Lesson 1

Getting Started – Taxpayer Identification

Numbers and Exemptions

Objectives

• Explain the importance of the taxpayer identification number (TIN)

• Identify the 3 types of Taxpayer Identification Numbers (TINs)

• Define the terms personal and dependency exemption

• Apply the dependency exemption tests for qualifying child/relative

Form 13614 Intake and Interview Sheet: Part I

Form 13614 Intake and Interview Sheet: Part II

Form 13614 Intake and Interview Sheet: Part III

Taxpayer Identification Numbers

• The Taxpayer Will Need• TINs – What are they?• TINs – Who Needs One?• TINs – How to obtain them?

Individual Taxpayer Identification Numbers

• Who Needs an ITIN?• Assisting Taxpayers with No ITIN• Assisting Taxpayers with an ITIN

Individual Taxpayer Identification Numbers

• SSN/ITIN Mismatches• ITIN Resources for Volunteers

Summing Up Taxpayer Identification Numbers

• Required Supporting Documentation

• TINs – SSNs, ATINs, ITINs• ITIN/SSN Mismatches• ITIN support

Exemptions

• Personal exemptions • Dependency exemptions • $3,300 each for Tax Year 2006• Additional exemption amounts of $500 for

each displaced individual as a result of Hurricane Katrina (up to a maximum of $2,000, $1,000 for married filing separate)

Personal Exemptions

Personal Exemptions– Taxpayer Exemption– Exemption for a Spouse

Dependency Exemptions

• The Uniformed Definition of a Child

• Qualifying Child• Qualifying Relative

Tax Year 2006 Dependency Tests

• Qualifying Child• Tie-Breaker Rule• Qualifying Relative• The Dependent Worksheets

Tax Year 2006 Dependency Test Qualifying Child

• Qualifying Child• Age Test• Support Test• Residence Test• Citizen or Resident Test

Tax Year 2006 Dependency Test Qualifying Relative

• Relationship or Member of Household

• Not a Qualifying Child• Gross Income• Support• Citizen or Resident

Tax Year 2006 Dependency Test Summary of the Rules

• Dependents on more than 1 return

• Joint Returns and Dependents• Residency Requirement• Dependent - Qualifying Child• Dependent - Qualifying Relative

Tax Year 2006 Dependency Support Test

• A qualifying child must not have provided more than half of his/her own support

• The taxpayer must provide more than half of the support of a qualifying relative

• Exceptions to the Support Test

Support Test

• Sources of Support– The individual’s contributions– The taxpayer’s contributions– State contributions

Determining Support

• Worksheet for Determining Support

• What’s Included• What’s Not included

Support Exceptions

• Multiple Support • Custodial and Non-Custodial

Parents

Tax Relief for Temporary Relocation

• Special rules apply for determining support for taxpayers relocated as a result of Hurricane Katrina, Rita, or Wilma.

Additional Exemption Amount

• Claim an additional exemption amount of $500 per person (up to $2,000 - $1,000 if married filing separately) for providing housing to a person displaced from main home as a result of Hurricane Katrina

• Claim an additional exemption amount on Form 8914, Exemption Amount for Taxpayers Housing Individuals displaced by Hurricane Katrina

Form 8158 Quality Review Checklist

Tax Year 2006 Tools for Determining Dependency

• Tools for Determining Personal and Dependency Exemptions

• Claiming the Exemption on the return

• Apply what you have learned

Summing Up Exemptions

• Exemptions impact taxable income

• Change in exemption tax law last year

• Use the Dependency Tools

Military Matters

• Explain how to obtain an SSN for children born abroad

• Determine whether an individual is a nonresident alien or a resident alien

• Determine if an exemption can be claimed for a nonresident spouse

• Determine if an individual can be claimed as a dependent

Children Born Abroad

• Must have a Tax Identification Number to be claimed as a dependent

Determining Residency Status

• Resident• Nonresident• Dual Status

Residency Status Tests

• Green Card• Substantial Presence

Exceptions to the Substantial Presence Test

• Commuter• Short stay• Medical condition• Exempt Individual

Residency Status

• Part Year Resident• Enlistees as Resident Aliens• Choices – Nonresident Spouse• Dual-Status Aliens• Undocumented Aliens

Exemptions

• Foreign Spouse• Married Filing Separate

Dependents – Armed Forces Members

• Change in Tax Law Last Year• Claiming a Dependent• Citizen and Residency Test

Summing Up This Military Segment

• Resident or nonresident• Personal exemptions• Dependents