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Purpose of this Training Understand policy & procedures of AARP Tax-
Aide Program Understand what is expected of volunteers Understand typical tax documents Understand how to access & use TaxWise Online
(TWO) Understand how to prepare a simple tax return
using TWO
AARP Tax-Aide
Charitable, non-profit program administered by AARP Foundation
Free, nationwide confidential service Help low- to mid-income taxpayers with special
attention to age 60+ Answer tax questions & prepare returns Funded 1/3 AARP, 2/3 IRS Tax Counseling for
the Elderly (TCE)
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Mission of AARP Tax-Aide
To provide high-quality, free income tax assistance & tax form preparation to the greatest number of low- & moderate-income taxpayers which will produce the most beneficial result for the taxpayers we serve No income or age limits Only limits are on complexity of return
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National, Volunteer-Run ProgramTY 2013 National StatisticsTax-Aide started in 1968 and is now the
largest nationwide, volunteer-run free tax service
Taxpayers served: 2.6 million Federal Tax Returns prepared: 1.65 M Volunteers: 35,000
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Somerset County Tax-Aide Program
In Somerset County:For 2013 tax season, we completed over 1,823 returns at 6 sites
Hillsborough, Manville, Raritan, Franklin, Bridgewater, Green Brook
100% e-filed on the computerApproximately 60 volunteers
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AARP Tax-Aide Counselors
Are trained Become certified Are assigned to a site Provide free tax counseling Report their service Promote the program
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AARP Tax-Aide Counselors Are Trained In Federal & NJ tax law In computer tax preparation software
(TaxWise) Use personal or loaner computers
In administrative requirements In use of appropriate reference materials
Publications, forms, schedules provided
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Publications & Tools Volunteer Resource Guide (spiral bound) (Pub
4012) Process-Based Training (Pub 4491) Your Federal Income Tax (Pub 17) NJ What’s In, What’s Out lists Site Sign-In Sheet & Activity Report Interview & Intake Sheets (Form 13614-C) IRS 1040 Instruction Book NJ 1040 Instruction Book & GIT Books
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Important Reference Websites
http://www.njtaxaide.org/tavolunteers/somerset Somerset County website
http://taxprep4free.org Training resources Proficiency problem scenarios & refund monitors
http://www.AARP.org/tavolunteers/ Volunteer portal includes news, cybertax notifications, links for
administration for AARP Tax-Aide volunteers
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Confidentiality, Privacy & Security
Keep taxpayer info strictly confidential Do not retain taxpayer documents Do not leave computer unattended if it has
taxpayer data All sites use TaxWise Online where data is
stored on secure servers
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Insurance Coverage & Liability
Travel accident insurance coverage if on Tax-Aide business
Insurance is supplemental to Medicare or its equivalent & covers medical expenses &/or death only. Does not cover personal property such as cars, computers, etc.
Notify district coordinator ASAP By congressional law, counselors are not
liable if they follow the rules12
Types Of Returns YouCan/Can’t Prepare Prepare only those returns for which you have been
trained & certified & which do not appear on the NJ “Cannot Do” List
Refer taxpayer to experienced counselor if tax subject is in Training Module “Topics for Experienced Counselors “ or if you are not comfortable with a particular tax situation
Refer taxpayer to paid tax preparer if anything on return is Out Of Scope
Do not prepare a tax return when you suspect information is untruthful
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Counselor Certification Requirements Pass IRS tests with grade of 80%+ (Volunteer
Standards of Conduct – Ethics & Advanced level tests) Open book test
Demonstrate proficiency in preparing tax returns Complete 3 problems (using 2013 tax law &
software) + 1 problem focusing on 2014 changes (using 2014 software)
Sign Volunteer Standards of Conduct14
Overall Process Client calls Tax Appointment phone line requesting tax
help Client is assigned to site coordinator/volunteer via email Tax volunteer calls client to set up appointment &
reviews Initial Phone Sheet info with client Client arrives at tax site & completes Intake/Interview
Sheet AARP policy mandates use of IRS Intake/Interview Sheet
for every client Tax return prepared, quality reviewed, printed and e-
filedNOTE: Refer to Process Overview handout for more details16
Interviewing – The Key To A Good Return Focus on interviewing to be sure you gather all
appropriate data to prepare accurate return Use information from Interview/Intake Sheet as starting
point, but continue to probe for all relevant details Also review prior year return and ask about items that
have changed Entering tax documents into TaxWise software is not
sufficient to ensure accurate return Use Volunteer Reference Guide (IRS Pub 4012)
decision trees and flow charts to ensure you are asking all the necessary questions to determine the full taxpayer situation
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Effective Interviewing
Speak clearly, simply, and loud enough Build rapport Have patience Reassure the taxpayer (“I understand”) Ask effective questions (e.g. - probing and
open-ended) Allow the taxpayer time to respond Involve the taxpayer in the process
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Verification of Taxpayer Identity Identity theft is a major IRS problem – verify
every taxpayer’s identity Ask every taxpayer & spouse for photo ID Check accuracy of Social Security #s for taxpayer,
spouse & every dependent Social Security card is preferred verification method If not available, can use SSA benefit statement or SSA
letter that shows both SS # and name Inaccurate SS #s can cause return rejects & delays
If taxpayer is not eligible for a SS #, can use Individual Taxpayer ID # (ITIN) Verify original copy of ITIN card or letter
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IRS Form 1040
Everyone files a 1040 or a version of the 1040 (1040A, 1040EZ, etc)
Split up into 4 general areas Taxpayer information Income Taxes & Credits Payments/Refunds Due and Signature
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Taxpayer Information
Includes: Personal information for taxpayer & spouse Presidential election campaign question Filing status Exemptions (including Dependents)
Input into TaxWise on the Main Information Sheet
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Income
All sources of income included in this section Income derived from various tax forms usually
issued by employer, financial institution, government agency, etc
Information from tax forms and client interview entered into the respective form or worksheet in TaxWise
TaxWise puts the appropriate values into the 1040
Adjustments to income included in this section Final line on page is “Adjusted Gross Income”
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Taxes & Credits Page 2 Taxable Income
- Start with “Adjusted Gross Income” - Deduct Itemized or Standard Deduction - Deduct Personal Exemptions - Arrive at “Taxable Income”
Calculate Tax on “Taxable income”
Total Tax - Start with Calculated Tax on Taxable Income - Deduct non-refundable tax credits (Credits that reduce tax up to
zero dollars) - Add other taxes - Bottom line is “Total Tax”
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Payments/Refund/Owe
Payments Apply tax withheld and estimated payments Add refundable credits (these credits can exceed
the amount of the tax you owe and increase your refund)
Total is your total payments Subtract total payments from total tax
If payments are greater than total tax, you are entitled to a refund
If payments are less than total tax, you owe taxes
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Direct Deposit/ Sign
In the box below the refund is a spot for direct deposit information
Bottom of the form is the signature box
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NJ 1040 Paper Page 1
Page I of the NJ 1040Tax Form includes: Taxpayer personal information County/Municipality Code NJ Filing Status Exemptions Dependent information Gubernatorial Election Fund Check Boxes Signature Box
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NJ 1040 Paper Page 2
Page 2 of the NJ Tax Form includes Income Exclusions Exemptions Deductions NJ Taxable income NJ Tax
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NJ 1040 Paper Page 3
Page 3 of the NJ Tax Form includes Credits Use tax on out-of-state purchases Payments Penalties Amount owed Contributions Amount to be refunded
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NJ1040 Page 4
NJ Page 4 is the NJ 1040H – Property Tax Credit Application Not in TaxWise – Paper file only Used for certain taxpayers that do not file a NJ
return but are entitled to a property tax credit Details to follow in Tax Law training modules
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TaxWise NJ 1040
Most of the information is carried forward from the TaxWise Federal 1040 to the TaxWise NJ 1040
Page numbers in TaxWise do not match page numbers of the paper return
NJ 1040 entries can be tricky
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TaxWise NJ 1040 Entries The following items are the minimum required manually
input entries: County/Municipality Code must be entered in the TaxWise NJ
1040 on page 1 Gubernatorial Election Fund Question must be answered in
the TaxWise NJ 1040 on page 3 Retirement Income line 19b Homeowner on Oct 1 question must be answered on the
TaxWise NJ 1040 on page 3 Use tax due on out-of-state purchases must be entered in
TaxWise NJ 1040 on page3 Worksheet F Property Tax Deduction/Credit in the TaxWise NJ
1040 on page 4 NJ DD Worksheet NJ IRA Worksheet (Taxpayers with IRA withdrawals)
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NJ 1040 for Familiarization
For Familiarization we are entering just basic NJ items
Resource for NJ 1040 is “New Jersey Special Handling” document found on the TaxPrep4Free.org web site
More detail on NJ coming later
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Intake/Interview & Quality Review Sheet Completed by client – Parts I - VI
Page 1 – General information about taxpayer, spouse & dependents
Page 2 – Summary of income, expenses & life events, & additional information/questions related to preparation of return
Completed by preparer Page 1 - Shaded section about dependents Page 4 - Notes
Used by quality reviewer Page 3, Part VII 64
TaxWise Online (TWO)
Forms-based software used for tax return preparation (not interview style) Only software approved by IRS for free tax
preparation sites Developed & maintained by firm called Commerce
Clearing House (CCH) Calculations done & returns stored on TWO server
Can work on same return from multiple computers (but not simultaneously)
No taxpayer data stored on individual computers
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TaxWise Online (TWO) Most of our training will use 2013 TWO training software
Can be accessed on the web at twonline.taxwise.com/training13
2014 training environment is also available, but will not include NJ software until late January (twonline.taxwise.com/training)
You will be given info on production TWO software and IDs at a later time Multiple years are available
Returns are separate by training vs production and by tax year
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cont’d
TaxWise Online (TWO)
Returns are kept in separate environments by training vs. production and by tax year Always make sure you are in proper environment
before you start a return Can differentiate environment by background
color once you are logged in Login screens are exactly the same for all
environments Once logged in, 2013 training environment background
is green 2013 production environment background is blue
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cont’d
Logging in to TaxWise Online (TWO) Training Use this URL to access 2013 TWO training
website for familiarization training: https://twonline.taxwise.com/training13
Use client ID 2276756 First time logging in, use your assigned ID as
both User ID and Password All IDs start with SOMERSET Last 2 digits are your student #
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TWO Start New Return
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Enter SS # twice
SS# in XXX-YY-ZZZZ format XXX=First 3 #s from problem YY=Student ID ZZZZ=4139 (EFIN)
TWO Open Existing Return (Enter SS #)
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Open existing return by:• Click on Open return icon• Enter SS#
Always click on Go to Tax Forms; never use Go to Interview
TaxWise Refund Monitor & Navigation Tree
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Incomplete or Incorrect Form: All Red and Red Exclamation Point
Complete & Correct Form: Check Mark
State Forms Loaded when State is Selected
Refund Monitor Adjusted Gross Income (AGI) amount & Refund Amount provide running totals
Calculated entry
Non-Calculated orDirect Entry
Required entry
Overridden field
Green
Black
Red
Blue
TWO Field Color Coding
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Underline Color in TWO
Main Information ScreenBasic Information – TaxWise Tips Enter names
Without punctuation marks (. , -) Last name of spouse is only needed if different
from taxpayer
Primary SS # is automatically populated Spouse’s SS # must be entered
Enter zip code - TW populates city and state
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Main Information ScreenFiling Status – TaxWise Tips
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• Enter birth date as mmddyyyy (TW inserts slashes). Age is calculated
• Check box for blind or disabled, if applicable. This is used to calculate Federal standard deduction & NJ exemption
• Enter date of death (if taxpayer died in 2013 or 2014 only - since using 2013 software)
• Check box to indicate who is filing return for deceased taxpayer
Main Information ScreenFiling Status – TaxWise Tips
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Donation for Presidential Election Campaign does not impact client’s refund/balance due Click on box to choose filing status
For Married Filing Single (MFS)Enter spouse’s name, SS #, & answer questions
For Head of Household (HOH)Only enter child’s name and SS # if child is not being claimed as a dependent
For QW, must enter year of death (2011 or 2012, since we are using 2013 software)
Main Information ScreenExemptions – TaxWise Tips
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TaxWise calculates first line of Exemptions based on previous data
Check box on lines 6A, B or C only if appropriate
Main Information ScreenDependents – TaxWise Tips
List dependents from youngest to oldest Enter 1-12 in M in HM (Months in Home) box Use Code box drop down to select relationship code
Only way to indicate non-dependent Check DC box (Child & Dependent Care) if there are
eligible expenses Always check EIC box for children CTC box is automatically checked by TaxWise if child
is eligible
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Main Information Screen – TaxWise Tips
State Information Section State Return defaults to “NJ”
NJ state return automatically e-filed after Federal return is accepted.
If TaxPayer does not have to file NJ return, click NO on box “Do You Want to Electronically File This Return” on Page 3 of NJ return
Leaves NJ return as part of file, but does not e-file it. If NJ taken out on Main Info screen, NJ return deleted
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Main Information Screen – TaxWise Tips
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Bank Information Section If Direct Deposit of refund or Direct Debit
of amount due is desired, enter 9-digit routing number and account number as per client’s sample check
Do not use deposit slip info Will also have to enter information a
second time at bottom of Form 1040 for verification purposes
Additional NJ Exemption for Full-Time College Student NJ allows an additional exemption for a college
student if: Student is under 22 years of age (at year end) for
entire tax year Student attends college full-time Student spends at least some part of each of 5
calendar months of tax year in school Educational institution is accredited Taxpayer paid ½ or more of tuition &
maintenance costs (not including financial aid)103
TW Additional NJ Exemption for Full-Time College Student – NJ 1040 Page 2
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Dependents Attending College
TaxWise Dependents’ Health Insurance & Gubernatorial Elections Fund - NJ 1040 Page 2
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Dependents’ Health Insurance Info
Gubernatorial Elections FundQuestions
TaxWise NJ Dependents Information Worksheet
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Link to Dependents Worksheet from NJ 1040 Page 3 Line 13
Dependent Health Insurance
Preparer Use Form
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Foreign Language Question
Counselor initials
Quality Reviewer Initials
DisabilityQuestion
Preparer Use Form – TaxWise Tips
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Must answer language/disability questions on Lines 11/12 from info on Interview/Intake Sheet, Page 3
Answers are used for grant and statistical purposes only
Enter preparer’s/quality reviewer’s initials on Lines 13/14 Qualify reviewer’s initials should be entered after
quality review is complete Taxpayer reminders can be entered at bottom of
screen
Entering Data into TaxWise for 1040 Page 1 Income:
W-2 Wage & Tax Statement 1099-INT Interest Statement 1099-DIV Dividend Statement 1099-R Distributions from Pensions, IRAs, etc. 1099-G Unemployment Statement SSA-1099 Social Security Statement
Adjustments: Student loan interest deduction
All entries are made on appropriate forms & TaxWise transfers to 1040 Page 1
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W-2 Wage & Tax Statement
Employer issues to employee for tax year Includes:
Employer identification info Employee identification info Wages earned Taxes withheld
All info to be copied to TaxWise EXACTLY as shown on W-2 form
TaxWise puts info entered in proper place111
W-2 Wages & Tax Statement
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2012
NJ Specific Taxes
State Wage & Tax Info
Federal Wage &Tax InfoEmployer Info
Check BoxesEmployee Info
Interest & Dividends Statements1099-INT & 1099-DIV Issued by financial institutions for interest
&/or dividends received Enter info from these forms in TaxWise on
Sch B Interest/Dividend Statement screens TaxWise transfers info onto Sch B Interest &
Ordinary Dividends & then to 1040
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1099-INT Interest Statement
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Interest IncomeEarly WithdrawalPenalty
Federal IncomeTax Withheld
Payer Info
Payee Info
1099-DIV Dividend Statement
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Payer Info
Ordinary Dividends
QualifiedDividends
Capital Gains Distribution
Federal TaxesWithheld
Payee Info
Retirement Income1099-R Distribution from pension, IRA, annuities, etc. Enter info on TaxWise 1099-R screen TaxWise puts the proper info on the correct
1040 lines
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1099-R Retirement Income
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Payer Info
Gross Distribution
If taxable amount notdetermined,there is more to do
Distribution Codes (on back or in Help)
Taxable Amount
Payee Info
Checked if IRA
Determining NJ Taxability of IRA Distribution – NJ IRA Worksheet May be able to claim Federal tax exclusion when
income is contributed to IRA; contributions all taxable on NJ return
To determine NJ taxability of IRA distributions, complete separate NJ IRA Worksheet for each IRA 1099-R
If taxpayer does not have info needed for Worksheet, must still complete by “getting the red out;” otherwise, income will not be included in NJ income
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Unemployment Compensation1099-G Unemployment compensation received from
government Enter info on TaxWise 1099-G screen TaxWise puts the proper info on the correct
1040 line
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TaxWise 1099-G
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Payer Info
Payee Info
Unemployment Info
Federal tax withheld
Unemployment Amount
Federal & NJ Tax Withheld
Social SecuritySSA-1099 Enter info from SSA-1099 onto TaxWise 1040
Worksheet 1 screen Includes:
2013 net benefits (from Box 5) Medicare Parts B, C & D (from Description box)
TaxWise transfers to Schedule A Detail Medical Expenses
Federal income taxes withheld (from Box 6)
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SSA-1099
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Box 5 Amount to 1040 Wkt 1
Medicare Part B to 1040 Wkt 1
If Medicare Part D, link toScratch pad for both PartsB & D
Federal Tax WithheldTo 1040 Wkt 1
TaxWise 1040 Worksheet 1 Screen(for Social Security)
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From SSA-1099 Box 5
From Medicare scratch pad
Student Loan Interest Deduction
Can deduct qualified student loan interest as an adjustment to income On 1040 Line 33
Link to 1040 Worksheet 2 to enter into TaxWise
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Other Sources of Income Not Covered in Familiarization Examples of other sources of income we
might see but not covered in familiarization: Sale of stocks and bonds Sale of home Partnership income on Schedule K-1 Gambling income Income tax and property tax refunds Alimony Business income
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Form 1040 Page 2 Taxes & Credits Start with AGI Deduct itemized or standard deductions Deduct personal exemptions Arrive at taxable income Alternative Minimum Tax (Out of Scope) Apply non-refundable tax credits Add other taxes Bottom line is Total Tax
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Standard vs. Itemized Deductions
Everyone is allowed a standard deduction TaxWise determines amount of standard
deduction depending on: Filing status If taxpayer is age 65 and older If taxpayer is blind
For some, itemized deductions can be more beneficial than standard deduction
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Standard vs. Itemized Deductions cont’d Itemized deductions include:
Medical Taxes (e.g.-state/local taxes paid, real estate taxes) Mortgage Interest Charitable Contributions Miscellaneous deductions
Enter itemized deductions in TaxWise on Sch A & Sch A Detail TaxWise determines whether standard or itemized
is better & transfers to 1040 Line 40138
Schedule A Itemized Deductions
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2013
Medical Expenses
Taxes You Paid
Interest You Paid
Gifts to Charity
Casualty & Theft Losses
Miscellaneous Deductions
Clients frequently bring in extra documents that cannot be claimed as deductions
Counselor must determine which documents are not needed for tax return. Examples include: Household bills (water, sewer, credit cards, etc.) Funeral expenses Life insurance proceeds Ineligible charitable contributions
Items Not Eligible as Itemized Deductions
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Medical Expenses Paid
Medical expenses can be claimed on both Federal and NJ tax returns
On Federal, can claim medical expenses above 10% of AGI; 7.5% if 65 or older
On NJ, can claim medical expenses above 2% of NJ gross income
Enter expenses on Sch A Detail screen & TW will do appropriate calculations for both Federal & NJ
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Real Estate Taxes Paid
Real estate taxes paid can be claimed on both Federal and NJ tax returns
On Federal, real estate taxes claimed as an itemized deduction on Schedule A
On NJ, taxpayer can claim a property tax deduction or credit (whichever is greater) Property taxes entered on NJ Worksheet F TaxWise automatically determines whether
deduction or credit is greater
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TaxWise NJ Worksheet F for Property Taxes
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Property Taxes on Main Home
TW determines whether Property Tax Deduction or Credit is better
Rent Paid
Rent paid cannot be claimed on Federal tax return
Portion of rent paid can be claimed on NJ tax return Rent paid entered on NJ Worksheet F TaxWise calculates the 18% of rent paid that
constitutes property taxes TaxWise automatically determines if property tax
deduction or credit is greater
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TaxWise NJ Worksheet F for Rent
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TW determines whether Property Tax Deduction or Credit is better
Rent Paid
18% of Rent can beClaimed as Property Taxes
Child Tax Credit (CTC)
Non-refundable credit that allows taxpayers to claim tax credit per qualifying child
TaxWise automatically populates CTC box on Main Info screen if eligible& calculates this credit
If not claimed in full, taxpayer may be eligible for refundable Additional Child Tax credit
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Payment/Refund/Owe/Sign
Start with total tax Apply tax withheld & estimated payments Apply refundable credits Bottom line
Refund You owe
Direct deposit information Signature line
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Earned Income Credit (EIC)
Refundable tax credit for people who work but do not earn high incomes
There are requirements that must be met to get this credit (details in later Tax Training)
For this class: Check EIC box next to dependent’s name on Main
Info Screen Follow form questions on EIC Worksheet in order
they are shown
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NJ 1040 Use Tax
Individual buys a product/service outside of NJ (or on Internet), intended for use in NJ If seller did not collect sales tax
purchaser should pay NJ sales tax If seller did collect sales tax but at a rate lower
than New Jersey's purchaser should pay the difference in sales tax
Use NJ 1040 line 45 with scratch pad
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TaxWise NJ 1040 Line 45 - Use Tax Due on Out-of-State Purchases
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Use Tax Due on Out-of-State Purchases. If 0, “get the red out.” If > 0, document on scratch pad
TaxWise 1040 Page 2 Screen cont’d
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2nd Entry of Bank Account Info for Direct Deposit & Direct Debit
Finalizing the Return & Concluding The Interview
IRS Form 13614-C Intake/Interview & Quality Review Sheet
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Finalizing Return cont’d
After return is completed: Ensure all forms in red in Forms Tree are
corrected (GET THE RED OUT) Click on red item in Forms Tree & TaxWise will take
you to correct screen Scroll down until you find item underlined in red Correct or complete red item(s)
Enter direct deposit/direct debit info if client desires
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Bank Account Information
Taxpayer can have refund deposited directly into bank account or have tax due electronically transferred from bank account to IRS
Must enter routing number and bank account number twice on 2 different TaxWise screens Main Info screen 1040 Page 2
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Finding Routing Number & Account Number on a Check
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Robert & Mary Smith54 Main StreetBridgewater, NJ 08807
Routing Number Account Number
TaxWise Main Info Screen – Bank Account Information Section
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Routing & Bank Account Info (from check)
TaxWise 1040 Page 2 Screen cont’d
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2nd Entry of Bank Account Info for Direct Deposit & Direct Debit
NJ Direct Deposit or Direct Debit Worksheet
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Check to use same bank info as Federal
Check if taxpayer desires check
Check to use different bank info from Federal or if Federal balance due/ NJ refund
Finalizing Return cont’d
Run Diagnostics (icon at top of TW screen) Click on item in Diagnostics that needs
correction. TaxWise will take you to correct screen
Correct error(s) Verify need for any overrides Read warnings & determine if any action needs
to be taken Must re-run Diagnostics after corrections
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Quality Review (QR)QR is a requirement on 100% of returns
When the tax return has been completed in TaxWise, another certified counselor (second pair of eyes) performs a quality review
QR counselor continues probing while referring to Part VII C of the Intake/Interview Sheet Verify all info from Intake/Interview form &
source documents Re-run diagnostics & correct errors
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Finalizing Return cont’d
Click on “Create e-File(s)” box (at bottom of diagnostics box) OR
Set the return stage, if not ready to e-file Click on Return Summary icon or close return & go to
appropriate client return Select appropriate return status from drop down box
Print copy of return for taxpayer Do not need to keep copies of W-2s & 1099s or signed
8879s; return everything to taxpayer ERO will e-file returns & notify counselor of any
rejects171
Finalizing Return with Taxpayer
Review printed return with taxpayer Line-by-line Federal & NJ 1040s Highlight any carryovers or “issues”
Have taxpayer(s) sign Form 8879 IRS E-File Signature Authorization If joint return, BOTH taxpayers MUST sign Tell taxpayers they are responsible for return
Assemble packet for taxpayer in envelope Return all source documents, Intake/Interview
sheet, 8879, etc.175
TW IRS e-file Signature Authorization - Form 8879
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2010By signing 8879, taxpayer(s) are acknowledging they are responsible for return and are giving permission to e-file