the decedent see Pub 559 1310 refund due a deceased taxpayer will be required if the return is filed by other than a surviving spouse and there is a refund If attachments to the return are needed see Using 8453 or Scanning PDF At
108. erson at the end of the tax year Enter the total payment for each person TaxWise will calculate the allowable amount Other unreimbursed medical expenses it is not necessary to list each individual service provider just list by category e g doctors dentist prescriptions transportation etc using summary data furnished by Taxpayer e f additional space is required link from F9 for additional worksheets to a NEW Addl A Wkt e TaxWise will calculate the 10 7 5 if age 65 or older through 2016 of AGI nondeductible portion Note Medical expenses reimbursed by an HSA are not deductible for federal but are deductible for CA o When 689 is properly completed TaxWise carries HSA reimbursed medical expenses to CA Sch A o See Health Savings Accounts in CA starting on page 54 Note For taxpayers under age 65 the nondeductible portion of medical expenses remains 7 596 of AGI for TaxWise makes the correct calculation Sch A Line 5 State and Local Taxes Paid e State and local income taxes flow to Sch A from W2 all 1099 series forms F S tax paid and CASDI entered in the California W 2 Only section of W2 Note the following assumes that the sales tax deduction option is extended to 2014 e Taxpayers can elect to deduct the LARGER of state income taxes OR state sales taxes which usually comes from a table based on the amount of the taxpayer s income on their federal return Go to Sales Tax CA worksheet o TaxWise
109. esearch rre EHE Bee 8 Useful Sites es eerte eee nep nn 8 Retirement Income 30 Retirement Savings 2 48 Retura Motes nct cete teint tne Pneu E 15 Return Stage nette eere ge 61 Returns Amended oients a epe 66 10 14 14 64 Extending Time to File 68 Priot Years iu eed 66 Reverse 2 2 22 101 43 Review Return with Client 62 RMD Not Taken eere 49 Royalty 35 RRB 1099 R Blue Form 37 RRB 1099 R Green Form ees 35 Salaries REC etre tese 16 Sale of Main Home eee 30 Sales Tax Deduction eese 42 Salutatioh eem 11 Savers Credit sox nee E et 48 Scholarships Fellowships Grants 19 SCOPCs a date eS se Ore et tee en 2 S Corp Incortne eterne tete 23 te 18 Self Employment eee 49 Notary Fee Exemption 27 Seller Financed 21 Shared Responsibility Payment 50 Shortcut Keys i 5e dede pete 5 SICK ect dent ite E 19 SIPDatutes ern ped i eque 63 8879 8879 iiis eae 63 Deceased Person
110. etc or leave blank recommended e Enter Taxpayer s first name s initial and last name as shown on the social security card o Forreturns with carry forward data use the name as entered and successfully filed last year unless a change is required e g new name e When the return is e filed the first check is that the first four characters of the last name match the IRS records o When the social security card indicates multiple names enter all but the last in the first name field leaving a space between each name e g SAM HUNTER ALBERT o Forsome Hispanic names the last two names may constitute the legal last name in which case they should both be entered in the last name field Itis good practice to enter questionable names as shown on the social security card or ITIN letter in the free form note field at the bottom of the Main Info sheet for use by the ERO in case the name rejects o Referto examples in Pub 4012 starting on page C 16 e Enter the spouse s first name and initial for only e Enter the spouse s last name only if it is different than the primary taxpayer s e Once the spouse s name is entered his her SSN will become a required field See page 13for Deceased Spouse Taxpayer See Starting a New Return above for acceptable means of SSN verification Mailing Address Name line 2 this is used ONLY if the address requires four lines or in the case of a deceased taxpayer see page 13 Deceased Spouse Taxpayer below
111. g 2 by linking from 7040 Wkt 7L 11 e LTC payments may be based on a per diem basis or as a reimbursement of actual expenses incurred o Per diem plan payments are not taxable to the extent of 320 per day or actual costs incurred if greater e If there are multiple payees under the insurance contract refer the taxpayer to a paid preparer e Complete questions 14 16 some answers may come from the 1099 LTC e Enter the 1099 LTC box 1 amount on 8853 Pg 2 L 17 and if from a qualified LTC insurance contract see box 4 on 1099 LTC enter again on L 18 e Complete the rest of Section C o Ifthe per diem payments received are less than 320 per day none of the payments will be taxable In this case it is not necessary to enter the actual costs e TaxWise will carry the taxable amount if any to 1040 Wkt 7L 11 e Unreimbursed medical expenses can be deducted on A Detail if itemizing HSA Distribution Note HSA s are out of scope unless the Counselor and Reviewer are certified in the area If a distribution is received Form 8889 and Form 1040 must be filed even if there is no other income Go to 8689 Pg 1 The 1099 5 distribution is entered 8889 Part If all of the distribution was used for qualified medical expense there is no taxable amount If used for other than qualified medical expense the taxable payment transfers to 1040 Wkt 7 L 12 There is a 20 addition to tax for non qualified distributions that transfers to 7040 Pg 2 L 60 Unreimbu
112. h annuitants at the annuity starting date This is true even if an annuitant dies after the start of the annuity payments e 4 the number of months for which payments were received during the tax year which will usually be 12 except for the year in which payments started or ended e L5 enter the amount recovered tax free in prior years o This amount carries forward from the prior year o Ifthe amount does not carry forward you need to either Look at last year s tax return to determine this amount or Calculate the amount using the monthly amount computed by Tax Wise times the number of months prior to the current tax year This line must be completed if the client has been receiving their pension for more than 17 years as they may have used up all their basis Note There is a small window for those whose benefits began 7 1 86 12 31 86 The computed annual exclusion can be taken as long as benefits are received This includes the survivor s benefits if the annuitant originally chose a joint and survivor annuity In this rare case do not complete L 5 of the simplified worksheet and note this in the preparer notes at the bottom of the Main Info sheet or taxpayer diary o Note You can use the pension calculator at http aarp bogarthome net Annuity Pension 20Calculator htm to verify the allowable exclusion for all years of the annuity and it shows the TWO entries needed non taxable amount is calculated by TaxWise and
113. he 1099 payer information Business address Question E is usually the taxpayer s home address Accounting method Question F is Cash or return is out of scope Material participation Question G is Yes or return is out of scope Payments needing 1099 forms Question I is NO or return is out of scope Business Code Question B look up in the 1040 instruction booklet or do the following From Sch C click F1 On the Help page click Index in lower left panel Click Codes for Principal Business Activity link Find the most applicable code and copy it Ctrl C Close the Help browser tab Paste the code into the applicable field on the Sch C Ctrl V If you cannot find an appropriate code use 812990 Enter all income on Sch C L 1 o Input all Forms 1099 MISC or Form 1099 K on line 1 by linking to 1099 MISC or Scratch Pad Select 099 MISC under Sch C on the Tree and complete the form Jfclient has more than one 1099 MISC click the next to the form in the Tree to open another 1099 MISC o Input income not reported on 1099 forms on Line 1 also use a Scratch Pad Note we should always ask if there is any additional income such as cash or amounts not shown on 1099s Do not enter on Sch C L 6 Other Income o Note Amounts entered on 1099 MISC and Scratch Pad are cumulative do not duplicate Part I Income L 2 4 and 6 must be zero or the return is out of scope Part II Expenses must be listed by category on the individual lines provid
114. he loan 30 years 2360 months and multiply by the months that the loan existed this tax year Enter the result directly on this line e When the loan is refinanced or paid off the remaining deductible portion of the points from the prior loan may be deducted Sch A Line 13 Total Mortgage Insurance Premium EXPIRED following applied to tax years before 2014 e Premiums PMI paid and or accrued for qualified mortgage insurance reported on the 1098 in connection with home acquisition debt on a qualified home are deductible The home must have been purchased after 2006 o Mortgage insurance provided by the Department of Veterans Affairs and the Rural Housing Service is commonly known as a funding fee and guarantee fee respectively Forcontracts issued in 2013 these also qualify e Report total qualified mortgage insurance premiums and TaxWise will determine the allowed amount 43 10 14 14 TAXABLE INCOME CALCULATION Note This deduction is not allowed on the CA return and is automatically adjusted by Tax Wise Sch A Line 16 Contributions Cash RULE Charitable contributions are entered on the A Detail Worksheet e Includes checks money orders or credit card payments e While we do not need to see any proof the client should know that no deduction is allowed unless the taxpayer has either o Bank records canceled check or bank credit account statement OR o Written acknowledgment from the charity documenting
115. hose boxes Box 7 Social Security Tips are reported here TaxWise will automatically adjust boxes 3 4 5 and 6 Box 10 Dependent Care Benefits are reported here These are rare but itis VERY important that they are entered accurately as they directly affect other benefit calculations Box 12 These codes can also be found in TaxWise F1 for Program Help Index W 2 Box 12 Codes Description Uncollected amounts including Social Security or Medicare taxes which TaxWise will correctly transfer to 1040 pg 2 L 62 Taxable cost for group term life insurance Quite common does not change anything as it is already included in Box 1 wages Elective deferrals that can make the return eligible for the Retirement Savings Credit which is subject to income limits also see Y below Non taxable Sick Pay 20 Excise tax on excess golden parachute payments Substantiated employee business expense reimbursements Not taxable however if Form 2106 out of scope except for Military certified is filed the amount would go on line 7 Excludable moving expenses If taxpayer s deductible moving expenses are not greater than this amount Form 3903 out of scope except for Military certified does not need to be filed 17 10 14 14 INCOME Description Non taxable combat pay Optionally used to calculate Earned Income Tax Credit TaxWise will pick the correct option Out of scope except for Military certified Employer contributions to an Archer Med
116. ical Savings Account MSA out of scope Adoption benefits out of scope Income from the exercise of nonstatutory stock options informational income is included in Box 1 Employer contributions to an employee s Health Savings Account HSA will put 8889 on the Tree out of scope except for HSA certified An elective deferral that is NOT eligible for Retirement Savings Credit Income under section 409A on a nonqualified deferred compensation plan AA BB EE Designated Roth contributions under a section 401 k 403 b or 457 b plan Cost of employer sponsored health coverage For 2014 if there is any amount with this code check the box for full year health coverage on 1040 Pg 2 L61 e If there more box 12 entries than Tax Wise W2 allows use box 14 for those that do not impact the return Code W HSA Employer Contribution must be HSA certified o Employer contributions to an HSA are not taxable for federal TaxWise handles code W properly o CA Note CA does not recognize HSAs see Health Savings Accounts CA below starting at page 54 e Box 13 Check the applicable boxes to agree with the paper W 2 o The retirement plan box determines IRA eligibility rules o Statutory employee income can be reported on Schedule C Check the statutory employee boxes in the lower section of W2 input form in addition to checking the statutory employee box in Box 13 Input the statutory employee income on a separate Sch L I and ente
117. ided an email address on the intake form enter it here Telephone Numbers We need a telephone number to call the taxpayer if the return is rejected there is an error e Enter taxpayer s daytime evening and especially cell phone numbers e This field may be left blank if they do not have a telephone Birth Date This is required for each taxpayer to calculate eligibility for various credits and must agree with the IRS s records if certain credits are claimed Taxpayer Occupation s e Complete as appropriate RETIRED UNEMPLOYED STUDENT are acceptable DECEASED is the appropriate entry if the taxpayer or spouse died during or after the tax year Taxpayer Information e Special Processing used by military is out of scope refer taxpayer to a military site e Exclusion of Puerto Rico Income is out of scope e Determine if the taxpayer and or the spouse qualify as blind or totally disabled check the appropriate boxes o Aletter from a physician or optometrist should be kept by the taxpayer if this is the first time they qualify as blind or totally disabled e See below for Deceased Spouse Taxpayer Presidential Campaign Check the appropriate boxes if the taxpayer and or spouse wish to direct this amount of their tax to the Presidential Campaign Matching fund Filing Status e Click and enter correct filing status e Anindividual is married if they are married under domestic or foreign law o Married status continues until
118. ifficulty of Care 39 Direct Debit Balance Due ieamsa 58 Balance Due Federal 58 Estimates ec ee rentrer 60 Estimates Federal sues 59 Direct Deposit dune euim 56 Split Accounts essere 57 USS Savings 57 Direct Deposit CA eere 57 Direct i aair 58 Dividend Income e enana eanan aA 24 CA Exemption Rule eee 25 Capital Gain Distribution 24 Dividend Stmt sess 23 Exempt Interest Dividend 24 Foreign Taxes x ene 25 Non Dividend Distribution 24 75 OLN ALY Aseria lise lacie sleds nera 24 Qualified 24 Donations to 1 2 Early Distribution Add n to 49 Early Withdrawal Penalty 22 Earned Income nee eter 40 While a Prisoner eene 20 Earned Income Credit esses 51 Education CTC CIES cote tede tendra tee 47 Scholarships tenni Rete 19 Student Loan Interest eese 41 Education Trust Income 1099 Q 39 E file to Paper Change 64
119. ing each change such as corrected W 2s 1099s Note If the amendment is the result of a letter or notice from the IRS or FTB send the amendment with a copy of the letter attached to the address shown on the letter For all other amended returns see the table above on page 1 for addresses The client should be given an exact duplicate set of the returns for their records REQUEST FOR EXTENSION OF TIME TO FILE An automatic six month extension of time to file is available for most taxpayers by submitting Form 4868 which can be done as follows o Filing form 4868 by phone or on IRS gov between February 1 and April 15 if a payment is due o e filing form 4868 if approved by ERO with direct debit if a payment is due o Mailing a paper form 4868 with a check for any tax due grants an automatic extension of time to file as long as the tax is paid in full by the due date o No form is needed if no payment is required Form 3519 is the payment voucher for an automatic extension The Key point that the taxpayer s must understand is that any tax liability albeit estimated must be paid to both the IRS and CA by April 15 otherwise interest and or a penalty will accrue Complete the Main Info sheet and in the Self Select and Practitioner PINs section select the 4868 with or without direct debit as appropriate o 486815 added to the Tree o Go to 4868 and click the box at the top of the form o Enter the information from tax documents that
120. ional State Tax Assistance Program Type of return e The default is e file there should be VERY few instances where a return cannot be e filed and only in those instances should a paper file return be prepared e Refer to Final Steps in Tax Return Preparation on page 60 for the procedure to change from e file to paper Bank to Audit Shield Select Your Bank Money Clip Prepaid Visa Fee Collect and Audit Shield are not used by Tax Aide and can be locked in the TWO template setup Bank Account Information e Generally you will complete this section after all other entries as it applies ONLY IF the taxpayer s have refund OR want to pay their balance via an ACH direct debit e See Refund or Balance Due on page 56 for detailed instructions Practitioner Pin e The ERO PIN has been entered as a default e The taxpayer PIN 12345 has been entered for both taxpayers as a default if not enter now It is not necessary to remove the PIN for the spouse if there is no spouse e Enter the date in the required field e TaxWise will add 8879 IRS e file Signature Authorization to the Tree Identity Protection PIN If a taxpayer or spouse has experienced identity theft and has previously worked with the IRS to fix this the IRS will issue a CP10 letter with a PIN for filing a return enter the PIN here Third Party Designee e This is a very limited authorization not a power of attorney and the taxpayer must sign the return or Form 8879 the
121. is exempts the payment from CA taxes Foreign Government Pensions e Foreign government pensions are out of scope except for Canadian and German Social Security see Social Security below Canadian RRSP similar to an IRA is out of scope o CA Note CA treats the account as a taxable investment account Income earned in a Canadian RRSP and capital gains or losses are currently includible in income out of scope LINE 17 RENTAL REAL ESTATE ROYALTIES TRUSTS imite e If there is a 1099 Misc with amounts in Box 1 rents or the taxpayer received cash rents for which there is no 1099 MISC and no associated expenses then the return is in scope 35 10 14 14 If there is 1099 Misc with amounts in Box 2 royalties these royalties do NOT relate to the personal services of the taxpayer e g book royalty and no associated expenses then the return is in scope and the income is reportable on Sch E If the royalties relate to the personal services of the taxpayer the income should be reported on Sch Go to Sch E Pg 1 o Answer question A o Describe the property source on L 1 and then go to 1 3 or 4 and link to the 7099 MISC If the taxpayer received rent but did not receive a 1099 MISC enter the amount received on L3 If there is a 1 with royalty income and no expenses input on Sch E Pg 1 see Simple K 1s and Prepaid Funeral Plans above on page 23 A K 1 with a rental income or loss is out of scope
122. is willing to do so e Counselor needs to insert their initials and assure that the reviewer also inserts their initials CLEAR WARNINGS e Check the flags to the left of each form in the Tree e Open each incomplete form with form name in red e Use to move your cursor to the next red field e Make correct entries for all required fields or to verify or confirm zero entry e Do not use to solve problems e Repeat until no forms are flagged as incomplete e Remember to scroll down to check the entire forms list e Only now are you ready to run diagnostics RUN DIAGNOSTICS e Click Run Diagnostics using the Toolbar or Ctrl D e TaxWise does a complete review of the return and displays a list of errors warns about overrides and estimates for both the federal return and the state return e All warnings must be carefully examined and corrections made as applicable e Quick access to the form that is in error is done by double clicking on the error message in the diagnostics screen This does not work for state or other errors that not underlined If there are multiple copies of the same form review each until the error is found and corrected e Overridden entries are those done within the context of TaxWise options such as changing the name amp address or overriding amounts in boxes 3 4 amp 5 on W2 will appear in the diagnostics o Each should be reviewed and verified as needed e Estimated entries o
123. l Gain Loss Sch D Pg 1 L5 Net Long term Capital Gain Loss Sch D Pg 1 CA Net capital gain loss Note Fed does not carry to CA CA Line 2 Loss and or Gain as applicable amount from CA K 1 may differ Royalty Sch EPg 1 L 4 address and 6 on L All other amounts on the K 1 Out of scope LINE 9 DIVIDENDS Go to Dividend Stmt tab to first field or amount column if payer is already shown RULE dividend entries MUST be made on the Dividend Stmt NOT directly on Sch B e This information may come from 1099 DIV substitute 1099 DIV a brokerage statement or a K 1 e Do not leave blank lines between entries e Use Ctrl I to insert a row or Ctrl R to delete a row the screen refresh may take a second or two e Only ONE Dividend Stmt is allowed per return o Always return to the same one when adding additional transactions Foreign account or assets See additional reporting requirements at the start of Line 8 Taxable Interest above on page 20 Completing the Dividend Statement e Payer payer name abbreviated if necessary o Enter name of brokerage or processor issuing the 1099 not the individual stock or fund names o The company that issues the stock or its transfer agent will be the processor if the client holds the stock directly 23 10 14 14 INCOME Ordinary dividends enter the dividends shown on the 1099 DIV Qualified dividends enter the qualified dividends shown on the 1099 DIV T
124. lifornia e See Line 46 Excess Advance Premium Tax Credit Repayment on page 45 LINE 70 AMOUNT PAID WITH REQUEST FOR EXTENSION TO FILE e Directly enter any payment made e When doing a prior year return remember to ask if payments have been made LINE 71 EXCESS SOCIAL SECURITY This entry is made automatically if there are multiple W2s for an individual and the combined wages exceed the maximum subject to social security for the year LINE 72 FEDERAL TAX ON FUELS FORM 4136 out of scope LINE 73 CREDITS 2439 out of scope CA ADJUSTMENTS amp DIFFERENCES This section identifies specific situations that MAY need to be addressed on CA returns e While California generally follows IRS tax law there are a number of situations where California and the federal law differ see CA Pub 1001 for more information e These differences are summarized on CA Schedule CA 540 by either adding to or subtracting from the amounts reported to the IRS on Form 1040 e In most cases Tax Wise will make the appropriate adjustments from entries on the federal forms e Counselors and QR must verify the differences reflected on CA CA and correct any problems by o Returning to the appropriate forms on the federal return OR o Making an adjustment on CA CA or CA C or CAA as detailed in the respective section of this manual o Caution Use a Scratch Pad to adjust the specific field direct entry may require an override and
125. light the SSN field and link to an Alimony Paid worksheet o Enter each recipients SSN s and amount s paid o TaxWise brings the total forward to 1040 Pg 11 31 LINE 32 IRA DEDUCTION e The taxpayer and spouse if filing jointly may each make contributions subject to age and total compensation income limits as shown on JRA Wkt e If covered by a retirement plan they may be able to take an IRA deduction subject to AGI limits Goto JRA Wkt Traditional Roth IRAs ESAs Worksheet enter contributions to a Traditional IRA L 10 and to a Roth IRA on L 20 TaxWise will check the contributions against the current year s limits e Non deductible contributions require completion of 8606 Part I o Enter the basis amount from the prior year s Form 8606 on 8606 L 2 o Complete L 4 if applicable e Traditional or Roth IRA contributions in excess of the permissible amount are subject to an annual addition to tax as long as the excess continues 5329 Part III or Part IV which is out of scope LINE 33 STUDENT LOAN INTEREST DEDUCTION Go to 1040 Wkt 2 Student Loan Education Worksheet e Refer to Pub 4012 p E 4 for rules e Enter interest paid on line lof the worksheet e TaxWise calculates the allowable adjustment amount LINE 34 RESERVED LINE 35 DOMESTIC PRODUCTION ACTIVITIES out of scope LINE 35 OTHER Jury Duty pay given to employer is input on this line everything else on this line is out of scope TAXABLE
126. loss Group the long term sales and enter on a second line If the taxpayer inherited the security IN HE RIT can be entered Date Sold o Enter the date from the 1099 B o Worthless shares or bonds including abandoned are treated as though they were sold on the last day of the tax year This includes stocks mutual fund shares or bonds that become completely worthless during the year and those that are abandoned Use WO RT HLSS as date sold and TaxWise will compute the long or short term correctly based on the date acquired DO NOT use for worthless debts which are out of scope Sales Price enter the Sales Price from the 1099 B or broker statement Cost basis required If basis is not shown on the 1099 B a gain loss statement or original purchase confirmation is not available advise the taxpayer s to contact the broker to get the cost basis o If all else fails enter zero as the basis and advise the taxpayer s what you are doing The return can be amended if and when a basis is determined o Ifanon statutory qualified stock option is exercised and sold on the same day the client s W 2 will show a code V and the compensation amount is included in box 1 wages The disposition of the stock acquired through the option is reported on a 1099 Often there is a small loss reflecting the commissions o Inherited property 10 14 14 28 INCOME The basis is the FMV at death of original owner and needs to be supplied by the
127. ly from any payments of quarterly estimated tax Mailing addresses are shown on page 1 EXITING A RETURN BEFORE COMPLETION Should you need to exit a return before completion of the return o Before closing change the return stage to indicate the reason why the return is not complete optional by district o lIfe files have been created delete the e file o Anychange to the return will delete the e file e g remove the date on the Main Info sheet o Enter an explanation of what is required to finish the return either in the Taxpayer Diary or at the bottom of the Main Info sheet Be sure to accurately explain the status of this return on your ERO log 10 14 14 64 UNABLE TO PAY LATE FILING Editing A Previously Created Unfinished Return e Your LC may have to assign the return to you if it was started by someone else e On the Toolbar click on Open Return e Enter the SSN of the file you need Tax Wise will load the return e Proceed as with any other return SUBMIT E FILES e Following your site s instructions submit E files if authorized to do so UNABLE TO PAY LATE FILING e Returns prepared by Tax Aide will always be filed by April 15 except for authorized sites open year round e Prepare proper vouchers for payment o Inform the taxpayer of the payment options below if they cannot pay in full on time e Refer to IRS Pub 594 The IRS Collection Process Pay Late e If payment can be made within four months pay as much
128. may cancel other adjustment that TaxWise flows to the CA return so direct entries should not be used FILING STATUS Head of Household CA 4803e MUST be completed for CA returns being e filed as head of household e Failure to complete the form will generate an error when running diagnostics e This worksheet asks a series of Yes No questions complete it carefully to assure proper filing e Caution when entering age of qualifying person year of age or older enter years ONLY o If less than 1 year old enter months ONLY INCOME EXCLUDIBLE FOR CA California taxes worldwide income except for e Ridesharing fringe benefits the employer should have reported this difference by reporting different state wages on W 2 the CA adjustment must be manually entered see W2 State Section above on page 18 e Clergy housing income see Pub 1001 tax provisions peculiar to clergy are out of scope e Indian Tribal Members Income if live amp work on tribal land see W 2 Indian Tribal Income on page 20 or 1099 MISC Income on page 38 e Interest paid on municipal bonds issued by the state of CA including Counties Cities or Agencies see 1040 Line 8 above on page 21 e Interest earned from US Government Savings Bonds US Treasury Bills and any other bond of the US or US territories see 1040 Line 8 above on page 21 Dividends from CA municipal and U S government bond funds see 1040 Line 9 above on page 23 Any state tax refund
129. ms o Note CA W2 becomes inactive and CA W 2 is added to the Tree as active o If the return has more than two W 2 forms click on W 2 with a hyphen in the Tree summary schedule with two W 2s per page to add more CA W 2 forms as needed Assign sequential numbers 1 3 5 etc numbering relates to the sequence of W 2 forms not the page number of the summary schedule o Caution TaxWise does NOT give a diagnostic for paper returns if there are not enough CA W 2 forms Sick Pay If a W 2 reports Nontaxable Sick Pay in Box 12 with a code J and no other entries it is not necessary to enter the W 2 in TaxWise If there are any other entries enter 1 in box 1 to enable e filing Substitute W 2 If the client has not received a W 2 by February 15 and has attempted to get a copy from their employer and failed they can contact the IRS for possible assistance If no IRS assistance is possible a substitute W 2 can be used You will need a pay stub for the last pay period worked that shows cumulative pay and withholding Proceed as follows o Open W2 and place the cursor in the Employer s name field o Linkto New 4852 Substitute W 2 or 1099 R o Complete the form If a substitute W 2 form is completed you must file a paper return Form 4852 prints with the return and must be signed and attached to the return with any other W 2 Scholarships Fellowships amp Grants W 2 or 1098 T Reportable on the return of the person rec
130. mselves e f we have an elderly client that is accompanied by their adult child and the client seems to depend on the child for understanding your interview questions or if there are other issues the client may be asked if they would like to designate someone for this limited purpose e If they agree they will have to provide a name phone number and PIN so that the third party may discuss the return with the IRS Tax Aide counselors may never be the third party Return Notes e The 3 lines at the end of Main Info sheet may be used for notes that will print when the Main Info sheet is printed and will carryforward to next year e Taxpayer Diary may also be used see below next page e Record any pertinent information regarding the current year s return at the bottom of the Main Info sheet overflow can be entered on the Prep Use form If you have any doubts what the first middle initial and last name are for anyone listed on the return document them as they are listed on the social security card This way the ERO can use this information if the return rejects due to name SSN birth date mismatch without having to call the taxpayer If the return is not completed show information or actions necessary to complete the return o Enter any references notes for next year s preparer deaths births o Notate years and individuals for which the American Opportunity credit is claimed NOTE The following paragraphs use go to a form or worksh
131. n Wkt even if the sales price minus basis is less than the allowed exclusion o The Title Company should issue a 1099 S only when the seller has indicated that the gain is more than the exclusion Gn Wkt input o When there is a gain and an exclusion is claimed in addition to the date acquired and date sold Enter the proceeds and basis information Enter the allowable exclusion as a negative number in the adjustment column with Code H Note CA conforms to the federal rules including sale by a widow widower within 2 years of the date of death o Ifa loss is incurred a nondeductible personal loss in addition to the date acquired and date sold Enter the proceeds and basis information Enter the amount of nondeductible loss as a positive number in the adjustment column with Code L Note If the taxpayer had California tax withheld from the sale they will receive CA 593 o Goto CA 540 Pg 3 L 73 enter the real estate withholding by linking to 593 e Note 5405 recapture If the home was originally purchased after 2007 and the First Time Homebuyer Credit was claimed see First Time Homebuyer Credit Repayment below at page 50 LINE 14 OTHER GAINS OR LOSSES out of scope LINE 15 16 PENSIONS AND ANNUITY INCOME amp IRA DISTRIBUTIONS Go to form 1099R e Form 1099 R is the usual source document for these payments e The Railroad Retirement Board and U S Government Office of Personnel Management OPM use variations
132. n as being filed by surviving spouse The date of death is matched against the IRS s database obtained from the SSA a mismatch may cause the e file to reject The combined name fields must not exceed 30 characters when there is a deceased taxpayer o Jonathan amp Elizabeth Smith would be 26 characters counting all spaces o exceed 30 characters delete middle names abbreviate first names or truncate names Enter name of surviving spouse OR the name and address of person handling the estate in the Name line 2 of the mailing address o Enter space before the name CA Note Go to CA 540 Pg 1 Deceased Taxpayer or Spouse Information executor guardian information must be entered Ifthe surviving spouse is filing the return enter the surviving spouse s name number If there is only a beneficiary acting as an executor enter the beneficiary s name number Failure to complete the executor guardian information will cause an e file reject o Complete the decedent representative information If filing as a surviving spouse TaxWise completes Decedent Representative with the survivor s name check the spouse box If the filing is by someone else an override is needed to enter the decedent representative information o Note it may be necessary to override the fields to enter the information CA Note Go to CA 8879 o Complete ERO declaration using the same name and representative type listed on CA 540 Pg 1 Occupation
133. n for each count if convicted END OF SHIFT Assemble the ERO Envelope e Your completed ERO Log e Form 8453 and attachments if applicable in duplicate Tax Aide Site Sign in Sheet e Check that everyone you have seen is properly recorded cross check with computer and with ERO info e Record the number of tax questions that you answered that did not involve a return you prepared Turnin the information to your site coordinator Computer Shutdown Procedure e See TaxWise Shutdown Procedures on page 3 OTHER RETURNS PRIOR YEAR RETURNS Counselors who have been certified for the prior year to be prepared or for at least two years may prepare prior year returns Only the last three years returns may be prepared in Tax Aide taxpayers needing older returns should be referred to a paid preparer e The prior year TWO is accessed by appending the two digit year to the TWO URL o E g for 2012 the TWO URL is twonline taxwise com 12 e Click New Return on the Toolbar e If the return will not be e filed note that many non dollar fields are not required for instance you only need dollar amounts on the W 2s e After completing a prior year return remember to log out of the prior year TWO site and open the current year TWO site before continuing with other new returns the current year background color should be blue e IRS offices will no longer assist taxpayers with preparation of prior year returns e Forms and instructions for prior
134. n of the child are out of scope Noncustodial Parents e noncustodial parent to claim a dependent along with the CTC they must have a Form 8332 signed by the custodial parent relinquishing their right to claim the dependent unless the divorce is pre 2009 e custodial parent can NOT give away HOH status EIC or the dependent care credit e custodial parent can revoke the Release of Claim to an Exemption by completing Part III of Form 8332 The revocation is effective in the year after notice is furnished to the noncustodial parent e Form 8332 release or revocation or the relevant pages from the divorce decree for a pre 2009 divorce for each child and for each year must be transmitted to the IRS See Using 8453 or Scanning PDF Attachments on page 64 State Information default is Full Year Resident CA 10 14 14 14 STEPS TAX RETURN PREPARATION non resident or part year resident returns out of scope unless the return is being prepared under the Tax Aide National State Tax Assistance Program e We should always prepare and file a CA return if a federal return is being filed o It would be very rare that a CA return is not required for an in scope return in which case simply check the appropriate box AND remove the full year resident CA entry e If another state s return should be prepared refer the client to a paid preparer for all returns unless the return is being prepared under the Tax Aide Nat
135. n ta 56 IRA Exclusion Worksheet 32 A308 aD Pena 30 Non Employee Compensation 38 CASCH iini iet eet eee 27 Notary Fees enit tienne 27 CA SCC A ua oett tte 52 Other sh atate 37 CA SchiD uenerit 29 53 enr 30 CA Schi P euge 54 Prepaid Funeral 23 E S Tax cae eet 50 Rents amp Royalties eese 35 ete edet tete 11 Sales of Securities sese 27 Prior Years sss c2 leh oder tn Renten 66 Scholarships erede 19 RRB 1099 Tier 1 Blue Form 37 Social Security i emet etg tetti 36 RRB 1099 R Tier 2 Green Form 35 SS Disability Ie 36 Sch K 1 Capital 23 State Tax Refund sees 25 Sch Dividends esses 23 TIS iiit Me e e ee 20 Sch K 1 Funeral Plans 23 US Bonds 3xsm ettet eere ees 21 Sch 1 23 Unemployment eene 36 SSA LOIS ee Sete t i ree 36 WAGES eee teet ree meos 16 16 While a Prisoner 20 W 22 Goes ERR 38 Incomplete Return 64 70 Injured 5 56 10 14 14 76 Interest
136. nds represent more than 5046 of its assets The fund reports that 95 of the dividend income is from federal bonds o Manually calculate the amount based on information from the mutual fund broker provided by the taxpayer 9596 x 1 500 2 1425 Example 4 General municipal fund exempt from federal tax taxable to CA because lt 50 of the assets are CA municipal obligations Example 5 California municipal fund holding only CA municipal obligations is exempt for both federal and California 10 14 14 24 INCOME California exemption rule e Generally the fund will indicate how much is exempt from state tax on a separate statement as a percentage of the total fund distribution e The general rule is o If less than 50 of the assets of the fund are federal and or CA obligations ALL is taxed by CA o 1 50 or more of the assets are federal or CA obligations the income from those obligations only is exempt from tax You must manually calculate the amount based on information from the mutual fund broker provided by the taxpayer To Finish Schedule B e You must ask and enter the answers to the questions at the bottom of Sch B when Schedule B is required e f any answer is yes see Foreign accounts or assets above at page 20 e Failure to answer the questions when Sch B is required will leave a red mark on the Tree LINE 47 FOREIGN TAXES PAID ON INTEREST OR DIVIDENDS Go to 1116 e Foreign taxes may appear on 1099 INT 1099
137. nt rounded up if desired for the next year the amount will be divided into four equal parts and carried forward to the vouchers Option 2 e Ifa substantial change in income filing status dependents or credits is expected fill in the non computed fields of JO40ES Pg 1 e Scroll down the form to fill in any other additional income and credit information based on this year s return and additional information from the client e TaxWise will compute the appropriate estimated payments and enter the amount on the vouchers Hint Note that computed tax does not subtract any withholding from any source therefore you need to input the estimated withholding for the following year on L 15 Application of overpayments to next year s estimated taxes e Arefund be applied to next year s estimates This is not recommended for several reasons If the prior year return is not brought in or not pro forma the client may not remember the amount applied o If there is any adjustment on the return the amount shown as applied may not have been applied and the client may not tell you of this change e However if the client insists proceed as follows o 040ES Pg 1 before the first voucher is a section that shows the amount of the refund followed by boxes that allow you to credit or 1 Installment Only o Checking ALL will apply all of the refund to the estimates starting with the first until used up Ifthe refund is mo
138. nt that they are a return of investment and reduce the basis of the security Liquidation Dividends in box 8 are out of scope CA Note CA withholding Boxes 12 14 on Form 1099 DIV should be entered on CA 540 Pg 3 L 71 last entry field as 1099 and the amount should be linked to a Scratch Pad that details the payer s name and state number this helps the FTB match the withholding Examples of Dividend Income Payer Ordinary Qualified State Capital 1250 28 Federal Exempt AMT dividends dividends Adjust gain gain gain with div PAB 1 GENERAL 1200 1200 0 0 0 0 0 MOTORS 2 MERRILL LYNCH 800 150 200 0 50 0 0 3 GOVT SECURED 1500 0 1425 0 0 0 0 0 FUND 4 MUNI FUND 0 0 250 0 0 0 250 50 5 CA MUNI FUND 0 0 0 0 0 325 75 Example 1 Ordinary and Qualified Dividends o General Motors Corporation common stock with ordinary dividends of 1 200 all of which are qualified o Dividends are taxable on both the federal and CA returns Example 2 Merrill Lynch held Stock and Mutual funds o Total of investments held at Merrill Lynch o 5800 ordinary dividends of which 150 were qualified dividends o 200 in capital gains of which 50 is a 28 gain Example 3 State exempt interest dividends from direct Federal Government obligations Assume that the Government Secured Fund includes investments in federal government amp agency bonds and that such bo
139. nts who were born or died during the year e Code Field enter the appropriate code from the dropdown list o Fora noncustodial parent claiming child who did not live with them for more than 6 months be sure to enter Code 2 o Use Code 3 for a grandchild or any other dependent that is not the taxpayer s biological adopted or eligible foster child o Foracustodial parent that has signed a Form 8332 and cannot claim the child as a dependent but can claim EIC and or enter code 0 DC Dependent Care Credit check this ONLY if the taxpayer has dependent care expenses for the person this adds 2441 to the Tree e the rule is to always check the box for dependent children so that TaxWise opens the necessary forms e CTC Child Tax Credit this is a calculated field which TaxWise will complete based on the data entered See Pub 4012 page C 12 for child without SSN or ITIN e If there are more than four dependents o Enter the first four on the Main Info sheet make sure that those who qualify for EIC are entered first Goto 1040 Pg 1 and link from a dependent line to Addl Deps Form 1040 line and add the dependents e Note Ifa change is made to any of the first 4 listed dependents the Main Info sheet you need to go to the Addl Deps form and make the same change e g spelling of name e dependent child has more than 1 900 of investment income the child may be subject to the kiddie tax o Form 8615 and the retur
140. nvestment Box 5 or Box 9b less amounts previously recovered is greater than the amount shown in Box 1 the net loss be claimed as a miscellaneous itemized deduction on Line 28 Amortizable Bond Premiums out of scope Casualty And Theft Loss out of scope Federal Estate Tax out of scope Schedule K 1 out of scope O O O O TAX LINE 45 ALTERNATIVE MINIMUM TAX out of scope LINE 46 EXCESS ADVANCE PREMIUM TAX CREDIT REPAYMENT Go to 8962 Note 1040 Pg 2 L46 and 1040 2 L 69 apply to taxpayers who purchased their minimum essential coverage MEC through the exchange only o Other health coverage does not qualify Taxpayers who purchased health coverage on an exchange may have been granted an advance premium tax credit APTC Intake form Pg 3 which would have been paid to the insurer not the taxpayer The APTC must be reconciled in the return using Form 8962 Some or all of an excess APTC may need to be repaid If the taxpayer qualifies for a PTC in excess of the APTC if any a net credit may be claimed o TaxWise will carry the computed Net Premium Tax Credit to 1040 Pg 2 L 69 Taxpayer will receive Form 1095 A with the information needed to complete 5962 If the taxpayer had a life event that might involve a shared policy situation carefully review the instructions to Form 8962 o Dissolution of marriage or legal separation o family member covered by another taxpayer o Taxpayer s policy covers someone
141. od Vete EHE ead 41 LINE 33 STUDENT LOAN INTEREST DEDUCTION cessere 41 LINE RESERVED H diii oU iban dH IH 41 LINE 35 DOMESTIC PRODUCTION ACTIVITIES OUT OF SCOPE eene 41 LINE 35 OTHER 41 TAXABLE INCOME CALCULATION ccssssscscscscscscscscscscscscscscscscsesessscsesescseseseees EINE 40 DEDUCTIONS o ertet tav edt iis ni 41 qc LINE 45 ALTERNATIVE MINIMUM TAX OUT OF SCOPE esee 45 LINE 46 EXCESS ADVANCE PREMIUM TAX CREDIT REPAYMENT cene 45 CREDUPES 5 add E d b lt db e ae ri v Dv ve a TE d vo EUR LINE 48 FOREIGN TAX CREDIT 0 cccccccccesssssssccececececeessnsececeseceesensssaaeceseeeeeeeessneceeeeecs 46 LINE 49 CREDIT FOR CHILD amp DEPENDENT CARE EXPENSES ccce 46 LINE 50 EDUCATION CREDITS c cccccccscsssssssececececeseessnsececesececeessnssaeceseceeeeeesssseeeeesens 47 LINE 51 RETIREMENT SAVINGS CONTRIBUTION 48 LINE 52 CHILD TAX CREDIT ccccccccccccscsssesssececececessessnsececeseesesensssaaeeeseceesenensnseaeeesees 48 LRESEBVBD E n fociis odit delito quae Ibero telae Eon Ruta cette d copied 48 LINE 34 OTHER CREDITS centes v bre uit 48 OTHER TAXES
142. odically to the District Coordinator o ERO Log information about returns to be e filed which is used by the site s ERO to control the e file processing 10 14 14 68 INDIVIDUAL TAXPAYER IDENTIFICATION NUMBER ITIN Sites can develop their own formats as long as they collect the following required elements of client activity o Paper filed current year returns o Prior Year Federal Returns prepared o Amended Federal Returns prepared o State Only Returns prepared o Count of Q amp A services when no return was prepared The site LC keeps the above statistics and provides them to the DC at specific intervals INDIVIDUAL TAXPAYER IDENTIFICATION NUMBER ITIN Federal law requires individuals with U S income regardless of immigration status to pay applicable U S taxes The ITIN is a nine digit number that begins with the number 9 and has a 7 or 8 as the fourth digit that was created for use on tax returns by those taxpayers who do not currently qualify for or have a Social Security Number An ITIN will be issued to individuals who have a valid filing requirement ONLY The ITIN does NOT o Authorize work in the US o Provide eligibility for Social Security benefits OR the Earned Income Tax Credit o Provide valid identification outside the tax system o Establish immigration status Refer to IRS Publications 17 and 1915 Taxpayer does NOT have valid SSN or ITIN Click New Return Mark Apply for ITIN A dummy identifica
143. of scope Note There is no equivalent provision for California DIRECT DEPOSIT e Ataxpayer s federal or CA refund can be deposited directly to the taxpayer s bank account which o eliminates printing and mailing a check and 10 14 14 56 REFUND OR BALANCE DUE o gets the refund to the taxpayer approximately a week or more sooner While the taxpayer is not specifically notified by the IRS or FTB when the refund has been deposited it will show up on the next bank statement the bank might notify its client Enter the 9 digit Routing Transit number which is always on the left side of the MICR encoded line and the account number from a check not a deposit slip Taxpayers who do not have a check should be encouraged to go to their bank to obtain a letter of account verification If the taxpayer is unable or unwilling to produce account verification or wants to use the account information from the prior year s return then it is acceptable to put the non verified account information on the return provided that the counselor advises the taxpayer that without verification the account information provided will be put on the return at their own risk such that if the funds do not arrive in their account that there will be no way to trace or replace the funds and o has the taxpayer write their initials next to the account information on the printed return The initials will serve as indication that they have been warned that
144. of the credit may be required if the home is disposed Form 5405 instructions e The first time homebuyer credit claimed during 2009 2011 is subject to repayment if with some exceptions within 36 months of the purchase date There is a disposition of the home including death of a joint owner or divorce or The home is no longer used as the main home e If 5405 is used or required because of a disposition separate 5405 will be required for the Taxpayer and Spouse exceptions for destruction condemnation F or are out of scope LINE 61 HEALTH CARE INDIVIDUAL RESPONSIBILITY Full year Coverage e If taxpayer spouse and dependents all had full year health insurance coverage check the box e Refer to the ACA tab in 4012 for coverage that meets MEC standards Individual Responsibility Payment e Go to 8965 complete after all other tax data has been entered e TaxWise may complete parts of the form based on data already entered e Complete the form if an exemption applies partially or fully If no exemption applies verify that TaxWise computes the individual responsibility payment or you may need to complete a worksheet LINE 62 OTHER TAXES e Ifa W2 has a box 12 code M or for uncollected social security RRTA or Medicare tax on the taxable cost of group term life insurance the amount will be shown on this line as UT no further action is needed e The other taxes Forms 8959 and 8960 are out of
145. of the form e Specify either taxpayer or spouse at the top of the form e The Check if 1099 R is handwritten altered or appears not to be a true 1099 R should be used ONLY IF the 1099 R is truly suspect e Check the corrected box if the corrected box is checked on the original 1099 R 10 14 14 30 INCOME e Check the appropriate box for address information if the taxpayer s current address is not the address shown on the paper 1099 R the Check and make changes box allows you to overwrite and change the address field to agree with the address shown on the 1099 R If no address is shown the 1099 R leave the default address here ITIN Returns e When the taxpayer has an ITIN and presents a 1099 R with a SSN the return cannot be e filed e paper return may be prepared 1099R Payer s Name and Address e Payer s ID enter the EIN o If TaxWise has encountered that EIN on another return the name and address information will be filled in by TaxWise o Compare to the paper 1099 R and make corrections as needed e Verify that the payer s name and ID match the 1099 R exactly as the e file will reject if these do not match IRS records e TaxWise will enter the Name Code field 1099R Dollar Value Boxes e The entries in this section must be an exact match of the paper 1099 R with rounding e 2 If box 2 is blank do not make an entry in 099R box 2 the entire box 1 amount will be taxable unless The b
146. oss Carryover CA Sch D see above pg 29 e Capital loss carryover amounts can vary between federal and CA however we don t see these differences because the return would usually be out of scope e TaxWise does NOT automatically carryforward the unused loss amount from the prior year s CA Sch D e f not yet entered confirm that the prior year s return did not have a different net capital loss for CA than for federal If there is a difference confirm that the CA amount is correct and use the CA return amount our typical client would not have such a federal to CA difference o Goto CAD o Enter combined federal long and short term carryover or the CA amount on Line 6 as a positive number e Verify that CA CA has no subtractions or additions or the correct amount on the Capital Gain loss line 53 10 14 14 CA ADJUSTMENTS amp DIFFERENCES DEDUCTIONS ALLOWED BY CA e Medical Expenses reimbursed by HSA distribution see Health Savings Accounts in CA on pg 54 e Work related expenses for which a federal education credit was claimed o Claim in CA Sch C CA Sch A if the requirements for deductibility are satisfied DEDUCTIONS NOT ALLOWED BY CA State or local income taxes Sch A Line 5 above pg 42 Foreign income taxes Sch A Line 8 above pg 43 PMI deducted as interest on the federal return Sch A Line 13 above pg 43 EXPIRED CA Lottery gambling losses 1040 Line 21 above pg 38and Sch A Line 28 above pg 45 HEALTH SAVINGS ACCOUNTS IN CA
147. our Registration Code 415 time logging in or established password Immediately upon your first login Click Login button L memet you will be prompted to change your password i e Client 7 TWO Print Manage Return e Click on Return Templates Users Templates Home Assign Unassign e Then on New Delete Edit Publish Name Ty SEC e Enter a name for the return template in the Name box o e Enter a detailed description in the Description Box _ e If you want this to be the default template select the Make Default box I e If you choose to base the template on an existing template select the The pow reum target wi be based on template from the new return new return template will be based on drop down list e Click Ok e Click to edit your new template e Note You cannot modify the pre set Default template s e The yellow background indicates that you in the Return Templates mode and 71 10 14 14 SITE SPECIFIC TWO ENTRIES changes made to this template will only affect newly created returns e You can now make your default entries on the Main Info sheet and 8879 e Use the key or Ctrl Spacebar key for toggling on and off in a field Main Information Sheet Entries e Scroll down to the bottom of the page to the Preparer Information section Entries Prepare
148. ox 7 code makes it not taxable or An amount is entered in the Exclusion Worksheet section of 099R or An amount is calculated in the Simplified Method section in the lower section of 099R o If box 2 is a zero not just blank confirm that the distribution is not taxable and if necessary after entering the box 7 code use L 5 of the Exclusion Worksheet to make the distribution nontaxable e Box 3 Capital gain will be shown for a Charitable Gift Annuity Code F o Ordinary income piece The difference between the distribution shown in box 1 and the capital gain shown in box 3 is ordinary income TaxWise carries this net amount to 1040 Pg 1 L 15b 16b o You must manually enter the capital gain piece go to Cap Gn Wkt Describe as FROM 1099 R in column 1099 code is C neither code A nor code B applies Sales price is the amount from 1099 R Box 3 Override S T term to be long term Use to remove the red in columns b and c Go to the respective 6949 use to remove the red in columns b and c e Box 5 If the payer has calculated the taxable amount of the pension in box 2 generally the difference between boxes 1 and 2 will appear in box 5 o ForCSA 1099R from the Office of Personnel Management see below on page 34 7 Take care to enter the code shown on the 1099 R o If multiple codes are shown e g 4G enter both codes o Acomplete list of codes is in Pub 4012 page D 20 and indicates the codes that are o
149. p sum payments at the bottom of 1040 Wkt 1 o Enter the amount received attributable to 2014 only for taxpayer spouse the rest of the form is completed by TaxWise from your entries on Lump Sum o Amounts taxable from previous years link to Lump Sum Wkt and complete the form o there is another previous year add another Lump Sum separate worksheet is required for each prior year LINE 21 OTHER INCOME e Use line 21 to report any income not reported elsewhere in the return such as gambling winnings prizes awards jury duty pay Alaska Permanent Fund dividends and recovery of itemized deduction o Note hobby income and other activities not entered into for profit are out of scope e Goto 1040 7 37 10 14 14 INCOME Gambling Winnings Form W 2G Link from 1040 Wkt 7 L 1 to W2G or add it Check the box for taxpayer or spouse at the top of the form The Payer s federal ID number EIN is required Tax Wise will calculate the name code Verify that the payer s name and ID match the W 2G exactly Complete the money fields as applicable matching the paper W 2G Input each W 2G CA Note California Lottery winnings are not taxed by CA o The box on the lower left hand side of this form should be checked ONLY when CA See F 1 Help on the state return for the use of Lottery winnings are being reported this box S This check mark results in the proper adjustment on CA CA for the winnings and asso
150. pe Worthless debts or other types of securities or assets are out of scope 18 If a K 1 reported capital gains or losses enter those directly on Sch D L 5 12 see Simple K 1s under Interest Income on page 23 above Hint Use a Scratch Pad if more than one K 1 All basis reported to IRS If there is only one statement on which all the capital transactions for the year are either Code or Code D direct entry onto Sch D L la 8a is advised in which case it is not necessary to send the transaction detail to the IRS 8453 nor pdf attachment Note If there is more than one statement with Code A or Code D entries it is recommended to use Cap Gn Wkt to document the source of the information and facilitate QR Capital loss carryover Enter directly on Sch D Pg 1 see Capital Loss Carryover From Prior Year s Schedule D below Go to Cap Gn Wkt RULE Except for the limited direct entries on Sch D noted above all capital gain entries MUST be made on the Cap Gn Wkt NOT directly on Form 8949 or Schedule D e Gains or losses requiring Forms 2439 4797 4884 6252 6781 8824 are out of scope e A tax return for a dependent child with more than 1 900 of investment income is out of scope Capital Gains and Losses e Proceeds and basis for sales of securities may be reported on a 1099 or on a brokerage statement together with dividends and interest e Basis also may be obtained from the client the original purchase confirmation
151. pecifically to AARP Foundation Tax Aide The NTTC publishes a comprehensive list of in scope and out of scope forms which can be downloaded from Volunteer ShareNet gt TaxLaw Training gt Site and Volunteers gt AARP Tax Aide Scope Manual Each site should have a printout or electronic version of this document for reference e Regardless of training and or certification if a counselor is not confident in their knowledge of forms and issues relating to a client s return the return will not be prepared by that counselor e When volunteers are not certain that a complete and accurate return can be prepared clients will be referred to either another counselor or site or a paid preparer e California resident tax returns can and should be prepared along with the federal tax return Part year or non resident California returns will not be prepared with the exception of authorized volunteers in the Tax Aide National State Tax Assistance Program e Federal or California returns that require income splitting will not be prepared e g MFS see limited exception for Married Filing Separately below RDP or innocent spouse claims State of California forms and Schedules we can prepare with associated worksheets 3805P Additional Taxes on Early Distributions Part I only 4803e Head of Household Schedule 5805 Underpayment of Estimated Tax only to eliminate penalty CA 8879 E file Signature Authorization 540 California Resident Income Tax Return Sch
152. pg 27 e Property inherited from decedents dying in 2010 has a basis of on the date of death for CA purposes e Federal basis may be different when shown on Form 8939 if so the return is out of scope IRA Basis Difference e Note IRA basis recovery is on Form 8606 Part I for federal e There may be a basis difference for CA as shown in the table below e Client must have records showing the amount contributed for each of these years and the amount deducted for federal and if any o Without records there will be no adjustment of the taxable IRA distribution e Generally CA basis in excess of federal basis is applied to reduce the amount of taxable IRA distribution until basis is the same as federal basis Thereafter no further adjustment would be needed as CA follows federal IRA basis recovery rules CA Pub 1005 has detailed instructions and worksheets Year Federal California 1975 Max deduction 1 500 No IRA deduction Max 1 500 and not allowed if covered by 1982 1986 Max 2 000 with earned income pension plan IRA limited to net federal Sch C income plus IRA limited to CA net Schedule C income if less wages than federal AGI limits increased for deductible IRA for CA AGI limits lower allowed deduction could 2007 2009 2 active participants have been lower 2007 2009 Catch up provisions Non conformity 1987 Present Non deductible contributions Separate election Capital L
153. r Information Check to bill as self prepared return 10 Date o Print as signature checked Preparers name AARP FOUNDATION TAX AIDE Print as signature F PTIN 0 EIN o IRS only checked Firm name Check if also ERO _ 1 Address Check if self employed Preparer s name enter AARP Zip code acids FOUNDATION TAX AIDE Email address Fax i us Non paid indicator IRS only o enter the eight digit SIDN for your site The letter 5 will automatically be entered in the left hand box If the computer is to be used at more than one site create a template for each one Firm name enter your site s name as shown on the confirmation sheet that came with the Tax Wise software AND the SIDN Example Anywhere Senior Center 570050000 Address enter the site s physical address o code enter either the 5 or 5 4 digit code for the site If the auto filled city information is incorrect enter the correct information o Phone enter the site s phone number DO NOT use your phone number as the entry in this box prints out on the client s 1040 page 2 return Lock these entries by using Ctrl L while the field is focused notice yellow and padlock around the locked field this is VERY important e All the other fields should be blank Form 8879 Entries T MINE US 8879 IRS e file Signature Authorization e Your EFIN enter the six digit
154. r expenses related to it on that same Sch C Also check the box on Sch C after the second sentence L 7 Note Schedule SE is not required as Social Security and Medicare taxes have already been withheld and TaxWise handles this correctly if the appropriate boxes are checked e Box 14 Enter the code s and dollar amount s shown on the paper W 2 These entries will not affect the tax return However if there is an entry for a retirement contribution in this box e g RET TS this might be an elective contribution You need to ask if this is the case If so then you need to check the box that generates Form 8880 and fill out accordingly o Do not enter disability in box 14 SDI VPDI etc see Instructions for W2 California W2s Only below RR fields complete to conform to paper W 2 W2 State Section Box 15 Enter the State ID number without dashes or spaces Tax Wise truncates the carryforward for the following year after 9 digits o The State ID number is NOT the same as the federal ID number o If the State ID is blank on the paper W 2 enter six nines 999999 in TaxWise State ID is not required if no state tax was withheld e Box 16 State wages may be different than federal in which case check the take calculations off line 16 state wages box at the top of the TaxWise W2 and enter the correct amount in Box 16 CANote TaxWise does not carry the state wages difference to CA 540 You must manually enter the
155. r more during the tax year o Include a mobile home for which the taxpayer pays rent for the land The residence is not exempt from property taxes The taxpayer did not claim a homeowners property tax exemption at any time during the year If CA AGI is too high or there is no CA income tax 540 Pg 2 L 35 no credit will be allowed o Answer NO to the question Did you pay rent on CA 540 Pg 1 and avoid filling out the renter s credit worksheet If the client is eligible for the credit check the YES box Did you pay rent on CA 540 Pg 1 o TaxWise adds the CA Rent Wkt to the Tree o Complete the worksheet o TaxWise will calculate the credit if the taxpayer s qualifies Complete the worksheet carefully to assure proper credit o Atleast two of the three landlord information fields should be completed name address tel o Leaving a field red will not stop the return from being e filed STATE TAX WITHHELD CA taxes withheld from wages 1099 R or any other 1099 will appear on CA 540 Pg 3 L 71 if properly entered on the respective form Verify CA amounts withheld from all forms 1099 B 1099 INT 1099 DIV were entered and are properly reflected in CA 540 Pg 3L 71 34 line as there is no input form for these CA tax withheld from state only form e g 593 real estate sale must be entered on CA 540 Pg 31 73 linked to CA 593 CA 592 B or a Scratch Pad STATE ESTIMATED TAX PAYMENTS See State Estimated Tax Payments section
156. r or ITIN of spouse available or non resident alien o Approved by the Local Coordinator 13 10 14 14 STEPS IN TAX RETURN PREPARATION Enter the spouse s name and social security number on the Main Info sheet and answer the questions after the MFS filing status box Tax Wise will add 8958 to the Tree and it will be red o Complete the Total Income column as needed o The Total column and the first Allocated column should be the same The headings may be confusing but they refer to spouse 1 and spouse 2 For in scope returns all income must be for the taxpayer spouse 1 There should be no entries in the column for the non client spouse for the situations we handle On 1040 Pg 2 L 39b F3 the MFS box if the taxpayer is eligible to claim the standard deduction This return can be e filed Exemptions Verify if someone else can claim the taxpayer or spouse if applicable as a dependent Check appropriate boxes Dependents Complete information as necessary do NOT enter the last name if it is the same as the taxpayer s e Enter youngest first so that the EIC forms use the most eligible children e Birth Date without the slashes e Social Security Number without the dashes e Relationship to taxpayer choose from the pick list o If an in law use the relationship without the in law e g son in law becomes son e Moin Hm home choose number of months the dependent lived in the home from the pick list o Use 12 for depende
157. re is a line for your principal residence real estate tax e There is another line for other real estate tax note that the real estate can be anywhere U S or foreign CAreceived IRS guidance that real estate taxes do not have to be based on the value of the property this means that the whole amount paid will generally be deductible o Two types of charges are not deductible Services provided to the property like trash collection sewer service fee etc Direct assessments for improvements that tend to increase the value of the property like curbs and sidewalks when not deducted these direct assessments can be added to the basis of the property Sch A Line 7 Personal Property Taxes Not Listed Above CA Vehicle License Fee qualifies as a personal property tax e The total amount paid to DMV includes non deductible registration fees and may include unpaid parking tickets only the VLF amount is deductible This amount may also be listed on the registration card in their vehicle near the bottom coded as e Also include the tax portion of other vehicles registrations boat RV etc Sch A Line 8 Other Taxes e Such as foreign income taxes when not claiming a foreign tax credit see Pub 17 Note No deduction is permitted for foreign income taxes lIfforeign income taxes are deducted for federal an adjustment must be made L 39 second line Sch A Line 10 Interest P
158. re than the total estimates the balance of the refund will be refunded and this will be shown on 040 Pg 2 Checking ALL and asking for equal division will reduce each estimate payment by the same amount o Checking the 1 installment only box will apply the refund only to the first installment and will refund any amount not used for the first installment Ifa client specifies a partial amount of their refund to be applied that does not match or exceed their first installment the amount of applied to the next year s tax shown on the 040ES Pg 1 must be overridden and the partial amount entered o Your site coordinator may have to accomplish the override Payment of Estimates with automatic withdrawal e This can be a big advantage for taxpayers who may forget their obligation to pay estimates on time e They need to be reminded that they must assure that sufficient funds are in their account on the designated withdrawal date e Automatic withdrawal from the taxpayer s bank account is done by using ACH 1040 ES ESTIMATE Goto ACH 1040 ES ESTIMATE e If using ACH for the balance due on the 2014 return you ned to add another ACH 1040 ES ESTIMATE for each estimated payment to be done by direct debit e Note Or taxpayers may use the new direct pay system at IRS gov if they wish to do so CA ESTIMATED TAX PAYMENTS CA 540ES WKT e Ifa client expects a balance due of 500 or more for the next year they may o Increase withholding from their pa
159. ried filing joint filing status Married filing separately filing status National Tax Training Committee Office of Personnel Management the federal agency which pays government pensions Private activity bond Power of attorney Public safety officer Premium tax credit ACA Qualifying widow er filing status Registered domestic partner Routing transit number 9 digit number assigned by the Federal Reserve to identify each bank Single filing status State Coordinator the individual responsible for all districts in the sub state Same as CASDI Site Identification Number A unique seven digit number starting with S assigned to each physical counseling site operated by Tax Aide The IRS Stakeholder Partnerships Education and Communication office Individual shared responsibility payment for ACA Social security Social security number District Technology Coordinator TaxWise Online Voluntary Insurance Voluntary Payment Voluntary Payment Disability Insurance NONE is deductible as a state tax 73 10 14 14 AARP Volunteer Information 2 ACA Advance Premium Tax Credit Repayment 45 Full Year Coverage eee 50 Individual Responsibility Payment 50 Net Premium Tax Credit 52 ACH automatic withdrawal Bal nce due eren ets 58 Estimates oett esee 59 Additional Child Tax Credit 51 Adjustm
160. rior year s state tax information to register for a CSN Board of Equalization Sales tax rate information http www boe ca gov sutax pam71 htm STEPS IN TAX RETURN PREPARATION INTERVIEWING THE CLIENT Review the Client s Intake Interview amp Quality Review sheet Explain the tax preparation process Confirm information provided by the client on the Intake Interview sheet o Complete the dependent information on page 1 as applicable o Complete the health insurance information on page 3 Get client to provide any information that they might have missed on the Intake sheet and write down on the Intake sheet Review all supporting documentation e g social security cards identification W 2 1099 etc Make sure that taxpayer isn t expecting any additional documentation e g 1099 INT 1099 DIV 1099 B brokerage statement Review last year s return if available Confirm that no item is out of scope ORGANIZING YOUR WORK While or after interviewing the client sort all supporting documents by type in the following sequence Supporting Document Enter in TWO Form Last year s tax return Main Info Social Security Cards ID card Main Info Income W 2s wages W2 1098 T Taxable Scholarship 1040 Wktl after all other input Broker Statement Interest Stmt Dividend Stmt 1116 Cap Gn Wkt Sch D if all bases reported to IRS 1099 INT interest K 1 interest or dividends and Funer
161. rmation for each payer Interest Income Go to Interest Stmt tab to first field or the amount field if payer is already shown RULE Interest entries MUST be made using the Interest Statement NOT directly on Schedule B except for seller financed mortgage interest e This information may come from a 1099 INT or OID substitute 1099 INT or OID a brokerage statement or a K 1 hereafter all are referred to as 1099 INT form e Do not leave blank lines between entries o Use Ctrl I to insert a row or Ctrl R to delete row the page refresh may hesitate give few seconds e Only ONE Interest Stmt is allowed per return o Always return to the same one when adding additional entries e If there are entries in both Boxes 1 and 3 for US Government Bond Interest of a 1099 INT enter each on a separate line on the nterest Stmt do not combine the amounts o CA Note Interest income from US Savings Bonds Treasury Bonds and other direct obligations backed by the US Government are not taxed by California and include federal Land Banks and Federal Home Loan Banks They do not include Fannie Mae and Freddie Mac Enter a in the State Adjust column in the Interest Stmt and enter the adjustment amount e Tax Exempt interest on state or local bonds must be included on the Interest Stmt o Enter E and the amount in the NAEOB column detailed description in Pub 4012 o Ifan account has regular and tax exempt interest enter e
162. rn cannot be e filed verify that the following has been done to prevent generating e files Paper is checked under Type of Return on the Main Info sheet for the federal return o CA Note No is checked in response to the question do you want to electronically file this return on CA 540 Pg 5 Update return stage to paper file Click the Print Return icon on the Toolbar Print two copies of the PDF which includes the federal copy attached to the CA if required Note Return stages are set by districts and the values they use may be different than the ones specified here Check with your site manager if the return stage choice isn t obvious Collate the returns Federal according to Attachment Sequence No at the top right of the form CA according to numerical alpha sequence followed by federal return if required o TaxWise prints a notation on Form 540 page 1 when the federal return is required to be attached The taxpayer s must sign the second page of the IRS 1040 AND the last page of CA 540 returns being mailed Attach to the first page of 1040 and 540 returns o W 2s Fed respectively For return only SchW2 may be used in place of W 2s but don t attach both o W 2Gs if tax was withheld Fed CA respectively o 1099 Rs if tax was withheld Fed CA respectively o Any other forms showing tax withheld Instruct the client to mail the returns with any payment vouchers and checks but separate
163. rsed medical expenses can be deducted on A Detail if itemizing CA Note does not recognize HSA see Health Savings Accounts in CA below starting on page 54 Cancellation Of Debt Note COD from credit card debt is part of the advanced certification and in scope for Tax Aide e Cancellation of credit card debt results in taxable income unless an exception applies see Pub 4012 D 32 e exception would make the return out of scope such as o Insolvency at the time of the debt forgiveness o Debt incurred for deductible items that have not been deducted or for which less than full tax benefit was received e Enter the amount of credit card debt that was cancelled and is therefore taxable 1040 7 with an appropriate description e Note all income must be reported on the return whether or not a 1099 was received Medicaid Waiver Payments CA s In Home Supportive Services pays for the in home care of certain needy individuals and reports the payments on Form W 2 the W 2 payer s address is in Roseville e notice 2014 7 the IRS clarified that when such payments represent Medicaid Waiver Payments or difficulty of care payments the payments may be excluded from income o To qualify the care provider and the care recipient must reside together See Pub 525 for more details e Ifthe taxpayer is eligible to exclude the income and wishes to exclude the income o Goto1040 Wkt 7 and on the next available blank line enter the f
164. rship and use tests The client must have owned the property for a total of 24 months of the previous 60 months ownership requirement can be satisfied by one of the two spouses filing a joint return o Theclient must have used it as their principal residence for a total of 24 months of the previous 60 months The use requirement must be satisfied by both spouses when filing a joint return to claim the maximum 500 000 exclusion If only one spouse satisfies the use test the exclusion is limited to 250 000 o The ownership and the residence 24 month test periods do not have to be continuous nor overlapping e The client cannot have sold another property in the previous two years AND used the exclusion e See Pub 17 chapter 15 for more information e If any portion of the client s main home was ever rented out or used for business home office such that depreciation would have been allowable whether or not it was actually claimed the return is out of scope e While the lower portion of Sch D Wkt2 is a sale of your home worksheet it is not required and does not carry to Cap Gn Wkt 8949 nor Sch D e Computing the basis of the home is complicated and may require a complete review of the transactions regarding home purchases and sales since the acquisition of the first home o needs to provide the basis information o Calculation of this basis is out of scope e Ifthe taxpayer received a 1099 S the sale should be included on the Cap G
165. rst four years Education after four years of college as determined by the educational institution is ineligible for the credit These qualifying first four years do not have to immediately follow secondary school and do not have to be continuous there can be breaks in between Up to 40 maximum 1 000 of this credit may be refundable Allowable expenses are tuition fees books supplies and computers required as a condition of enrollment Enter in part III of 8863 note that the credit will be split between 1040 Pg 2 L 49 and 1040 Pg 2 L 66 Amounts paid by others e g grandparents are deemed paid by the taxpayer When the student is the taxpayer and is less than 24 year of age refer to Pub 4012 J 8 which denies the refundable part of AOC in certain circumstances Lifetime Learning Credit All other postsecondary education not covered under the AOC Allowable expenses are only tuition and fees Amounts paid by others e g grandparents are deemed paid by the taxpayer The limit is 10 000 of costs per return regardless of the number of dependents Which education benefit is best If the student qualifies for the AOC in almost all cases it will be the most beneficial credit because Itis a partially refundable credit Eligible expenses include course materials as well as tuition and fees o The AGI limit is higher than the Lifetime Learning credit 47 10 14 14 CREDITS e If the student does not qualify for the AOC because
166. rtcuts not specific to TWO Ctrl C Copies a highlighted selection Ctrl X Cuts a highlighted selection Ctrl V Pastes the selection at the mouse cursor point Not all users will be able to override the Administrator has the capability to prevent users from overriding The standard setting for ReturnPreparer users is to not allow overriding Normally move around forms in TWO is with the Tab key mouse pointer or the Enter key o PgUp and PgDown keys scroll with a form scroll bar on the right hand side of the form can also be used a form Note that the link icon next to certain fields provides functionality based on the field that you are in From left to right the choices are LEE o Link choices provides list of Existing or New links that can be created for v this field 5 10 14 14 TAXWISE ONLINE PROCEDURES o Estimated provides a toggle to make the field required non required o Calculator provides a calculator for this field o provides context sensitive help for this field TOOLBARS The TWO Toolbar icons are dependent on the context that you are using e g you will get one set of icons if you are not in a return and another set if you are in a return It is also dependent on the role you are assigned e g Administrator Return Preparer etc These roles were described earlier The following Toolbars are available in TWO for the most common user roles Refer to the TWO User M
167. s see 1040 Line 10 above on page 25 Tier 1 1040 Line 20 above pg 37 and Tier II railroad retirement benefits 1040 Line 15 16 above pg 35 Unemployment compensation paid by CA or another state 1040 Line 19 above pg 36 10 14 14 52 CA ADJUSTMENTS amp DIFFERENCES Social Security Benefits US only 1040 Line 20 above pg 37 CA lottery winnings 1040 Line 21 above pg 38 lottery winnings from other states are taxable for CA Government agency authorized reward from a crime hotline see Pub 1001 HSA distribution in excess of qualified medical expenses see Health Savings Accounts in CA on pg 54 INCOME INCLUDIBLE FOR CA California taxes certain items not taxable on the federal return e Wages HSA employer contributions see Health Savings Accounts in CA on pg 54 Interest from non CA state and municipal bonds see 1040 Line 8 above on page 21 Interest or other income earned in an HSA see Health Savings Accounts in CA on pg 54 Dividends from non CA municipal bond funds see 1040 Line 9 above on page 23 Retirement payments from foreign governments such as Canadian OAS CPP QPP or German Social Security see 1040 Line 15 16 above pg 35 e Discharge of indebtedness excluded for federal in excess of CA limits 1040 Line 21 above pg 39 Military Income e See Pub 1032 for differences must be Military certified Inherited Property Basis Difference 1040 Line 13 above
168. s considered unmarried but does have a dependent parent s for which the taxpayer paid more than half the household expenses The taxpayer must have lived apart from their spouse RDP for the last half of the tax year See Form 540 instructions The credit is input on CA P Pg 2 Section Bl if the taxpayer qualifies click the button on L 15 The credit is 3096 of the tax due CA 540 Pg 2 L 35 limited to a credit of 425 The credit cannot be claimed if the Joint Custody HoH Credit code 170 is claimed o Properly TaxWise will not permit both credits to be claimed Senior Head of Household Credit Code 163 CA 540 Pg 3 L 43 44 This credit is available for a person 65 or older who o qualified as head of household for 2012 or 2013 o does not qualify for HoH in 2014 because the qualifying relative for HoH died in 2012 or 2013 o AGI does not exceed 69 005 for 2014 caution TaxWise may not apply this income limit properly See Form 540 instructions Eligibility for the credit is input on CA P Pg 2 Section if the taxpayer qualifies check the box on L 16 The credit is 2 of Taxable Income Line 19 but not more than 1 300 for 2014 caution Tax Wise may not apply this income calculation properly Child Adoption Credit Code 197 out of scope Renter s Credit non Refundable CA 540 Pg 3 L 46 CA AGI must be less than 37 768 in 2014 or 75 536 for MFJ HOH or QW Rent was paid on a principal residence in CA for 6 months o
169. s If dependent care benefits were paid by the employer make sure that this amount has been entered correctly on W2 CA Note CA also has a nonrefundable credit for Child and Dependent Care Expenses o When 2441 is completed TaxWise adds CA 3506 to the Tree and carries the information from 2441 o Answer questions at the top of the form o Note CA 3506 Part I regarding other funds received is not required this field can be left blank o 3506 Part IL two addresses are needed provider s business address The location in CA where care was provided o Complete CA 3506 and get the red out 10 14 14 46 CREDITS LINE 50 EDUCATION CREDITS If the taxpayer paid or used loans for qualified expenses for themselves or a dependent to enroll in or attend an eligible educational institution an education credit may apply o Schools that qualify are listed at https fafsa ed gov FAFSA app schoolSearch locale en_EN A dependent cannot take either credit but they can report taxable scholarship income if they have any If taxpayer could be claimed as a dependent by another taxpayer Main Info sheet question 6 a answer the question at the top of 8863 Pg 1 The taxpayer can use ONLY ONE credit per student o Complete 8863 Pg 2 for each student for which a credit is claimed add more 8863 Pg 2 as needed Expenses used for calculating either credit must be paid during the tax year The student should receive a Form 1098 T from the
170. scope PAYMENTS AND REFUNDABLE CREDITS LINE 64 FEDERAL INCOME TAX WITHHELD e Federal tax withheld is transferred to this line from entries on W2 and some 7099 e For 1099 withholding not listed elsewhere e g 1099 B enter on the line immediately below L 62 o If there are multiple amounts link from that field and enter a Scratch Pad LINE 65 AND 540 LINE 72 2014 ESTIMATED TAX PAYMENTS e These are payments that the taxpayer HAS MADE using either 1040ES federal and or 540ES for the CURRENT tax year Goto F S Tax Paid worksheet e Note See Estimated Tax Payments For Next Year on page 58 to prepare payment vouchers for NEXT year s estimated tax payments as well as applying any overpayments refunds from this return to the NEXT year s estimated tax Federal Estimated Tax Payments e Enter any overpayment amount from last year that was credited toward estimated taxes for the current year e Enter payment dates shown on taxpayer s checks e Enter actual amount paid in each quarter 10 14 14 50 PAYMENTS AND REFUNDABLE CREDITS e fields to the right are calculated fields do not attempt to change these fields State Estimated Tax Payments Middle section on the same form e Note that this section loads horizontally unlike the federal All payments for state taxes for any tax year made during the tax year will be transferred to Sch A The payments for the current tax year will be transferred to the CA
171. se pad in laptop case making sure the computer s identifying number matches the number on the case e Shut down the printer s and return to box es along with extra printer paper and instruction manual e Turn off unplug router and or switches and store them along with the cables KEYBOARD SCREENS ETC Privileges e Counselors may assume different roles in TWO based on the security settings established by the TWO Administrator e There are 7 roles Admin SuperUser ReturnPreparer Template Manager Interviewer Reviewer and E file Manager e The majority of counselors will be assigned the ReturnPreparer role e The roles and Toolbar choices available for roles are outlined in the following table only the most common roles are listed for other roles refer to the TWO User Manual 3 10 14 14 TAX WISE ONLINE PROCEDURES Tasks that can be done via Toolbar Icons Interviewer ReturnPreparer SuperUser Reviewer Start a New Return Yes Yes Yes Yes Open Return Your own Your own All All Submit e files No No Yes No View Acks No No Yes Yes Create Client Letters No No No No Create Return Templates No No No No Lock field on a Template No No No No Return Query Your own Your own TWO Reports No No Yes No Reports Server No No Yes No Change Program Settings Subset Subset Subset Subset Manage Users No No No No Print Checks N A N A N A N A TaxWise
172. sed the auto refresh feature is disabled it refreshes when you go to another form or close the return still the input is saved e Any time the program freezes you should go back over your last few entries to make sure that the data was saved properly Deleting E Files in TWO e If you mistakenly create e files e g not ready to file you should delete the e file so the ERO won t have an e file loaded for which he she has no paperwork to accompany the return delete the e file o Remove the e file authorization date from the Main Info sheet o Then close the return this will erase the e file Restoring Deleted Returns e Multiple returns can be restored using the Restore Returns feature e Ifthe SSN of a deleted return taxpayer is entered in the New Return dialog box Tax Wise will advise that there is a deleted return and give the option of using it SITE SPECIFIC TWO ENTRIES Reference IRS Pub 3189 TaxWise User Manual amp Tax Aide materials for all other settings e TWO has a Master Template on which you can base the site template or if you have been subscribed to the AARP National Template or a state template you can base the site template on one of them For TWO the Main Information Sheet and Form 8879 are in the Return Templates TaxWise Online allows you to create templates in Training and Publish to production e Login as Admin Client Login pt by comgieting the form below Enter y
173. starting date of the payments was prior to July 2 1986 and there is no entry in 1099 R box 2 the entire amount of the taxpayer s contribution probably would have been recovered under the Three Year Rule and you should clear the red from box 2 with F3 The entire amount in box Iwill show as taxable on 040 Pg 1 If the annuity start date is after July 1 1986 1099 R box 2 is blank and there is a total employee contribution amount in box 9b o Enter the total amount of employee contributions from 1099 R box 9b on L 1 of the simplified method worksheet o Check the appropriate box for the primary annuitant s age when the annuity payment started even if the employee subsequently died not his or her current age If the employee died before starting the annuity and the surviving spouse is collecting the benefits use the surviving spouse s age only Depending on the annuity start date you MAY have to check one of the two boxes relating to annuity starting date Note that the second box is used ONLY if this is a joint or survivor annuity in which case the combined ages at the time the annuity started must also be checked Note the joint or single determination is made when the annuity starts subsequent changes are disregarded e g death or remarriage 33 10 14 14 o Errors in checking these boxes WILL result in an incorrect tax exempt amount o Fora Joint and survivor annuity check the combined ages of bot
174. t Print Return on the Toolbar and click to open PDF file in a new window then click the print icon Go over the entries in the federal return with the taxpayer Review the entries in the CA return with the taxpayer Does the taxpayer understand the returns If prior year return is available you may review differences with Taxpayer Summary form may also be used e When satisfied that the returns in good order continue PRINTING RETURNS e Click on Print Return on the Toolbar This assumes that the print sets are setup by your TC or LC o If not your LC will have to provide printing instructions e pdf file will be created and can be scrolled through to see what will print e Print the pdf file or select the forms to be printed and print e Note After printing a return collate according to the Paper Return assembling instructions on page 64 below Printing Individual Forms e Print sets print only those forms that have been used on the tax return e Occasionally this can prevent a needed form from printing as in the following situations Itemized interest and or dividends on Schedule B are less than 1 500 TaxWise recognizes that Schedule B is not required and does not print it Sch can be printed for the taxpayer s copy of the return o Itemized deductions apply for state but not for federal TaxWise applies standard deduction to federal and does not print Schedule CA Sch A be printed for the taxpay
175. tachments on page 64 Power of Attorney POA If an agent is signing the return for a taxpayer a Power of Attorney POA must be submitted see the following section for attachment instructions 63 10 14 14 FINAL STEPS TAX RETURN PREPARATION For POAs the preparer must add 2848 Power of Attorney and Declaration of Representative and check the box which states check here if using this form o Shred the 2848 when it prints with the return o Instead the POA provided by the taxpayer s agent will be used Note A Power of Attorney expires when a person dies Using 8453 or Scanning PDF Attachments Two copies of printed Form 8453 and attachments shall be given to the ERO who sends one copy to the IRS Processing Center in Austin TX and the other copy to their IRS SPEC representative o The ERO can get mailing labels from their SPEC representative Sites may use attachments scanned as pdf files but must securely delete any files after their use is over In Tax Wise either 8453 or scanned pdf option may be selected o If scanning a broker s statement check the appropriate box at the top of Sch D o If scanning 8332 or divorce papers check the appropriate box on the Main Info sheet below Noncustodial Parents o If scanning POAs or other authorizing document check the appropriate box es at the top of 2848 o Note TaxWise automatically adds 8453 when it is needed PAPER RETURNS When paper returns are required because the retu
176. tatement o Taxable on both the federal and CA returns o Enter 100 in the Box 1 or 3 Amount column and 40 in the Early Penalty column e Example C 666 interest from a bond issued by the United States Government reported on a 1099 INT Box 3 substitute 1099 INT a statement from the US Bureau of Debt Treasury Direct or brokerage statement o Taxable on the federal return exempt on the CA return o Enter 666 in the 1 or 3 Amount column o Enter 71 e Example D 111 interest from a CA municipal bond reported on a statement issued by the state municipality or a brokerage statement o Not taxable on either the federal or CA returns no state Adjustment required o Donotenter anything in the Box 1 or 3 Amount columns o Enter an E in the column headed NAEOB and 111 in NAEOB amount column Example E 333 interest from a state OTHER THAN CA municipal bond reported on a statement issued by that state or a brokerage statement o Not taxable on the federal Return taxable on the CA return o Donotenter anything in the Box 1 or 3 Amount columns o EnteranE in the column headed NAEOB and 333 in NAEOB amount column o Enter in the column and 333 in State Adjustment Amount column e Note Mutual funds now report distributions as dividends even if they originate from interest earned on the fund s portfolio see L 9 Dividends below in the column and 666 in the State Adjustment Amount column 10 14 14 22 INCOME OID Interest
177. tax for the year of the refund If the NO box is RED and unchecked it may be necessary to check YES and then NO and again YES to remove the RED e Ifsome or all of the refund could be taxable add the State Tax Refund Worksheet St Tax Refund o Note You MUST have the prior year s tax return to accurately complete the worksheet if the needed information is not carried forward by TaxWise e Line 2 General Sales tax must be calculated if not shown on the prior year s return or if not carried forward o Use the IRS calculator at http www irs gov Individuals Sales Tax Deduction Calculator Ifunable to access the internet refer to prior year s Duckbook e Enter the filing status on L 7 and number of taxpayers over 65 in prior year or blind on L 8 e TaxWise will calculate the standard deduction on L 9 e Ifthe prior year s return is NOT available select SUMMARY form from the Tree to see prior year if this is a return with carryforward data and it is likely that there were itemized deductions enter the entire refund amount directly on 1 040 Pg L 10 for Taxable Refunds o Note If this line has been linked to the State Refund Worksheet see Field is yellow resulting from linking in error under Confusing Situations in TaxWise on page 8 CA Note State taxes are not deductible on the CA return Therefore refunds of any state taxes are not CA taxable TaxWise makes the adjustment on CA CA 25 10 14 14 11 ALIM
178. tax return as taxes paid Enter payments made for prior years on the applicable line Indicate with a if the Q4 2014 payment was made before 1 1 2015 so that it will be deducted this year if itemizing Checkthe column ifpayment4 was paid before 01 01 2014 ga yg gc yn ceca Taxpayer Joint or Combined State Ret For a spouse filing a married separate state return ora second full year resident state page down to list the estim ated payments made to that state Do not override the st t column Credit from 04 15 2013 06 15 2013 09 15 2013 01 15 2014 last year Amount 1 Amount2 Amount3 Amount 4 _ F eee Pee mh FIC is available to people who have earned income subject to income limits and generally have at least one qualifying child e tisarefundable credit it is not necessary to have federal tax to claim the credit e Higher income limits apply when there is more than one qualifying child up to three children e Taxpayer may claim a child for EIC that lives with the taxpayer even though that child cannot be claimed as a dependent because the child provided more than one half of their own support or because the noncustodial parent is claiming the dependent o Use code 0 on the Main Info sheet in the dependents section code column e When dependents or nondependents are included on the return the EIC box on the Main Info form must be checked next to d
179. taxable amount is reflected in box 14 and on 7040 Pg 1L16b The taxable amount in 099R box 2 will remain at 0 this is ok e Note Print the simplified method and attach to client s copy of their return for future reference o Use PrtScn to capture the image and print it e CANote If the annuity start date was after 7 1 1986 and before 1 1 1987 the 3 year rule could have been used for CA even though it was not allowed for federal If so make an adjustment on CA L 16 to increase the taxable retirement income for an amount equal to the federal simplified method basis recovered 7099 simplified worksheet L 6 Office of Personnel Management OPM CSA 1099R The OPM reports annuity payments using the CSA 1099R which places information in a different sequence PAID OFFICE OF PERSONNEL MANAGEMENT STATEMENT OF ANNUITY PAID 201 4 RETIREMENT SERVICES PROGRAM Copy B File with Federal tax ret Fron P O BOX 45 Retrerser oc Poft BOYERS PA 16017 0045 Plans IRAs Contracts Federal Income Tax Withheld PAYER s Federal Hdentificabon Recpient s ID No Account number Retirement Claim No nployee Contribions Designated ROTH Contributions PAID Insurance Premiums TO gt 7 Dwinbution Codes 7 WONDISABILITY hma T This information is being furnished to the Form CSA 1099R Rev 1 2009 Department e IRS Publication 72
180. taxpayer Estates of decedents dying in 2010 could have made an election for a carryover basis that would be shown on a Form 8939 provided by the estate If so use basis provided and original purchase date Taxpayer may also provide the necessary information CA Note The basis for CA is FMV at date of death in all cases An adjustment will be needed on CA D if the Form 8939 has a value other than FMV Adjustments Ifa transaction was reported 1099 B with basis reported to IRS BUT the basis is incorrect Enter an adjustment code and the amount of adjustment in the adjustment column o If an incorrect basis is shown in box of 1099 B but basis was NOT reported to IRS enter the correct basis in the cost column and in the adjustment column enter Code B and 0 amount o Wash sales reported on brokerage statements are in scope use code W The broker will adjust the basis of the re acquired securities no further adjustment will be needed Wash sales not fully reported on 1099 B are out of scope Tax Aide list of codes that are in scope or out of scope are in Pub 4012 starting at page D 16 Last return to Sch D Pg 1 and make sure the amounts are in the proper locations and add up to the same total as on the client s pages or brokers statements If federal tax has been withheld on the 1099 B or broker s statement you MUST o Go to 1040 Pg 2 L 62 federal income tax withheld second field o Linktoa Scratch Pad o Enter the
181. te CA 3567 is used to request installment payments o 34 filing fee applies Hardship extension of time to pay e Note Form 1127 may be used request an extension of time to pay due to undue hardship not available on Tax Wise Late Filing e tax is due or the taxpayer is due a refund there is no penalty as long as the return is filed within three years of the due date e Penalties if tax is owed o The interest on the amount past due can vary by quarter For all of 2014 it is 3 per year for each federal and CA compounded daily The late filing penalty is 5 per month of the unpaid tax up to a maximum penalty of 25 of the amount due for each federal and CA 65 10 14 14 END OF SHIFT Jf the return is filed more than 60 days late the minimum penalty is 135 or the full amount of the tax due whichever is less Refunds e There is a deadline for claiming refunds e For federal three years from the date the return was due e g the last day for claiming a refund on 2011 return will be April 15 2015 For CA four years from the due date of the return e g the last day for claiming a refund on 2010 return will be April 15 2015 Prolonged Failure to File e Unlike the three year deadline for refunds there is no limit on how far back the IRS can go in assessing taxes for non filed returns e Repeated failures to file could result in criminal charges which carry a maximum fine of 25 000 and one year in priso
182. the defaults are set to zero the penalty e If 2210 Pg 1 Pg 4 appear on the Tree with an exclamation point TaxWise has computed a federal penalty Hint Do NOT simply go into form 1040 and delete the penalty This will cause a transmission reject even if the amount is as small as 1 00 e Goto 22 0 Pg 1 and DO ONLY THE FOLLOWING nothing else o Enter a value of 1 on Line 8 last year s total tax liability DON T do anything else o The remaining red fields will correct themselves 2210 becomes inactive in the Tree and the form is not transmitted with the e file Clear CA Penalty e If form 5805 Pg 1 Pg 3 appears on the Tree with an exclamation point TaxWise has computed a CA penalty Hint Do NOT simply go into form 540 and delete the penalty This will cause a transmission reject even if the amount is as small as 1 00 e Goto CA5805 Pg 2 and DO ONLY THE FOLLOWING nothing else o Enter a value of 1 on Part II Line 5 last year s tax liability DON T do anything else The fact that some fields remain red is okay 5805 becomes inactive in the Tree and the form is not transmitted with the e file INJURED SPOUSE CLAIM e If there is a refund due because of withholding or estimates paid by taxpayer and that refund will be offset by debts of the spouse that originated before marriage the taxpayer may request that a Form 8379 be filed with the return Because 8379 requires income splitting it is out
183. the marriage is dissolved by divorce or death This applies equally to common law marriages o It also applies if the spouse resides outside of the US e In the event the spouse does not have a social security number or ITIN the primary taxpayer is still considered married and must file MFJ MFS see Married Filing Separately exception below or HoH o Note If the spouse is a nonresident alien an election can be made to be treated as a resident in which case the spouse s worldwide income must be included in the return If the Taxpayers wish to make this election they must be referred to a paid preparer 10 14 14 12 STEPS TAX RETURN PREPARATION Head of Household o Consider whether one of the special situations applies that allows the married person to claim HoH status if all requirements are met married but lived apart nonresident spouse o Enter a name of a qualifying person only if they are not a dependent Deceased Spouse Taxpayer If filing MFJ and the primary listed on the prior year s return has died there are two choices Start a new return listing the survivor as the primary Carryforward the information from the prior year make the survivor as primary and make changes as needed be sure all TP or Spouse boxes are correctly checked on forms especially W2s or 1099s Enter date of death in the appropriate field If this is a joint return based on the filing status of MFJ TaxWise will automatically show the retur
184. they are not a half time student or are not in their first four years of college the Lifetime Learning credit should be claimed unless a Sch C business related expense is available and better e The recommended procedure to determine which education credit Lifetime or AOC is better o First complete ALL other aspects of the return Then o Enter amount information for the Lifetime Learning credit Note the tax result and remove the information o If business related enter on Sch C and note the tax result o Enter amount information for the AOC if the individual qualifies Note the tax result if this produces the best result you are done Otherwise remove the AOC Credit and o Re input the Lifetime Learning Credit or Sch C whichever produced the best result o If there are multiple students proceed one student at a time All various combinations should be tried e Note that if an education credit calculates to zero you MUST remove the 8663 or the entries from the Tree otherwise it will cause an e file reject e Note Education expenses that are not claimed for the credit may be taken as an unreimbursed business expense on Sch C or Sch A IF they otherwise satisfy the requirements for deductibility Note CA has no education credits If a Sch C or Sch A deduction is proper enter an adjustment on CA C or CA A using a Scratch Pad LINE 51 RETIREMENT SAVINGS CONTRIBUTION CREDIT Goto 8880 added to the Tree when a retirement or
185. tion number e g ITI N0 0001 will be assigned but will not print on the return Prepare the tax return Return cannot be e filed Taxpayer will complete W 7 Taxpayer will submit the paper return together with the W 7 and required documentation to the following address and not to any other IRS office IRS ITIN Operations PO Box 149342 Austin TX 78714 9342 Taxpayer may alternatively submit the W 7 and required documentation to an IRS Acceptance Center or an IRS authorized Acceptance Agent authorized to review the information o Local Acceptance Agents be located on www irs gov under Acceptance Agent Program State return should be paper filed with Applied For written in the SSN field o should contact the FTB once the ITIN is received 1 800 852 5711 Taxpayer has valid ITIN from prior years Client should bring their IRS letter that assigned their ITIN Check documents to make sure name is correct SSN will be incorrect Create the return using the ITIN as appropriate for the primary or secondary taxpayer For W 2 forms with the incorrect SSN enter the incorrect SSN that appears on the paper W 2 issued by the employer return can be e filed For 1099 R forms with the incorrect SSN submit as paper return If documents have an incorrect name submit as paper return Taxpayer now has a valid SSN previously filed using an ITIN Prepare return E file using the SSN Amend the prior year s returns 69 10 14 14 TROU
186. to that person Pub 525 and Medicaid Waiver Payments on page 39 if this income is excludible Verify that the employer s name and ID match the W 2 exactly as the e file may reject if these do not match IRS records TaxWise will calculate the Name code field Employee SSN when filing under ITIN If the employee is filing using an ITIN the paper W 2 will have a SSN that is not theirs There will be a check box on the last line of the top portion of the W2 that will be automatically checked if an ITIN is used o Type in the employee s ID number exactly as shown on the paper W 2 Employee SSN incorrect If the taxpayer has a SSN and the SSN is incorrect on the W 2 document the employee must request a corrected W 2 from their employer If a corrected W 2 cannot be obtained do not change the correct SSN on the TaxWise W2 form to match the incorrect SSN paper W 2 The return may need to be paper filed and an explanation noted about the erroneous SSN A W 2 without any SSN is not considered valid so the return cannot be prepared by Tax Aide W2 Dollar Value Boxes The entries in this section must be an exact match rounded of the paper W 2 After you complete the W2 data entry skipping boxes 3 to 6 check to see if the amounts in Boxes 3 4 5 and 6 agree with the paper W 2 If they are different check the box labeled Check to take calculations off lines 3 4 5 and 6 at the upper left and enter the correct data in t
187. tter to enter the cents value and let TaxWise do the rounding e The general rule is to NOT use any punctuation double spaces or dashes however there are limited exceptions o Double spaces create a diagnostic error that is hard to find e When a pick list of values is available for a field highlight the field and click the drop down arrow to display the list and then click on the desired value o Verify that result is as desired e Linking is accomplished by using the F9 key or clicking on the the existing or new tab as applicable and then the form you want e Insert Delete rows is accomplished by clicking in the row to be deleted added and pressing or CTRL R respectively e The cursor can be located by noting the darker shade of gray in the field e Understanding the colors of the fields in TaxWise is important The colors are either of the two following and available to all users 10 14 14 P icon to the right of the field and clicking TAX WISE ONLINE PROCEDURES o With High Contrast Color Scheme in the TWO Toolbar Settings gt Display gt Use High Contrast Color Scheme Yellow calculated entries or linked to another form Light gray non calculated entries Dark blue overridden entries Orange with double red underline required entry or validation Solid red data entry error o Without High Contrast Color Scheme Light gray with green underline calculated entries or linked to another form
188. ull amount received that may be excluded as a negative item with the description Notice 2014 7 Itis all or nothing the taxpayer may not exclude a portion of the income e Caution when the income is excluded it is no longer earned income for EIC or other benefits and you may need to reduce earned income in these calculations for the amount of W 2 income excluded as Medicaid Waiver Payments exact TaxWise specifics are not available as of this writing 39 10 14 14 ADJUSTMENTS TO INCOME Go to 2441 Pg 1 Go to Sch EIC Wkt Figure your credit section at the bottom Go to 8812 Pg 2 Part II Note in each case reduce earned income as needed fno special line is provided use a scratch pad to adjust the earned income amount Avoid overrides as other calculations may be affected e You should test which way is most advantageous for the taxpayer to exclude or to not exclude o Note if excluded the waiver income is not part of MAGI for ACA purposes neither 8962 nor 8965 e Note CA conforms to the federal treatment stated above e Note Double check the nonrefundable dependent care credit CA 3506 to make sure TaxWise has carried the correct amount of earned income Oo ooo Other Income Without A Supporting IRS Form Go to 1040 Wkt 7 and enter on appropriate line describe source if necessary e This includes poll worker income medical study income jury duty pay among others Entering Multiple Types Of Other Income
189. ut of scope o In TaxWise view a listing of all codes F1 gt Index gt 1099 R Codes for Box 7 If IRA SEP box is checked o Confirm with the taxpayer the type of IRA traditional or Roth and whether it is a Roth conversion o Conversion from a traditional IRA to a Roth IRA requires completion of Form 8606 out of scope o A qualified distribution from a Roth is in scope even if coded J or T incorrectly see 099R Exclusion Worksheet Line 5 on the next page o Distribution from a converted Roth is out of scope if any portion of the distribution is or could be taxable Note that the 5 year rule applies to each conversion distribution from SEP or SIMPLE plan is in scope if 100 is taxable 31 10 14 14 e Check if disability and taxpayer is disabled entry below box 7 the 7099 MUST be checked if the pension or annuity is being paid as the result of disability code 3 in box 7 and the client is under normal retirement age for that company The pension amount will show up on 7040 Pg 1 L7 as wages and eligible for EIC e Check to Force Form 5329 box If there is an early distribution surtax because the taxpayer is less than 59 years old the surtax will show in the Other Taxes section of the 1040 Pg 2 L 58 and no 5329 is required o However if there is an exception to the surtax check the box to force a 5329 5329 the amount subject to the surtax is shown on line 1 view the e
190. were received and estimates for missing income or deduction items o Enter the amount to be paid if any on 4868 L 7 o Extensions can be e filed or you can print Form 4868 so the taxpayer can mail the form with a check for amount due Note E filing must be coordinated with and approved by your ERO o Atsome later date the taxpayer s will need to file the return which will almost always be after April 15 when Tax Aide services are no longer available except for limited sites When there is a payment due for CA o Complete the direct debit information on CA 540 Pg 5 or Go to CA 3519 and check the box at the top of the form Inform the client that the returns must be complete and filed by October 15 Be careful if you print copies of the return as it is not complete has not been filed and may lead the taxpayer to believe that a return was filed by Tax Aide o To remove doubt it is suggested that you use a watermark or manually write on the return that it is a draft and has not been filed REPORTING amp SITE LOGS AARP Foundation must track counseling activity at each site as this is the basis for the IRS grant In addition the site ERO needs to track e file activity Sites use various logs which may include Site Sign in to keep track of taxpayers in order to determine the sequence of service o Tax Aide Site Sign in Sheet to track counseling services provided which is summarized by the Local Coordinator and reported peri
191. wever since the amended return cannot be e filed employer or payer names usually do not need to be entered o Donotenter the original return numbers directly on the 1040 screen as some items such as taxable social security or allowable medical deductions may change with the adjustment in income e If amending a current year return make a note at the bottom of the Main Info sheet why an amendment was filed and the date o Change the type of filing from e file to paper on both the federal and CA o Update the return stage according to local instructions Before Making Changes e Reconfirm that all data conforms to the last determined amounts for both federal and California returns e Lock the amounts in Column A Original Amount data o Federal return Go to 1040X Pg I Check the box on the first line to Override the original entries in column A before making any changes to any forms o California return Goto CA 540 X Pg I Check the red box above L la State wages to Override all original entries in Column A before making any changes to any forms Make Required Changes e Go through each form that requires revision and make the necessary changes This updates both the federal and returns DO NOT make numeric changes directly on 7040X or CA 540X e Once all changes are completed and both revised returns are correct Open each page of 040 and complete any remaining red fields Open each page of CA 540X and complete
192. who is not a member of their tax family o Filing a return separately from their spouse Taxpayers who marry during the year may make an alternate calculation Form 8962 Part 5 Note Taxpayers receiving APTC should notify the exchange when they have a significant change to their income or family 45 10 14 14 CREDITS CREDITS Non Refundable Credits Non refundable credits offset tax due whereas refundable credits may generate a refund Note even if the Line 46 tax is zero some or all of the Child Tax Credit may become a refundable Additional Child Tax Credit The existence of nonrefundable credits in excess of the amount allowed in a year may affect other calculations e g the amount of capital loss carryover that received tax benefit o Enter all eligible credit information LINE 48 FOREIGN TAX CREDIT Foreign tax reported on Form 1099 INT 1099 DIV K 1 or substitute payee statement up to 300 single or 600 joint should be entered directly on the top of TaxWise 1116 see above at p 25 o Usea Scratch Pad if there are multiple payments When foreign taxes exceed these limits the Taxpayer is not eligible to use the simplified limitation method o Anitemized deduction would be available o Orthe Taxpayer should be referred to a paid preparer to complete a full Form 1116 Foreign taxes paid coming from other forms or sources make the return out of scope LINE 49 CREDIT FOR CHILD amp DEPENDENT CARE EXPENSES Refer to
193. xception to surtax codes Use F1 to reach TWO Help Click Index in the lower left panel Click on Exception Codes for Additional Tax on Early Distributions o Enter the appropriate code on 5329 L 2 and the amount NOT subject to additional tax on L 3 e 9b is the total employee contributions to the plan o The annual recovery of basis or investment in the contract may appear in box 5 Caution you cannot always tell if box 5 is recovery of employee contributions or something else unless it states so on the 1099 R or in an accompanying document If the amount in box 5 is equal to box 1 minus box 2 it confirms that the box 5 amount is the annual recovery of the employees basis o If an amount appears in 1099 R box 9b and a taxable amount is not shown in box 2 the taxable amount 1099R box 2 remains blank and red until you complete the 099R Simplified Method section described below on page 33 this will also get the red out e If this is a Total Distribution 1099 R box 2b the remaining employee contribution may appear in box 5 If box 5 is greater than box 1 there may be a loss on the annuity which may be deducted if itemizing see Miscellaneous Deductions 2 and not 2 below starting on page 44 e Note Survivor benefits attributable to service by a public safety officer who is killed in the line of duty before 1 1 1997 are excludible from federal income tax o The taxpayer may receive a 1099 R form with 0 taxable in box 2
194. ychecks form DE 4 available from their employer o Increase withholding from their retirement income form DE 4P available at www edd ca gov 59 10 14 14 FINAL STEPS TAX RETURN PREPARATION Note State tax cannot be withheld from social security nor from unemployment o If withholding will be insufficient they should make estimated payments in order to avoid penalties e estimated payment requirements are slightly different from the IRS requirements but are generally close enough that the same procedures can be used to estimate the tax e Goto CA 540ES and use the same process for calculating the estimated tax as used for federal e estimates are distributed 30 to first quarter 40 to second none to third and 30 to fourth quarter e You must print four individual pages including the worksheet in TaxWise if printing the ES forms only or generate the PDF for the return and print only the estimated tax payment voucher pages e Electronic funds withdrawal o After completing CA 540ES Wkt go to CA 540 Pg 5 bottom of page to specify which estimates are to be automatically withdrawn PRINTING BLANK ESTIMATE FORMS e TaxWise requires an entry on 040ES Pg 1 and or CA 540ES Wkt o Enter 1 on 040ES Pg 1 L 15 Income tax withheld o Enter 1 on CA 540ES Wkt L 20 Income tax withheld o Print each page FINAL STEPS IN TAX RETURN PREPARATION COMPLETE PREP USE FORM e Answer the questions on the form if the Taxpayer
195. years can be downloaded from the IRS web site AMENDED RETURNS Counselors who have been certified for the prior year to be prepared or for at least two years may prepare prior year returns Only the last three years returns may be amended in Tax Aide taxpayers needing older returns should be referred to a paid preparer e Amended returns CANNOT be e filed e When amending a federal return check to see if the CA return also needs to be amended o Both be easily done at the same time on the computer o An adjustment letter CP2000 is not a reason to amend a return 10 14 14 66 OTHER RETURNS o However if the federal adjustment proposed is correct and is accepted a CA amended return may be necessary to agree with the adjusted 1040 e There will be instances when the federal return rejects and the necessary correction s change the state return amounts If the state return has already been accepted the ERO will have to generate a state amendment and arrange for the taxpayer s signature and mailing e If amending a prior year return confirm you are working in the software for the applicable year e Prior year returns can be accessed only if the return was prepared in TWO for that year o If have a access to the original return open that return o If not anew return may be prepared and amended Enter information from the original return on appropriate supporting form screens using information from the original return Ho

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