Pub 4491 Part 6 Lesson 28 Pub 4012 Tab H
Other Taxes Pub 4491 Part 6 Lesson 28Pub 4012 Tab H Form 1040 Lines
57-63 Pub 17 Chapters 6,10,17, 30 Other Taxes Self-employment
tax
Social security and Medicare taxes on tipincome Additional taxes on
IRAs and other qualifiedretirement plans Repayment of first-time
homebuyer credit SRP for health insuranceSee Lesson 3 Not reduced
by nonrefundable credits NTTC Training TY2015 Self-employment Tax A
tax in addition to the income tax
Composed of two elements Social security Medicare TaxWise does it
automatically whendata entered on Schedule C When a person goes to
collect social security, his/her benefits may be better if they
paid in more into the system NTTC Training TY2015 Self-employment
Tax Applies if net income from self- employment is $400 or more
Does not apply to a Notary Public Does not apply to statutory
employee(already withheld on W-2) Special rules for ministers or
churchworkers out of scope NTTC Training TY2015 Self-employment Tax
The additional tax: The tax Form In TaxWise
Refer to Form 1040 page 2 Emphasize that there are only payments
and refundable credits that offset the self-employment tax NTTC
Training TY2015 Self-employment Tax Social Security portion 6.20% +
Medicare portion 1.45% = 7.65% x 2 = 15.30% Both employer and
employee portions paid by self-employed person Temporary reduction
in the employee portion of social security lapsed 2012 NTTC
Training TY2015 Self-employment Tax Employer part is deductible in
computing the self-employment tax Profit from business $10,000
Employer part (7.65%) 765 Net $ 9,235 Tax rate (combined) 15.3% Tax
$ 1,413 TaxWise does the math on Sch SE! Effective tax rate is
14.13% This is the calculation reflected on Schedule SE It explains
the 92.35% factor used on Sch SE Line 5b NTTC Training TY2015
Self-employment Tax Adjustment
The deductible portion of the tax (theemployers part) Form 1040
Line 27: TaxWise does it automatically! NTTC Training TY2015
Self-employment Taxes
Special situation: Notary public no Self-employment tax Input
exempt net profit from notary business on Sch SE Line 3 NTTC
Training TY2015 Self-employment Tax Notary Public Also check box on
1040 Pg 2 Line 57
NTTC Training TY2015 Tip Income Tip income included in W-2 Box
7already had FICA and Medicare taxeswithheld Allocated tips shown
in W-2 Box 8 havenot TaxWise automatically calculates addlFICA and
Medicare taxes on Form 4137 Put 17 Chapter 6 Additional Tip Income
info in 09 Business Income slides NTTC Training TY2015 Unreported
Tip Income If employee keeps good records (tip logavailable free
from IRS) Can enter actual amount of all tips onForm 4137 instead
of allocated tipamount Will need to use a scratch page to
adjustline 4 of Form 4137 NTTC Training TY2015 Unreported Tip
Income If tips 10% of AGI (or 7.5% iftaxpayer or spouse age 65 or
older)(same amount as would show on Sch A) Even if medical or
education expenses are used here, they can also be used as
deductions or towards credits. Note: The distribution can be taken
for any reason, but if the taxpayer has incurred the medical
expenses during the tax year, s/he can claim the exception(s). The
funds are fungible so taking the distribution to replace the roof
in May and then having medical in October means the taxpayer can
qualify for the exception. NTTC Training TY2015 Part I: Early
Distribution Exception Codes
Pub 4012 H-2 All plans (cont.) 10 Due to IRS levy 11 To reservists
on active duty for 180days or more 12 More than one exception code
orother reason (see form), includingdistributions incorrectly coded
on form R Includes distributions incorrectly coded as 1, J or S in
box 7 of 1099-R See 5329 instructions or Pub 17 for further
information NTTC Training TY2015 Part I: Early Distribution
Exception Codes
Pub 4012 H-2 IRAs only: 07 The amount paid during the year
forindividual health insurance premiums whileunemployed (see rules
in Pub 590-B) 08 The amount paid during the year forqualified
education expenses (including roomand board), more details in later
slides 09 Used to buy or build first main home (mustbe used within
120 days of distribution) Even if health insurance or education
expenses are used here, they can also be used as deductions or
towards credits. Generally, if you had no interest in a main home
within 2 years of the date of acquisition for the home you are
using, then you qualify as a first time home buyer. Note: The
distribution can be taken for any reason, but if the taxpayer has
incurred the health insurance or education expenses during the tax
year, s/he can claim the exception(s). The funds are fungible so
taking the distribution to replace the roof in May and then having
medical in October means the taxpayer can qualify for the
exception. NTTC Training TY2015 Part I: Early Distribution
Exception Codes
Pub 4012 Tab H Other than IRAs only (employer plans) 01 After
separation from service afterthe age of 55 (age 50 for public
safetyemployee) 06 Made to an alternate payee under aQualified
Domestic Relations Order NTTC Training TY2015 Part I: Early IRA
Distribution Exception Code 08
The amount of higher education expenses special definition
includes: For self, spouse, foster child, adopted childor
descendent of any of these Does not have to be a dependent!
Tuition, fees, books, supplies andequipment required to enroll or
attend Special needs services expenses for specialneeds student
NTTC Training TY2015 Part I: Early IRA Distribution Exception Code
08 (Cont)
The amount of higher education expenses-special definition includes
(cont.): If student is at least time, room andboard Can be at-home
room and board (based on allowance established by the education
institution) Reduced for nontaxable scholarships,grants or ESA
distributions See Pub 970 Chapter 9 for more details Room and board
amount may be limited refer to Pub 970, Ch 9. NTTC Training TY2015
Part I Exercise Joyce, age 50, has no medical insurance.She took a
$10K distribution (code 1) fromher traditional IRA in June 2015
when shebroke her arm. Her total unreimbursedmedical expenses for
the year were $8K.Her AGI is $50K. Q: What, if any, is the
additional tax due onthis distribution? NTTC Training TY2015 Part I
Exercise Answer: $700
Line Entry 1 $10,000 [Early distribution included in income] 2 Code
05 and $3,000 [Amount of early distribution not subject to
additional tax] which is the $8,000 of medical expenses less 10% of
her $50K AGI or $8,000 minus $5,000 = $3,000 3 $7,000 [Amount
subject to additional tax] which is $10,000 minus $3,000 from Line
2 4 $700 [Additional tax = 10% of Line 3] Line Entry 1 $10,000
[Early distribution included in income] Line Entry 1 $10,000 [Early
distribution included in income] 2 Code 5 and $3,000 [Amount of
early distribution not subject to additional tax] which is the
$8,000 of Medical Expenses less 10% of her $50K AGI or $8,000 minus
$5,000 = $3,000 3 $7,000 [Amount subject to additional tax] which
is $10,000 minus $3,000 from Line 2 Line Entry 1 $10,000 [Early
distribution included in income] 2 Code 5 and $3,000 [Amount of
early distribution not subject to additional tax] which is the
$8,000 of Medical Expenses less 10% of her $50K AGI or $8,000 minus
$5,000 = $3,000 Note: Even though the medical expenses are used to
offset the early IRA distribution, they can also be used as an
itemized deduction on Schedule A NTTC Training TY2015 Part IX:
Waiver Request for Failure to Take RMD
Taxpayer can request waiver of theadditional tax for failure to
takeRequired Minimum Distribution (RMD)from qualified retirement
plan, includingtraditional IRAs Counselor NOT expected to review
alltaxpayer plans and verify that requireddistributions were taken
NTTC Training TY2015 Part IX: Waiver Request for Failure to Take
RMD
Taxpayer needs to remedy thedistribution shortfall by taking
anadditional distribution Will result in more than one
yearsdistribution in the year of remedy Then ask for waiver NTTC
Training TY2015 Waiver Request Failure to Take RMD
Part IX of Form 5329 pg 2 Note: Select 5329 for taxpayer or spouse
NTTC Training TY2015 From all plans not just one(s) missed
Part IX of Form 5329 pg 2 From all plans not just one(s) missed
Moved to Part IX for TY 2015 Link to Explanation for Request of
Waiver of Tax form and explain reason for request NTTC Training
TY2015 Part IX of Form 5329 pg 2 Possible explanations
(examples):
Clerical error (math goof) Relied on Trustee who failed to make
theRMD TP impaired by health Beneficiary not notified by Trustee
thatRMD had not been taken IRS accepts most reasonable explanations
NTTC Training TY2015 First Time Homebuyers Credit Payback
Intake/Interview First Time Homebuyers Credit
Did taxpayer receive FTHC in 2008? FTHC could have been claimed In
2008 subject to repayment In 2009 not subject to repayment and
because 36-month test period has passed, will never be repaid In
2010 not subject to repayment and because 36-month test period has
passed, will never be repaid In 2011 limited to certain eligible
taxpayers and not subject to repayment and because 36-month test
period has passed, will never be repaid Certain uniformed services
or Foreign Service employees of the intelligence community NTTC
Training TY2015 First Time Homebuyers Credit Payback
Taxpayers who claimed First TimeHomebuyers Credit in 2008 Started
repayment in 2010 Continue to make payments until fullamount of
credit is repaid Can look up amount of credit still owedon irs.gov
Can pay more than the minimum due Wasnt really a credit rather was
a 15-year loan NTTC Training TY2015 2010 Letter for 2008 Credit
Thomas J. Hunter 123 Main Street
Your City, YS YZ $6,000.00 $400.00 $5,600.00 $6,000.00 $400.00
$5,600.00 $ NTTC Training TY2015 FTHC Payback 2008 In TaxWise enter
original creditclaimed in 2008, amount repaid to dateand amount
paying with this return Form 5405, Pt II Also add note to Taxpayer
Diary orTaxpayer Reminder section of Prep Useform as reminder for
next year While if still main home for borrower(s), can enter
repayment directly on 1040 line 59b and Form 5405 is not required,
best practice is to not enter anything directly on 1040 if there is
a supporting form. NTTC Training TY2015 Form 5405 in TaxWise Total
Credit Received in 2008
Line 4 Total Credit received in 2008 Line 5 Credit repaid in 2010,
2011 , 2012, 2013, and 2014 Line 8 Amount repaying in 2015 Credit
repaid in previous tax years Amount repaying in current tax year,
usually $500 but can pay more NTTC Training TY2015 FTHC Payback If
disposed of home purchased in or home ceased to be main home,
mustgenerally repay balance of un-repaidcredit with current tax
return Complete Part I of Form 5405 2009 and 2010 credits Do not
have to be paid back if home continued to be main home for next 36
months 2009 FTHC 36-month test period should have expired in 2012
NTTC Training TY2015 Exceptions If home sold to someone not related
totaxpayer, repayment limited to gain onsale Part III of Form 5405
If home destroyed or sold throughcondemnation, and if new main
homepurchased within 2 years of event, cancontinue with annual
payments (out ofscope) NTTC Training TY2015 Home Sold or No Longer
Main Home
If taxpayer and spouse claimed the credit onjoint return, each must
file a separate Form claiming half the credit (and half of
anyrepayments) to notify IRS of status change If taxpayer claimed
the credit on joint returnfor 2008, but spouse died, enter half of
credit(and half of any repayments) The remaining half (deceased
spouses half)does not have to be repaid Home is no longer main home
If converted to business or rental Have a new principal residence
NTTC Training TY2015 Home Ceases to be Main Home
Conversion to rental property;condemnation; foreclosure Out ofScope
See the general instructions for Form for additional
repaymentinformation NTTC Training TY2015 Quality Review
Self-Employment Tax
Is the correct amount of self- employment tax shown on 1040 Page 2
Is of the tax deducted on 1040 Page 1 NTTC Training TY2015 Quality
Review Early Withdrawal Penalty
Verify Form 5329 not applicable if notused Verify Form 5329 if used
Verify First Time Homebuyers Credit ifapplicable read instructions
carefully NTTC Training TY2015 Taxpayer Summary Explain any
additional tax Type Amount Why
NTTC Training TY2015 Other Taxes Questions? Comments? NTTC Training
TY2015 46