Question 24 Advanced Exam Vita Program Tax Year 2015

Question 24 for 2015 VITA Advanced Certification: IRS booklet, Form 6744 VITA/TCE Volunteer Assistor’s Test/Retest for 2015 Returns. The VITA program is sponsored by the Internal Revenue Service.

Question 24: How much of the $17,500 gross distribution reported on Form 1099-R is taxable in 2015?

Advanced Scenario 7: Elliot and Kathy Blackburn, Interview Notes on Page 85 on Form 6744 Test/Retest for 2015 Returns.

Review Form 1099-R, Hickory Corporation on page 90.

Form 1099-R, Hickory Corporation displays the following:
Box 1: Gross Distribution is $17,500.
Box 2a: The taxable amount needs to be calculated because box 2b is checked (Taxable amount not determined).
Box 4: Federal Income tax withheld $1,750.
Box 9b: Total employee contributions $12,500.

The student logs into the Link and Learn Practice Lab and inputs data from Advanced Scenario Seven into the data fields in the Tax Wise Software.
Enter password: [Learntwo] then sign into the practice lab.

From the Interview Notes on page 85, the important information pertaining to Question 24:
Eliot Blackburn is 70 years old, Date of Birth 01/11/1945. He collected the pension distribution from March 1, 2015 through December 31, 2015 which is 10 months.
Eliot did not select a joint survivor annuity for these payments.
This information is plugged into the simplified method's data fields.

Using the simplified method, the software calculates the answer. The $17,500 is reduced by $595. The answer is $16,905.

I have placed Worksheet A. Simplified Method, IRS Publication 575 at the bottom of this hub.
The taxable amount can be hand calculated without software. A brief explanation is the following: The cost of the plan is $12,500. You divide the appropriate number from Table 1, which is 210 into $12,500 and get 59.52. You multiple 59.52 by 10 months, the monthly number of payments Eliot Blackburn received for 2015. (59.52 times 10 equals 595). You subtract 595 from the total pension of $17,500 and that gives you the answer $16,905.