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Welcome & Happy New Year

Refresher Training

5-8 Jan 2016

Part 1

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Preliminaries

Sign In Sheet (check name each day)

Breaks & lunch

Class schedule Start: 9:30 AM Tues, 9:00 AM Thurs and Fri, adjourn

approximately 3:30 PM each day

Formal portion: Tues, Thurs, maybe part of Fri

Rest of Friday

Additional topics and discussion

TaxWise On-Line (TWO) practice

2015 MA updated software (hopefully)

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Chelmsford SC Wireless Network

Must use Windows OS. Browser can be Internet Explorer or Chrome

TaxWise On-line (TWO) software requires Adobe reader

Connect to Chelmsford SC wireless network

Password __________

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TaxWise On-line (TWO)

For December, new volunteer training, we used TWO 2014 because we needed MA software

For this training and certification – we will use TWO 2015 (no MA required)

Click on desktop icon, or

Open Internet Explorer or Chrome and insert URL:

https://twonline.taxwise.com/training (no www.)

Put URL into favorites list or create desktop icon (only if you use IE or Chrome as your browser)

Log into training account (click on “remember me”)

Ref: 4012, page N-1

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TaxWise On-line (TWO)

2014 training site – Green background

https://twonline.taxwise.com/training14

2015 training site – Green background

https://twonline.taxwise.com/training

2014 production site – Blue background

https://twonline.taxwise.com/14

2015 production site – Blue background

https://twoline.taxwise.com

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Overview

Administrative matters

Certification requirements

What’s new and supplementary subjects

Review Federal and MA basic tax laws

Focus on reminders

Review use of TaxWise software (as we go)

Quirk reminders

Discuss IRS test and MA Instructional Problems

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Volunteer Protection

Volunteer Protection Act of 1997 Certified volunteers not liable provided

We act within scope of program

Any harm that occurs is not willful

Taxpayer is responsible for return Only SIDN* and site name/location appear on returns and e-file papers

* SIDN – Site ID Number

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Reimbursement

Flat-rate of $35 for counselors or

Itemized expense voucher Mileage at 54 cents/mile for 2016

Need specific dates/locations

Need purpose (e.g., prepare returns)

Covers training classes (57.5 cents/mile for 2015)

Covers counseling 2/1 – 4/18

Submit to LC or me after season

LC’s can purchase supplies/itemize on voucher

Direct deposit encouraged

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Training/Reference Documents

Keep all documents for next year

IRS Pub 4491 - Student Training Guide (STG) Basic training source for Federal tax laws and rules

Follows 1040, line by line

Has many examples that illustrate laws

IRS Pub 4012 - Volunteer Resource Guide (VRG) Great reference for test and for preparing returns

Covers Federal tax law and how to use TaxWise software (both desktop and on-line)

IRS Pub 4491X – Updates to 4491 and 4012 Electronic only – posted on District 20 website

You should update at least 4012

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Websites

https://www.irs.gov

https://www.mass.gov/dor/

District 20 website: https://aarptaxaidema20.wordpress.com

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Training/Reference Documents

IRS Pub 4961 Standards of Conduct – Ethics & Pub 5101 Intake/Interview & QR Paper provided to new volunteers

Electronic – posted on District 20 website

IRS Form 6744 - Volunteer Test/Retest Test problems, test/retest answer sheet, Volunteer

Agreement

Test requirements on upcoming chart

IRS Publication 17 - Your Federal Income Tax Used for more complex issues

2015 available electronically now – paper soon

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Training/Reference Documents

MA Form 1 Instructions

Covers MA tax rules and laws

Line by line instructions

Available District 20 or MA DOR websites

Pick up copy at your Library

MA Manual – reformatted for 2015

Covers MA unique tax laws and how to use TaxWise to complete MA returns

Available on District 20 website

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Certification Tests Pub 6744, Page 5

Recommended, Not required

Required

Required

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District 20 Certification Requirements

Pass Standards of Conduct, Intake/Interview and Advanced Federal test with > 80% for each part

Returning counselors can enter test answers on Link and Learn (see later chart)

Any counselor can submit paper test in Form 6744. Submit answer sheet and signed Volunteer Agreement

Can also ask for comments on returns

Due date to H. Gong: Mon, 25 Jan 2016

Extensions handled on a case by case basis

Federal retest available

Complete MA Instruction Problems using 2014 software

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Paper Test Requirements Test Answer Sheet

6744, Page 6

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Volunteer Standards of Conduct

Agreement (Form 13615) 6744 (pages 14-15)

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Use Link and Learn To Enter Test Answers

Take test as if you will submit paper answer sheet, but answer both test and retest questions

Do test returns on TWO 2015 training site

Create an account on Link and Learn site to enter answers

Recommend using Internet Explorer browser

URL: https://www.linklearncertification.com/

Can start test, log out and log back in

On completion, save Volunteer Standards of Conduct Agreement showing passing grades – make sure it is electronically signed

Send me copy (PDF via email) or paper mail

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Submit Test Results

Answer sheet and signed Volunteer Agreement

Scan and email to me, or

Mail to me at 166 Pine Hill Rd, Chelmsford, MA 01824

Electronically signed Volunteer Agreement with test scores

Email PDF to me – harry.gong@comcast.net

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What’s New/Special Topics

2015 tax returns due by Tues, Apr 19, 2016

New/revised tax laws

Affordable Care Act (ACA)Refresher

Change in TWO ACA Worksheets

Discussion about Medicare

AARP policies and practices (Including scope)

Forms and TaxWise

Health Saving Accounts

What to watch out for

Handling certification/AARP policy

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2015 Tax Laws Changes

Federal

Extenders renewed, with wrinkles

Inflation adjustments made on exemptions, deductions, etc.

ACA penalties increased

Federal taxability of 2014 MA refund if taxpayer received CB, itemized on 2014 Federal return and used RE taxes as a deduction

MA

Income tax rate reduced to 5.15%

Gambling losses deductible for Plainridge Casino

Senior Circuit Breaker (CB) figures modified

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Federal “Extenders” (Pub 4012, Pg Ext 1-8)

Permanent extension of deductions

Expenses up to $250 for K-12 educators on 1040 – indexed for inflation

State/local sales tax in lieu of state/local income taxes on Sch A

Charitable contributions of traditional IRA’s up to $100,000 – counts toward RMD

Extensions through 2016

Cancellation of Debt on principal residence – Out of scope in MA

Deduction of qualified mortgage insurance on Sch A

Deduction of qualified tuition expenses on 1040

10% credit for energy improvements – 5695 Pt II

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Taxability of MA State Refund

Federal tax law says MA refunds may be taxable if taxpayer itemized last year and used MA income tax as a deduction

Taxability determined by filling out State Tax Refund Worksheet (STRW)

IRS now says same applies if taxpayer itemized last year, used RE taxes as a deduction, got the CB and a MA refund in 2014

Taxability also determined by using the STRW

Only a small number of taxpayers will be affected – but we should run calculation using flow chart

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Rationale Behind Flow Chart

If taxpayer was a renter and received a CB credit in 2014, none of MA refund is taxable unless refund was due to MA taxes paid in 2014

Taxability of 2014 CB credit is reduced if some of credit was used to pay MA income taxes owed

If any part of 2014 CB credit is taxable on 2015 Federal return, it is not taxable in MA

Flow chart process puts taxable portion on line 10, which does not transfer to MA return

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Mass. Tax Law Changes 2015 Senior Circuit Breaker

Available to home owners and renters over 65; not MFS

Maximum credit = $1070

House value less than $693,000

Income limits

Single - $57,000

HoH – $71,000

MFJ - $85,000

Reminders

RE taxes + ½ W/S > 10% total income

25% rent > 10% total income

Subsidized housing not eligible

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Affordable Care Act (ACA) Basics

Taxpayer(s) and dependents must

Have Minimum Essential Coverage (MEC) health insurance each month, or

Have a coverage exemption, or

Make a Shared Responsibility Payment (SRP)

Insurance bought on Marketplace*

Advanced payments can be sent to insurance company, or

Buyer can pay premiums

Buyer will get 1095-A – used to fill out Federal return

*Marketplace in MA is the Health Connector

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Affordable Care Act (ACA) Basics

For Marketplace purchased insurance, Federal return used to reconcile advanced payments or buyer premiums paid vs year’s cost for insurance

Taxpayer may owe - 1040, line 61

Taxpayer may be eligible for refundable Premium Tax Credit (PTC) – 1040, line 69

Net may be zero

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ACA versus MA Sch HC

MA Sch HC still required

ACA requires coverage for taxpayer(s)’ actual and possible dependents; MA does not

ACA requires Medicare and US military (like Veterans & Tri-care) to be full year; not MA

ACA max gap is 2 months; MA is 3 months

If taxpayer owes both ACA and MA penalty:

MA penalty is reduced by ACA penalty

Checking boxes for coverage by month have opposite meanings

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2015 ACA Changes

New forms to be provided to taxpayers

1095-B – provides evidence of health insurance coverage – includes Medicare, MassHealth

1095-C – provides evidence of health insurance coverage for employees in companies with >50 full time employees

Both 1095-B & C originally due 1 Feb 2016 to taxpayers

IRS recently relaxed deadline to 31 Mar 2016 – we’re back where we were last year

Lacking other forms, we can take taxpayer’s word

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Other ACA Forms

Form 8962 – used to reconcile payments vs actual year’s insurance costs

Form 8965 – used to document reason for exemption, full year or partial year

Neither 8962 nor 8965 is in the Forms Tree when starting a return

New TWO ACA Worksheets (called “Pages”)

Filling out Page 1 will insert 8962 and/or 8965 – if required

Here’s What We Do for 2015

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TWO ACA Page 1

Click “Yes” if 8965 is required for any exemption

Click “Yes” if 8962 is required

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TWO ACA Page 2 Calculates SRP based on Page 1 entries

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Observations from 2014

>95% of our taxpayers & dependents had full year MEC coverage through Medicare (?), MassHealth or employer provided insurance

Some taxpayers had MEC but not full year

Determine if exemptions apply (Form 8965)

A few had insurance purchased on Marketplace

Have to enter 1095-A into Form 8962

Some taxpayers had no MEC at all

Some had exemptions (Form 8965)

A few had SRP

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Full-Year Coverage (Not Mkplace)for Entire Household

Preliminary – TY2014

1040 Page 2, line 61 will show full year coverage

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Full-Year Coverage for Entire Household (Marketplace)

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Entering 1095-A Data into Form 8962 for PTC

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Entering 1095-A Data into Form 8962 for PTC

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Employer Coverage – Part Year with Exemption

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8965 For Exemption (2 Month Gap)

Exemption codes 4012, page ACA-6

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Shared Responsibility Payment Example

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ACA Page 2 Determines SRP

Preliminary – TY2014

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Medicare 101

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Minimum Essential Coverage (MEC)

See 4012 page ACA-4 for full list

Most commonly seen for MEC

Medicare Part A or Medicare Part C (not B)

VA/TRICARE

Medicaid/MassHealth (but not Health Safety Net)

Employer plans (active employees and retirees)

MA Health Connector Plans

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Medicare

Medicare provides health care coverage for most people 65 and over plus many disabled adults under 65 Some seniors, typically municipal retirees,

are not covered by Medicare but do have retiree insurance

Components Part A – Hospital Insurance Part B – Medical Insurance Part C – Medicare Advantage Part D – Medicare Prescription Drug

Coverage

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Medicare Costs – Part A

No monthly premium if beneficiary (or spouse) worked and paid Medicare taxes for 40 quarters

Can buy into Part A if worked fewer than 40 quarters

Premiums vary based on number of quarters worked (max for 2015 was $407/month)

Premiums subject to late enrollment penalty

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Medicare Costs – Part B

All beneficiaries are charged a part B premium

Based on income with base figure set at 25 percent of cost (adjusted annually)

For 2015, monthly premiums ranged from $104.90 to $335.70 per person

Subject to late-enrollment penalty

Medicaid program pays premiums for extremely low-income beneficiaries

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Medicare Costs – Part C

Requires Parts A and B

Offered by private insurers, each offering multiple plans at various price points

Premiums for Medicare Part C can be, but are not typically, deducted from Social Security benefits

Medigap plans (e.g., Medex/Medex Bronze) are not Medicare Advantage plans

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Medicare Costs – Part D

Offered by private insurers, each with multiple plans at various price points Can be part of a Medicare Advantage Plan

Premiums are subject to late enrollment penalty Federal “Low Income Subsidy” program subsidizes

premiums, deductibles, and co-pays for extremely low-income beneficiaries

Premiums for Medicare Part D can be, but are not typically, deducted from Social Security benefits Part D is also subject to the high-income surcharge

(for 2015 ranged from $12.30 to 70.80/month) – the surcharge is paid directly to Medicare, not the insurance company

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Social Security, Medicare, and Medicaid

Social Security and Medicare are separate programs If Medicare beneficiary is getting social security benefits,

Medicare A and B premiums, B and D surcharges, and A, B, and D late enrollment penalties are deducted from that

If Medicare beneficiary isn’t getting social security benefits (not eligible, delaying social security), beneficiary pays Medicare directly (medical costs would not be carried over from SSA-1099 to Schedule A)

Medicaid/MassHealth is joint federal/state program covering very low income beneficiaries Umbrella for many different levels of service depending on

income/need Only public source for long-term care services Beneficiaries can be on both Medicare and MassHealth

(dual eligibles)

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Medicaid/MassHealth

Medicare and MassHealth have not been issuing 1095 or HC forms to all beneficiaries (this may change in the future)

Most Medicare beneficiaries get premium-free Medicare Part A so SSA-1099 does not prove MEC

In absence of 1095 or HC forms, taxpayer interviews are only way to determine MEC

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AARP Policies and Practices Health Savings Accounts

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Volunteer Standards of Conduct Excerpt

Do not accept payment or solicit business/donations

Do not knowingly prepare false returns

Do not engage in unethical behaviour

Do not engage in conduct that is detrimental to program

Ensure confidentiality, privacy and security

Keep taxpayer information strictly confidential – do not disclose to unauthorized individuals

Provide in-scope tax assistance

Treat all taxpayers equally and professionally

Follow Quality Site Requirements (QSR)

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Key Quality Site Requirements

Use Intake and Quality Review Sheet

Conduct second person reviews

Identify ourselves to taxpayers

Display ID badges with first name only

Verify client ID via SSN documents and picture ID (ID theft deterrent)

Display Title 5 poster

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Key AARP Policies

Primary goal is to produce accurate returns

No single person sites

Will be closed immediately if found during audit

Procedures to handle emergencies TBD

No Windows XP operating computers

Windows 7 preferred operating system

OK to add $1 to zero AGI Federal returns

Check for ID theft; prevent additional returns being filed

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District 20 Policies

Even if you are certified at Advanced level, your scope is based on your expertise

Ask for help on anything you are unfamiliar with or borders on scope definition

Capital gains/losses and consolidated statements from brokerage firms are complex

Unless you and your site are familiar with capital gains/losses, put return on hold pending further review

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Scope Changes

Expenses up to $25,000 allowed on Sch C/C-EZ

Non-cash donations > $500 but < $5000 allowed

Fill out Form 8283

1098-T with EIN of college needed for education credits (Form 8863)

In-scope 1099-R Box 7 codes expanded*

1099-LTC scope expanded (no change for us)

*More info as part of later discussion

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Form and TWO Changes

2015 Intake Sheet (handout)

Places telephone number in upper RH corner

Expanded section on health care coverage on page 3

TWO

ACA changes

ID Theft PIN entry for dependents on MIS

IRS has awarded new contract for future software

Starting 2016, software will be TaxSlayer

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Preparing for New Software

Little or no chance for any carryover from TaxWise to TaxSlayer

AARP guidance

Emphasize need to bring 2015 material back next year

Make sure to include in print packet: Main Information Sheet, Three year summary, Any diary information, Simplified Method worksheet, Sch A detail, Sch D Wksht 2 (carryover) – done by admin for license

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Health Savings Account

Associated with high deductible health insurance plans

Individual and family plans are available

HSA’s are similar to traditional IRA’s

Administered by a trustee

Total contributions made each year are limited

Contributions can be made by employer, employee

$1,000 increase on limit for employees over 55

Contributions made each year directly to trustee on employee’s behalf may allow an income adjustment on Federal return

Funds in HSA grow tax free; do not have to use yearly

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Health Savings Account

Money withdrawn from HSA is tax free if used for qualified medical expenses

Expenses cannot be used on Sch A

10% penalty if HSA money is used for non-qualified medical expenses

If total amount contributed (employer and employee) in a year exceeds limit:

6% penalty on excess, year after year, until withdrawn

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Recognizing Return with HSA

Intake sheet asks if taxpayer has an HSA

Taxpayer HSA documents

W-2 with code W in Box 12 – total contributions from employer and employee (thru employer cafeteria plan)

1099-SA – with HSA box checked - issued by trustee for withdrawals

5498-SA – with HSA box checked - issued by trustee & states total contributions for tax year

May not be available in time for taxes; if so,

Have to ask taxpayer about non-W-2 contributions (has pitfalls)

Incorrect information can trigger penalties

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Handling HSA Returns

Look for any of the documents on last slide; ask taxpayer if he/she has HSA; look at Intake Sheet

Entering a W-2 with an entry in Box 12, Code W triggers Form 8889 in TWO that needs to be completed

Taxpayer with a 1099-SA, but no W-2 will need to fill out Form 8889

If you are certified for HSA, complete return, but put return on hold pending second person review by someone who is also certified

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Handling HSA Returns

If you are not certified for HSA, enter all data, put return on hold and contact me

We will contact taxpayer to finish return

Recommendation: Certify for HSA, especially if you work at a library