Federal Taxes and Verification. Mary Condon Sr. Student Services Coordinator University of WI Madison April 8, 2015

Transcription

1 Federal Taxes and Verification Mary Condon Sr. Student Services Coordinator University of WI Madison April 8, 2015

2 Regulations require us to know Whether a person was required to file a federal tax return, What the correct filing status for a person should be, and An individual cannot be claimed as an exemption by more than one person.

3 Eligible to file Form 1040A or 1040EZ? Amount on a tax line specific to Form 1040 Income threshold Federal benefits: SSI, SNAP, Free/Reduced price lunch, TANF, WIC Dislocated worker as defined by the Department of Ed

4 Filing requirements 3 key elements used to determine if an individual is required to file: Gross income Filing status: Single, Married filing Jointly, Married filing Separately, Widow(er) with Qualifying Child, and Head of Household Age at the end of the tax year

5 Filing requirements for most taxpayers IRS Table 1-1

6

7 Other required filing situations IRS Table 1-3

8 Head of Household To use the head of household status, a taxpayer must meet all of the following: 1. unmarried, or considered unmarried on the last day of the year (as determined by the state the taxpayer lives in), 2. paid more than half of the cost of keeping up a home for more than half of the year and, 3. a qualifying person lived with taxpayer in the home for more than half of the year (except for temporary absences such as school.) However, if the qualifying person is a dependent parent, he or she does not have to live with the taxpayer.

9 Head of Household who is a qualifying person 1? If the person is taxpayer s AND THEN that person is qualifying child (such as a son, daughter, or grandchild who lived with taxpayer more than half the year and meets certain other tests) 2 qualifying relative 4 who is taxpayer s father or mother qualifying relative 4 other than taxpayers father or mother (such as a grandparent, brother, or sister who meets certain tests) is single is married and taxpayer claims exemption for him or her is married and taxpayer cannot claim exemption for him or her a qualifying person, whether or not taxpayer claims as exemption. a qualifying person. not a qualifying person 3. can claim as an exemption 5 a qualifying person 6. cannot claim an exemption lived with taxpayer more than half the year, and is related to taxpayer in one of the ways listed below 7, and can be claimed as exemption 5. did not live with taxpayer more than half the year is not related to taxpayer in one of the ways listed below 7 and is a qualifying relative of taxpayer only because s/he lived with taxpayer all year as a member of taxpayers household taxpayer cannot claim as exemption not a qualifying person. a qualifying person. not a qualifying person. not a qualifying person. not a qualifying person

10 Head of Household qualifying person continued 1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. 2 The term qualifying child is defined under Exemptions for Dependents in chapter 3 of Publication 17. Additional definitions of qualifying child are described under Children of divorced or separated parents in chapter 3. 3 This person is a qualifying person if the only reason the exemption cannot be claimed is that the dependent can be claimed on someone else s return. 4 The term qualifying relative is defined under Exemptions for Dependents in chapter 3. 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Multiple Support Agreement in chapter 3. 6 Special rule for parent (taxpayer). If taxpayer s qualifying person is taxpayer s father or mother, taxpayer may be eligible to file as head of household even if taxpayer s father or mother does not live with taxpayer. However, taxpayer must be able to claim an exemption for taxpayer s father or mother. Also, taxpayer must pay more than half the cost of keeping up a home that was the main home for the entire year for taxpayer s father or mother. Taxpayer is keeping up a main home for taxpayer s father or mother if taxpayer pays more than half the cost of keeping parent in rest home or home for the elderly. 7 Member of household or relationship test: relatives who do not have to live with you. A person related to the taxpayer in any of the following ways does not have to live with the taxpayer all year as a member of the household to meet this test. The taxpayer s child, stepchild, foster child, or a descendant of any of them (for example, taxpayer s grandchild). Taxpayer s brother, sister, half brother, half sister, stepbrother, or stepsister. Taxpayer s father, mother grandparent, or other direct ancestor, but not foster parent. Taxpayer s stepfather or stepmother. A son or daughter of taxpayer s brother or sister. A brother or sister of taxpayer s father or mother. Taxpayer s son-in-law, daughter-in-law, father-inlaw, mother-in-law, brother-in-law, or sister-in-law. Any of these relationships that were established by marriage are not ended by death or divorce.

11 Cost of keeping up a home IRS Worksheet 2-1 Amount You Paid Property taxes $ $ Mortgage interest expense Rent Utility charges Repairs/maintenance Property insurance Food eaten in the home Other household expenses TOTALS $ $ Minus total amount you paid Amount others paid $ Total Cost ( ) If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home.

12 V1, V5, V6 Verification Groups Standard, Aggregate, Household Resources Tax filers adjusted gross income tax-exempt interest US income tax paid untaxed portions of pensions/annuities IRA deductions and payments education credits untaxed portion of IRA distributions Non-tax filers income earned from working

13 V1, V5, V6 Verification Groups Standard, Aggregate, Household Resources All groups --- Non-tax items (includes tax filers and non-tax filers) household size number in college SNAP, if indicated on the ISIR child support paid by the student (or spouse), the student s parents, or both, if indicated on the ISIR

14 V1, V5, V6 Verification Groups Standard, Aggregate, Household Resources V5 further includes: high school completion status identity/statement of educational purpose

15 V1, V5, V6 Verification Groups Standard, Aggregate, Household Resources V6 further includes other untaxed income: W-2 from each employment source payments to tax-deferred pension/savings veterans noneducational benefits child support received housing, food, other living allowances money received or paid on applicant s behalf

16

17 IRS Data Retrieval Tool (DRT) tax items transferred to FAFSA (02 code) without changes Items imported from 1040, 1040A, and 1040EZ type of return filed filing status adjusted gross income taxes paid income earned from work exemptions Also imported from 1040, 1040A, but not from 1040EZ tax-exempt interest untaxed IRA distributions untaxed pensions IRA deductions education credits

18 DRT issues 02 meets Department of Ed verification requirements however Includes rollovers Doesn t include: untaxed portions of health savings accounts self-employed SEP, SIMPLE, and qualified plans

19 Line items from the 2014 tax return A 1040EZ Tax-exempt interest 8b 8b AGI Income tax paid Untaxed portions of IRAs, pensions, and annuities (excluding rollovers) Deductible SEP, SIMPLE, qualified plans 15a minus 15b and 16a minus 16b 28 11a minus 11b and 12a minus 12b Deductible IRA Health savings account 25 Education credits 50 33

20 Availability of IRS information DRT and Transcript When a tax return filer: If filed electronically If filed by paper Doesn t owe the IRS or has an expected refund at the time tax return submitted to the IRS Owes IRS and makes full payment at the time the return was submitted to the IRS. Owes IRS and pays full amount due prior to submitting tax return. Owes IRS and didn t pay in full prior to submitting tax return Generally tax returns are accepted by the IRS within a day or two of the return having been electronically filed with the IRS. In most cases, IRS DRT is available and an IRS Tax Transcript may be requested within 2-3 weeks after the return has been accepted by the IRS. Generally tax returns are accepted by the IRS within a day or two of the return having been electronically filed with the IRS. In most cases, IRS DRT is available and an IRS Tax Return Transcript may be requested within 2-3 weeks after the return has been accepted by the IRS. Generally tax returns are accepted by IRS within a day or two of the return having been electronically filed with IRS. In most cases, IRS DRT is available and an IRS Tax Transcript may be requested within 3-4 weeks after full payment made. Generally tax returns are accepted by the IRS within a day or two of the return electronically filed with IRS. However, IRS will not process until May. In most cases, IRS DRT is available and an IRS Tax Transcript may be requested within 2-3 weeks after return has been processed in May. Generally tax returns are accepted by the IRS when the tax return is received by the IRS. In most cases, IRS DRT is available and an IRS Tax Return Transcript may be requested within 8-11 weeks after the return has been accepted by the IRS. IRS will process the return in June. In most cases, IRS DRT is available and an IRS Transcript may be requested within 2-3 weeks after return processed by IRS. IRS wil process return in June. In most cases, IRS DRT is available and an IRS Transcript may be requested within 2-3 weeks after return processed by IRS. IRS will process return in June. In most cases, IRS DRT is available an IRS Transcript may be requested within 2-3 weeks after return has been processed by IRS.

21 Other relevant tax issues Identity theft Amended returns Tax filing extensions Foreign tax filers Common law marriage

22

23

24 Resources and references Department of Education Federal Register Department of Education Dear Colleague Letter DCL ID: GEN Electronic Announcement Posted Date: November 24, Subject: Verification-Suggested Text and Availability of 2014 IRS Tax Information (Updated February 20, 2015) IRS Publication 17 NASFAA Verification webinar 11/19/2014

25 Thank you! Mary Condon