Link and Learn - Income Adjustments Flashcards
Adjustments to Income on Form 1040
To identify the adjustments to income that a taxpayer can claim, you will need to ask the taxpayers if they had the types of expenses listed on the Adjusted Gross Income section of the tax return.
Be sure to ask if, during the tax year, the taxpayer or spouse:
Received income from self-employment
Paid a penalty for early withdrawal of savings
Paid alimony
Made contributions to a traditional IRA
Paid student loan interest
Received income from jury duty that was turned over to an employer
There are other adjustments to income on Form 1040, such as self-employed health insurance deduction, self-employed SEP, SIMPLE, and qualified plans, and domestic production activities deductions. The other adjustments to income on Form 1040 are beyond the scope of the VITA/TCE programs. Encourage taxpayers who might be able to benefit from other adjustments to consult a professional tax preparer.
A specialty course on health savings accounts is available on Link & Learn Taxes for volunteers with a Basic certification or higher—this course is optional. Check with your Site Coordinator to determine whether you should be certified in this topic.
Form 1099-INT or Form 1099-OID
Taxpayers can adjust their income by deducting penalties they paid for withdrawing funds from a deferred interest account before maturity. Ask if the taxpayer and/or spouse made any early withdrawals during the tax year. If so, ask to see Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, documenting the penalty.
