Federal Tax Preparer - Basic Tax Filings/Returns
MFS (Married Filing-Separate)
Using the MFS filing status may be beneficial if the taxpayer wants to be responsible for only their taxes or if this status results in LESS tax than a joint return. Or if one of them disagrees to file jointly.
Tracy (32, non-de[pendent) is single and filing as head of household (HoH). Her gross income is $10,105. She qualifies for the Earned Income Credit (EITC) and the Additional Child Tax Credit (ACTC). Should Tracy file a return?
YES
Is Tyrone (27) required to file a tax return?
YES. Tyrone (27) quit his job during the tax year. He is single, & the amount in Box 1 on his W-2 is $5100. He took a distribution from an IRA account of $600 set up @ his job & owes add'l tax on the distribution. *His earned income is > than $12200 single-filer threshold, he does owe taxes on the $600 distribution, he's required to file on.
Marshall (27, not a dependent) is a server. His filing status is single. His gross income is $9271 which includes unreported tips of $148. He owes Social Security AND Medicare tax on the $148 because he didn't report tips to his employer. Is Marshall required to file a return?
Yes
Sparkle, two(2)years old, can be claimed as a dependent by her parents. She acted in some commercials before she turned 1yrs old and earned $6k this tax year. Some of the money was invested & she was paid dividends of $1157 this tax year, which is unearned income. Is Sparkle required to file?
Yes
Enrolled Agent
a tax practitioner certified by the IRS to represent clients in IRS proceedings
HoH
head of household
Federal Definition of Marriage
include all legal marriages from a state, locality, or foreign gov't, including same-sex marriages. All couples who are legally married, regardless of gender, are considered married for federal income tax purposes.
tax attorney
licensed by state and local bar to deal/represent taxation issues.
enrolled agent
someone who is licensed to prepare tax returns.
Social Engineering
using deception to obtain unauthorized access to information resources
Filing Requirements for "Most Taxpayers" category are:
(1) Filing Status (2) Age (3) Gross Income
Different types of Filing Status
(1) Married Filing Jointly or MJF. (2) Married Filing Separately or MFS. (3) Head of Household or HoH. (4) Qualifying Widow(er) or QW. (5) Single.
5 Standard filing Categories
(1) Most Taxpayers (2) Dependent Taxpayers (3) Children (4) Self-Employed Individuals (5) Aliens. *A taxpayer may qualify for more than one filing status. A tax preparer can help the taxpayer file using the most advantageous filing status for which they qualify.*
refundable tax credit
(a) a tax credit that can reduce one's income tax liability to below zero with the excess being refunded to the taxpayer. (b) called "refundable" because if you qualify for a refundable credit and the amount of the credit is larger than the tax you owe, you will receive a refund for the difference. For example, if you owe $800 in taxes and qualify for a $1,000 refundable credit, you would receive a $200 refund.
The condition under which a filer is considered married?
A married tax payer remains married to their spouse, even if they live apart and do not have any contact.
Qualifying Relative
A person who bears a certain relationship to the taxpayer for whom the taxpayer provides more than one-half support for the year, whose gross income for the year is less than the exemption amount, and who is not claimed as a qualifying child of any taxpayer.
CPA (Certified Public Accountant)
A person who has met a state's education, experience, and examination requirements in accounting. Usually Accounting Degree or Uniform CPA exam.
Bryan & Lydia are employed, married, U.S. citizens. Their child, Kim, was born 5yrs ago while they both lived in Italy. Kim has never been to the U.S. & currently lives in Italy with Lydia. Bryan lives in the U.S. Which of the 3 General Test of Dependency are met in this case?
All 3: (1)Citizen/Resident Test (2) Joint Return Test & (3) Dependent Taxpayer Test.
Domestic Partnerships/Civil Unions, etc
Are NOT considered a marriage under state law & are not considered married for federal tax purposes.
spouse
Can be an individual married to a person of the same sex or the opposite sex.
Yes. Fernando (16) is required to file a return. His UNearned income is not more > $1100 but his EARNED income is > than the threshold amount of $12200.
Fernando (16) is being claimed as a dependent by his aunt. He's single. His income includes unearned income of $2 & earned income of $16,341. Is Fernando required to file a tax return?
Walt & Julia are married U.S. citizens. Their son, Guy, was born in France were they lived.
He meets the Citizen/Resident Test because BOTH of his parents are U.S. citizens.
Non-filing entity
If the taxpayer is not required to file a return, they should file to obtain a refund if they had federal income tax withheld, or if they qualify to claim refundable credits.
Do ITINs Expire?
ITIN, aka Individual Tax Id Number, expires 3 years after non-filing
Apply for ITIN
If a taxpayer is not eligible for a SSN, they can apply for an ITIN using form W7.
Dependent Taxpayer Test
If the dependent can be claimed by someone else, then the taxpayer cannot claim this person as a dependent
Definition of Marriage
Is considered by the Feds between a man and a woman.
Married; Widowed @ mid-year
Jose's wife, Juanita, died on June 19th of this tax year. He has not remarried. What describes Jose's marital status for filing status purposes?
No. Not required to file because gross income is less than the threshold amount. (FY 2020= $18,350)
Maria(55) filing status is Head of Household (HoH). Her gross income is $17,227. Is Maria required to file?
MFJ
Married filing jointly
MFS
Medicare Fee Schedule or Married Filing- Seperate.
General test dependency
Must meet (1) Dependent Taxpayer Test (2) MFJ Joint Return Test (3) Citizen or Resident Test
PTIN Holders with no credentials
No credentials, can not represent clients in court. Just prepare taxes and due diligence.
Sam (62) and Janes (70) filing status is MFJ (Married Filing Jointly) w/ combined gross income is $25000, are they required to file?
No. Their joint gross income is less than the threshold amount of $25,700
Is Victor (15) required to file a tax return?
No. Victor (15) is single. He has a PT-job. He can be claimed as a dependent on his parents' tax-return. His earned income is $4355 w/ $127 withheld for federal income tax. *He's not required bc' he has NO unearned income & is < than $12,200 & his gross income is < than $4705 [the larger of $1100 or ($4355 +$350)], BUT he should file to receive a return on his withholdings. { < = less than}
Citizen or Resident Test
One of the tests for identifying a qualifying child or qualifying relative as a dependent: Assuming all other dependency tests are met, the citizen or resident test allows taxpayers to claim a dependency exemption for persons who are U.S. citizens for some part of the year or who live in the United States, Canada, or Mexico for some part of the year.
QW
Qualifying Widow(er). Can be claimed for two(2) years if they meet certain requirements.
Circular 230
Regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS.
S
Single also can be HofH.
Joint Return Test for QC
The QC cannot file a joint return, unless merely to claim a refund.
Joint Return Test
The joint return test stipulates that no dependent can file a joint return with a spouse and still be claimed as a dependent on someone else's return, (such as that of a parent or guardian). However, exceptions to this rule. I: A taxpayer filing a joint return can be claimed as a dependent under two separate exceptions. (1) is when neither the dependent nor his or her spouse is required to file a tax return, except to claim a refund. (2) The other is when neither the dependent nor his or her spouse would owe any tax if he or she were to file separately instead of jointly. In these cases, another taxpayer may claim this person as a dependent.
Tax Ethics
The principle of conduct governing an individual or group
Qualifying Child
To be a qualifying child, the dependent must meet eight tests: (1) relationship, (2) age, (3) residence, (4) support, (5) citizenship or residency, (6) joint return, (7) qualifying child of more than one person, and (8) dependent taxpayer.
How do you determine filing status (single, married, etc)?
To determine filing status, find out the taxpayers marital status on the last day of the tax year, usually December 31st. *Depending on their marital status, a tax payer, may qualify for MORE than ONE filing status.*
Do the address automatically update every filing?
True. Changing an individuals address on a tax form will also update it at the IRS.
personal information
employee's full name, address and social security number...and whether they want to donate $3 to go to the Presidential Election Campaign fund.
