tax aid experienced training · tax changes in 2015 individual shared responsibility under aca...

Tax Aid Experienced Volunteer Training

Presented by Andy Chang

www.tax-aid.org Revised 1/6/16 1

Tax-Aid Disclaimer

This summary provides basic information regarding basic tax law. Nothing in this summary supplants or replaces the requirements of the tax code. This summary is not intended as a substitute for advice from a taxpayer’s own legal and financial advisors.

Additional information about tax law can be found on www.IRS.gov

www.tax-aid.org Revised 1/6/16

This summary provides basic information regarding basic tax law. Nothing in this summary supplants or replaces the requirements of the tax code. This summary is not intended as a substitute for advice from a taxpayer's own legal and financial advisors. Additional information about tax law can be found on www.irs.gov. 2

Agenda 2015 Tax Updates

Schedule C

Earned Income Credit

Education Credit, Tuition and Scholarships



New Legislation

The Trade Preferences Extension Act of 2015 includes the following provisions:

• Requires taxpayers who claim the American opportunity and lifetime learning credits to have a Form 1098-T, beginning in tax year 2016. There are no changes for claiming an education credit for tax year 2015.

• Child tax credit not refundable for taxpayers electing to exclude foreign earned income from tax: Applies to taxable years beginning after December 31, 2014


This summary provides basic information regarding basic tax law. Nothing in this summary supplants or replaces the requirements of the tax code. This summary is not intended as a substitute for advice from a taxpayer's own legal and financial advisors. Additionalinformation about tax law can be found on www.irs.gov. 4

Tax Changes in 2015 Individual shared responsibility under ACA increased

to $325 per adult (up to $975 per family)

Mileage reimbursement rate change

57.5 cents business

23 cents medical or moving purposes

14 cent charitable service



Extended Tax LawThe following legislative provisions (“extenders”) have been renewed through December 31, 2016:

Cancellation of debt on principal residence Enhanced Child tax credit Enhanced American Opportunities Credit Enhanced Earned Income Credit Transit extension Qualified Charitable Distribution (QCD) $250 Adjustment for Teacher Classroom Expenses Deduction for Qualified Tuition and related expenses Deduction for State and Local General Sales Tax Deduction for Mortgage Insurance Premium Nonbusiness Energy Property Credit



Medicaid Waiver Payments Paid by state or county

Paid to caregiver to provide nonmedical support services to an individual

Frequently paid to member of care recipient’s family



Difficulty of Care paymentIRS Notice 2014-7

Treats “qualified Medicaid waiver payments” as difficulty of care payments

Qualify whether care recipient related or unrelated

Services must be provided in caregiver’s home

Qualified payments

• Prior to 1/3/2014 may be excluded from income (optional exclusion)

• On or after 1/3/2014 must be excluded from income


This summary provides basic information regarding basic tax law. Nothing in this summary supplants or replaces the requirements of the tax code. This summary is not intended as a substitute for advice from a taxpayer's own legal and financial advisors. Additional

information about tax law can be found on www.irs.gov. 8

Income Documents

Each state reports payments according to its own rules

• 1099-MISC Box 7 or Box 3

• W-2

In California W-2 is issued by In-Home Supportive Services (IHSS)

•Patient is listed as employer

•All have same Employer Identification Number (EIN)



Form W-2 from IHSS

Will IHSS issue W-2s for employees with qualified Medicaid waiver payments?

Notice 2014-7 instructs agency with independent knowledge of excludable payments to not include those payments in Box 1 of Form W-2

Payments may still be subject to Social Security and Medicare (Boxes 3-6 of W-2)



Form W-2 from IHSSPayments not subject to Social Security/Medicare if:

Spouse employed by the other spouse not in a trade or business, such as domestic service in a private home

Parent employed by son or daughter not in a trade or business

Child under 21 employed by parent not in a trade or business, such as domestic work in the parent’s private home



Tax Return

Taxpayer has W-2 with Social Security and Medicare wages only – no need to enter into tax return

Taxpayer has W-2 with Box 1 wages that must be excluded

• Enter income from W-2 on Line 7 of 1040

• Enter same amount as a negative number on Line 21 (Worksheet 7) labeled “Notice 2014-7”



myRA Introductory retirement account: myRA

No fees with modest growth

Open account with as little at $25 and add up to $5 at a time

When account reaches $15,000 roll over to traditional Roth IRA

More information at www.myra.gov




Schedule C


Education Credit, Tuition and Scholarship



Schedule C vs Schedule C-EZ Schedule C

• Expenses: advertising, mileage, commission/fees, insurance, interest, legal/professional services, repairs/maintenance, supplies, taxes, licenses, travel and utilities

• Expenses not deductible: bribes, kickbacks, demolition expenses

Schedule C-EZ

• No expense >$5,000

• No employees

• No Inventory

• No depreciation or deducting of the cost of your home




Schedule C





Federal vs State Earned Income Credit

Federal EITC State EITC

• Maximum Income $14,820 (no children)

• Maximum income of $6,580

• Maximum Income of $53,267 (3 or more children)

• Maximum Income of $13,870(3 or more children)

• U.S. Citizen or Resident Alien • U.S. Citizen or Resident Alien

• W-2 wages or self-reported • W-2 wages or self-reported

• Ages 25 to 65 (no children) • Ages 25 to 65 (no children)




Schedule C





Education Credit, Tuition and Scholarships Education Credits

• American Opportunities Credit

• Lifetime Learning Credit

Tuition

Scholarships

Refer to Publication 970

