Income from Form 1040 Wages, Interest

Income from Form 1040

Wages, Interest

About Income from Form 1040 Wages, Interest, etc.

• Additional resources listed in L&LT “References” tab

• Review all tips and cautions in the lesson

• Read all examples and sample interviews

• We will review answers to each exercise

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Objectives – Income from Form 1040 Wages, Interest, etc.

• Compute taxable and nontaxable income

• Distinguish between earned and unearned income

• Report income correctly on Form 1040

• Time Required: 30 minutes

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Topics

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

• Interest income

• Dividends

• State and local refunds

• Alimony

• Determining taxable a

ntaxable inco

• R

eporting wages, salaries, tips, etc.

• Scholarship and Fellowship income

Key Terms

Definitions are always available in the L&LT online Glossary.

• Allocated Tips

• Capital Gain Distributions

• Earned Income

• Gross Income

• Ordinary Dividends

• Taxable Income

• Tax-exempt Income

• Unearned Income

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Determining Taxable and Nontaxable Income

• Nontaxable (excludable)

• Gifts and inheritances

• Exempt income

• Earned

• Received for work, such as

wages, business income

• Unearned

• Interest income from

investments

• Review Pub 4012, Income

tab, for

examples

What are the differences between taxable and nontaxable income?

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Determining Taxable and Nontaxable Income

Examples of income items used to determine entries in TaxSlayer.

• Review Pub 4012, Using TaxSlayer® Pro Online tab, Navigating

TaxSlayer chart

• Tax Forms:

• W-2

• 1099-INT

• 1099-DIV

• 1099-G

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Determining Taxable and Nontaxable Income

• Remember: Volunteers probe taxpayers to determine all sources of

income

• Media: Videos & Audio for topic

• FAQ, 1099-DIV Dividend Income

• End of topic – Q & A

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Reporting Wages, Salaries, Tips, etc.

• Form W-2: Issued to employees by January 31, reports wages and other

compensation

• Pub 4012, Income tab

• How/Where to Enter Income

• Form W-2 Instructions

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Reporting Wages, Salaries, Tips, etc.

• TaxSlayer Practice

• Click Income from Federal Section, then click Wages and Salaries

• Complete Form W-2

• To enter tips not shown on Form W-2, click on Other Taxes from

Federal Section, then Tax on Unreported Tip Income

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Reporting Wages, Salaries, Tips, etc.

• Remember:

• Household employees earning less than $2,200 may not receive a

Form W-2, but the income must be reported

• Self-employed taxpayers who receive tips should include their tips in

gross receipts on Schedule C

• Media: Videos & Audio for topic

• Missing Form W-2 (YouTube video)

• End of topic – Q & A

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Scholarship and Fellowship Income

• Taxable scholarship income may be reported on Form W-2 and Form

1098-T

• If the taxpayer did not receive a Form W-2, the taxable amount

should still be reported

• Review Pub 4012, Education Benefits Tab, Tax Treatment of Scholarship

and Fellowship Payments

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

• Interest income (unearned income) is reported on Form 1099-INT

• Common sources: savings accounts, CDs, saving certificates,

government bonds, interest on insurance proceeds, loan interest

• Enter interest income

directed in the

software

Interest Income

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Dividends

• Reported to the taxpayer on Form 1099-DIV

• Ordinary dividends

• Section 199A dividends

• Qualified dividends: Eligible for lower tax rate

• Review Pub 4012, Income tab, Interest and Dividend Income

• See Publication 17,

Dividends and

Other Distributions

for more details

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Dividends

• Generally, all dividend

income is reported o

orm 1040, lines 3a an

3b,

Qualified Dividends

and Ordinary Dividends.

• Capital Gains Distribution

ll appear on Form 1040

Income from Form 1040, Lines 1-3 and Schedule 1, Lines 10-11

Dividends

• Ask taxpayers for their annual brokerage statement if they did not

receive Form 1099-DIV for a dividend

• Schedule B is needed if the taxpayer’s ordinary dividends are greater

than $1,500

• Out of scope: Form 1099-DIV boxes labeled Unrecap. Sec. 1250 gain,

Section 1202 gain, Cash

liquidation distributions,

and Noncash liquidation

distributions

• Media: Videos & Audio

for topic

• FAQ: 1099-DIV Dividend

Income

Income from Form 1040 Lines 7-11

• Will be shown on Form 1099-G

• Report only if:

• Taxpayer i

temized deductions last year, and

• Received a

n income tax benefit.

• Do not report if state sales tax was deducted.

• Taxable refund is reported on Form 1040, Schedule 1

• Click Income from

e Federal Section

then state and local

refunds

State and Local Refunds

Income from Form 1040 Lines 7-11

Alimony

• Do not confuse child support payments with alimony

• Where do you get alimony information?

• Ask the taxpayer if they have:

• Post 1984 and pre 2019 divorces

• Post 2018 divorces

• How do you report alimony?

• Form 1040, Schedule 1, if receiving

• Schedule 1 Adjustments to Income section

if paying

• For any divorce or separation instrument executed after December 31,

2018, or modified after that date, alimony and separate maintenance

payments are not deductible by the payor spouse and are not included

in income by the recipient of the payments.

Income from Form 1040 Lines 7-11

• Getting information about alimony

• Form 13614-C

• Pub 4012, Adjustments tab, Alimony Requirements

Alimony

Income from Form 1040 Lines 7-11

Summary

• This lesson covered:

• Income reported on Form 1040 and Schedule 1

• Differentiating taxable and nontaxable income

• Earned and unearned income

• Check your understanding of this lesson by going to Certification Warm

Up on your student landing page

Income from Form 1040 Lines 7-11

Out of Scope for this Lesson:

• Taxpayers with income from the following sources:

• Other gains/losses

• Farm income

• Accrual method for reporting income

• Taxpayers who buy or sell noncovered bonds between interest payment

dates

• Form 1099-INT, with entry in Specified private activity bond interest box

subject to AMT

• Adjustments needed for any of the amounts listed on Form 1099-OID, or if

the taxpayer should have received Form 1099-OID but did not receive one

• Form 1099-DIV, boxes labeled Unrecap. Sec. 1250 gain, Section 1202 gain,

Cash liquidation distributions, and Noncash liquidation distributions

• State or local income tax refunds received in the current tax year for a year

other than the previous tax year

• Alimony/divorce agreements executed before 1985

• Minister tax returns with parsonage/housing allowance

Income from Form 1040 Lines 7-11

Practice

• Select the problems from L&LT Skills Workout based on your

certification course of study

• Complete the exercise

Income from Form 1040 Lines 7-11