Level 3, 4, 5 Returns

Level 3, 4, 5 ReturnsO ScholarshipsO 1099-MISCO SSA-1099

ScholarshipsO Form 1098-T

O Qualified tuition and related expenses billed by school

O Scholarships and grants received by taxpayerO If scholarships or grants exceed

qualified educational costs, some of the grant or scholarship money may be taxable

1098-TO Commonly used boxes

O Box 1: Payments received for qualified tuition and related expenses

O Box 2: Amounts billed for qualified tuition and related expensesO Schools will use either Box 1 or Box 2

O Box 5: Scholarships and GrantsO May reduce the amount of education

credit taxpayers can claim for the year

Qualified Tuition and Related Expenses on 1098-T

O Undergraduate TuitionO Graduate TuitionO Undergraduate student Activity FeesO Graduate Student Activity FeesO Course materials and reader feesO All financial aid

1099-MISCO Self-employed individuals are

independent contracts, not employesO For business owned by just one

person, self-employment income, expenses, and profit or loss are reported on Form 1040, Schedule C.

O 1099-MISC is required when the payment form any one payer is $600 or more for the calendar year

1099-MISCO Example:

http://apps.irs.gov/app/understandingTaxes/hows/mod14/sim_mod14b_01.jsp

SSA-1099O Social Security Benefits

O Payments made under Title II of Social Security Act

O Include old age (monthly retirement), survivor, and disability insurance benefits

O Generally, if social security benefits are the only sources of income, they are not taxableO However, if taxpayer is Married Filing

Separately, 85% of the benefits will be taxable

SSA-1099O The amount from Box 5 of the form

SSA-1099 is used to calculate the taxable portion of the benefits

Adjustments to IncomeO Tax deductions that are not itemizedO Adjust (reduce) your income to arrive

at your adjusted gross income

Adjustments to IncomeO Ask taxpayer if they

O Had any expenses as an educatorO Received income from self-

employmentO Paid a penalty for early withdrawal of

savingsO Made contributions to a traditional

IRAO Paid student loan interestO Paid college tuition

CreditsO Sum deducted from the total amount

a taxpayer owesO Dollar-for-dollar reduction of taxO Important credits

O Education creditsO Child Tax CreditO Earned Income Tax Credit********

Education CreditsO Two kinds of education credits

O American Opportunity CreditO Lifetime Learning Credit

O Taxpayers can not claim both credits

Education CreditsO Eligibility

O If taxpayer claims an exemption on the tax return for a dependent who is an eligible student, then only the taxpayer can claim an education credit based on the student’s expenses. The student cannot claim the credit.

O If taxpayer does not claim an exemption for a dependent who is an eligible student, then the student can claim an education credit but the taxpayer can not.

Education CreditsO Income Requirements

O Single/Head of Household/Qualifying Widow(er)O Can not claim education credit if AGI is

$90,000 or more; credit will be reduced if AGI is $60,000 or more

O Married Filing JointlyO Can not claim education credit if AGI is

$180,000 or more; credit will be reduced if AGI is $120,000 or more

Education CreditsO American Opportunity Credit

O Credit will be up to $2500 based on qualified tuition and related expenses paid for each eligible student

O To be eligible, taxpayer must beO Enrolled in a program that leads to a degreeO Taking at least one-half of the required workload for

the course of study for at least one academic periodO Enrolled in the first four years of postsecondary

educationO Free of any felony conviction for possessing or

distributing a controlled substance

O 40% of credit will be refundable

Education CreditsO Lifetime Learning Credit

O Claim credit of up to $2000 based on qualified tuition and related expenses paid for all eligible students enrolled

O Education expenses that qualify are for courses taken as part of a postsecondary degree program or taken to improve or acquire job skills

Child Tax CreditO Two tax credits for children

O Child Tax CreditO Additional Child Tax Credit

Child Tax CreditO Allows taxpayers to claim a tax

credit of up to $1000 per qualifying child

O Eligibility requirements:O For qualifying child:

O Under age 17 at the end of tax yearO Citizen of USO Doesn’t provide over half of own

supportO Lived with taxpayer for more than half

of yearO Be taxpayer’s son, daughter, brother,

sister, etc

Child Tax CreditO Taxpayers must provide the name

and SSN of each qualifying child on their tax return

O LimitationsO Amount of taxpayer’s child tax credit

depends on the taxpayer’sO Tax Liability

O For example, if tax liability is 0, then the credit will be 0

O Modified AGI and filing status

Child Tax CreditO Limits

O If married filing jointly, must have AGI less than $110,000

O If head of household/single/qualifying widow(er), must have AGI less than $75,000

O If married filing separately, must have AGI less than $55,000

Additional Child Tax Credit

O When a taxpayer’s child tax credit is more than their tax liability, they may be eligible to claim an additional child tax credit as well as the child tax credit

O Also a tax credit of up to $1000 per qualifying child

O Same requirements for qualifying child as for the child tax credit

Additional Child Tax Credit

O The credit will be whichever is lowerO 15% of the taxpayers earned income

that is over $3000O The amount of unused child tax credit

(caused when tax liability is less than allowed credit)

O Can claim up to $1000O Taxpayers must earn more than

$3000 and have a tax liability that is less than their allowable child tax credit

Earned Income Tax Credit

O Tax credit for certain people who work and whose earned income and adjusted gross income (total income reduced by certain amounts) are under a specified limit

EITCO For 2011, earned income and AGI

income had to be less thanO $43,998 ($49,078 if married filing jointly)

with 3 or more qualifying childrenO $40,964 ($46,044 if married filing jointly)

with 2 qualifying childrenO $36,052 ($41,132 if married filing jointly)

with 1 qualifying childO $13,660 ($18,740 if married filing jointly)

with no children

EITCO To claim EITC taxpayers must

O Have gross income less than the listed amounts

O Valid SSN numberO Cannot be married filing separateO Must be a U.S. citizenO Must have earned incomeO Investment income must be less than

$3150O Cannot be the qualifying child of another

person

EITCO http://apps.irs.gov/app/

understandingTaxes/hows/tax_tutorials/mod11/tt_mod11_06.jsp

1040O http://www.nytimes.com/interactive/

2012/02/12/business/yourtaxes/2011-taxes-1040.html?src=tp