Other Income Form 1040 Line 21 Pub 4012

Other Income Form 1040 – Line 21 Pub 4012 – Pages D-3 and D-4 Pub 4491 – Part 3 – Lesson 16 TAX-AIDE

Intake/Interview TAX-AIDE NTTC Training – TY 2015 2

Form 1040 – Line 21 TAX-AIDE NTTC Training – TY 2015 3

Examples: Pub 17, pg 94 ● Gambling winnings including lotteries and raffles ● Reported on 1099 -MISC, Box 3 ● Reported on 1099 -MISC, Box 7 (but “not a business”) ● 1099 -LTC ● Jury duty pay and Poll Worker Pay (not on W-2) ● Other: Prizes and awards Medical study subject pay Cancellation of credit card debt TAX-AIDE NTTC Training – TY 2015 4

National Mortgage Settlement ● Taxpayers may receive a settlement payment ● Relates to a home lost in foreclosure 2008 – 2012 ● No tax form (1099) issued ● Out-of-scope TAX-AIDE NTTC Training – TY 2015 5

Other Income ● Generally does NOT include 1099 -MISC non-employee compensation (Box 7) which is business income – Sch C ● Does NOT include rent or royalty income which are reported on Sch E ● DOES include income not reported on other lines and schedules TAX-AIDE NTTC Training – TY 2015 6

Line 21 in Tax. Wise Link to Wkt 7 Other Income Worksheet, if not already on tree. TAX-AIDE NTTC Training – TY 2015 7

Gambling income Link to W-2 G If no W-2 G, use L 16 TAX-AIDE NTTC Training – TY 2015 8

TAX-AIDE NTTC Training – TY 2015 9

Bottom of W-2 G Check if not taxable by state Losses automatically transfer to Schedule A limited by amount of winnings. If no W-2 G, ensure losses are entered on Schedule A, but do not exceed winnings. TAX-AIDE NTTC Training – TY 2015 10

Other Income If 1099 -MISC received TAX-AIDE If NO 1099 -MISC received NTTC Training – TY 2015 11

Long Term Care Payments 1099 -LTC ● LTC Insurance Contracts – Generally reimbursements not taxable Per diem costs up to an aggregate limit of $330/day are non-taxable ● Reported to taxpayer on 1099 -LTC ● Complete Form 8853, Section C (Sections A and B remain out-of-scope) TAX-AIDE NTTC Training – TY 2015 12

Long Term Care Payments 1099 -LTC XX TAX-AIDE NTTC Training – TY 2015 13

Accelerated Death Benefits 1099 -LTC ● Insured has been certified by a physician as terminally ill Fully excludible ● Certified as chronically ill Treated the same as paid under a qualified long-term care insurance contract TAX-AIDE NTTC Training – TY 2015 14

Long Term Care Payments 1099 -LTC ● If there are multiple payees under the insurance contract, refer the taxpayer to a paid preparer TAX-AIDE NTTC Training – TY 2015 15

Long Term Care Payments 1099 -LTC ● Complete Form 8853 Pg 2 Either add or link from Wkt 7 ● Tax. Wise will carry taxable amount, if any, to 1040 Wkt 7 L 11 ● Unreimbursed medical expenses can be deducted on A Detail, if itemizing TAX-AIDE NTTC Training – TY 2015 16

F o r m 8 8 5 3 NTTC Training – TY 2015 17

Cancellation of Debt Pub 4012 – pg D-32 ● Nonbusiness credit card debt only ● Taxpayer must be solvent immediately before debt cancelled Value of assets exceeds value of liabilities Not in bankruptcy ● Otherwise out-of-scope TAX-AIDE NTTC Training – TY 2015 18

Cancellation of Debt ● Lenders must issue Form 1099 -C if cancel $600 or more of debt Less than $600 must also be reported as income by taxpayer ● Cancelled debt included on Form 1040, Line 21 TAX-AIDE NTTC Training – TY 2015 19

Form 1099 -C OOS Nonbusiness credit card debt only TAX-AIDE NTTC Training – TY 2015 20

Income – Quality Review The final question with respect to income: Did you have any other income? TAX-AIDE NTTC Training – TY 2015 21

Other Income Questions? Comments… TAX-AIDE NTTC Training – TY 2015 22

Medicaid Waiver Payments Difficulty of Care Payments 4491 – Part 3 – Lesson 16 TAX-AIDE Entire Lesson

Medicaid Waiver Payments ● Paid by state or county ● Paid to caregiver to provide nonmedical support services to an individual in caregiver’s home ● Frequently paid to care recipients own family TAX-AIDE NTTC Training – TY 2015 24

Difficulty of Care Payments ● IRS Notice 2014 -7 Treats “qualified Medicaid waiver payments” as difficulty of care payments MUST be excluded from Income TAX-AIDE NTTC Training – TY 2015 25

Income Documents ● Each state reports payments according to its own rules 1099 -MISC Box 7 1099 -MISC Box 3 W-2 Not reported Other… TAX-AIDE NTTC Training – TY 2015 26

Tax Return ● Enter income from W-2 on Line 16 of Wkt 7 as negative number OR ● Enter income from 1099 -MISC on Line 21 (using Wkt 7 Line 2) ● Enter same amount as a negative number on Line 21 (using a blank line on Wkt 7) labeled “Notice 2014 -7” TAX-AIDE NTTC Training – TY 2015 27

In Tax. Wise ● Worksheet 7 TAX-AIDE NTTC Training – TY 2015 28

Reported on W-2 ● Payments entered on a W-2 and then excluded are automatically deducted by TWO from earned income for EIC ACTC Dependent care credit TAX-AIDE NTTC Training – TY 2015 29

Schedule C ● Report payments on Schedule C if taxpayer is in the business of providing care ● Enter exclusion as an other expense on Schedule C ● Do not exclude income if care is for more than 5 adults or more than 10 children TAX-AIDE NTTC Training – TY 2015 30

Excluding Payment from Return ● Taxpayer must exclude income from return. Will likely receive a notice of omission from IRS Should answer with “Notice 2014 -7” TAX-AIDE NTTC Training – TY 2015 31

Quality Review ● Verify if amount has been excluded from all applicable worksheets/forms, (EIC, ACTC, & Dependent Care Credit) ● Verify the dollar amount on Wkt 7 TAX-AIDE NTTC Training – TY 2015 32

Medicaid Waiver Payments Questions? Comments? TAX-AIDE NTTC Training – TY 2015 33