Sign Pennsylvania Assignment of Partnership Interest Myself

Document type sign assignment of partnership interest pennsylvania myself

all right well welcome back everyone as Esther mentioned tonight we're gonna be talking about state and local income taxes and also the Affordable Care Act so if you have questions feel free at any point in time to address those what we're gonna be looking at today is kind of a nice overview of what state local taxes are gonna be handled within the scope of Ida so what we want to be able to be sure is that we can walk through your common situations things that you're going to be seeing within the sites so we're gonna be talking about how some things may be a little bit different than what we've talked about over the past couple weeks what's gonna be different for things like filing requirements and how income may be a little bit different from federal so if you have questions feel free to bring those up particularly if they're related to bytom will kind of let you know whether or not they're typical ones that we see within our program if they're a little bit more complex we can certainly take some time at the break or after this session to go through in more detail for you okay so we're gonna hit right in and start off with state and local income tax so one of the things that's different in addition to no longer using the forty twelve for state local income tax since the IRS only covers their piece the 1040 we do have some additional information in your volunteer guide so we actually have a lot of pages in your volunteer guide that will go through some of those state and local issues that we'll be covering this evening so we're in the past we refer to to a tab in the forty twelve tonight we're gonna be having you refer to your volunteer guide for some additional information so one of the first things we're going to take a look at is a filing requirement almost like how we started off our initial old IRS session when we first talked about filing requirements for federal income tax we talked about filing status and gross income for Pennsylvania we're gonna change that completely the only thing we're gonna be looking at is and whether or not there was gross income over thirty three dollars relatively low threshold so $33 wise to thirty three dollars penstemon he actually has a flat test they actually have a 3.07 you do not need to memorize that that's not an easy number to go ahead and keep an 3.07 percent is the tax rate pia uses on all taxable income if you take $33 multiplied by 3.0 7% you come up with $1 of tax that's why PA wants to go ahead and see it now not to say that we're gonna be having a lot of people over terms because we're gonna be talking about a program a little bit later in the session that even though we call it a flat tax it actually is not we're gonna show how it's a back ended kind of graduated tax rate we do have some abilities to have tax forgiveness which is almost like an exemption from tax we also have some tax credits that people can apply for as well so we just want to kind of take a look and say it's a 33 dollar gross income so while we have people who may not have a federal filing requirement we may need to file a PA return for them in addition if someone has more than 33 dollars that would be triggering a filing requirement or if they have a loss from a business if they have a loss from a k1 that's passing through if they have an S corporation or partnership activity those would be reasons that they would need to file as well so you would have to have no income Pennsylvania wants to see a return if they have a loss coming through off a schedule k1 or a sole proprietorship again hence Mia does not have a rule that exempts minors not actual coal miners but actually minor children from the filing requirement so if you have a four-year-old who has an interest account with $50 in it they theoretically have a filing requirement kind of tips and techniques that we use if you've already filed a PA return continue to file a PA return it may be taking a look to see why they haven't gotten one if you've been filing in the past and all of a sudden you stopped filing you may get an inquiry from the Commonwealth wondering where your return is it's not a problem if you have less than $33 but once you start we recommend continue filing and we'll talk about that specifically when we get to Lancaster County so Pennsylvania $33 you need a file if you have a loss you need a file basic rule of thumb you need to file so if you're coming in a beta we already complete all the information we almost have everything we need to complete the return so it's very easy for us to electronically file PA returned the one returned we cannot electronically file is it Lancaster County now Lancaster County's a little bit different now lexsha counties can be based on earned income tax only so that's gonna be based only on wages self-employment income areas from a partnership we'll talk a little bit more about that and as to get through the state section so not everyone's gonna have to fill out a local or an income tax return however if you do get a pre-printed form from Lancaster County one of these flushes one of these nice little pre-printed pink sheets with someone's name and rest on it we need to go ahead and send that back in if they do get a pre-printed printed sheet it means that Langstrom county tax collection bureau is looking for a return from them if we do not send one in and they can charge $25 per taxpayer for failure to file so we do want to be sure we file that and we'll give you some more pointers here when we just get a little bit more detail on the local return so who needs to file a local return well if you lived in Lancaster County or if you lived in the akhter School District in Chester County monster County tax collection bureau is your tax authority usually we just refer to as LC TCB first of all it's a whole lot easier to say than Lancaster County tax collection Bureau time and time again even though it does sound like it's an ice cream or yogurt shop LLC TCB is just simply are an abbreviation for how we're gonna write checks and refer to it in our instructions so again what we're looking at is earned income if you had any earned income net profits any source of employment in 2017 you will need to file a local return now there is an exception if you are under the age of 16 you are an exempt individual for purposes of local filing requirements so you would not need to file a local return if you're under the age of 16 however sometimes employers don't always do that correctly and they will start withholding for younger employees that happens simply go ahead and file the return for a minor child and write exempt or stated an attachment and that money can be refunded they are not obligated to pay pence main tax well I'm sorry country tax yes local tax no okay any questions on filing requirements this scr kind of alluded to we may have the ability if all goes well if everyone crosses her fingers between now and january 18th when the program goes live maybe we can do local returns through our tax system if everything goes well if it doesn't and we'll show you how to do these manually now pennsylvania has a different system of taxation the federal government had a policy to say everything's taxable unless we tell you it is not Pennsylvania on the other hand actually only taxes eight different classes of income sounds simple right well we're gonna take a little bit more of a look into each of these various classes what are the things that were commonly gonna see within the bita program the first one that we typically see is wage income if someone has a w-2 it's gonna be reported in our top line of income it's gonna be actually one of the easiest ones to work with and we'll go through some tips and techniques on how to be sure we have the appropriate amount of wage income on the return second category is going to be interest interest income is pretty much what we'll see from the federal we'll show you a couple adjustments as we get into perhaps some interest that's not taxable for PA purposes dividends are pretty much gonna follow from federal as well the one difference that you'll probably see is you go through the return is that they're gonna be certain things that move around from the federal to the state return if you have a brokerage statement that has capital gain distributions coming from a mutual fund Pennsylvania will actually move those to a dividend item of income not a capital gain income like they would be on a 1040 kind of while we're talking about kind of some differences with PA just want to mention PA while the return looks like it's a joint return it is actually not a joint return if you have a married filing jointly a couple technically the return is two individuals filing on the convenience of one form so if you take a look at the return a spouse's losses cannot offset a taxpayers games when we get to areas like business income where one taxpayer may have some income from business the other one may have generated lost we cannot offset those amounts so we have to pick up the income for the taxpayer and the spouse is lost is unutilized we can't use that to offset any other items of income so we can't use the loss from a spouse to offset a taxpayer you also can't use the loss for one category to offset income from another category so if you're used to looking at math and thinking things should work pa does not recognize the negative numbers so when you go through the process it's only gonna add the positive numbers and will not take any negative into account so if you know that you have a business loss and you're wondering why is there a zero on the form it means that it is not able to offset any other activities so a zero would be an appropriate entry usually we may see zeros not in the first three lines is just very hard of a negative way just negative interest or negative dividends even though in the taste interest rate it feels like you're not making anything off your money but there's no negative interest component but we may see that when we get to this fourth category business income business income is an area that we'll be talking about a lot more next week when we talk about our advanced certification but if you do run into business losses again it can only be used to offset other business income from that taxpayer cannot be used to offset a spouse and cannot be used to offset other classes of income the fifth one that we sometimes see is going to be gained or lost from the sale of property that could either be from the sale of a residence typically we won't see that very often because of the exclusion rules for both federal and PA but it will typically come from sales of security stocks and bonds mutual funds those types of things the other couple categories two of which we won't see at all we do not have rent royalty in a scope a service provider so because we can't handle things like depreciation some other complex areas we do not actually handle rental activity with invite up we also do not do a state and Trust work if you do have a k1 coming through there may be some exceptions we can take a look at it we do not do the actual estate in trust work itself last category is ambling and lottery winnings this is kind of the last of the bunch on the PA return one we don't often see but we do need to make sure that if a taxpayer does have gambling or lottery winnings we are picking it up correctly we always see stay in the past if you wanted to buy a lottery ticket particularly Mega Millions through the Powerball buy it in PA because up until two years ago any winnings you had from a national lottery if the ticket was bought in PA was exempt from PA tax that changed so now it doesn't matter where you buy your lottery ticket if you want to go to the shore and buy lottery tickets while you're on vacation that's fine it's still gonna be taxed in PA irrespective of where you actually purchased the ticket so if there are any gambling winnings that would be reported on the eighth line that includes anything that you people have either from the PA lottery from the casinos anything along those lines would be reported as taxable gambling winnings okay so now that we went over kind of things that PA does tax the categories of income there are a lot of exceptions that PA has PA does not tax retirement dollars for the most part it will not tax Social Security will not tax railroad retirement benefits typically will also not tax pension or retirement distributions now there is one exception you'll see an asterisk there one of the things we had talked about when we covered income was the early distribution from a retirement plan if an individual takes money out of a plan before they hit retirement age and you'll see a 1099 R with a code one in box seven that's going to indicate that that's an early withdrawal from a retirement plan Pennsylvania has the ability to text that as compensation on the return now Pennsylvania is a little bit unique when we take a look at the w-2s what we'll see is that Pennsylvania does not allow a deduction for amount contributed to a 401k 403 B or the retirement plan the reason why they do that is because they do not tax distributions when they come out later as long as you hit a normal retirement age now if you take your money out early Pennsylvanians going to consider that as if it's money that you could have gotten as wages but you simply defer to him so if you take it out early that's going to be considered wage income now the trick is that it's only on the amount paid by the employer and any games you have in your account Pennsylvania has what we call cost recovery roll so any dollars you take out of your retirement plan or first treated is coming out of your own contribution and then only after you've exhausted all your contributions is that excess amount taxed what's the major problem we have invited no one knows how much they contributed to the plan it's difficult to come up with that number because there's not really a great system to tell you what your contributions to the plan were sometimes we get lucky and what we'll see is an early withdrawal from a retirement plan happened because an employee had been working for the company maybe a year or so decided to leave they had a little bit of money contributed we have a copy of the prior year return and the current year return so we know how much they had contributed to the plan so that's an easy number for us to come up with if we can't come out the number the Commonwealth will come up with one for us and we'll talk about this when we get to gains and losses the government's very willing to give you a number to put on the return it's just generally one we don't like they're gonna tell you that number is zero that there's no employee contributions which is not the case so if you do run in this situation just bear in mind we can take the employees contributions to the planet first that's non-taxable there's the spot we can put it in on the return we see this on occasion some of the returning volunteers you've have run into this on occasion at all [Music] [Music] wonderful that's a that's an excellent situation so we can break it down and we know exactly how much they had contributed we can reduce the amount that's taxable for PA purposes and then simply the amount that's contributed by the employer and any earnings on the account would be subject to PA tax so I say hopefully everyone comes in as well prepared as Howard's clients do all right so we do run in those situations hopefully we have some opportunity if you do run into that and you're unsure of how to proceed just go ahead and ask your site coordinator we can kind of work on a policy of how we can request some additional information so some other things PA does not tax or unemployment compensation so you don't have to pay wages for not working unlike federal which does charge tax on unemployment compensation sick pay disability pace not taxable for Pennsylvania there's alimony also similar to federal you do not need to pay text on inheritances so a couple of those items are going to be non-taxable for PA however we're gonna see where PA will actually add some of those items in later when we start talking about some tax forgiveness and some possibility of rent rebate credits also there's going t be a active military duty pay exception we are going to be covering a little bit of military pay next week when we talk about some advanced topics but if someone is actively engaged in the military their Pennsylvania compensation would not be subject to tax on their active military duty pay so we'll cover a couple more of those issues next week in advance if you are interested in working with members of the Armed Service okay so what are we talking about in terms of these different categories the first one we mentioned was the wage income the nice part about wage income is Pennsylvania actually has to form the w-2s which is going to report how much we've entered on the tax Slayer program for federal wages Medicare wages and state wages is a great form if you want to go ahead and double make sure they have all the w-2s entered all the information entered correctly now as we mentioned about retirement plans oftentimes box 1 of the federal w2 will not match the state wages that you're gonna see in bostic's team if anyone has contributed to a retirement plan those numbers are quite often going to be different so just the main thing we keep in mind is when we enter the w2 information into tax layer just enter the w2 exactly as you see it make sure that you're taking a look at box 16 box 16 frequently will need a new number to be entered in once you entered in is gonna go immediately through the system and be a record on the correct line of the w2 Box 17 is typically where we're gonna see state withholding for the most part box 16 and 17 I think we're pretty good on not really a whole lot of issues there the local wages however may be a little interesting sometimes we'll see employers that will report the local services tax in box 19 that actually should be reported in box 14 so if you do see some odd things in the local area just go ahead and double check the w2 make sure that it actually looks like it makes sense if you see a $52 amount of withholding it most likely is local services taxed not local income tax withholding and if we do put on the local return Lancaster County tax collection here or else etcb will eventually catch up and realize that you did not overpay your local taxes quite often when we see local taxes are typically going to be generally a break-even scenario if they only have wage income unless they have some unreimbursed expenses or they may owe a little bit of money if there was a slight discrepancy but typically we do not see large refund amounts on a local return so just watch to make sure that we see anything that's a local withholding that is actually based on wages not on some other type of tax okay now the other interesting part about Pennsylvania is if you work in one of our surrounding states or state that the Commonwealth has negotiated an agreement with you do not need to pay tax in those jurisdictions so the interesting area that we have here is the very first state that we report on our reciprocal list is Indiana which is nowhere close to being a two contiguous state to Pennsylvania in fact you have to drive through a couple states to get DNA I've never seen a client that says I Drive daily to get to Indianapolis for my job yet we negotiated a contract with them to say if you work in Indiana you do not need to pay Indiana state income tax your employer should be withholding PA so we do have a lot of situations because we're so close to the border here in Lancaster County with Maryland and we do see a number of clients that actually have jobs in Maryland their employer is supposed to be withholding Pennsylvania income tax if that's the case it doesn't matter we can still prepare the PA return everything's going to be working normally the w-2 should be reflecting PA sir state and just show their PA income tax if for some reason the employer does not withhold PA then we have to go through a different process we actually have to file a maryland and a PA return report the income in both states that claim a credit in order to get our money back we're technically the taxpayers money back so hopefully we don't run in those situations but there were several states that that should happen Indiana Maryland New Jersey Ohio Virginia and West Virginia yes sir that is correct right so if you have a move basically what what that is is that here actually part your resident for both states so the reciprocal agreement covers full-year residents so if you're in PA for the entire time and you happen to have a job in Virginia West Virginia Maryland Ohio Indiana you're alright but if you do move then we're gonna have to file two returns and multiply State returns get to be very tricky with vitae so you want to double check with your site coordinator before we handle multi-state issues so typically we don't do that with invited but do check for their cybernator if there becomes an issue now you'll notice there's two states that are not on here that actually do border PA one being Delaware if you do have a individual who has a job in Delaware we sometimes see that with the construction industry they may be working in Delaware for a couple of days if they're in for a couple days they're gonna have typically Delaware withholding which means we would have to file a Delaware return as a non-resident go ahead and file that return and then take a credit on PA so again we may have some issues with those the other state New York New York does not negotiate it with any other state if you work in New York though we're gonna keep all your money they're gonna treat you as a resident of New York depending on how often you work there and those are gonna be some complex issues so not to really throw a wrench in the works I don't think we see a lot of taxpayers with multi-state issues but just be aware if someone comes in and they say I have some questions about my income earned in other states we may just want to go ahead and ask a couple questions before we get too deep into the return for the most part these work fairly cleanly again the wages are typically just going to be coming through off of their w2 so usually we all have to make a lot of adjustments now the one area that is a little bit different is our ability to deduct unreimbursed employee expenses and so what we're gonna take a look at here are the opportunity for us to write off any expenses that are related to employment we did not really get much of a benefit on the federal return because in order to take a nun remember employee expense first of all the taxpayer had itemized deduction s so we had to get over the standard deduction threshold in order to even take a nun reversed employee expense the second hurdle even after we had passed a standard deduction is the fact that we have to get over 2% of our adjusted gross income before we can deduct any benefit of our unreimbursed employee expenses at 2% of miscellaneous itemized deduction so quite often we do not get a benefit on the federal return but we can take it for PA purposes there are couple things we just want to take a look at here in order to take the unreimbursed employee expense for PA the expense has to be ordinary and necessary for the industry or occupation and that's uranium so a couple of things that we want to just remind taxpayers about is that we need to make sure that they have the opportunity to actually deduct these on their PA return if an employee could have gotten reimbursed from their employer but did not they're not eligible to take an unreimbursed employee expense on the return so what that means is if you have an employee who brings some receipts and says I'm a sales person I had some travel and I had some meals that I did not turn in to my employer for reimbursement can I take it on the PA return the answer is no if you had the ability to take it to your employer for reimbursement Pennsylvania will not allow you to take an unreimbursed employee expense deduction the other area we're going to take a look at is Pennsylvania's been much more aggressive in pursuing unreimbursed employee expense claims so there are a couple things that we just want to be sure that we communicate to our clients to make sure that they can substantiate and document the amount that they're reporting to us a couple of the areas that we kind of recommend is if you have anyone with unreimbursed employee expense be sure that the occupation that you're putting on the PA return is appropriate for the amount that you're taking as an unreimbursed employee expense so if you have someone who's a full-time college student but they work in a job in construction or pizza delivery we probably want to change their occupation from student to construction worker or delivery person that way we actually have a better understanding to say why are they having an unreimbursed employee expense as a student it just helps alleviate some of those issues that doesn't prevent them from meeting making sure that they keep documentation but it does at least help us get to the point where they have a basis to take an unreimbursed employee expense a couple other things we need to take a look at they have to be paid in connection with employment so in performing of duties again what we want to take a look at is make sure that they sound that they be appropriate if we need to have safety goggles and skill tip boosts probably makes sense for a construction worker probably does not make sense for someone in a education setting you probably don't need steel tip foods in your classroom unless you happen to be a shop teacher speaking of teachers this is one area that we can actually see that they can take some additional deductions we mentioned last time about the educator deduction that was that $250 for classroom supplies that's actually eligible to be a deduction for the PA return and there's no $250 cap so what ever the educator had spent is eligible for the unreimbursed employee expense and oftentimes educators may have a couple other expenses as well such as union dues which we'll talk about in a in a minute so again what we're looking at here is the expenses have to be paid in connection with a business it has to be in relation to ordinary or customary within the industry it has to be reasonable and not excessive so if someone's deducting travel they have to go to Europe to go meet with a client traveling by air is fine comma will actually allow you to picket that class of travel you'd like to go in but air travel is fine going across on the qe2 in the presidential suite taking a two-and-a-half week trip to get to the UK is not a reasonable expense there's a little excessive so you cannot take an expense in that amount but if it is travel that's fine we can go ahead and take a look and see just to make sure it's in there reasonable in the mouth they have to be necessary to perform your duties so we have to have a direct connection so some things we're going to take a look at or making sure that any unreimbursed expenses are needed in order to perform your job so they can again be excessive and we'll talk about a couple of the more common areas here in just a little bit so as we mentioned kind of the big ones are going to be things like the educator expenses so if you do have school teachers that come in we're gonna take that $250 deduction hopefully for them that's an adjustment to income any amount that they do spend would be eligible for a Pennsylvania unreimbursed employee expense the nice part is this also works for local returns as well so sometimes the educators will also have union dues so if you see someone who's coming in and they're a member of the Union hopefully that they'll either have the information report on their w-2 or bring in their a statement from the Union saying how much they're deducted what union dues are we also see is quite often with factory workers people and maintenance and also systems of higher education they have union dues as well they are deductible on the PA return oftentimes we'll also see some other work uniform and clothing again what we're going to be taking a look at here it has to be used in performance of the job one of the areas that they take a look at kind of one of the areas that we want to take a look in terms of criteria are that the clothing or other items are not adaptable for ordinary use so we can't basically have a landscaper that says I'm working outside I'd like to buy a nice car art jacket because it's cold and by the way it's also going to work out very well when I go out before hunting season well if you can use it for general use it's not considered an unreimbursed employee expense so what we're getting back to her things like safety equipment steel tip shoes perhaps if you're in a flagging position maybe have some brightly colored neon items perhaps there are other things that we take a look at in terms of work uniforms the criteria we used to use before would be to say if you would not feel comfortable walking around outside of work hours in the clothing that's probably indicating it's for work purposes only but all you have to do is walk into any type of grocery store department store or Walmart and there's no dress code anymore now you can walk in feel comfortable in your pajama bottoms and slippers and go ahead and browse the electronics department so we can't really say it has to be a standard that fits the our society of feeling comfortable walking around it's just more of an opportunity is it for a specific business purpose if you're a mechanic and you have coveralls that would be a work purpose generally don't throw on a pair of coveralls to head out to Thanksgiving dinner so what we try and take a look at is what's the connection with the clothing the supplies to the work environment so if we take a look and it's used directly in the performance of a job duty that would indicate that it's a deductible expense if we have someone who's a server for a restaurant and they need to have non-slip shoes something along those lines that they're required to wear that would be fine if they are getting a job at a bank and the bank says you need to look presentable those are not deductible expenses wearing a nice shirt to go to work is not something that is a deductible expense because hopefully you'll wear that nice shirt somewhere else so what we try and take a look at is if it's generally adaptable for ordinary use it's not going to be considered in unreimbursed expense we can take a look at small tools and supplies again typically we may see that within the construction industry people may say I need to provide my own tools for work as long as they're reasonable they're in relation to their job responsibilities those will be fine any professional licenses sometimes we'll see people in the medical field that have to pay for their own licenses if they're not being reimbursed and again they do not have the ability to request reimbursement from their employer then we can deduct those as an unreimbursed employee expense sometimes we'll see people that have vehicle expense whether then is because they're in a position of a salesperson perhaps that they are a administrative worker at a company and the company asks for them to make small deliveries run to the post office and they do not give the opportunity to be reimbursed they can take vehicle expenses the important thing we need to take a look at vehicle the state can request that you have a vehicle mileage log to document where you went the business purpose and the amount route so we just want to be sure if someone says I have some unreimbursed mileage you say great we can K take that out how much do you have I have exactly a thousand dollars per month or a thousand miles per month every month exactly a thousand miles now probably not accurate so again what we want to remind them of is substantiation rules to say we're gonna compare the returned the information that you provide however all the information on the return is your responsibility if either the state the federal government or elsie tcp comes back to request information that is can be your responsibility if it seems reasonable we can go ahead and take it if they say I Drive a hundred thousand miles for work and they're not over the road truck driver it's probably unrealistic so we can't go ahead and try and red ce your tax liability by coming up with false claims really there are only a few deductions that you can take for PA this is probably the biggest one will see is the unreimbursed employee expense but we do just want to remind them of the rules that they need to have in substantiation of those expenses but they can take any vehicle expense that includes mileage any parking any tolls any other transportation any travel away from home if they're required to be away for a period of time as long as this temporary one benefit Pennsylvania has is we do allow a deduction for 100% of meals and entertainment federal government only allows 50% because they believe you have some personal enjoyment out of meals and entertainment I always like to think it's because Pennsylvania has more snack food and Department of Agriculture than any other Commonwealth has but it's actually a different reason but it sounds better to say where the snack food capital of the world we prefer there provide more chips or pretzels more chocolate factories than anyone else per capita but the real reason is because pence me just follows the accounting rules in the last 100 % of the Olsen entertainment so if you do have those it can be deducted in full again the main things to take a look at it you can only take it if you do not have the ability to be reimbursed by your employer and we are gonna recommend that everyone substantiate their deduction and keep track of that if and when the Commonwealth does ask for a copy ok I'm sorry I've got a little a little fast for the clicker here one of the things would you want to talk about one of the other areas that we may see some adjustments for would be interest income interest income is generally going to follow directly from the federal return except there are a few areas where Pennsylvania does not tax all the same interest Penn State does not have the ability to tax US government interest only the federal government can tax their own interest so any US government interest is going to be exempted so that includes interest from US savings bonds so when we went through the 1099 int and you saw that there was a mountain box 3 that amount will automatically be excluded from the PA return he generally do not need to make any adjustments the areas where we may see some adjustments are that Pennsylvania will not tax interest earned from the Commonwealth of Pennsylvania itself or any of its political subdivisions so that means municipal boss so if you have a client who has interest coming off of a School District bond or a road improvement bond or a local library bond those would be exempt for PA tests and generally what we'll see is you'll get a brokerage statement that will break down to say how much interest was earned from PA sources all we have to do is put an adjustment in tax layer and go ahead and remove that amount of interest or taxable for PA and we'll cover the tax layer portion when we get to beginning in January some other things that they don't get to tax in addition to the Commonwealth and any municipal government within the Commonwealth is any bonds or obligations from Puerto Rico Virgin Islands or Guam truth be told I've never seen any interest from Guam I assume that they wrote improvement bonds but I've yet to see any client that's invested in one we may see some more areas coming out of Puerto Rico once they're looking at improving infrastructure after the after the recent hurricane but if you who do have any areas of interest from US Virgin Islands Puerto Rico and Guam particularly Guam if you do get one I know we're not supposed to keep any information but if anyone does see a bond from Guam please photocopy and just send it to me because I'd love to see what that looks like but other than that we generally are gonna see any adjustments mainly just from PA municipal bond interest that's gonna be our typical adjustment we're gonna see that from the brokerage statement and then our it right in the tax layer most of the other forms are automatically going to rollover from the federal so you don't really have a whole lot of adjustments for PA there are some opportunities that we can take a look at for what we consider tax forgiveness the only trick with tax forgiveness tax layer still must allow you to go in and check the box to say the taxpayer is eligible for the tax forgiveness program just as a reminder I'm going to kind of drop down to the bottom here before we get it all overly excited about the tax forgiveness and before we just start checking the box to say everyone's going to be eligible if you have someone who's a dependent on someone else's return they are not eligible for tax forgiveness unless their parents or whoever's claiming them on the return are eligible for tax forgiveness so oftentimes we may have a student that comes in to get their taxes prepared because of their income level but they normally would qualify under the chart for tax forgiveness we do not want to check the box to say that they're eligible unless we know that their parents are eligible for tax forgiveness so we just when they ask that question but tax forgiveness is a tremendous benefit so when we talked about that whole policy of you need 33 dollars an income to file a lot of our clients particularly seniors that they may have retirement income social security income and maybe a little bit of interest in dividends quite often will pay zero to the Common Wealth because of our tax forgiveness program and that's based on your marital status if you're single if you're married if you have dependents we do not need to memorize that chart tax layer will automatically go ahead and do the calculations on that for us tremendous benefit will automatically calculate as long as we check the box to say the taxpayer is eligible now there are a couple of things and when we talked about what PA is allowed to tax they have to come back into consideration so for tax forgiveness we do need to add back in any alimony that the taxpayer received even though it's not taxable for PA purposes that's now gonna be an item of adjustment for tax forgiveness any of that non-taxable interest that we just covered would be coming back and tax layer actually does a pretty good job of bringing those amounts over so if I notice that you had it on the federal return if it knows that you had those deductions it should bring them over into the calculation the things that it doesn't always pick up are gonna be the next three inheritance so even though inheritance is they're not taxable for federal or state purposes for income tax they are an adjustment for tax forgiveness so if someone does inherit money we have to disclose the amount of inheritance that they received and that may impact their ability for tax forgiveness for that year also any non-taxable educational assistance so that be tax-free scholarships would be impacting their ability for tax forgiveness and then also they'd have to add back to sale of a personal residence any gain that they'd have on those so typically where we may see a situation particular if you have a senior citizen that's leaving their home and moving in a retirement facility they may have been accustomed to getting tax forgiveness for a number of years if they sell their home and they have a gain from the sale of the principal residence even though it may not be taxable for federal or state purposes we still need to disclose that amount and unfortunately you don't need a whole lot of income to push you out of the self of the tax forgiveness program so maybe a situation where they have to temporarily pay tax for a year but that is one other item to add back in so those last three generally we have to ask the client then as a manual adjustment within taxpayer inheritance tough non tax and yes sir right yes so it's a good question about what happens time pleasure what happens when a individual comes in and we have some questions about how their parents are gonna be filing the return so generally what we always have to ask probably make sure their parents are going to claim them as a dependent that's gonna trigger a lot of different things within there the main thing we take a look at probably if they can get in touch with their parents to say did you qualify for tax forgiveness for the prior year and has your income substantially changed from that prior year the best case would be that we wait until the parents file the return but that may not happen until April 15th or even later depending if their parents extend but that'll give us the best indication of whether or not the parent didn't qualify for tax forgiveness in the past so as long as they're within the tax forgiveness eligibility tables this student would be eligible as well so we do probably want to inquire the great if the parents can get their return done may be a great time to say hey mom and dad how would you like to come in as long as you're vital to get your taxes prepared if they say I'm sorry we're probably not buy to eligible that may give you an indication they're probably not going to qualify for tax forgiveness most of those tables are going to be kind of in line with where we be preparing returns so if they say well let me double-check with my accountant to determine whether or not have taken tax forgiveness the answer is probably not they if they have wage income they're probably going to be outside of the tax forgiveness program yeah but it never hurts to ask if you have that opportunity probably double check and if it sounds like they're probably not gonna qualified probably say do not do the tax forgiveness and file the return if it sounds like it's closed you may want to just double check with the tax payer all right great question all right just a couple other little issues on the PA return and then we're gonna talk about some Tax Credit Opportunities for PA one of the other things we just want to mention we had indicated that traditionally retirement payments are not taxable for PA and that's true Penn State has not taxed retirement distributions as long as they're in connection with retirement however there are some payments that people might be taking off a 1099 are that are not actually retirement distributions so if you have an individual who's invested in an annuity a non retirement investment account they've taken money they put it in generally with a life insurance or other brokerage company and they're going to be getting a stream of payments either over life for a period of time those are not retirement payments they're still gonna be reported on 1099 are so the question is how do we determine whether or not any of those are taxable for PA the trick is to look at the 1099 ar7 codes if you see ad in box 7 it's going to indicate that it is a payment from a life insurance or annuity so those would be taxable for PA purposes so if you do see a 7 d in box 7 it means that that amount of income whatever is the taxable amount of income is also gonna be taxable for PA and there is an adjustment within the 1019 our section of tax layer that you can add in a state taxable amount and it should put it in the correct box to have it flow through Pennsylvania actually considers this investment income this is actually their earnings off that annuity account so even though it's coming off a 1099 our constraint is gonna treat it as investment income not just retirement income so it's just one thing to take a look at there as we go through that process yes sir well so the most annuities are going to be either that could be within your retirement of the count and if they're within your retirement account they're fine they're going to be qualified for purposes of PA taxes if they're an outside investment so if someone has money and they decided I'd like to buy an annuity rather than put money into a stock or mutual fund those are gonna be what's taxable for PA so what we're looking at is this really your investment option so if you said I'll go to investment broker my insurance agent and they put me in an annuity that's if it's not through a retirement account it's a non retirement annuity which would cause it to be taxable yes sir right right so the question is is basically annuities are part of their own contribution part of the earnings on the plan what we generally go with is what the annuity company they will actually go through the calculation and determine the taxable amount being in consideration of how much the the taxpayers put into the plan versus how much your earnings so they'll actually calculate the 1099-r as long as it's still with the same institution that you bought the annuity with they will calculate the taxable amount and there can be cases where they're still receiving their amount and if it's considered recovery of cost that will be reflected in the taxable income piece so the feds will not text your own money coming back to you either so it's just a little bit different usually we're gonna rely on the 1099-r to determine the taxable amount so sometimes we'll see in the earlier years they consider it as earnings coming out first technically pas a cost recovery first but our ability to go through and recalculate that sometimes it's easier to use the 1099-r because they will eventually catch up to their entire basis okay so again that trigger is going to be a 7d in the 1099-r right that's correct so if it's dressed seven it's not gonna be taxed for PA if it's any just number we're okay if it's a letter like a G we're all right the DS gonna be the one that throws us off 7d yeah so the seven is gonna be in the indication it's a normal distribution and DS gonna be indicating it's coming out of a retirement account there can be some other ones in there as well if you have a charitable gift annuity sometimes you'll see individuals that have done a program with a church or other type of institution a charity those would be taxable as well because they're non retirement annuities so if you see something in box 7 just take a look at it and then again if you flip over the 1099 R or if you take a look at your 4012 it will indicate what those codes are but seventies kind of our big indication that is Hayden on retirement annuity I will cost you if you ask a client sometimes they don't even know what kind of distribution is coming out of they'll say I never bought an annuity okay that's fine I know you didn't buy an annuity I'm just gonna treat it like it is an annuity like it is shown on the 1099 are the other techniques that we generally see is that these are coming most likely from a insurance company usually it's probably gonna be coming from one of the larger insurance providers for annuity providers if it's coming out of something like a fidelity or Vanguard is probably a retirement account if it's coming out of Northwestern Mutual it may be either an IRA or an annuity depending on those types of things but usually the ones I see are coming out of life insurance companies okay any other questions on the new ities all right now one of the fun questions we have to ask with PA returns so there are a couple things we do need to acquire Pennsylvania has a use test requirement for residence of PA what use taxes is a complement to our sales tax program so when you buy things in Pennsylvania as long as they're subject to sales tax you need to pay 6% on anything that you buy within PA or from an online provider that is collecting sales tax so fortunately places like Amazon now collect sales tax a couple years ago you could buy anything you wanted and not pay sales tax now to not pay sales tax you have to find another provider or drive to Delaware to avoid paying sales tax but the Commonwealth knows there are options that you can avoid paying and running to the Commonwealth what they have is a provision to say we would like you to pay use tax so if you didn't pay sales tax you can go ahead and self-report and a use tax that you would owe the interesting part about use tax it is a tax on the books to the Commonwealth but there is no mandatory reporting for use tax it's a line this voluntary reporting process we do not actually have an audit provision for use tax for individuals businesses do but not individuals so we asked the question on the return would you'd like to report any use test for the year to the Commonwealth of Pennsylvania in most cases you get a blank look to say what in the world is use tax and then you can either go through and explain well if you happen to be out of state and you bought something that did not have 6% sales tax or something less than 6% sales tax you may voluntarily report reduce those transactions on the return and submit the difference to the Commonwealth of Pennsylvania with your 10 with your PA 40 so if you went on vacation up to New Hampshire and you got some souvenirs you bought a snow globe or some molasses or some delicious syrup you can report the use tax that you owe for bringing that back in a PA most of them say I've never calculated that amount I have actually had clients in the past and come in with an entire list of things that they bought out of state and they will calculate to the penny how much they owe it's a rare occasion I think we have a couple other people have done it and they had had it done twice it's unique some of them know about it but usually I take a look at it and say would you like to make a voluntary contribution to the Treasury of the Commonwealth of Pennsylvania because that's where the money's going if you choose to report that you have use tax you may certainly do that you can come up with all of your receipts you can total it off and give them a number again the state's not gonna audit you they're just gonna go ahead and take your money and thank you for a self reporting if you decide that you'd like to buy a large and luxury item and register in the state of Delaware to avoid paying sales tax you may self report that to PA most of our clients are not going to be buying large from luxury yachts and registering them in Delaware if you do have the ability to say I believe I have use tax but I don't know how much that is the system can calculate it for you it's actually on a sliding scale usually if you have less than $15,000 you can add six dollars to your return you're between 15,000 and 30,000 though I had twelve dollars there above 30 up to 50 though I had $17 again what this is gonna do is two things one to give more money the Commonwealth and maybe help your clients sleep better at night but again this is a completely optional area to fill out we do need to ask the question do you have any use text that you would like to report in some cases maybe they're gonna bring an entire listing for your two clients that have done that have many other preparers run into that situation in the past four people would like to pay anything other than one okay do they go with the default or do they bring in their unless [Music] okay all right yeah excellent so that's a great opportunity if you want to contribute to the to help pay down the the Commonwealth's debt you can certainly do that and on the PA 40-knot I guess I don't think we've had a lot of clients do this you can actually contribute to a lot of other charities on the back of the PA forty as well again we probably haven't seen a whole lot of that but if you do have a client who would like to tip the Commonwealth for the services you're getting this is a great opportunity to say put it up or down whatever you'd like to contribute it's almost like you're going to the pharmacy and they ask if you'd like to give a dollar to the charity of the week there alright so just an option a question you have to ask them you go through the PA return do you have any use text you'd like to report in most cases the answer is probably going to be I have no idea what you're talking about in that case we can say zero is fine and we can move on all right so what are the areas that we do see that we have some benefit a lot of clients may be coming in we have some senior citizens that may not have a federal tax obligation maybe their incomes too low for filing perhaps all their incomes just coming out of Social Security which would make it non-taxable for federal perhaps say they have a little bit of income for PA there over the $33 but the tax forgiveness they don't have any money one of the reasons they might be coming in is for this program that called property tax trend rebaiting it's a form that we can help prepare for them we can prepare it directly out of tax layer it's not a manual form that we need to work with but what the program does is it benefit seniors aged 65 or older widows or widowers age 50 or older and anyone who has permanent disability of age 18 or older so those are the categories of income are the categories of eligible participants in the rent rebate program now we do have some limitations on income the incomes gonna kind of phase out a little bit here a little over $36,000 for homeowners once you're above that you do not get any benefit renters is a lot less it's generally just under sixteen thousand dollars of income before you're out of the benefit the system again will automatically calculate most of the income is going to bring in all of your taxable income from PA plus 50% of your social security benefits however there are a couple things we need that back in again inheritance alimony spousal support and any gain from the sale of a principal residence or items that have to be included back in income so sometimes we'll see again in a transition period where someone might be moving from their home into a different facility that they're not gonna be eligible for a property tax or rent rebate in that year because to say all the home income will potentially push them over the limit particular if they bought their home and they've lived in it for about 30 or 40 years even though they probably don't have any federal taxable gain or pay taxable gain it may take them out of the opportunity for PA tax forgiveness so just want to kind of show you a quick chart again you do not need to memorize these numbers these are just mainly for purposes of understanding how the tax credit will be calculated to get a maximum credit for homeowners again we're going to phase out to the next level around $8,000 between eighteen fifteen thousand goes demo about five hundred fifteen eighteen we drop again until we get to our kind of top level face out there renters are a lot less they start facing out from the top six fifty once to hit eight thousand and pretty much done right after around fifteen thousand dollars the numbers change a little bit each year with cost-of-living increase so the charts a little bit different from what you actually see in calculation but just to kind of give you an indication of where people wind up when we prepare the return again the PA 1000 which is the property tax rent rebate will get most of its information directly from tax layer with the exception things that we need to enter the inheritance alimony and any sale of a personal residence if the taxpayers lived in PA for the entire year you do not need to attach any social security statements in fact the policy typically with most sites is we're gonna attach page one of the 1040 and submit that with a PA 1001 of these other two attachments for either a home owner or renter but again what we're gonna try and take a look at is the system we'll go ahead and calculate the income with a couple exceptions and then we just need to determine whether there are a home owner or renter or perhaps poet and if that's the case we'll just attach some additional documentation if there are a home owner they're gonna be claiming the PA property tax rebate it's all in the same form all we do is just check the box to say that they're a homeowner we need to prove that they actually paid their real estate taxes so that can be accomplished in a couple of different ways one is they can get a copy of their receipted tax bill and that's actually going down to the tax collectors office and asking for a copy of their bill it'll be stamped and receipted that they can send in with their PA 1000 if they do not have a receipt a tax bill they can actually provide a copy of their tax notice do both their spring in their fall and a copy of the canceled checks to show that it had been paid sometimes this easier to go to the tax collectors office to go ahead and get that receipted bill than to get to cancel checks from your bed but either way is acceptable if they still have a mortgage and they're paying their taxes through escrow we can just simply send a copy of the form 1098 as long as it shows the amount of real estate taxes paid that'll be acceptable for the Commonwealth to prepare their property tax for a rebate just to let you know this form typically is due by June 30 and has been extended every year that I've been in practice to December 31st but generally you have tax payers calling up immediately and say where's my PA property tax rent rebate it'll take a little while for the Commonwealth to process and sometimes the amount may actually be higher than the amount that we request it has a lot to do with their income level on how much they're paying in income in real estate taxes if the amount that they're paying in real estate tax is above a certain percentage of their income the state will automatically give them an additional amount back again we don't calculate on the PA 1000 but that will be just an additional check so if anyone runs into someone and they come back and they said hey last year you told me I'd be getting a 500 I got a lot more than that back from the state what do I do well you keep the money that's fine they send you the check you may keep it and that's perfectly acceptable so when we prepare the PA 1000 it's just going to show the amount that's calculated on that area if someone happens to be a renter what we need to attach is a rent a certificate which has to be signed by the landlord basically testifying that the tenant has lived there and that the landlord has paid real estate taxes one of the areas that was mentioned in our Tuesday morning session was sometimes people who live in retirement communities may be in a tax-exempt facility meaning that they're not paying real estate tax they do not get the benefit of the property tax rent rebate because the landlord's not paying real estate tax so we do need to get a copy of the rent certificate form that can be attached with the PA 1000 if they bring it in we can prepare all the information for them sometimes they may not have all their documents together so the options we have is we can complete what we have send it back with the instruction some what else they need to get every once in a while they'll come back into the site with all the information and say now I have it together and hopefully the greeter at that point can say thank you very much we'll put in the envelope for you you can lick it and put the stamp on it and send it in yourself but if we have the information together we can prepare it for them and let them mail it in if not we can send them back and let them know what else they need to to get it so again for homeowner they need two copies of their real estate tax bill for a renter they need their rent a certificate for a couple other things that we have for the PA property tax rent rebate if they are a first-time filer we just need to prove a couple different things first is age if they're age 65 or older we need to have a copy of certain documents the one thing that I always find ironic is that for a lot of these documents they're actually issued either by the Commonwealth of Pennsylvania or subdivision so if you've ever pulled a birth certificate you'll see in big print do not photo so what's the first thing that state asked for a copy of your birth certificate which is issued in the state of Pennsylvania and says do not photocopy but what their instructions say we'd like a photocopy of a document we told you not to photocopy so we'll see how text and government works here in terms of their language skills but you can copy a birth certificate and send it with them the driver's license can work a passport if you have a paste or a paste net card a Medicare card can all work as well if you have Hospital birth records so depending on how long someone was born they may not actually have a birth certificate but they have like a hospital birth record which is still acceptable for proof of age not acceptable to try and get a passport you have to get that updated you cannot use the actual birth notice in the newspaper so if you can't find your birth certificate but you found the scrapbook that your mother had with your lock of hair and your birth notice in that doesn't work you have to go get your actual birth record hopefully have something else driver's license or paste net card if your widow or widower aged 50 or older basically what will happen from age 50 to 64 you're under the widow or widower category at age 65 you'll move up to the age based if you are widow or widower you still need to prove age just to show again that you're aged 50 and you also need a copy of a death certificate which again says do not photocopy but those are the areas that we need to prove if you're gonna qualify under the permanently disabled what we're need to have is one of three statements one is either if you have a Social Security or SSI disability you'll get a copy of the SSI disability letter that would be something that you would be submitting with the PA 1000s of the award letter photocopy that and attach that with the PA 1000 for first time only once they're in the system you do not need to have any of these attachments if someone's qualifying under a VA benefit what they need is they'd have to buy the VA letter to state that they are permanently disabled and for anyone else if they're not even going through SSI or the VA system they'll need a personal physician statement which is a PS 1000 just signed by the physician stating what their disability would be so again first time filers we just have a little bit more information for the returning ones it's fairly easy to go through the system we'll do most of the work with a couple questions we need to go through now we'll just print an additional copy of the page one of the 1040 and have them submit either their property tax bill or their renter certificate okay that's PA returns in a nutshell