000_P+P 2014 tax yea..

Report
Basic B volunteer training
Tax year 2014
BASIC B TRAINING OVERVIEW
• Federal nonrefundable and refundable credits
• NEW: Premium Tax Credit and related credit
“reconciliation”
• Exemptions to the ACA insurance coverage
requirement
• Other federal taxes and related tax issues
• Financial services at the tax site
Affordable Care Act (ACA)
and the 2014 tax return
ACA THE BASICS
• The ACA created the Health Insurance Marketplace
– Minnesota has it’s own marketplace, MNsure
• MNsure marketplace is where Minnesotans find
information about health insurance options,
purchase health insurance and enroll in public
health plans
• Taxpayers must report whether he/she (and family)
had insurance coverage for the year on their tax
return
THE TAX RETURN
• A new tax credit, the Premium Tax Credit (PTC), is
available to help eligible taxpayers pay for coverage
• Taxpayers could elect to claim the PTC throughout the
year to help pay monthly insurance premiums –
Advanced Premium Tax Credit (APTC)
• The ACA also includes the individual shared
responsibility provision, which requires individuals to
have health insurance coverage for their family
• Form 8962, Premium Tax Credit (PTC), Form 8965,
Health Coverage Exemptions, and Form 1095-A,
Health Insurance Marketplace Statement
LINE 46: EXCESS ADVANCE
PREMIUM TAX CREDIT
• Must have purchased health insurance through MNsure
marketplace
• Advanced payments of the Premium Tax Credit to help
taxpayer pay their 2014 monthly insurance premiums
• Advanced payments were based on the estimated income
the taxpayer entered on their MNsure application
• Complete Form 8962 to “reconcile” their payment –
comparing what they estimated their income would be and
what their actual income was for 2014 – did they receive
too much advanced payment
• Must have Form 1095-A to complete the return
LINE 61: HEALTH CARE,
INDIVIDUAL RESPONSIBILITY
Taxpayer and each family member must have –
A. Health coverage,
B. Qualify for a health coverage exemption, or
C. Make a shared responsibility payment
(SRP) on their tax return
WHAT YOU NEED TO DETERMINE
• Did everyone listed on the return have insurance
coverage?
– Yes, is the insurance coverage considered MEC
and what months was the taxpayer (family)
insurance in 2014
– No, is the taxpayer (family member) required
to file a return or eligible for an exemption
from insurance coverage
YES, THE TAXPAYER (FAMILY) HAS
HEALTH INSURANCE
• Is the health insurance considered minimum
essential coverage (MEC)?
• If the taxpayer (family) had MEC insurance
coverage all year, check the “full coverage” box
on line 61, click your heels and shout hooray!
• If the coverage was not all year, complete
Worksheet 8 in TaxWise
NO, THE TAXPAYER (FAMILY) DID NOT
HAVE HEALTH INSURANCE
• Check the federal filing requirement threshold to
determine whether the taxpayer is required to file
a return
• Determine whether the taxpayer (family) may
qualify for an exemption from the penalty
MINIMUM ESSENTIAL COVERAGE
• Insurance through employer
• Insurance purchased through private company
• Insurance purchased through MNsure
marketplace – must have Form 1095-A to
complete the return
• Student health plans
• Government-sponsored
EXEMPTIONS TO THE PENALTY
• Taxpayer (family) may be eligible for more than
one exemption
• Find the exemption that is least complicated
• Undocumented taxpayers are exempt from the
penalty (exemption code C)
• Some exemptions require approval from the
federal marketplace
• Taxpayer can elect to take the penalty without
claiming an exemption
LINE 69: NET PREMIUM TAX CREDIT
• Credit based on MAGI and family size
• To be eligible must have purchased insurance
through MNsure marketplace
• Must have Form 1095-A from MNsure
• If taxpayer elected to receive the APTC, then the
portion used during the year will be deducted
from the calculated PTC amount
10 MINUTE BREAK
Topic 7: Nonrefundable
Credits
LINE 48: FOREIGN TAX CREDIT
• Enter the amount shown in box 6 of
1099-DIV or 1099-INT directly on line 48
• If required to use Form 1116 then it is outof-scope
LINE 49: CHILD AND DEPENDENT CARE CREDIT
• Max credit: $3,000 for 1 qualifying person,
$6,000 for 2+qualifying persons
• Cannot be married filing separately
• Must have earned income
• Expenses must be paid by the taxpayer to work
or look for work
• Form 2441
QUALIFYING PERSON
• Child under age 13 and claimed as an
exemption
• Person who is physically/mentally incapable of
self-care and couldn’t be claimed as
exemption because income was $3,950+
• Spouse who is physically/mentally incapable of
self-care
QUALIFYING EXPENSES
• Paid by the taxpayer (spouse) to work or
look for work
• Child in nursery school or pre-school for
children below level of KG qualify for the
credit
• Overnight camp does not qualify
• Day camp may qualify if the camp
specializes in a particular activity such as
computers or soccer
QUALIFYING PROVIDER
• Payments cannot be made to the
taxpayer’s (spouse) dependent
• If payments are made to a taxpayer’s
(spouse) child, he/she cannot be a
dependent and must be age 19 or older by
the end of the year
• If the provider refuses to give EIN/TIN, the
taxpayer can still claim the credit, see Pub
17, “provider refusal”
LINE 50: EDUCATION CREDITS
• American opportunity credit, max credit
$2,500 per student
• Lifetime learning credit, max credit $2,000
per return
• Cannot use both credits for the same
student
• Form 8863
CANNOT CLAIM THE CREDIT
• Claimed as a dependent on another person’s
tax return, such as the taxpayer’s parent
• Filing status is married filing separately
• Was a nonresident alien for any part of 2014
(nonresidents are out-of-scope for Tri-CAP)
EDUCATION DOCUMENTATION
• Can be shown on Form 1098-T or annual
statement from the institution or receipts for
books and equipment
• Reduce expenses by amounts received from
scholarships and grants shown in box 5 of
Form 1098-T
AMERICAN OPPORTUNITY CREDIT
• 40% of the credit may be refundable
• Available for the first 4 years of post secondary
education
• Pursuing a degree or recognized educational
credential
• Enrolled at least half time
• No felony drug convictions
NOT ELIGIBLE FOR THE REFUNDABLE
AMERICAN OPPORTUNITY CREDIT
1. Taxpayer is (a) under age 18; or (b) age 18 and
their earned income was less than ½ of their
support; or (c) FT student over age 18 and
under 24 and earned income was less than ½ of
their support; AND
2. At least one of his/her parents was alive at the
end of the year; AND
3. Taxpayer is not filing a joint return
LIFETIME LEARNING CREDIT
• Nonrefundable
• Available for an unlimited number of years
• Do not to be pursuing a degree
• Can take one or more courses
• Felony drug convictions are permitted 
EXPENSES
• Qualifies: tuition, required enrollment fees and
course-related materials such as books, supplies and
equipment
• American opportunity credit: books, supplies and
equipment do not have to be purchased from the
school
• Lifetime learning credit: books, supplies and
equipment must be purchased from the school
• Does not qualify: computer tech fees, student
activity or athletic fees, insurance, room and board,
transportation
CALCULATING EXPENSES
Scenario 1
Tuition
$12,500
Course-related materials
$650
Scholarships and Grants
($5,000)
Eligible expenses for credit
$8,150
LINE 51: RETIREMENT SAVINGS CREDIT
• Taxpayers qualify if they made contributions to
an eligible plan
• Contributions to employer-sponsored plan are
shown in box 12, Form W-2
• Contributions to a traditional IRA or Roth IRA
• Must be age 18 or older and cannot be a FT
student
• Form 8880
LINE 52: CHILD TAX CREDIT
•
Nonrefundable credit up to $1,000 per child
•
Taxpayers not claiming the full amount may
be eligible for the refundable Additional
Child Tax Credit
•
Must have a Qualifying Child, determined by
info entered on TaxWise Main Information
Sheet
•
Form 8812
LINE 53: RESIDENTIAL ENERGY CREDITS
• Expired provision
Topic 8: Other taxes
• Line 57: self-employment tax
• Line 59: additional tax on IRAs, other
qualified retirement plans – early
distributions subject to 10% penalty
• Line 60b: 1st time homebuyer credit
repayment
• Line 61: health care, individual
responsibility
10 MINUTE BREAK

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