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QSS from IRS Findings: Common 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

First Aid for Tax Returns Prepared Using TaxSlayer: Premium Tax Credits

By Tara Straw on 02/24/2017 @ 11:00 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. We’re going to triage the ACA trauma into two Dispatch issues. This one offers tips for preparing returns that have premium tax credits and the next will Dispatch will answer your burning questions on ACA exemptions.

What is a premium tax credit?

The premium tax credit (PTC) is a benefit helps pay the health insurance premiums for taxpayers who purchase a plan in the Marketplace. In general, to get the PTC a taxpayer must have income between 100­-400% of the federal poverty line (FPL) and not be eligible for other coverage, like Medicaid, Medicare or coverage through an employer. Most people get PTC in advance (APTC) based on their projected income for the year. Everyone who gets APTC must file a tax return and use Form 8962, Premium Tax Credit, to reconcile the PTC. The final PTC is based on the actual income reported on the tax return. Taxpayers may end up getting more PTC or they may need to pay some back.

Symptom #1: The taxpayer enrolled in health insurance through the Marketplace but doesn’t have a Form 1095-A, Health Insurance Marketplace Statement.

Diagnosis: First, figure out if the person really did have Marketplace coverage. The Marketplace shares applications with Medicaid and applicants are routed to one program or the other based on income. So it’s possible that someone started to apply for Marketplace coverage and ended up with Medicaid which means that Form 1095-A isn’t needed. Find out if the taxpayer paid premiums, copays or deductibles. If not, it’s likely that the taxpayer was on Medicaid and Form 1095-A is not needed.

First Aid: If he or she did have Marketplace coverage, the taxpayer can log into their online account to get a copy of Form 1095-A or call the Marketplace to have it sent again or the entries read over the phone.

Symptom #2: It appears that the taxpayer needs to repay all of the APTC received!

Diagnosis: Repayment of APTC is capped based on income for most taxpayers and all of the APTC does not need to be repaid. TaxSlayer added a question a few weeks ago: “Are you required to repay all excess APTC received?” In other words, it is asking if the taxpayer is liable for unlimited APTC repayment.

First Aid: In the vast majority of cases, the answer is “No” and the taxpayer is not required to repay all of the APTC. This is true even for taxpayers who are ineligible for PTC. Only answer “Yes” if the taxpayer had income over 400% FPL (TaxSlayer will determine this correctly even if you answer “No” here) or if the person is an undocumented immigrant who erroneously received APTC. There are other circumstances that are rare and out of scope. But in every other case, answer “No.” For more details, see “Tips to Avoid Unnecessary APTC Payments” developed by the Center for Budget and Policy Priorities.

Symptom #3: A taxpayer with income below the poverty line is denied PTC.

Diagnosis: Another tricky question new to TaxSlayer asks taxpayers with income below the poverty line if they meet certain exceptions that allow them to claim the PTC. TaxSlayer defaults to “No” for this question – the wrong answer for the vast majority of people. In general, if the taxpayer got APTC, they can claim the credit.

First Aid: The answer should almost always be “Yes.” There are two big exceptions that allow taxpayers to claim the PTC even if income is less than 100% FPL: (1) the Marketplace awarded APTC with the expectation that the taxpayer would have income above the poverty line for the year, or (2) an immigrant was ineligible for Medicaid because of immigration status. The second one can get complicated. Luckily, those cases almost always meet the first exception. More information on this is covered in “Tips to Avoid Unnecessary APTC Payments.”

Example: Lilly received APTC in 2016, but she lost her job in the fall. Her income was lower than expected and fell below the poverty line. The preparer noticed that TaxSlayer defaulted to the answer “No” and just moved to the next question. The reviewer noticed a PTC repayment of $300, which prompted her to review the health insurance questions. She corrected the answer to “Yes” since the taxpayer was determined eligible for the credit by the Marketplace based on her estimated income and received APTC. Instead of a making a repayment, Lilly gets additional PTC.

Symptom #4: The final PTC is a lot lower than expected.

Diagnosis: There are two ways to enter the Form 1095-A information: enter the amount for each month or enter the total for the year. It is easy for a preparer to enter the Form 1095-A incorrectly.

First Aid: Only enter the annual values if Marketplace coverage lasted all 12 months of the tax year and each month was the same. So, for instance, if a person only had cover February through December, you’ll need to key the monthly values. And remember – if you can use the annual figures, make sure to input the annual (not monthly) figures. So, if premiums and the benchmark were $300 every month and the APTC was $200 every month, enter $3,600 for the premium and benchmark and $2,400 for the APTC. If you enter the monthly amount, the credit won’t be correct.

Symptom #5: The Form 1095-A has some blank boxes or the family received more than one Form 1095-A.

Diagnosis: Form 1095-A sometimes defies the rule: you shouldn’t always key what you see! Sometimes a blank box needs to be filled in, a benchmark plan (SLCSP) needs to be changed, or multiple Forms 1095-A need to be added together.

First Aid: If you run into a Form 1095-A with blank boxes or a taxpayer with multiple Form 1095-As, consult Publication 4012, Volunteer Resource Guide, pages ACA-14 and ACA-17 for more guidance.

Stay tuned for the next patient: ACA Exemptions.

Learn More about Facilitated Self Assistance for Your Clients!

By Rebecca Thompson on 02/22/2017 @ 02:35 PM

Tags: Taxpayer Opportunity Network

As another tax season progresses towards the mid-April end, VITA programs expect to provide assistance to a staggering number of taxpayers. For many VITA sites, Facilitated Self-Assistance (FSA) provides a logical and relatively easy-to-implement option to extend their services to a larger population while minimizing additional program costs. CFED’s Taxpayer Opportunity Network convened a group of experts from the field in the Facilitated Self-Assistance working group to identify and develop promising practices for programs looking to implement and sustain the burgeoning growth of this innovative approach to community tax preparation.

What Is FSA?

The FSA tax prep model, similar to a traditional VITA/TCE model, uses IRS-certified income tax preparers to assist filers in their tax return preparation. The main difference between the traditional volunteer preparation and FSA boils down to who does the majority of the preparation. As the name suggests, FSA puts the taxpayer in charge of their taxes by walking them through their taxes with free computer tax preparation software with an IRS-certified volunteer.

FSA can be divided into three subcategories: FSA Standalone, FSA Co-located and Remote FSA. Standalone FSA sites use a hub of computers with a volunteer to provide any coaching or assistance as needed to the tax preparer as they work through the program and is the only form of tax prep assistance offered at that location. Co-located FSA sites takes advantage of an existing VITA site infrastructure and resources; however, tax site staff are intentional about directing ideal FSA clients towards the service while also providing traditional VITA services to others. The Remote FSA model uses online marketing and other existing social media platforms to allow taxpayers to file at home, work or any other computer with access to a customer support line via phone, email or chat support. Despite these distinctions, VITA programs can incorporate all three types of FSA products offerings. For example, MyFreeTaxes is a product operated by United Way Worldwide which can be used to create FSA kiosks at VITA sites, standalone sites and at home!

Who Should Use FSA?

Members of the Facilitated Self-Assistance working group observed that the ideal FSA client falls into some if not all of these categories: has a simple return, is tech savvy, fluent in English, a first-time filer and those who may not expect to have a volunteer lead their tax preparation process. Due to the unique focus on computers, online software and learning curve, those who fall in the aforementioned demographics make the most successful FSA clients. With these communities in mind, more than 2,000 tax sites supported taxpayers with some version of FSA across the nation. By employing FSA products to extend the reach and capacity of your tax site, you can help more people access quality, no-cost and efficient returns while empowering them to take control of their taxes.

If you think FSA might be the right fit for you and your clients, click here to learn more!

Tax Season Kickoff, EITC Day Highlight the Importance of Tax Time in Boosting Financial Well-Being

By Rebecca Thompson and Chad Bolt on 02/09/2017 @ 10:00 AM

Tags: News, Taxpayer Opportunity Network

For folks who understand the power of tax time as a pathway to financial health for millions of workers and their families, the past few weeks have been an exciting time. On January 23, we officially kicked of the 2017 filing season, and later that week, CFED and the Taxpayer Opportunity Network celebrated EITC Awareness Day. Then, just last week, we partnered with Tax Credits for Workers and Their Families and H&R Block to convene a Capitol Hill Policy Forum about creating opportunity and fighting inequality at tax time and beyond. Each of these events helped raise awareness and mobilize action to spread the word about the Earned Income Tax Credit (EITC), Volunteer Income Tax Assistance (VITA) and other powerful tax-time financial capability-boosting programs.

With the start of the 2017 filing season, community tax programs and local and state governments joined in with the IRS to mark the 11th annual celebration of EITC Awareness Day on January 27. Throughout the month leading up to EITC Awareness Day, CFED and the Taxpayer Opportunity Network partnered with a range of allies to send a consistent message: protecting and expanding the EITC is critical to our shared mission of expanding economic opportunity. EITC Awareness Day also gave us the chance to recognize the important role that VITA programs play in connecting taxpayers to the EITC. Network members and other allies celebrated EITC Awareness Day by sharing social media messages, videos, shareable graphics, state-by-state data snapshots and more, which led to #EITCAwarenessDay trending nationwide on Twitter!

On February 2, CFED, Tax Credits for Workers and Their Families and H&R Block welcomed Senator Sherrod Brown (D-OH) and Representative Gwen Moore (D-WI) to a packed room on Capitol Hill. The day kicked off with a keynote address from Senator Brown, who underscored his strong support for the VITA program and his tireless work to expand the EITC, such as his 2015 legislation to make permanent important improvements to the EITC. Later in the day, Representative Moore highlighted her work with the Consumer Financial Protection Bureau to protect low-income families and people of color from predatory and discriminatory loans, as well as her fight to give everyone an opportunity to rise out of poverty. Both speakers emphasized that the political landscape will be a challenging one for advocates, but that we can still achieve meaningful victories by remaining steadfast in our commitment to showing the power of consumer protections and the social safety net.

As we look toward a busy and productive tax filing season, we encourage you to join the Taxpayer Opportunity Network. Joining is free and gives you access to a gold mine of resources, including webinars, publications, learning groups and more that help you tackle challenges from volunteer recruitment and retention to mastering TaxSlayer and everything in between. Learn more and join today!

It’s a Tie! Who Gets the Kid?

By Barbara DelBene, Guest Contributor on 02/03/2017 @ 10:00 AM

Tags: Taxpayer Opportunity Network

VITA prepares tax returns for low-income families and the tax law issues are restricted by SPEC scope guidelines. So one might assume that VITA returns are all pretty easy. Unfortunately, that is not always the case. There seems to be an infinite number of ways a return can get complicated - even in seemingly simple aspects of tax law like who is claimed on a return. The rules for determining a qualifying child are complex, convoluted, counter-intuitive and confounding. Family situations that are complicated and ever-changing can quickly lead to difficult tax law applications about who can be claimed on a tax return – and for which benefits. This Dispatch discusses one of the more problematic issues for determining a qualifying child: the knotty tie situation.

First, Let’s Review the Basics

The definition of qualifying child affects five different tax benefits.

  1. Earned Income Tax Credit (EITC)
  2. Dependency exemptions
  3. Head of household filing status
  4. Child and Dependent Care Credit and the dependent care benefits exclusion
  5. Child Tax Credit and Additional Child Tax Credit

There are five basic requirements that make up the foundation of the definition of qualifying child.

  1. Age – Unless the child is disabled, the child must be under a certain designated age and the child must be younger than the taxpayer.
  2. Relationship – The child must be the taxpayer’s child, stepchild, adopted child, foster child, sibling, step-sibling or a descendant of any of these relatives.
  3. Residency – The child must have lived with the taxpayer for more than half of the tax year.
  4. Support – The child cannot have provided more than half of his/her own support.
  5. Joint Return – The child cannot file a joint return unless that joint return was filed only to get a refund of withholding or estimated taxes.

Comment: These requirements are just the basic structure of the definition of qualifying child. There are important exceptions and additions. Moreover, some of the five benefits have additional requirements. A summary chart, “All Those Kids,” can be used as a quick reference tool.

Next, the Rules for Tie Situations

Sometimes a child can meet all five requirements for more than one person. However, each child can be claimed on only one tax return for all five benefits, with one notable exception.

Comment: Right now one might wonder: what about divorced or separated parents who can sometimes split child-related benefits? Divorced/separated parents are parents who didn’t live together which means that the child only lived with one of the parents for more than half of the tax year. Since the child does not pass the residency test for both parents, that child is not the qualifying child of both parents and it is not a tie situation. The child is claimed by the custodial parent unless that parent relinquishes the child for the dependency exemption and child tax credit to the non-custodial parent via Form 8332 which is a rare occurrence. The parent that the child lived with is the only parent who can claim the child for EITC, head of household and child and dependent care credit.

IRS publications and TaxSlayer tax preparation software draw a lot of attention to the tiebreaker rules; however, it is important to remember that sometimes families have choices. During tax preparation, this can mean that the preparer can help the taxpayers decide the most beneficial approach to claiming a child in a tie situation. The strict tiebreaker rules are applied by IRS when an actual tie occurs. That is, the tiebreaker rules are applied by IRS when two taxpayers claim the same qualifying child.

These are the rules to consider during tax preparation…

  • If one of the qualified persons is the child’s parent and the other is not the child’s parent, the non-parent can claim the child only if that non-parent has higher adjusted gross income (AGI) than either parent.
  • When the nonparent’s income is higher than the parent’s income, the family can decide which qualified person claims the child.
  • Once it is determined who will claim the child, that person will claim the child for all five benefits, assuming that person meets the other qualifications.

Note: AGI, in general, is total income before exemptions and standard or itemized deduction are subtracted.

During tax preparation, the tiebreaker rules should be considered to answer a question like, “My brother lives with us and he said that he didn’t claim my son, but what if he did?” The tiebreaker rules predict what the IRS would do.

These are the tiebreaker rules that IRS applies after filing when two taxpayers claim the same qualifying child…

  • If one of the taxpayers is the child’s parent, the child is the qualifying child of the parent.
  • If both taxpayers are the child’s parents, the child is the qualifying child of the parent with whom the child has lived for the longest period of time during the tax year. If the residency period is the same for both parents, the child is the qualifying child of the parent with the highest AGI.
  • If neither taxpayer is the child’s parent, the child is the qualifying child of the taxpayer with the highest AGI.

Now, Some Examples

Example 1: June, who is not disabled, lived all year with her baby boy, Felix, and her mother, Maryann.

  • Maryann | Age: 57 | AGI: $40,000
  • June | Age: 26 | AGI: $22,000
  • Felix | Age: 0 | AGI: $0

Felix is the qualifying child of Maryann and the qualifying child of June.

During tax preparation: Either Maryann or June can claim little Felix as a qualifying child.

If somebody goofs: If both Maryann and June claim Felix, IRS would step in and apply the tiebreaker rules. June would get to claim Felix because she is Felix’s parent; Maryann’s return would be adjusted to remove Felix.

Example 2: John lived all year with his teenage son, Tyrone, and John’s big brother, Myron. No one in the family is disabled.

  • Myron | Age: 37 | AGI: $22,000
  • John | Age: 36 | AGI: $40,000
  • Tyrone | Age: 16 | AGI: $0

Tyrone meets the requirements of qualifying child for Myron and also for John.

During tax preparation: Only John can claim Tyrone as a qualifying child. Myron cannot claim Tyrone because he is not Tyrone’s parent and his income is less that John’s, who is Tyrone’s parent. If Myron’s income was more than John’s income, then either Myron or John could claim Tyrone.

If somebody goofs: If both John and Myron claim Tyrone, IRS would step in and apply the tiebreaker rules. John would get to claim Tyrone because he is Tyrone’s parent; Myron would not.

Example 3: Freda and Sam are the parents of little Maggie. Freda and Sam are both unmarried. All three of them lived together all year.

  • Freda | Age: 32 | AGI: $42,000
  • Sam | Age: 32 | AGI: $5,000
  • Maggie | Age: 5 | AGI: $0

During tax preparation: Freda and Sam can decide who claims little Maggie. Remember that the taxpayer must otherwise qualify for the relevant benefit. For instance, in this situation it is unlikely that Sam provided over half the cost of household expenses and, therefore, he would not be able to take head of household filing status. So if Sam is the person who claims Maggie, nobody here gets head of household.

If somebody goofs: If both Freda and Sam claim little Maggie, the IRS would apply the tiebreaker rules. Since both Freda and Sam are Maggie’s parents and both lived with her all year, Maggie would go to Freda, the person with the higher AGI.

Comment: Aren’t these fun? IRS Publication 501, Exemptions, Standard Deduction and Filing Information, has lots of interesting examples with new twists and turns. Check it out!

Finally, About TaxSlayer

For each qualifying child claimed for EITC, TaxSlayer asks about these issues as part of the due diligence questions: Is this child currently, or intended to be, the qualifying child on any other individual’s return? The SPEC guidelines say: Answer “no” even if the taxpayer would win the tiebreaker. If the answer would be “yes,” mark "wish NOT to claim EIC" in the Dependents Section.

Comment: This advice is a puzzling. Why answer “no” if the answer is “yes.” And how does the tiebreaker play into this? Why block the child for EITC if the answer is ‘yes’ but the taxpayer qualifies? One can imagine a situation where the taxpayer knows that a child is being claimed by someone else yet it is the taxpayer who would ultimately get to claim the child. Since the TaxSlayer due diligence questions do not affect the outcome of the tax return, this is not a serious concern at this time.

TaxSlayer also asks if the preparer explained the tiebreaker rules to the taxpayer. SPEC advice is to answer ‘yes.’ A more appropriate response might be, Answer ‘Yes’ if the child is or might be the qualifying child of more than one individual.

Comment: There are so many situations – most situations – where the child lived with – and only with – the taxpayer and there is no question that the taxpayer can claim the child and is the only person who would possibly claim that child. Bringing up tiebreaker rules seems inappropriate and unnecessary. But, as always, preparers should explain the rules and possible IRS actions whenever there is a more complex situation that might result in questions from IRS.

Why the Earned Income Tax Credit is Essential to the Opportunity Economy

By Rebecca Thompson on 01/27/2017 @ 11:00 AM

Tags: EITC, Federal Policy, Local Policy, Taxpayer Opportunity Network

Click the image to check out our EITC Awareness Day Toolkit!

Since 1975, the Earned Income Tax Credit (EITC) has been among the most powerful anti-poverty tools in our country. Because the EITC is a fully refundable tax credit that puts money back into the hands of hard-working taxpayers, it often represents the largest windfall of cash that low- and moderate-income households receive in a given year. As such, the EITC is a critical income support that helps hard-working Americans overcome financial challenges and put a little away for a rainy day, all while fulfilling their civic obligation to pay their taxes.

In recognition of this powerful tool, the IRS has declared today EITC Awareness Day. Now an annual event, EITC Awareness Day is dedicated to raising awareness of, protecting and expanding the EITC. Throughout the month, CFED and the Taxpayer Opportunity Network have been working with our partners in the field to take advantage of this important opportunity, as protecting and expanding the EITC is critical to our mission of expanding economic opportunity.

As we celebrate EITC Awareness Day today, it is also critical that we recognize the important role that Volunteer Income Tax Assistance (VITA) programs play in connecting taxpayers with the EITC. VITA programs provide free, high-quality tax preparation services to low-income workers, and these services not only connect families with the EITC, but also to a range of other financial capability and asset-building services in their community. As such, EITC Awareness Day is a prime opportunity for CFED and the Taxpayer Opportunity Network to say “thank you” to the thousands of VITA volunteers across the country who make the important work of community tax preparation possible.

EITC Awareness Day affords us the opportunity to carry the message of the value and effectiveness of the EITC far and wide, encouraging all who may be eligible to seek out and claim the credit, and to lift up our collective voice with our elected officials at the local, state and federal levels to protect and expand the EITC to help as many taxpayers as possible.

Interested in using your voice to protect and expand one of the most powerful anti-poverty programs in the US? Download our EITC Awareness Day Toolkit for more information, resources, templates and tips for how you can make a difference!

2017 Tax Season Kicks Off!

By Justin Chu on 01/23/2017 @ 02:00 PM

Tags: Taxpayer Opportunity Network

Today marks the first official day of the 2017 filing season! For many VITA/TCE providers this is a time of celebration and anxiety. After many months of preparation, the filing season is at long last underway. Soon, taxpayers across the country will turn to these community tax preparation programs for the high quality tax prep services they provide. As is the case with every year, and 2017 especially, these services remain a cornerstone of one of the most important financial opportunities for working Americans. The EITC Refund Delay and transition to a new software for many programs have been the forefront of the community tax preparation thought process. As the Taxpayer Opportunity Network moves into its third tax year, we remain committed to elevating the voices and concerns of community tax preparation volunteers, programs and taxpayers.

Earlier this month, we held a webinar on TaxSlayer updates for the 2017 season with representatives from TaxSlayer and IRS SPEC. At the January 19 event, we showcased the unique features of the TaxSlayer software, the transition process and ways for the field to get involved in the TaxSlayer process. For those who did not join us for the live event, we recorded the entire session and presentation slides for public release. In addition, the Slain: Let’s Slay Together blog is here to provide advice to your software quirks and challenges.

For those worried about the delayed refund for EITC filers, the Network hosted a webinar in mid-November on a messaging campaign undertaken by the Intuit Financial Freedom Foundation in coordination with a myriad of national partners, including the Taxpayer Opportunity Network. As a part of this webinar, the entire messaging toolkit was released to the field for dissemination with constantly updating materials. These materials include social media posts, handouts, one-pagers and generic press releases to inform your local community on the impact the delayed EITC refunds may have on qualifying taxpayers. The EITC is vital for many hard-working families and it is imperative that those who may be effected by a delay in receiving the payment are totally prepared for any financial shifts.

Looking ahead to this year, we will host webinars on a variety of topics that will provide resources, tools and tips for VITA programs. As each tax season presents its own unique challenges, the Taxpayer Opportunity Network continues to provide the community tax preparation field with the knowledge, tools and resources required to make this year more successful than the last.

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