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Tax Prep Dispatch: Do It Yourself?

By Barbara DelBene, Guest Contributor on 05/12/2017 @ 11:00 AM

Tags: Taxpayer Opportunity Network

If you have sites open this time of year, you see all kinds of unusual and challenging tax situations. Late spring filers have put it off for a good reason or taxpayers are coming to you for help because something seems amiss on the returns they have already filed. Some of the most challenging situations involve returns that the taxpayer prepared themselves.

Don’t get me wrong. I love the idea of self-preparation. Taxpayers who do their own returns get more involved in the process, become better record keepers, have an increased understanding of their tax refund or balance due and, of course, more self-prep means less demand on VITA resources. But when the taxpayer doesn’t take the process seriously, has complicated issues, or doesn’t carefully read and follow the instructions, the result can be a fantastic knot that takes some effort to unravel.

The following self-prep problem discussion is based on three cases I saw - all in the same afternoon - just last week.

  • NO COPY OF THE TAX RETURN – In my experience, self-prep taxpayers often don’t have a copy of the tax return that was filed. Sometimes the taxpayer doesn’t have the W-2s and other tax documents anymore either. I don’t know why this happens. I’m sure that tax preparation software offers a pdf or other method of saving/printing the returns.

Taxpayer: I got this letter from IRS about last year’s return and I don’t understand it.
Preparer: It appears to be related to the Affordable Care Act. Did you have health insurance all last year?
Taxpayer: No, I just had that Obamacare for part of the year.
Preparer: Did you bring a copy of your tax return?
Taxpayer: No. I did it myself online. I don’t have a copy.
Preparer: I’m thinking that you can you go back online to get a copy.
Taxpayer: Not sure that I remember where to go. What’s that system that everybody uses?
Preparer: I think one of the most popular is TurboTax.
Taxpayer: Yeah, that sounds familiar…

The upshot of this was that the taxpayer could not find any clue about where he had prepared his return and had to go to IRS for a transcript.

  • PROBLEM WITH THE FILING PROCESS – I’m most familiar with unresolved rejects. That is, the return is rejected – usually due to a typo in a name or SSN – and the taxpayer doesn’t follow up to correct. This all usually comes to light when a taxpayer gets antsy because the refund hasn’t been received. Last week I saw a new twist:

Taxpayer: Please help me understand this letter that I got from the Illinois Department of Revenue. And, also, could you help me figure out why I never received either of my refunds?
Preparer: This letter is questioning your state withholding amount. Do you have your W-2s?
Taxpayer: No. I couldn’t figure out how to do the electronic filing so I just mailed everything to Springfield.

The taxpayer did remember that his only income was one W-2 and he knew the expected refund amounts. We went to the IRS’s Where’s my refund? It showed no record of a federal return for 2017. The amount of withholding on the state return turned out to be the federal withholding amount. The “Springfield” the taxpayer mentioned is Springfield, IL, which, in fact, is the destination for paper IL returns. It appears that the taxpayer prepared both federal and state returns – although with some apparent co-mingling - and mailed them both to the Illinois Department of Revenue. (The taxpayer did not have a copy of the returns but was able to find a copy of the one W-2. See item 1 above.) The tax site prepared and filed a new federal return, reconstructed the IL-1040 and prepared an IL-1040X to correct the withholding.

  • PREPARATION ERRORS – It seems that sometimes the self-prep taxpayers really have no basic understanding of taxes and make some spectacular mistakes.

Taxpayer: I did my taxes myself and I never got my refund. Yesterday, I got this letter from IRS that says something about line 64.
Preparer: The IRS is asking for verification of the entry for $7,142.34 on Form 1040, line 64. That’s the withholding amount. Do you have a copy of what you filed?
Taxpayer: I don’t have the return. (See item 1 above.) I do have my W-2s.

The taxpayer handed over three documents: two W-2s, both with zero federal income tax withheld in box 2, and one Form 1099-MISC with $7,142.34 in box 7. Uh oh. This taxpayer went home to get his mom to help him go online and retrieve a copy of what was filed.

Here’s some general advice on handling self-preparation issues:

  • Be thoughtful in how you talk to and with taxpayers who have made mistakes on their own returns. Be careful to not use judgmental words and to remember that they tried. With a bit of careful coaching, they could probably get it right next year and be that much more self-sufficient.
  • Utilize the IRS Where’s my refund? as a quick way to try and get a sense of the return/refund status. Of course, one needs to know the filing status and refund amount, which may not be available.
  • When the taxpayer does not have a return copy, encourage them to go online and secure a copy.
  • When the taxpayer can’t get a return copy online, don’t hesitate to instruct the taxpayer to get an IRS transcript. Unless it was extremely simple, guessing what was probably on the original return is risky business. It could certainly be something totally unexpected.
  • Keep an open mind. You may have a snarly puzzle to solve and anything goes.
  • Don’t forget to remind the taxpayer that next year he can come to your VITA site for free preparation services.
  • If the taxpayer seems really interested in learning more and wants to understand taxes, invite him to volunteer next year. You never know, you may have a great preparer in the making.

Good luck helping the self-preppers! And remember do-it-yourselfer is a learning experience and that many of them may get into some kind of trouble along the way.

VITA Field: Much to Celebrate Following a Whirlwind Tax Season!

By Rebecca Thompson on 05/04/2017 @ 09:00 AM

Tags: News, Taxpayer Opportunity Network

For those with experience working in the community tax prep world, the 2017 tax season felt a little…different. Even before the season began on January 23, VITA preparers were already grappling with several important issues. For example, the IRS had announced that EITC refunds would be delayed, creating the need to develop messages that would make the refund delay clear to taxpayers and dissuade them from turning to costly Refund Anticipation Loans. Similarly, new Individual Taxpayer Identification Number, or ITIN, requirements that went into effect at the beginning of the year threatened to make the tax filing process a complicated endeavor for the millions of taxpayers who don’t have a Social Security Number.

Despite these challenges—not to mention the transition to a new software system that had a few kinks to work out—the community tax prep field worked diligently all season long to provide the quality service that taxpayers want and need. As the dust settles, it’s time not only to celebrate VITA programs’ many successes this season, but also to think about how we can work together to leverage those successes in the 2018 season and beyond.

One of this season’s successes was the coordinated response to overcome key challenges facing the taxpayers who rely on VITA. In response to the EITC refund delay, CFED’s Taxpayer Opportunity Network, with support from the Intuit Financial Freedom Foundation, developed and disseminated an EITC Refund Delay Messaging toolkit to VITA programs. The toolkit provided a variety of marketing and messaging resources programs could use to amplify the IRS’s messages about the refund delay in their communities. Then, in response to new ITIN Renewal requirements, a range of VITA programs partnered with the IRS to assist taxpayers with their new and renewal ITIN applications, while the Taxpayer Opportunity Network provided support by hosting a webinar with several of our national partners to walk preparers through the new ITIN requirements and how to address filers’ questions. Although these challenges were unique to the 2017 filing season, the ways the field came together to coordinate on messaging and fill in gaps provides a good model for how we can work together for better results in the future.

We can also draw lessons from the field’s outreach efforts this season to reach even more taxpayers in 2018. For example, on January 27, CFED partnered with the IRS on EITC Awareness Day, an annual event supported by H&R Block that raises awareness among local, state and federal lawmakers about the power of the EITC. To mark the occasion this year, our Taxpayer Opportunity Network developed a toolkit, complete with social media messages that the field helped trend nationally. On March 15, we celebrated the third annual VITA Awareness Day with a tour of a VITA site in Virginia that we streamed live on Facebook. Seeing how well people reacted to the behind-the-scenes look at a VITA site, we wrapped up the season with a tour of a VITA site in Utah, this time in conjunction with our partners at the Patriotic Millionaires. Following this event, two members of the Patriotic Millionaires—Art Lipson and Jonathan Ruga—penned an op-ed urging support for the VITA program and the VITA Permanence Act.

Each of these efforts represents a blueprint that we can use to do more—and more efficiently—in future tax seasons. By coordinating our outreach efforts and working together, this season proved without doubt that when we come together, there’s little we can’t overcome. So, as you recover from this whirlwind of a tax season, we hope you’ll take a moment to reflect on just how much we accomplished together.

Tax Prep Dispatch: Tax Triage

By Barbara DelBene, Guest Contributor on 04/14/2017 @ 12:00 PM

Tags: Taxpayer Opportunity Network

It’s Saturday, April 15. You have seven volunteers and a mob in the waiting room – way more than you can handle in one Saturday. Moreover, clients on the last few days of the filing season tend to be a hapless bunch. They have strange situations; e.g., no idea who had health insurance when, prior year returns, stories about other people claiming their kids and tax records that look like a six-year-old’s origami project. How do you decide who to serve?

Suggested priorities, from most important to least important:

  1. 2013 return - refund
  2. Amended return to correct an error made at your tax site
  3. 2016 return - balance due
  4. 2016 extension - balance due return
  5. Amended return - balance due
  6. 2016 extension - refund return
  7. Everything else

2013 Return - Refund

If someone has an overpayment on a 2013 return, that person must file by April 18, 2017 to get the refund. If filed later, that money is gone. IRS will not issue a refund when an original return is filed more than three years after the return due-date.

Amended Return to Correct an Error Made at Your Tax Site

It happens. We owe the taxpayer the service of correcting the error as soon as possible. This filing season, this could include ACA errors made by the TaxSlayer software. Even though the VITA site did not directly cause the problem, these taxpayers should receive priority. And make sure that they get a copy of the apology letter from TaxSlayer.

2016 Return - Balance Due

When someone files late and has a balance due a late filing penalty will be assessed. The penalty is 5% of the balance due for each month – or part of a month – that it is late for up to five months. For example, it looks like Mary will owe $800. If she files at the end of May, she’ll owe the $800 plus an $80 penalty. Mary should file her return by April 18, even if she can’t pay.

2016 Extension - Balance Due Return

Some folks just don’t have it together yet. If a client is not ready to prepare the return and it looks like the client will owe, advise the client to file for an extension and pay the anticipated balance due with the extension request. Both need to be done by April 18. See last week’s Dispatch for more information about extensions.

Amended Return - Balance Due

A client with a probable balance due needs to file as soon as possible to reduce interest and, perhaps, penalties.

2016 Extension - Refund Return

Yes, sometimes a client with an overpayment who is not ready to file should file for an extension. A taxpayer who has a legal filing requirement should really file the return or file for an extension by April 18. Late filing penalties are not assessed on returns with an overpayment. But if the client subsequently owes – for example, maybe IRS audits the return and discovers unreported income – then the late filing penalty would be assessed. Better safe than sorry.

Everything Else

This includes 2016 returns with no filing requirement – for example, someone who is just filing to get some withholding back, all 2014 and 2015 returns, various amended returns and all of the other flotsam and jetsam that floats through your door.

Final Notes

Does the concept of triage apply to taxes? The non-medical definition of triage is "assigning of priority order to projects on the basis of where funds and other resources can be best used, are most needed or are most likely to achieve success.” This definition certainly applies to tax sites.

Tax triage may not be life or death; that is, if you make the wrong decision, no one is going to bleed out or convulse. Nonetheless, know that you do difficult, important work. Here’s hoping that your filing season comes to a productive close, all of your last-minute returns are accepted and that most of your clients say thank you.

Problems related to TaxSlayer have made this an especially challenging tax season. VITA people really care about their taxpayers and take pride in the quality of their work, making all this apologizing for errors and downtime and delays more difficult. Even with the software difficulties, our service could be worse – as I was reminded by this video. (The tax part starts at about two minutes in.)

"I Need More Time!" Filing For Extensions

By Barbara DelBene, Guest Contributor on 04/14/2017 @ 10:36 AM

Tags: Taxpayer Opportunity Network

We have a scant two weeks left in the filing season and unprepared taxpayers are still walking into the sites. Often, they ask if there is a way to get more time. Well, yes, it’s pretty easy for a taxpayer to get a six-month extension. But filing for an extension is not always the most advisable action. A complete interview may reveal a more appropriate course of action.

Warning: Everything discussed here applies to federal income tax. Don’t forget to find out about your state’s filing requirements and extension procedures.

Who Should Get an Extension?

People Who Don’t Have All of Their Records

Situation: Someone missing a W-2, a 1095-A – whatever - comes in during the last week and still doesn’t have what is needed.

What to do? The taxpayer can file for an automatic six-month extension until October 16, 2017, but keep in mind:

  • It’s generally better to avoid a postponement. The person has had at least 2½ months to get it together. Will it be any different after the due date?
  • Example: Jane, a self-employed taxpayer, knows that she has a receipt for the roughly $20 that she paid for a few office supplies. Somewhere.
  • Comment: If she doesn’t have it by now, it’s probably better to just claim the $20 and file the return.
  • Does it make a difference on the tax return? Before agonizing over missing information, make sure that the item is really needed.
  • Example: John and Mary, who claim their three kids on their joint return, have $30,000 total wage income. They forgot to get the daycare provider’s tax identification number and wonder if they should get an extension.
  • Comment: A taxpayer with no income after the standard deduction and exemptions are subtracted won’t benefit from a child care credit. John and Mary have zero taxable income and probably don’t need that identification number. They should go ahead and file.
  • A taxpayer with no filing requirement does not need to file for an extension.
  • Example: Suzy is a student with $1,500 wages from a summer job and no other income. She is claimed as a dependent and wants to file to get back her $80 withholding. But she lost her W-2.
  • Comment: Since she does not have a filing requirement on this simple return there is no need to get an extension.
  • Make every effort to get the information that is needed. Is it available online? Is there someone to call and ask? Can it be requested and sent in an email?
  • Example: Suzy’s parents want to claim the American opportunity credit but they don’t have Suzy’s Form 1098-T, Tuition Statement.
  • Comment: Most college students can easily access Form 1098-T online. The parents should ask Suzy to get on her smartphone, access her student account and get the Form 1098-T.
  • Can missing data be estimated or reconstructed? If it is later discovered that the return was wrong, the taxpayer can file an amended return.
  • Example: James did not have nearly enough withheld from his wages and owes self-employment tax on his “under-the-table” side job. When the return is pretty much finished and it appears that he owes a lot, James says that maybe he overestimated the income on the side job and he needs more time to find more records.
  • Comment: If the missing item is really critical and the taxpayer is trying to get it right, you could help him file for an extension. If it appears the taxpayer doesn’t want to include everything to avoid a balance due and just wants more time to figure that out, refuse to do the return.
  • When it is clear that the taxpayer isn’t going to get it together enough to file by April 18, it may be best to file the extension – even if the taxpayer is getting a refund. It may not be necessary, but it could avoid penalties and it helps keep the taxpayer aware that due dates are important.
  • Example: Julie comes in on the last day and she is really not ready to file. She has a combination of self-employment and wage income, her records are a disheveled puzzle, and she’s not at all sure about when exactly she and her daughter had health insurance. She definitely has a filing requirement and it appears that she will get a refund of about a $1,000.
  • Comment: Even though it appears that she won’t owe, an extension is probably a good idea. When the outcome of the return is a shot in the dark, you never know if something might turn up that drastically changes the outcome. She might end up owing an Individual Shared Responsibility payment for herself and her children, or perhaps a forgotten Form 1099-MISC will appear. An extension could help her avoid a late filing penalty on any unpredicted balance due that ensues.

Not People Who Owe

Situation: Some taxpayers put off filing because there is a big balance due. They know they can’t pay it all and often they want to file for an extension.

What to do? Make two points clear from the get-go:

  • Filing for an extension just gives a taxpayer more time to complete the tax return. It does not extend the due date for payment. Tax payment is due on the original return due date. Amounts paid after the due date will be subject to interest and late payment penalties.
  • Don’t delay filing – even if the taxpayer can’t pay a penny of the balance due. There is a penalty for late payment, but there is a bigger penalty for late filing.

Example: Fred is a self-employed bike messenger and he knows he owes $1,500. He is recovering from an injury and can’t work again until September. He wants to just wait and file and pay in the fall.

Comment: Don’t wait, Fred! He is much better off if he files by April 18, paying as much as possible with the return and then paying the rest when he can. If he files timely and then pays it all in September, he will have about a $38 late payment penalty. If he waits and files and pays in September, he will also have about a $375 late filing penalty.

Taxpayers with Complications

Situation: The taxpayer sold a bunch of investments that he had inherited or received as a gift from various relatives over the years, he usually can itemize but has not yet sorted through the stack of shoeboxes filled with receipts, he was forced to cash in an insurance endowment, and he has a Form 1099-MISC with some mysterious income in box 3… Well, you get the picture. Lots of challenging tax issues tend to walk in the door at the end of the filing season

What to do? Don’t guess. And if it is out of scope or you just don’t understand it, don’t do the return. If it seems that your site can do it correctly and it appears to be a hugely time-consuming issue, this might be the time to prepare Form 4868, Application for Automatic Extension of Time to File U.S. Income Tax Return, and get an extension.

Example: Manuel comes in on April 18 when the tax site is slammed with clients and he has several complex issues. Since your site has always prepared his return, he doesn’t want to go to another tax preparer.

Comment: Looks like it’s time to estimate and get an extension. A quick review leads you to think that he will get a refund and may not even have a filing requirement. Nonetheless, it’s a good idea to get that extension to avoid any possibility of late filing penalties and advise Manuel to return during the summer when things are calm and you can devote the appropriate amount of time to his situation.

How Do You Get an Extension?

File Electronically

Prepare and electronically file a Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.

  • Using TaxSlayer: For the full blog post, including screenshots, click here.

Where is the extension located?

The extension is located in the Federal Section>>Miscellaneous Forms

How do I electronically file the extension?

  • Select e-file in the left navigation bar
  • Select File Extension

Will I really get an email from

  • No, you will receive an IRS acknowledgment with an acceptance or rejection.

Will the status on the client list change to transmitted?

  • No, it will stay as “in progress.”

Will I receive an IRS Acknowledgement?

  • Yes, you will receive an IRS acknowledgment indicating accepted or rejected.

What will the status of the client list change to after the extension is accepted?

  • The status on the client list will change to “Accepted.”

Using TaxWise: Here is an excerpt from the Form 4868 instructions from TaxWise HELP. To get the extra time you must:

  • Properly estimate your 2016 tax liability using the information available to you
  • Enter your total tax liability on line 4 of Form 4868
  • File Form 4868 by the regular due date of your return
  • Check here if using this form (You will see this at the top of the 4868 page).
  • If you are using this form, select the check box.


  • Select Form 4868 without direct debit or Form 4868 with direct debit on the Main Information Sheet in the PIN section.
  • Name information is transferred from the Main Information Sheet. Any changes to the name must be made on the Main Information Sheet.
  • Do NOT override the name information on this form.
  • If you select Form 4868 with ACH debit on the Main Information Sheet, you must fill in information on the ACH Ext (Direct Debit of Balance Due or Gift Tax) form.

Advise the Taxpayer to Just Pay Electronically

The taxpayer can just pay the estimated balance due electronically. No Form 4868 is needed if the taxpayer pays the estimated amount due using IRS electronic payment options and indicates that he wants an extension. The extension is then automatically granted. The taxpayer can pay online or by phone, using the IRS electronic payment system or pay by debit or credit card.

Paper: The Old-Fashioned Way

A taxpayer can always fill out a paper Form 4868 and send it to IRS in the mail. This is particularly useful for taxpayers who can’t or don’t want to pay electronically. The taxpayer sends payment for the estimated balance due with the Form 4868.

  • At a really busy site with no time to talk to every taxpayer, this could be as simple as printing out a bunch of Form 4868s and have a stack available at the door. The form includes instructions and the mailing address.
  • A preparer could use the tax preparation software to complete the Form 4868 and print it for mailing.
  • A preparer could complete the online fillable IRS Form 4868, print and mail.
  • IRS FreeFile provides software for preparing and filing extensions.

Preparing an extension form is pretty easy – well, except for the part about estimating the tax liability.

Example: Joe is single, had five jobs last year, and he has lost two of his W-2s. Based on his pay stubs, it looks like his total tax will be around $2,500 and his withholding was $2,000. Here’s his Form 4868.

Comment: See how easy it is!


  • Taxpayers with a balance due and most people with a filing requirement who cannot file by April 18 should file for an extension of time to file.
  • If possible, thoroughly discuss the situation with the taxpayer to determine the best course of action.
  • An extension of time to file is not an extension to pay. Someone who cannot pay can get an extension to avoid the high late filing penalties.
  • There are lots of ways to get an extension and it’s easy.

The Taxpayer Opportunity Network’s VITA Field Census Shines New Light on the Field

By Steve Holt, Guest Contributor on 04/03/2017 @ 12:00 PM

Tags: Data and Research, Taxpayer Opportunity Network

We have long known that the volunteer-led tax field is robust, involving the work of a wide variety of organizations in a diverse array of communities. We knew basic facts such as the number of free tax sites and the total returns prepared, but we did not know much (at least in any systematic way) about the organizations operating the sites, the populations served or the services offered.

The Taxpayer Opportunity Network designed the VITA Field Census to gain a deeper understanding of the field. Beginning last November, community tax programs from across the country completed the Field Census. This blog post profiles the results of the Field Census and its survey respondents. The complete Field Census results may be found here, and in coming months the Network will highlight key findings in the Taxpayer Opportunity Network Monthly Update.

The VITA Field Census respondents represented 261 organizations operating free tax sites in 46 states and the District of Columbia. The states with the most respondents were Pennsylvania (25 programs), Florida (18) and New York (17).

The 2,690 tax sites represented in the Field Census prepared just over 1 million federal income tax returns in 2016, equaling almost a third of all federal returns accepted from volunteer tax programs nationwide; reporting sites represent more than half the volunteer returns filed in each of four states (Utah, North Carolina, Rhode Island and Maryland) and DC.

The overwhelming majority of programs in the Field Census –96%– are affiliated with VITA (with 9% sharing affiliation with TCE and/or Military VITA). Almost all programs (again, 96%) operate tax sites in only one state.

VITA Field Census respondents represent all sizes of programs. Almost a third (31%) prepare fewer than 500 returns each year, and over half prepare fewer than 1,500. On the other hand, 35 programs (13.4% of respondents) prepare more than 7,500 federal tax returns annually.

Three-quarters of the smallest programs (under 500 returns) operate only one tax site, while over 90% of programs preparing over 3,500 returns operate seven or more sites (with the median number of sites among these programs being 19).

The smallest programs prepare on average 201 returns per site. The median number of returns per site prepared by programs with 500 to 3,500 total returns is 330 and the median for larger programs is 432 per site.

A majority (61%) of VITA Field Census programs serve urban areas, with 23% of respondents serving only urban communities. Just over half (52%) serve rural taxpayers, with 19% serving only rural areas.

One-quarter of Field Census respondents are community-based organizations, with an additional 12% classifying themselves as a social service agency, and 3% a community development corporation. Almost one in five respondents is a United Way agency; 11% are community action agencies, and 10% are educational institutions. Some respondents (8%) categorize themselves as a coalition or collaborative.

The VITA Field Census shines new light on the volunteer-led tax field, offering a more complete picture of the organizations providing free tax return preparation and the communities they serve. This information will assist the Network in both representing and serving the field going forward.

"I'm Sorry": Apologizing for Tax Preparation Errors

By Barbara DelBene, Guest Contributor on 03/31/2017 @ 04:00 PM

Tags: Taxpayer Opportunity Network

It seems like we apologize a lot. Most apologies are pretty innocuous; for example, “I’m sorry that you had to wait so long.” But let’s face it. Despite our best efforts, we make mistakes and from time to time we need to apologize for serious errors that make a big difference to a taxpayer. Often the person making the apology is not the person who made the mistake. Nonetheless, a sincere apology is warranted.

Let’s look at some aspects of expressing regret and taking the blame. In these examples, I have a site manager talking to the taxpayer. It could be a volunteer, but generally, it should be someone in a leadership role with lots of experience handling these tricky situations. All sample scenarios are based on real-life situations. In other words, I have made most of these apologies.

Error Discovered by the Taxpayer

Two weeks after having her joint return prepared, a taxpayer returns to the site. She is concerned because her refund is so much lower than usual. Her neighbor looked at their return and pointed out that she didn’t get any EITC. The taxpayer wants to know, “Where’s my EITC?”

Site Manager: The reason that you didn’t get the EITC is because you and your husband both have ITIN numbers instead of social security numbers. The law does not allow someone with an ITIN to claim the EITC.

Taxpayer: Are you sure? Because my refund is usually at least $1,000 more.

Site Manager: Yes, I’m sure about the EITC. Do you have a copy of your return from last year? I could compare the two returns and explain the difference. It probably has something to do with the withholding.

Taxpayer: I don’t have it with me. I guess I could find it and bring it back in.

The site manager takes a closer look at the return and sees a $1,390 individual shared responsibility payment on Form 1040, line 61. Uh oh.

Site Manager: I just noticed that the return includes a penalty for not having health insurance. That is an error. I’m sorry. Because you have an ITIN you are not required to have health insurance and you do not owe a penalty. I will prepare an amended return and you will get another refund for $1,390.

Taxpayer: I knew it!

Site Manager: I am so sorry that we made this mistake and I am glad that you questioned the refund amount. This second refund may take several weeks. I apologize for the delay in getting the rest of your money.

Comment: I like the fact that the site manager apologized casually, but repeatedly. Even though someone else probably made the error, the person dealing with the taxpayer is representing the site and that person is responsible for the apology

Here’s a similar scenario with a different outcome.

Two weeks after having her return prepared, a taxpayer returns to the site. She is concerned because her refund is so much lower than usual. Her neighbor looked at their return and pointed out that she didn’t get any EITC. The taxpayer wants to know, “Where’s my EITC?”

Site Manager: The reason that you didn’t get the EITC is because your filing status is married filing separately. The law does not allow someone filing married separately to claim the EITC. I’m sorry if that wasn’t explained to you before.

Taxpayer: I don’t think that the preparer really understood my situation. The thing is, I’m not really married anymore. I haven’t even talked to him for years.

Site Manager: Do you have any children that live with you?

Taxpayer: No, we never had any kids.

Site Manager: You may not be with him anymore, but did you get a divorce or legal separation?

Taxpayer: I feel like we’re separated.

Site Manager: Did you go in front of a judge and make it a legal separation?

Taxpayer: No, I can’t afford all that.

Site Manager: Well, in that case you must file as married – either married filing jointly with your husband or married filing separately.

Taxpayer: There’s no way I’m filing with him. I don’t think you really know how to handle this right. I’ve filed as single for two years now and I got the EITC with no problem.

Site Manager: Well, actually since you were married, those returns were wrong and that EITC was claimed in error. You have the option of filing an amended return and paying back the EITC.

Taxpayer: No way. I’m going to find a tax preparer that understands my situation.

Site Manager: That’s certainly your choice. You might want to keep in mind that from an income tax perspective you would be better off getting a divorce. There are some legal clinics who provide low-cost assistance.

Comments: Sound familiar? The thing is, married is married and unless the taxpayer has dependent children who qualify her for head of household, she is stuck with no EITC. The last comment about getting a divorce is not appropriate in some cases. It probably depends on how the conversation is going. We want to be careful not to interfere with personal matters while providing good tax assistance.

Error Discovered by the IRS

Taxpayer: I just got this letter from the IRS that says that you made a mistake on my return. I thought you guys knew what you were doing. Aren’t you certified by the IRS?

Site Manager: Yes, we are certified by the IRS and I’m sorry about the trouble. Let me look at the letter and see how I can help.

Taxpayer: Here it is. Will this take a long time? I’m parked by a meter that runs out soon.

Site Manager: We’ll take care of this as quickly as possible. Your letter indicates that you purchased health insurance through the Marketplace, but it wasn’t reported on your tax return. Do you have a Form 1095-A?

Taxpayer: You mean this? (Taxpayer extracts an envelope from a big messy pile of documents. It contains a Form 1095-A, Health Insurance Marketplace Statement.) I gave all my papers to the gal who did my forms.

Site Manager: Good, you have the right form. I’ll use it to prepare the Form 8962, Premium Tax Credit, mentioned in this letter. Then you can send the Form 1095-A and Form 8962 back to IRS. This should only take a few minutes. I’m sorry that this wasn’t done when we prepared your return last month. I apologize that we missed this.

Taxpayer: That’s OK. At least you can fix it. I know that you guys try to get things right.

Site Manager: All finished. It turns out that your refund is $200 less. The advanced premium tax credit that you received during the year was more than your actual premium tax credit. Let me show you…

Comment: Is this mess the tax site’s fault? Maybe. Who knows? The taxpayer may have answered “No” to the Marketplace question, may not have had the Form 1095-A with the other tax documents, the preparer may not have asked about Form 1095-A, or the preparer may have stared right at the thing and just goofed and ignored it. At any rate, it’s nice to go ahead and say, “Sorry,” anyway rather than try and determine who was at fault. In a case like this, we are sorry that the taxpayer was inconvenienced, no matter what the cause.

Error Discovered by the Tax Site

Things are a little trickier when the tax site discovers an error; for example, a miscalculation by the tax preparation software – you know what I’m talking about. There is the issue of breaking the news to the taxpayer and then the logistics of making the correction. Should you call or write to the taxpayer and have the taxpayer return to the site? Send the taxpayer an amended return in the mail? Call the taxpayer first and then send something? The protocol is up to each site and depends on the kind of error and the action that needs to be taken.

Any effort to get a taxpayer to return to the site should include:

  • name and address of the tax site
  • tax site hours and the best time to come
  • the reason the taxpayer needs to return
  • an alternative to returning to the site
  • a phone number for follow-up
  • an apology for the inconvenience

Many sites probably start with a phone call:

Site Manager: Hello? Is John Doe there?

Answerer: No.

Site Manager: Would you please tell him that his tax preparer called and that there is a problem with his tax return and he needs to come back and get it fixed.

Answerer: Sure. OK.

Site Manager: This is really important! Make sure that you tell him this right away. He needs to take care of this to avoid big problems with IRS.

Comments: This unfortunate exchange is problematic for several reasons. First, the site manager should not reveal to anyone other than the taxpayer that there is a problem. Moreover, the sense of alarm is disproportionate to the situation. The best thing is to be vague about the reason, but insistent that it is important. Also, the caller needs to provide specific information – like the site location and hours of operations. When a taxpayer can’t be reached by phone, a letter might be preferable.

Site Manager: Hello? May I speak to John Doe?

John: This is John.

Site Manager: This is Mary from the Center for Tax Help and Financial Fun. I’m calling about your taxes. (John hangs up.)

(Second try.)

Site Manager: John Doe, please.

John: Yes.

Site Manager: Please don’t hang up. I need to talk to you about an issue with your tax return.

John: There must be some mistake. I get my taxes done at the Main Street Library.

Site Manager: Yes, I’m calling from the library where we did your tax return. When we sent your return to IRS, it was rejected because you were claimed as a dependent on someone else’s tax return.

John: Oh. Maybe my parents did claim me after all. Can I come back on Saturday?

Comment: Despite the best outreach efforts, many taxpayers are not aware of the organization that runs a VITA site. They just remember where it was done. Be clear who you are.

Once a taxpayer is back at the site:

Site Manager: We asked you to come in today because we think that we found an error on your tax return.

Taxpayer: Am I in trouble?

Site Manager: No. This is something we can address. When we prepared your return last week, it did not include an individual shared responsibility payment - even though you had no insurance. There was a glitch in our system and we did not recognize the omission. I apologize for the error.

Taxpayer: Huh? I don’t get it.

Site Manager: Most taxpayers are required to have health insurance and if they don’t, they must pay a penalty on the tax return. In your case, the penalty is $695. Instead of a $2,000 refund, you should get $1,305. I can prepare an amended return to make the correction.

Taxpayer: What if I don’t do anything? Maybe I can get away with not paying the penalty? You said they accepted my return, right?

Site Manager: I am confident that IRS will discover the error. If you don’t file an amended return, IRS will eventually send you a letter asking about this. Whether you file an amended return now or wait for the IRS notice is up to you.

Taxpayer: Gee, I don’t know what to do.

Site Manager: Let me remind you that this office closes after April 18. So if you want our help, you may want to just take care of this today.

Taxpayer: Yea, OK. Let’s do the amended return and get this over with now.


Taxpayer: Why would I want your help when you already messed things up? No thanks. Good-bye.

Comment: All we can do is apologize and offer advice and assistance. The rest is up to the taxpayer.


Tax law is complex and sometimes mistakes are made. As tax preparers, VITA staff often end up in the position of breaking the bad news and making the apology. The important things are that we say we’re sorry and make things right.

Speaking of foul-ups, here’s one of my all-time favorites. I never tire of the story of Mrs. Whitcher and her social security number that was used by thousands of people. Makes our little reject problems seem pretty easy, right?

For more information on how to navigate the ACA miscalculations, click here to learn more about what you can do to help taxpayers potentially impacted by the TaxSlayer software error.

QSS from IRS Findings: Pitfalls and How to Avoid Them

By Barbara DelBene, Guest Contributor on 03/17/2017 @ 11:00 AM

Tags: Taxpayer Opportunity Network

Say it a few times out loud: QSS from IRS, QSS from IRS. Has a nice ring to it, right? Well it is especially nice this year because IRS has started providing some real detail about some of the findings.

Every filing season the IRS issues reports summarizing the results of the quality statistical sample (QSS) reviews. These are tax return reviews conducted by IRS employees at VITA and TCE sites around the country. The number of returns reviewed and the return selection method are statistically valid and the results are used to measure the overall quality of VITA and TCE sites nationwide. So far they have issued reports on 103 return reviews and found eight incorrect returns. That’s a 92.23% accuracy rate, which is the same as the accuracy rate this time last year. Considering the complexity of tax law and the challenges related to adjusting to new tax preparation software, this is an impressive quality percentage.

The QSS reviews, as well as the other reviews conducted during routine field site visits, have been around for years. The main difference this year is that the reports include more specific information about the errors that were discovered during the QSS reviews. This is wonderful news for everybody. Because if folks in Waukegan, Illinois, are making a certain error on business mileage, you can bet it’s likely that other preparers are making similar errors in Des Moines, Jacksonville and Tulsa. Many local programs try to measure their own quality, but that’s tricky business. What, exactly, counts as an error? How do you know who said what to whom to cause an error? If one error causes something else to be wrong on a return, how is that counted? IRS has spent years developing the current methods, review forms and protocols to provide useful information and meaningful statistics.

Let’s see what we can make of the errors in the most recent report, dated February 17, 2017.

INCORRECT SOCIAL SECURITY NUMBER: In this case, the preparer had looked at the social security cards and made a data entry error.

Comment: This one is not surprising or particularly disturbing. Volunteers are human and make mistakes. The IRS computers catch this kind of error by rejecting the return so it is likely that it will be corrected. Other than a potential slight refund delay, there would probably be no effect on the taxpayer.

Takeaway: Remind volunteers to carefully review the social security cards. Many of the cards can be hard to read.

EDUCATION EXPENSES: The amount of qualifying expenses was incorrect on Form 8863, Education Credits, for a taxpayer claiming the American opportunity credit. The preparer had looked at the Form 1098-T, Tuition Statement, and did the arithmetic wrong when subtracting the scholarship amount from the expense amount.

Comment: There are lots of ways that someone can go wrong when determining qualifying education expenses. The amount billed may not be the amount paid, the total amount paid to the school may not all be for expenses that qualify and the cost of books is not included on Form 1098-T – just to name a few probable wrinkles.

Takeaway: Preparers and reviewers always want to be careful with this one and make sure that they conduct a thorough interview. In some cases, it is necessary to look at the student’s school account transcript to get the correct information.

FORM 8862, PREMIUM TAX CREDIT: The amounts from Form 1095-A, Health Insurance Marketplace Statement, were not entered correctly and the Form 8962, Premium Tax Credit was wrong. The totals on the Form 1095-A only covered ten months, but they were entered as if they applied to the entire tax year, making the premium tax credit repayment amount wrong.

Comment: Golly gee, ACA is complicated. And the counterintuitive way TaxSlayer asks ACA questions, and the way the software keeps changing, makes it even more confusing.

Takeaway: Preparers need to be reminded that many taxpayers with Marketplace coverage are not covered all year and to carefully read each and every ACA question.

FEDERAL INCOME TAX WITHHOLDING OVERSTATED: The amount in box 4 of a W-2 (social security tax withheld) was entered in box 2 (federal income tax withheld). The correct box 2 amount was zero.

Comment: This is another case of a data entry error by a preparer who undoubtedly knew better. But unlike the wrong social security number, this one would not cause a reject and, in fact, might never be discovered after filing.

Takeaway: Remind preparers to enter W-2s carefully and require quality reviewers to double-check all withholding amounts. The TaxSlayer summary page that is created when using the quality review pdf, includes an “Income Forms Summary” section that lists income and withholding amounts and can be a useful way to check withholding.

INCOME SECTION: The wrong amount of social security benefits was entered, which made the amount of taxable social security incorrect and changed the outcome of the return.

Comment: The report says that the error was on line 14a, which I assume is line 14a of Form 1040A. This entry would be on line 20a of Form 1040.

Takeaway: There is lots of information on an SSA-1099. Remind volunteers to enter what’s in box 5, the pink box. I’ve also seen returns where the preparer missed the federal income tax withholding on social security income – a serious error that may mean the taxpayer never gets credit for the withholding amount. Since most SSA-1099s have no withholding, it’s easy to forget to check. Encourage preparers and reviewers to always look for withholding.

SELF-EMPLOYMENT INCOME: The taxpayer had cash self-employment income and no Form 1099-MISC. None of the self-employment income was reported on the return. The client had checked “Yes” to question 7 in Part III of Form 13614-C, which asks if the taxpayer received “Self-Employment income? (Form 1099-MISC, cash).” Apparently the preparer hadn’t noticed the “Yes” answer.

Comment: It is easy to miss one little check box or to assume that it was checked in error. Preparers must not assume. When someone assumes that the 21-year-old guy getting his return done isn’t repaying the first time homebuyer credit, that’s taking a chance. You never know. All of the questions on Form 13614-C are there for a reason and any answer could make a difference.

Takeaway: Impress upon preparers that every question must be answered and to heed every “Yes” answer. It usually means that something needs to be added to the return or, at the very least, more questions need to be asked. The QSS report also mentioned that some preparers were not completing the shaded areas regarding dependents. Encourage quality reviewers to require that everything on the Form 13614-C be filled out before they start a review.

PENSION INCOME: The amount entered on Form 1099-R, box 2, taxable amount, was wrong in a way that indicated that none of it was taxable. The correct course of action was to use the simplified method to determine the taxable amount.

Comment: This sounds to me like a preparer trying to do a return beyond his level of certification or maybe just presuming that none was taxable.

Takeaway: Develop a culture of “never guessing” and always provide a way for a preparer to research an issue and provide access to an experienced, knowledgeable preparer to ask.


The QSS reports will be issued periodically during the filing season and will be distributed by the Taxpayer Opportunity Network, as well as SPEC relationship managers. Watch for these and think about how this information can be used to improve quality at your site. And remember, getting 92% right is wonderful, but there is always room for improvement. One disturbing aspect of these results is that in some cases the returns had not received a complete quality review. One wonders how high the accuracy rate could be if everybody did conduct a full quality review! Remind your quality reviewers to use the tools available to them - the intake sheet, the quality review checklists, and their years of experience - and let’s aim for getting that percentage up to 100%.

The Nine Common Filing Errors

By Barbara DelBene, Guest Contributor on 03/10/2017 @ 10:00 AM

Tags: Taxpayer Opportunity Network

If you’re on any of the IRS mailing lists for e-news, you probably received the message this week entitled, “Nine Common Filing Errors to Avoid.” This error list refers to all returns filed with IRS, but it got me to wondering how these might apply to VITA and how we can avoid them.

  1. “Missing or Inaccurate Social Security Numbers. Be sure to enter each SSN on a tax return exactly as printed on the Social Security card.”
    The SPEC Quality Site Requirements clearly cover verification of the taxpayer’s identity with photo ID and require that the SSN or ITIN be confirmed for everyone on the tax return. That means that for social security numbers the site needs to see a social security card, SSA-1099 or Medicare card. For each ITIN on the return, the site requires a letter or card from the IRS. VITA sites are generally good about this. And if they’re not, it only takes a few rejects before they get compliant. Sites learn that people think they have their son’s number memorized or that the number on the W-2 must be right, but it sometimes turns out to be wrong.
  2. “Misspelled Names. Spell all names listed on a tax return exactly as listed on that individual’s Social Security card.”
    VITA tackles this issue on several fronts. First, VITA volunteers are trained to take the name from the document used to verify the SSN or ITIN. Secondly, checking on the names is part of quality review process that is required for all VITA returns. Many tax sites also require the taxpayers to review the printed return. This is a good practice that can result in finding typos that a reviewer might miss. Moms know how to spell their kids’ names. And since the vast majority of VITA returns are e-filed, we get a chance to correct misspellings during the reject process.
  3. “Filing Status Errors. Some people claim the wrong filing status, such as Head of Household instead of Single.”
    A large chunk of most VITA training addresses basic issues such as filing status, qualifying children and qualifying relatives. Both the Basic and Advanced certification tests have several filing status questions. The main VITA resource, Publication 4012, Volunteer Resource Guide, has detailed decision trees and interview guides devoted to determining the correct filing status.
  4. “Math Mistakes. Math errors are common.”
    Really? Perhaps for some, but not for VITA. Our new tax preparation software may be recalcitrant at times, but it does do arithmetic correctly. For VITA, math errors are a thing of the past; however, what we have in its place are data entry errors. In fact, recent results from the SPEC national quality team found several errors that were caused by typing in the wrong numbers. This is particularly problematic when withholding is wrong.
    Quality reviewer alert: Always check the numbers – particularly amounts from 1099s and W-2s. Preparers are human and we make mistakes. Please have our backs.
  5. “Errors in Figuring Tax Credits or Deductions. Filers can make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, the standard deduction and other items.”
    Fortunately, this is another topic that VITA spends lots of resources on training, testing and in Publication 4012. But it is easy to make one little wrong click and mess up a credit. So here’s another plea for preparers and reviewers alike: always look for EITC and if there isn’t any, know the reason why. It may be something simple like the income is too high, or something less obvious, like the taxpayer turned age 65. Fewer than half of VITA returns claim the EITC; but if it is missed on the original return, it may never be discovered. And that could be thousands of dollars lost by the taxpayer.
  6. “Incorrect Bank Account Numbers. The IRS strongly urges all taxpayers who have a refund due to choose direct deposit. It’s easy and convenient.”
    One of the worst errors is sending someone’s money off to the wrong bank account. And since TaxSlayer doesn’t require double entry on two different pages and no double entry on a Form 8888, Allocation of Refund, it’s really easy to get a routing or account number wrong. In addition to quality review, this is a good time to enlist the help of the taxpayer. Require all taxpayers to review the routing and account number and maybe even ask them to initial it after review just so they really pay attention.
  7. “Forms Not Signed. An unsigned tax return is like an unsigned check – it’s not valid.”
    This is really just relevant to paper returns and VITA does few of those. The most important angle is to make sure that when we do a paper return, we make sure that the taxpayer understands that we are not filing the return and that he must sign and mail the paper return. There can be real trouble when this is not made clear. This year, the problem is exacerbated by the fact that many volunteers find the TaxSlayer federal return types to be confusing. Here’s a translation:

    For refund returns:
    • Electronic Mailed - E-file with Paper Check
    • Direct Deposit - E-file with Direct Deposit
    • Paper Return with Direct Deposit – This one is clear.
    • Paper Return - Paper Return with Paper Check
    For balance due returns:
    • Mail Payment - E-file with No Direct Debit
    • Direct Debit - E-file with Direct Debit
    • Paper Return with Direct Debit –This one is clear.
    • Paper Return - Paper Return with No Direct Debit
  8. “Electronic Filing PIN Errors.”
    Most VITA sites have this well covered and the process is set up in the software, making it all pretty automatic. There is more information about this in Publication 4299, Privacy, Confidentiality, and Civil Rights – A Public Trust.
  9. “Filing with an expired ITIN. A tax return filed with an expired Individual Tax Identification Number (ITIN) will be processed and treated as timely filed, but will be processed without any exemptions or credits claimed.”
    The PATH Act requires ITINs to be periodically renewed. The renewal process is similar to the original application; that is to say, it is cumbersome and takes a long time. VITA sites who serve taxpayers with ITINs should identify Certified Acceptance Agents in their area who can help taxpayers with this process. A recent QSRA Alert from SPEC provides some detailed information on this topic.

Looks to me like VITA is in good shape regarding all of these common errors. See, you’re doing a great job. But we knew that. Keep up the good work!

First Aid for Tax Returns Prepared Using TaxSlayer: ACA Exemptions

By Tara Straw on 03/03/2017 @ 10:00 AM

Tags: Taxpayer Opportunity Network

This week's Tax Prep Dispatch was guest written by Tara Straw and the Center on Budget and Policy Priorities

Affordable Care Act (ACA) issues have left some tax preparers dialing 911. In the last Dispatch, we tackled premium tax credits. This one offers tips for preparing returns with ACA exemptions.

What is the ACA coverage requirement?

Taxpayers are required to be covered by health insurance all year or pay a penalty, called a shared responsibility payment (SRP). For tax year 2016, the SRP is the greater of 2.5% of household income above the filing threshold or $695 per adult. The SRP is half that for each child and is prorated based on the number of months uninsured. The SRP can be avoided, however, if the uninsured taxpayer qualifies for an exemption. Exemptions are available from the Marketplace or can be claimed directly on the tax return and are based on a variety of income and personal hardship situations. No SRP applies on a tax return filed by someone who can be claimed as a dependent.

Does the coverage requirement and the SRP still apply for tax year 2016?

The IRS announced a few weeks ago that it would accept so-called “silent” returns – those that don’t report health coverage, exemption, or SRP. Prior to President Trump’s January 20 executive order directing agencies to “minimize the … burden” of the ACA, the IRS had planned to reject silent returns, but it changed course after the order. However, the executive order does not change the law: the IRS may initiate correspondence requesting ACA information if coverage is not reported and the SRP can still be assessed. Since it’s still the law, VITA continues to report health insurance issues.

Symptom #1: TaxSlayer asks for the “lowest cost bronze plan” and “second lowest cost silver plan.” What are they and how do I find them?

Diagnosis: TaxSlayer’s first screen on exemptions is a doozy because it dives straight into the most complicated exemption: affordability of coverage (Code A). Before delving into this difficult process, see if the taxpayer qualifies for a simpler exemption, such as the exemption for having income below the filing threshold, the short-term coverage gap, or the exemption for noncitizens.

First Aid: Interview the taxpayer, using the Form 13614-C, Intake, Interview & Quality Review Sheet, to determine any gaps in coverage for each member of the family and investigate the other, easier exemptions listed on page ACA-7 in Publication 4012. TaxSlayer will automatically calculate the taxpayer’s eligibility for the most common exemption – having household or gross income below the filing threshold. Also, for taxpayers who lived in a state that didn’t expand Medicaid, remember that there is an exemption for people with income below 138% of the federal poverty line (FPL). (You’ll need to calculate eligibility for that exemption yourself; TaxSlayer doesn’t assist with that.)

When no other exemption applies, determine if the taxpayer qualifies for the affordability exemption. A person qualifies for this exemption if his or her coverage costs more than 8.13% of household income. People with an offer of coverage from an employer measure the affordability of the lowest-cost self-only plan (for the employee) or the lowest-cost family plan (for the employee’s eligible family members). People who weren’t offered coverage at work measure the affordability based on the net cost of subsidized coverage in the Marketplace, using the Marketplace Affordability Worksheet in the instructions to Form 8965, Exemptions. The lowest cost bronze plan (LCBP) and second lowest cost silver plan (SLCSP) are used to complete that worksheet. Find the cost of these plans at or, if your state runs its own Marketplace, on the state’s website. Check here to find your state’s tool for looking up plan costs. In a few states (notably, California), no online tool is available. You should call the Marketplace or, in a pinch, use a broker website, like to look up the 2016 plan costs.

Symptom #2: I don’t understand who to include in the LCBP or SLCSP boxes.

Diagnosis: TaxSlayer doesn’t provide much guidance on whose plan cost to include in these boxes but getting it wrong could lead to a person being incorrectly denied the Code A exemption.

First Aid: For the LCBP (Line 1 of the Marketplace Affordability Worksheet), include anyone listed on the tax return who does not have an offer of employer-sponsored coverage or qualify for another exemption. So even people with Medicaid or Medicare coverage should be included. On the other hand, the SLCSP (Line 10 of the Worksheet) includes everyone on the tax return who is not eligible for any minimum essential coverage or other exemption. So those Medicaid and Medicare enrollees included in the LCBP are not included here. We’ll also enter zero for the SLCSP if the filing status is married filing separately. The tax tool at correctly determines the LCBP and SLCSP if you carefully follow the instructions. Most tools for state-based Marketplace plans require tax preparers to have more knowledge and make these determinations on their own.

Example: Sarah is a tax filer with two dependents, her daughter Michaela and her mother Edith. In 2016, Michaela was enrolled in Medicaid, and Edith was enrolled in Medicare. Sarah was uninsured. Assuming no other exemption applies and she wasn’t offered coverage at work, look up Sarah’s LCBP and SLCSP and enter it on the TaxSlayer worksheet. The LCBP will include Sarah, Michaela and Edith. The SLCSP will include only Sarah since her daughter and mother were eligible for other minimum essential coverage. Find the completed Marketplace Affordability Worksheet in the .pdf of the tax return and compare the result of Line 13 of that worksheet to 8.13% of household income. Or use a tool like this one to help you with the math. If Sarah is eligible for the exemption, enter the exemption in TaxSlayer by selecting the dropdown option for Coverage is Unaffordable. The exemption will be included on Form 8965, Health Coverage Exemptions and no penalty should calculate on Form 1040, Line 61.

Symptom #3: Our state expanded Medicaid. The taxpayer was eligible for it but not enrolled.

Diagnosis: An exemption probably applies, but you’ve got to do the math.

First Aid: First, check to see if the person is eligible for the exemption for household or gross income below the filing threshold. TaxSlayer will make this determination. If that exemption doesn’t work, and the taxpayer wasn’t offered employer-sponsored coverage, enter the LCBP and SLCSP. The SLCSP will be zero for a person who was eligible for Medicaid but not enrolled.

Example: Joshua’s filing status in 2016 is married filing separately and he had household income of $10,000. He was uninsured all year. First, consider the simplest exemptions. His income is above the tax filing threshold ($4,050 for his tax filing status) and he lived in a state that expanded Medicaid to 138% FPL so neither of those easy exemptions apply. He does not appear to be eligible for any other exemption and was not offered coverage through his job so we’ll try the exemption for marketplace affordability. Look up Joshua’s LCBP and enter it in TaxSlayer. His SLCSP is zero since his income of $10,000 (or 85% FPL, as determined by dividing income by the federal poverty line) would have made him eligible for Medicaid in his state. Find the completed Marketplace Affordability Worksheet in the .pdf of the tax return. If Line 13 is greater than 8.13% of household income, he is eligible for the Code A exemption. If Joshua is eligible for the exemption, enter it in TaxSlayer by selecting the dropdown option for Coverage is Unaffordable.

Symptom #4: I looked up the LCBP and SLCSP and entered them in TaxSlayer but Form 1040, Line 61 still shows a penalty.

Diagnosis: TaxSlayer completes the Marketplace Affordability Worksheet but doesn’t automatically calculate and enter the exemption.

First Aid: The result of the Marketplace Affordability Worksheet is the annual cost of Marketplace coverage after subsidy. Compare that value to 8.13% of household income. If the cost of Marketplace coverage is greater than 8.13% of income, coverage is unaffordable and Code A applies. TaxSlayer doesn’t calculate 8.13% of income. Also, remember that household income is defined differently for each of the income-based exemptions. If you have trouble keeping it straight and want some assistance on the math, consider using a tool to help with the calculations, such as ACA Exemptions Related to Income Tool.

Symptom #5: The taxpayer was offered health insurance at work but didn’t take it and doesn’t know how much it cost.

Diagnosis: First, make sure you’re not overlooking a more straightforward exemption, such as the exemption for having income below the filing threshold.

First Aid: If no other exemption applies, ask the taxpayer to contact the employer’s human resources department to find out how much the health insurance offered by the employer would have cost. The taxpayer will need to know the lowest-cost monthly premium for coverage just for him and, if there are uninsured family members seeking an exemption, the lowest-cost premium for family coverage. Don’t try to short-circuit the affordability exemption rules by bypassing the employer-insurance affordability rules and just considering Marketplace affordability. People with employer coverage offers don’t determine their eligibility for Code A using the Marketplace Affordability Worksheet. However, if the taxpayer had an offer of coverage for only some months of the year and was unemployed (and uninsured) for the rest of the year, you may need to do the affordability calculation twice: once to determine the affordability of employer-sponsored coverage during the months the employee was eligible to enroll, and once to determine the affordability of marketplace coverage for the months when no other exemption applied and the person wasn’t eligible for other minimum essential coverage.

Need more help on the affordability exemption? Additional tools are available from the Center on Budget and Policy Priorities:

Listen to this informal recorded presentation, Refresher: Affordability Exemption, that walks through the exemption in TaxSlayer.

Try this downloadable Excel tool designed to help tax preparers with different income calculations that are necessary to determine eligibility for ACA exemptions related to income, especially the affordability exemption.

Use the updated Affordability Exemption Primer that explains who is eligible for the Code A and Code G exemptions based on a lack of affordable coverage and how to complete the tax worksheets.

The TaxSlayer Support Quick Guide Is Here!

By Justin Chu on 02/27/2017 @ 02:00 PM

Tags: Taxpayer Opportunity Network

Along with the typical challenges associated with every tax season, the transition to TaxSlayer has been at the forefront for many VITA/TCE sites nationwide. To assist you and your volunteers in becoming acclimated to operating within the new software environment, CFED’s Taxpayer Opportunity Network has developed a quick support guide one-pager. This guide is the result of a collaborative partnership between the Network team and steering committee along with IRS SPEC and TaxSlayer, to ensure solutions for some of the common concerns you or your site may be experiencing. Hopefully, it will help by pointing you to the right resources to get answers to your questions and some of the most common challenges we’ve heard from the field. From issues like site activation to site or program level data, this quick guide has you and your volunteers covered.

The Taxpayer Opportunity Network also recently hosted two webinars to help with the TaxSlayer transition. The first webinar focused on the updates on TaxSlayer for the 2017 tax season. During that session, Kim Manuel of TaxSlayer featured the changes from the TaxSlayer Practice Lab to the production software including: site activation, e-filing, and more. Network consultant Barbara DelBene provided insight from the practitioner perspective, touching on return types, quality review and due diligence. Click here to learn more about the event and download the webinar slides and recording.

On February 8, the second in the TaxSlayer webinar series focused on using the reporting function in TaxSlayer. Kim Manuel from Taxslayer joined us once again; to demonstrate how to run production reports, share the types of program information and reports available to you through TaxSlayer and more. Helpful information for troubleshooting common report errors and accessing reports for custom fields, such as the Form 8888 Report was also shared. Click here to learn more about this webinar and download the slides and recording.

CFED and Taxpayer Opportunity Network understand the unique issues surrounding the transition to the new TaxSlayer software for VITA/TCE providers and we are committed to provide tools and resources to the field to make the transition as smooth as possible. If you have any suggestions for future learning opportunities, tools and resources, please email us at

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