2014 Tax Season PTIN requirements Common Tax Issues Bank Product - - PowerPoint PPT Presentation
2014 Tax Season PTIN requirements Common Tax Issues Bank Product Credits Information Whats New for Tax Information needed Season 2011 from Taxpayer Compliance and Filing Status Due Diligence Dependent
Information
from Taxpayer
Information
Credit (EITC)
Season 2011
Due Diligence
must have completed 15 hours of CE credits by December 31, 2013.
must renew/apply for their PTIN by December 31, 2013. Costs $64.25 to start, then $63.00 per
available from October 16 through December 31 annually.
in payment with the Form W-12.
PTIN Application
Many tax return preparers will be required to file tax returns electronically.
phased in as follows:
–Tax preparers who prepare 11 or
more individual or trust returns in 2013 will be required to e-file.
product has been called a Bonus Deposit or Bonus Check.
COLLECT FEES UP FRONT, FEES will be taken out of the taxpayers check!
(ERC) – Customer will receive refund check within 8 – 15 days and will be printed in the office that filed the return. All fees will be taken out of the check, so taxpayer does not have to pay out of pocket for return.
existing checking or savings account
e-file it and the customer has their refund mailed to their home
mail it in. This process takes the longest to receive their refund
MUST BE PAID FOR BY THE TAXPAYER BEFORE BEING TRANSMITTED AND BEFORE THE TAXPAYER IS GIVEN A COPY OF THE RETURN!!!!!
documents.
no less than three years.
You must determine your filing status before you can determine your filing requirements, standard deduction and correct tax. You also use your filing status in determining whether you are eligible to claim certain deductions and credits.
status depends on whether you are considered unmarried or married on the last day of the tax year.
purposes, a marriage means only a legal union between a man and a woman as husband and wife.
unmarried for the whole year if, on the last day of the tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree.
married for the whole year is on the last day of the tax year you and your spouse meet any of the following tests:
There are two types of exemptions: Personal exemptions and exemptions for dependents. While each is worth the same amount ($3,650 for 2011), different rules apply to each type.
You can claim an exemption for a qualifying child or qualifying relative only if the these three tests are met.
1.Dependent taxpayer test.
These three tests are explained in detail later.
Overview of the Rules for claiming an Exemption for a Dependent
a dependent by another person, you cannot claim anyone as a dependent. Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent.
as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident
some part of the year.
There are five tests that must be met for a child to be your qualifying child. The five tests are:
1.Relationship, 2.Age, 3.Residency, 4.Support, and 5.Special test for qualifying
child of more than one person.
To meet this test, a child must be:
Your son, daughter, stepchild, foster child,
grandchild) of any of them, or
Your brother, sister, half brother, half
sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them.
To meet this test, a child must be:
Under age 19 at the end of the year, A full-time student (post secondary) under
age 24 at the end of the year, or
Permanently and totally disabled at any
time during the year, regardless of age.
To meet this test, your child must have lived with you for more than half of the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents
Your child is considered to have lived with you all during periods of time when one of you, or both, are temporarily absent due to special circumstances such as:
Illness, Education, Business, Vacation, or Military Service.
died during the year is treated as having lived with you all year if your home was the child’s home the entire time he
the year. The same is true if the child lived with you all year except for any required hospital stay following birth.
To meet this test, the child cannot have provided more than half
for the year.
There are four tests that must be met for a person to be your qualifying
are:
1.Not a qualifying child
test,
2.Member of household or
relationship test,
3.Gross Income test, and 4.Support test.
Age Unlike a qualifying child, a qualifying relative can be any age. There is no age test for a qualifying relative.
Member of household or Relationship Test
To meet this test, a person must either:
1.Live with you all year as a
member of your household,
2.Be related to you in one of
the ways listed under Relatives who do not have to live with you.
Relatives who do not have to live with you.
A person related to you in any of the following ways does not have to live with you all year as a member of your household to meet this test.
Your child, stepchild, foster child, or adescendant of any of them.
Your brother, sister, half brother, half sister, stepbrother, or step sister.
Your father, mother, grandparent, or other directancestor, but not foster parent.
Your stepfather or stepmother. A son or daughter of your brother or sister. Your son-in-law, daughter-in-law, father-in-law,mother-in-law, brother-in-law, or sister-in-law.
Gross Income Test
Support Test To meet this test, you generally must provide more than half of a person’s total support during the calendar year.
How to determine if support test is met.
You figure whether you have provided more than half of a person’s total support by comparing the amount you contributed to that person’s support with the entire amount of support that person received from all
support the person provided from his or her own funds.
son Julian moved in with a friend of the family, Elizabeth. Theresa and Julian lived there the entire year of 2013.
during 2013.
security numbers.
bills.
was her total income for the year.
numbers.
They have not lived together for three years.
$33,000.
Natasha grocery money. He is providing over half the cost of maintaining the home for Natasha and Hannah.
numbers.
credit is more than the tax liability, the excess is not
child and dependent care credits, child tax credits, credits for the elderly and disabled, education credits, foreign tax credits and adoption credits are
zero, but will not produce payments to the taxpayer.
Are treated as tax payments. The credit amount is added to federal income tax withheld. If the total of these credits is more than the tax liability, the excess will be
1.Additional child tax credit 2.Earned income credit 3.Excess Social Security withheld 4.Credit for federal tax paid on fuels 5.Credit for taxes paid by regulated investment companies.
Your adjusted gross income (AGI) must be less than:
You must have a Valid Social Security Number
Your filing status Cannot be “Married Filing Separately.”
You must be a U.S. Citizen or Resident Alien All Year
You cannot claim the EIC if you have Foreign Income
Your investment income must be $3,300 or less.
You must have Earned Income!
ules if if you ha
e a Qualifying Child. Child. Your child must meet the Relationship, Age, and Residency Tests, your child is a qualifying child if your child meets the three tests.
Tests for Qualifying Child
2010
2010
2010
by more than one person to claim EIC.
If you and someone else have the same qualifying child, you and the other person(s) can decide which of you, if otherwise eligible, will take all of the following tax benefits based on the qualifying child.
care expenses.
benefits.
The other person cannot take any of these six tax benefits unless he or she has a different qualifying child.
person.
ules if y you
do no not ha t have e a a Qua Qualifyi lifying ng Child Child
1.You must be at least Age 25 but under Age 65. 2.You cannot be the Dependent of Another Person. 3.You cannot be the Qualifying Child of Another. 4.You must have lived in the USA more than half of
the year.
Most taxpayers who have children under age 17 are eligible for the child tax credit.
qualifying child.
Under age 17 at the end of 2013 A citizen or resident of the USA Did not provide over half of his/her own support for
2013
Lived with the taxpayer for more than half of 2013. Has one of the following relationships to the taxpayer:
Son/daughter, stepson/stepdaughter, adopted child, brother/sister, any descendant of the above or eligible foster child.
$6,000 for two or more qualified dependents. A nonrefundable credit of up to 35% of the expenses incurred for the care of a qualified dependent is allowed when the expenditures are work related. The percentage of the credit goes down as income goes up with 20% of eligible expenses as the smallest amount allowed.
Child Related Tax Benefits Comparison
Our handy chart shows the eligibility requirements for tax benefits available to taxpayers with a qualifying child
education credits are available to taxpayers, the American Opportunity Credit (formerly the Hope Credit) and the Lifetime Learning Credit.
Credits are not available to MFS taxpayers. Education expenses must be paid for the taxpayer, taxpayer’s spouse
Prepayments for an academic period that begins during the first three
months of the following year are treated as if the academic period begins in the year of the prepayment.
The credits are not allowed for any amount otherwise allowed as a
deduction.
If the taxpayer was a nonresident alien for any part of the year,
he/she cannot claim a credit unless he/she qualifies and elects to be treated as a resident alien.
Both Credits are nonrefundable.
Educational institutions should issue Form
1098-T, Tuition Payments Statement.
The taxpayer may not claim both the American
Opportunity Credit and the Lifetime Learning Credit for the same student in the same year.
Meals, lodging, student activities, athletics,
transportation, insurance and personal living expenses are not considered qualified expenses
Many Parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Credit. This tax credit is part of the American Recovery and Reinvestment Act of 2009. Following are six important facts about the new American Opportunity Tax Credit.
1.This credit, which expands and renames the existing Hope Credit, can be claimed for qualified
tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.
2.The credit is equal to 100% of the first $2,000 spent and 25% of the next $2,000 per student
each year. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.
3.The full credit is generally available to eligible taxpayers who make less than $80,000 or
$160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.
4.40% of the credit is refundable, so even those who owe no tax can get
up to $1,000 of the credit for each eligible student as cash back.
5.The credit can be claimed for qualified expenses paid for any of the first
four years of post-secondary school.
6.You cannot claim the tuition and fees deduction in the same year that
you claim the American Opportunity Credit or the Lifetime Learning
which ever is more beneficial for you.
limited to the first two years of post secondary education. The maximum allowed credit is $2000 or 20% of the first $10,000 of qualified tuition and related expenses paid for all students during the
enrollment at an eligible educational institution.
Expenses for graduate degree level courses are eligible. The amount of credit a taxpayer can claim does not increase based on the number of students for whom the taxpayer paid qualified expenses.
a home in 2008, and received the First-Time Homebuyer Credit, this filing season the IRS will begin taking up to $500 to pay the loan back!
Differences in the 2008 First-Time Home Buyer Credit and the 2009 First-Time Home Buyer Credit
must match data from the IRS Master File.
not match what the IRS and/or the Social Security Administration (SSA) have on file. This could be caused by misspelling the primary taxpayer’s last name or using the wrong SSN for the primary taxpayer. It can also result if the primary taxpayer has multiple or hyphenated last names, or has changed their last name (e.g., by marriage or court
Qualifying Child Name Control must match data from the IRS Master File.
qualifying child does not match what the IRS and/or Social Security Administration (SSA) have on file. The qualifying SSN of the dependent on Schedule EIC, Earned Income Credit, must match data from the IRS Master File.
child does not qualify as a dependent, the child is not eligible to be a qualifying child for EIC.
Identification Number of Form W-2G, and Payer Identification Number of Form 1099-R and Company or Trust Identification Number
match data from the IRS Master File. Note: Form 1099-R is ONLY required when federal income tax is withheld.
Form(s) W-2, W-2G, W-2GU, 499R-2/W-2PR, 1099R, or 2439 must match the EIN on the IRS Master File. This error could be caused by entering the EIN incorrectly or using an EIN that is invalid.
match data from the IRS Master File or if filing status equals “4” and Exempt Spouse equals “X”, then the Spouse SSN and Exempt Secondary Name Control must match data from the IRS Master File.
match the IRS Master File and/or Social Security Administration (SSA) records.
Social Security Number (SSN). It can also result if the spouse has multiple or hyphenated last names, or has changed their last name (e.g., marriage or court order) and has not notified the SSA.
Name Control must match data from the IRS Master File.
Qualifying Child Name Control must match data from the IRS Master File.
Master File and/or Social Security Administration (SSA) records.
Social Security Number (SSN). It can also result if the dependent has multiple or hyphenated last names.
same purpose.
for the purpose of claiming Earned Income Credit (EIC) has been used on another tax return. This could be the result of an inadvertent data entry error or someone else has claimed this dependent. This is often a companion to Reject Code 0507. The qualifying child for EIC purposes must be a qualifying dependent.
used for the same purpose.
used for the same purpose.
the tax return and/or Schedule EIC, Earned Income Credit has been used on another tax return. This could be the result of an inadvertent data entry error or someone else has claimed this dependent.
exemption and/or on the return and was also used as a Dependent’s SSN on form 1040 or Qualifying Child on Form 1040-SS (PR) on another return.
another return and was claimed as an exemption on that return.
return and claiming their own exemption. When the parent(s) file and claim the child as a dependent, the parents’ return will reject with ERC 0510.
error if the erroneous SSN matches another taxpayer or dependent.
Authentication Record of an online return does not match the data from the IRS Master File.
Record of an online return does not match data from the IRS Master File.
(ERC 0523) does not match the IRS Master File. The DOB is required to authenticate the taxpayer’s Self-Select Personal Identification Number (PIN) which acts as the taxpayers’ signature when filing an
corresponding Year of Birth must match data received from the Social Security Administration.
what the IRS and/or Social Security Administration (SSA) have on file. The qualifying Social Security Number (SSN)
must match data from the IRS Master File.
Credit installment is due.
Homebuyer Credit in 2008, and must pay back the amount received over a 15 year period.
√ Hardware √ 1 Stop tax software installed and tested √ Marketing Materials √ File Cabinets in place C H E C K L I S T
–Update addresses –Contact Brittany Tomlinson at 770-877-5565 or
brittany@1stopfss.com
these forms are located in the procedures manual in the software
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Do not need to attach form 5405 to return just to report repayment of 1/15 of 2008 credit for FTHB. Any paid tax preparer must complete Form 8867, Paid Preparer’s Earned Income Tax Credit checklist Expired Provisions:
1.Marking work Pay Credit (Schedule M) 2.Advanced Income Credit 3.Computer technology and equipment allowed as qualified
higher education expenses for qualified tuition programs.
information used by the taxpayer in determining the taxpayer’s eligibility for EITC is incorrect. You may not ignore the implication of information furnished to, or known by, the preparer and must make reasonable inquiries if the information furnished appears to be incorrect, inconsistent, or incomplete.
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