Part One - Unit 1.1

$50,000, $75,000

Form 8938 must be used to report specified foreign financial assets with an aggregate value greater than WHAT at the last day of the year or more than WHAT at any time during the tax year?

April 30, July 31, October 31, and January 31 (See Publication 15)

If you are liable for social security and medicare taxes and income tax withholding and use Form 941 or 944, when is it due?

State income tax refund, AMT for credit, gain or loss carryover, charitable gift carryover, Schedule D, Form 8801, etc.

What are some examples of certain items from a prior-year return that may be needed to complete the current-year return?

1. 50% or greater ownership 2. 10% or greater ownership of US controlled partnership 3. Contributed property (1) resulting in at least a 10% interest or (2) with a value of more than $100,000 4. Had a reportable event (acquisition, disposition, or change in proportional interest)

What are the 4 categories under which US persons qualify (based on interest in a foreign partnership) under that require one to complete and file Form 8865?

1. FBAR isn't filed with individuals's federal income tax return and must be filed online with Financial Crimes Enforcement Network by 4/15 2. Form 8938 is filed with any annual return (Form 1040, Form 1040NR, Form 1041, Form 1041-N, Form 1065, Form 1120, & Form 1120-S) 3. Filing thresholds differ 4. Foreign financial assets that must be reported on Form 8938 are not limited to bank and financial accounts

What are the differences between the FBAR and Form 8938?

Age of an individual

What can determine if (s)he qualifies for additional deductions, retirement distributions, dependency, etc?

Form 5471

What form is used by certain US citizens and residents who are officers, directors, or shareholders in certain foreign corporations?

Form 1099-C

What form is used for Cancellation of Debt?

W-2G

What form is used for Certain Gambling Winnings?

Form 1099-G

What form is used for Certain Government Payments?

Form 1099-R

What form is used for Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.?

Form 1099-SA

What form is used for Distributions From an HSA, Archer MSA, or Medicare Advantage MSA?

Form 1099-DIV

What form is used for Dividends and Distributions?

Form 1099-INT

What form is used for Interest Income?

Form 1099-MISC

What form is used for Miscellaneous Income?

Form 1099-OID

What form is used for Original Issue Discount?

Form 1099-K

What form is used for Payment Card and Third Party Network Transactions?

Form 1099-Q

What form is used for Payments From Qualified Education Programs (Under sections 529&530)

Form 1099-S

What form is used for Proceeds From Real Estate Transactions?

Form 1099-B

What form is used for Proceeds from Broker and Barte Exchange Transactions?

Form 1099-PATR

What form is used for Taxable Distributions Received From Cooperatives?

W-2

What form is used for Wage and Tax Statement?

Form FinCEN Report 114

What form must be filed if a US citizen/resident/person doing business in the US who has an ownership interest in, or signatory authority or other authority over, a financial account in a foreign country with aggregate value over $10,000 at any time during the calendar year?

Form 8992

What form must be filed to include GILTI?

Form 1042, Annual Withholding Tax Return for US Source Income of Foreign Persons & Form 1042-S, Foreign Person's US Source Income Subject to Withholding

What form must be used by PTP to report withholding from distributions?

It is carried forward and allowed as a deduction in a tax year when the PTP has net income or when the taxpayer disposes his or her entire interest in the PTP.

What happens with a disallowed loss from a PTP?

Prior year's return

What increases efficiency in completing the current year's return?

Cancellation of Debt, for canceled debt payments of $600 or more

What is Form 1099-C used for?

Miscellaneous Income, for reporting a variety of types of income that are not reported on a W-2 or other specific Form 1099, that are made in the course of a trade or business, and for which the taxpayer paid during the the year: At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest or at least $600, e.g., in medical and healthcare payments or crop insurance proceeds.

What is Form 1099-MISC used for?

Repayment of the First-Time Homebuyer Credit, to notify IRS that the home the taxpayer purchased in 2008 and for which the credit was claimed has been disposed of or ceased to be the taxpayer's

What is Form 5405 used for?

CFC (Controlled Foreign Corporations)

What is a foreign corporation that has US shareholders that own more than 50% of all voting power of all classes of voting stock or all value of the stock of the corporation?

If a nonresident elects to be treated as a US resident

What is an exception to the general rule that nonresident aliens are only taxed on US sources income?

Rent and insurance premiums paid for the taxpayer's own dwelling; Life insurance premiums paid by the insured; Payments for food, clothing, domestic help, and upkeep of an automobile; And personal interest

What is included in nondeductible expenses?

A taxpayer's previous correspondence with the IRS

What is likely to provide insight to issues still affecting a current return?

Net CFC tested income - [(10% x Certain tangible property) - Specified interest expense]

What is the calculation for GILTI?

1. Criminal Investigation (CI) Procedures 2. Large Business and International (LB&I) 3. Civil Processing 4. Business Operating Division and Exam

What is the path of resolution for each request involving a taxpayer wishing to avoid criminal and substantial civil liability for foreign/international and domestic asset disclosure and disclose voluntarily?

Taxpayer biographical information

What is used to verify the identity of the taxpayer and related dependents?

Married Filing Jointly

What status often increases beneficial dollar limits for deductions and credits?

Correct noncompliance for all tax periods involved

Regarding the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily, in cases where noncompliance involves fewer than the most recent 6 tax years, the voluntary disclosure must what?

Expand the scope of the examination period to include the full duration of the noncompliance and may assert maximum penalties under the law (with approval of management)

Regarding the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily, in voluntary disclosures not resolved by agreement, the examiner has the discretion to do what?

Tax year with the highest tax liability

Regarding the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily, the civil fraud penalty or civil penalty for fraudulent failure to file income tax returns will apply to what tax year?

With IRS review and consent

Regarding the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily, when may cooperative taxpayers be allowed to expand the disclosure period?

Correcting tax issues with other governments that require additional tax periods, correcting tax issues before a sale of acquisition of an entity, correcting tax issues relating to unreported taxable gifts in prior tax periods

Regarding the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily, why may a cooperative taxpayer be allowed to expand the disclosure period?

Business Operating Division

Regarding voluntary disclosure & cooperation with IRS to avoid criminal and substantial civil liability, who performs the civil examination?

Form 8938

What Form must be filed to report specified foreign financial assets with an aggregate value greater than $50,000 at the last day of the year or more than $75,000 at any time during the tax year?

IRA deduction, Student loan interest deduction, & Alimony expense (pre-2019 divorces)

What are examples of Changes in the amount of adjustments to income that need to be discussed as part of the preliminary work to prepare a tax return?

Interest income, Dividends, Capital gains, Self-employment income, & IRA (including certain Roth IRA) distributions

What are examples of Changes in the amount of taxable income not subject to withholding that need to be discussed as part of the preliminary work to prepare a tax return?

Marriage, Divorce, Birth/Adoption, Loss of right to claim dependent, Purchase new home, Retirement, & FIling Chapter 11 bankruptcy

What are examples of Lifestyle Changes that need to be discussed as part of the preliminary work to prepare a tax return?

Spouse starts or stops working or starts or stops a second job

What are examples of Wage Income that need to be discussed as part of the preliminary work to prepare a tax return?

Medical expenses, Taxes, Interest expense, Gifts to charity, Dependent care expenses, Education credit, Child Tax Credit, Earned Income Credit

What are examples of changes in the amount of itemized deductions or tax credits that need to be discussed as part of the preliminary work to prepare a tax return?

Retirement pay, sale of principle residence, itemized deductions, applicable taxes, etc.

What are examples of items that are not common to all individuals?

1. All voting power of all classes of voting stock or 2. All value of the stock of the corporation

A CFC is a foreign corporation that has US shareholders that own more than 50% of what?

Any distributions of that income made to its foreign partners

A PTP that has effectively connected income, gain, or loss must pay withholding tax on what?

Global Intangible Low-Taxed Income (GILTI)

A certain tax requires domestic taxpayers who own at least 10% of the value or voting rights in one or more controlled foreign corporations (CFCs) to include WHAT as currently taxable income and file Form 8992?

Not deductible (unless the Code specifically provides otherwise)

A personal, living, or family expanse is (deductible/not deductible)?

Income, filing status, and age

A taxpayer's what determine whether a taxpayer's income tax return must be files?

Make timely voluntary disclosures and fully cooperate with the IRS

After Sept. 28, 2018, a taxpayer wishing to avoid criminal and substantial civil liability must do what?

A

All of the following are nondeductible expenses EXCEPT A. Ordinary and necessary business expenses. B. Life insurance premiums paid by the insured. C. Payments for food. D. Rent and insurance premiums paid for the taxpayer's own dwelling.

B

All of the following income types are reported on Form 1099-MISC EXCEPT A.Crop insurance proceeds of $600 or more. B.Canceled debt payments of $600 or more. C.Nonemployee compensation over $600. D.Payments made to a physician or supplier or provider of medical or healthcare services of $600 or more made in the course of your trade or business.

Publicly traded partnership (PTP)

Any partnership an interest in which is regularly traded on an established securities market regardless of the number of its partners.

1. The taxpayer sold the home (including through foreclosure); 2. The taxpayer converted the entire home to business or rental property; 3. The taxpayer abandoned the home (except in connection with a sale or foreclosure); 4. The home was destroyed, condemned, or disposed of under threat of condemnation; or 5. The taxpayer who claimed the credit died in 2019 .

Between April 8, 2008, and May 1, 2010, a credit for qualifying first-time homebuyers was available. Taxpayers who claimed it in 2008 and experience situations which include but are not limited to the following are required to repay the credit over 15 years:

Civil Fraud Penalty

Civil penalty under IRC Sec. 6663 for fraud

Applicable items that are not common to all individuals

Comparison of the prior year's returns helps to identify what?

Any income that can be excluded as foreign-earned income or as foreign housing amount

For purposes of determining whether a taxpayer must file a return, gross income includes what?

1. At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest or 2. At least $600, e.g., in medical and healthcare payments or crop insurance proceeds

Form 1099-MISC, Miscellaneous Income , is used for reporting a variety of types of income that are not reported on a W-2 or other specific Form 1099, that are made in the course of a trade or business, and for which the taxpayer paid during the year:

Secs. 6038, 6046, & 965 (transition tax) and related regulations

Form 5471 is used to satisfy the reporting requirements of what Secs?

US source income

Generally, nonresident aliens are only taxed on what?

Choose to be treated as a US resident for part of the year (dual-status aliens)

If a taxpayer doesn't meet green card or substantial presence test, what may they be able to do?

Filing income, estate, and gift tax returns and for paying estimated tax

If a taxpayer is a U.S. citizen or resident alien, the rules for what are generally the same whether the taxpayer is in the US or abroad?

Either the green card test OR the substantial presence test for the calendar year is met

If a taxpayer is an alien, (s)he is considered a nonresident alien UNLESS what?

Similar amounts and tax liability/refund

If the comparison shows that there were no significant changes, the current-year return should result in?

January 31 April 30, July 31, October 31, and January 31, but only if the liability for unpaid tax is more than $500

If you are liable for Federal Unemployment (FUTA) tax and file Form 940, when is it due?

Form 940

If you are liable for Federal unemployment (FUTA) tax then use what form?

Form 941 or 944

If you are liable for Social Security and Medicare taxes and income tax withholding then use?

15th day of 4th, 6th, and 9th months of tax year, and 15th day of 1st month after the end of tax year

If you are liable for estimated tax and use Form 1040-ES, it is due by?

Form 1040-ES

If you are liable for estimated tax then use?

15th day of 4th month after end of tax year

If you are liable for income tax and use Form 1040 and Schedule C, when is it due?

Form 1040 and Schedule C

If you are liable for income tax then use?

Form W-2 (to employee) Forms W-2 & W-3 (to the SSA)

If you are liable for providing information on Social Security and Medicare taxes and income tax withholding then use what forms?

January 31

If you are liable for providing information on social security and medicare taxes and income tax withholding and use Forms W-2 or W-3 when is it due?

Schedule SE

If you are liable for self-employment tax then use?

Worldwide Income

In general, US citizens and resident aliens are taxed on their what?

6 years

In general, voluntary disclosures include a disclosure period of how long?

Aggregate value in excess of $10,000

Must file Form FinCEN Report 114 when US citizen/resident/person doing business in US with ownership interest/signatory authority/other authority over a financial account in a foreign country when they have what amount?

1. Rent and insurance premiums paid for the taxpayer's own dwelling 2. Life insurance premiums paid by the insured 3. Upkeep of a personal automobile 4. Personal interest 5. Payments for food, clothing, or domestic help

Nondeductible expenses include what?

Yes, because the taxpayer had a total of more than $10,000 in foreign accounts at any time during the year.

On Jan 1, a US taxpayer deposits $5,000 in an account in foreign country X. On July 1, the taxpayer deposits $5,001 in an account in foreign country Y. On July 2, the taxpayer withdraws the $5,000 from X to make a purchase. Would the taxpayer have to file an FBAR?

D

The requirement to file the FinCEN Form 114 applies to U.S. persons with a financial interest in or signature authority over any foreign financial account(s), if the aggregate value of these accounts, at any time during the calendar year, exceeds A.$7,500 B.$1,000 C.$5,000 D.$10,000

1. Streamlined Filing Compliance Procedures (SFCP) 2. Delinquent FBAR submission procedures 3. Delinquent international information return submission procedures 4. Filing an amended or past-due tax return

Taxpayers innocent of any tax-related crimes who do not need the voluntary disclosure program to seek protection can correct past mistakes using one of what procedures?

Office of Appeals

Taxpayers retain the right to request an appeal with whom in regards to voluntary disclosures of tax-related noncompliance?

Prior year's return

The accuracy of what affects the accuracy of the current year's return?

Resolve tax and tax-related noncompliance of taxpayers who make voluntary disclosures

The examiner of the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily are authorized to do what?

1. Voluntary disclosures include disclosure period of the most recent 6 years (may vary) 2. Taxpayers must submit all required returns and reports for disclosure period 3. Examiners will determine applicable taxes, interest, and penalties under existing law and procedures 4. IRS will provide procedures for civil examiners to request revocation of preliminary acceptance when taxpayers fail to cooperate with civil disposition of cases

The examiner of the Business Operating Division and Exam function of the path of resolution for those wishing to avoid criminal and substantial civil liability and disclose voluntarily are authorized to resolve tax and tax-related noncompliance of taxpayers who make voluntary disclosures in what manner?

Taxpayer fails to cooperate and resolve the examination by agreement

The examiners under the Business Operating Division and Exam function of the path of resolution for voluntary disclosures may apply the civil fraud penalty beyond the 6-year disclosure period if what?

1 or more of the 6-year scope up to all 6 years based on the facts and circumstances of the case

The examiners under the Business Operating Division and Exam function of the path of resolution for voluntary disclosures may apply the civil fraud penalty to how many years of the voluntary disclosure period?

1. Did the house cease to be the main home, either by change in use or disposal/sale? 2. What was the total amount of the original credit received? 3. How much of the credit has already been repaid?

The taxpayer's prior-year Form 1040 shows repayment of the First-Time Homebuyer Credit. The taxpayer should ask questions such as?

True

True or False. A taxpayer is allowed to request the use of accuracy-related penalties under IRC Sec. 6662 instead of civil fraud penalties or non-willful FBAR penalties instead of willful penalties.

True

True or False. A taxpayer's net income from a PTP may not be used to offset net losses from other PTPs or net losses from other passive activities.

False

True or False. Filing Form 8938 relieves an individual of the requirement to file the FBAR.

False

True or False. Penalties for failing to file information returns will be automatically imposed.

True

True or False. Willful FBAR penalties may apply to those being examined by Business Operating Division due to voluntary disclosure.

Form 3520

US persons and executors of estates of US decedents file WHAT form to report certain transactions with foreign trusts, ownership of foreign trusts under the rules of Secs. 671-679, & receipts of certain large gifts or bequests from certain foreign persons?

D

Upon reviewing a new client's prior year tax return, the preparer sees taxes paid for the First-Time Homebuyer Credit. The preparer should ask the taxpayer all of the following EXCEPT A. Are the taxpayers still using the home that generated the credit as their main home? B. How much of the original credit was repaid on prior years' returns? C. What was the total amount of the original credit received? D. Was the entire credit used towards the purchase of their main home?

In the year of arrival in or departure from the US

When does an alien choosing to be treated as a US resident for part of the year (dual-status) USUALLY occur?

D

When e-filing their federal return, a taxpayer who meets the requirements to file both Form 8938, Statement of Specified Foreign Financial Assets, and Form 114, Report of Foreign Bank and Financial Accounts, should... a. Attach only the Form 114 to their federal return as it contains the 8938 information b. Send both forms in separately to the IRS c. Attach both forms to their federal return d. Attach only the Form 8938 to their federal return and file the Form 114 through the Financial Crimes Enforcement Network's e-filing system

If the aggregate value of all foreign accounts is $10,000 or less at all times during the year or the accounts are at a U.S. military banking facility.

When is FinCEN Form not required?

With the tax return

When is Form 5471 filed?

When the PTP has net income or when the taxpayer disposes his or her entire interest in the PTP

When is a disallowed loss from a PTP carried forward and allowed as a deduction in a tax year?

If, on the regular due date of the return, they're living outside of the US/Puerto Rico due to they're main place of business/post of duty or on-duty military service

When is a taxpayer allowed an automatic 2-month extension to file?

April 15

When is the FBAR due?

15th day of the 4th month after the end of the tax year

When is the return due?

C

When preparing a current-year tax return, which of the following benefits are derived from the use of the previous year's return? I. Prevents gross mathematical errors II. Identifies significant changes III. Increases efficiency A. I and III only. B. II and III only. C. I, II, and III. D. I and II only.

The IRS will provide procedures for civil examiners to request revocation of preliminary acceptance

When taxpayers fail to cooperate with the civil disposition of tax-related noncompliance, what happens?

September 28, 2018

When was the last of the programs designed for taxpayers with exposure to potential criminal liability or substantial civil penalties, due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets, closed?

File with Form 1040 (4/15)

When you are liable for self-employment tax and use Schedule SE, when is it due?

Present convincing evidence

Where the facts and the law support the assertion of a civil fraud or willful FBAR penalty, what must a taxpayer do to justify why the civil fraud penalty should not be imposed?

1, 2, and 4

Which items from the prior-year return may be needed to complete the current-year return? 1. State income tax refund 2. AMT for credit 3. AGI 4. Gain (loss) Carryover

D

Which of the following is true regarding the Report of Foreign Bank and Financial Accounts (FBAR) requirements? a. The FinCEN Form 114 (FBAR) must be filed by anyone with a financial interest in or signature authority over a foreign bank account. b. The FinCEN Form 114 (FBAR) is filed with your current tax year individual income tax return. c. The due date for the FBAR filing is generally July 15 of the current tax year for individuals. d. The FinCEN Form 114 (FBAR) is filed online with the Financial Crimes Enforcement Network.

B

Which taxpayer information is necessary to have before preparing a tax return? A. Immigration status. B. All of the information is needed. C. Age of an individual. D. Marital status.

Examiner discretion will take into account the application of other penalties. (such as civil fraud penalty and willful FBAR penalty) and resolve the examination by agreement

Why are penalties for failing to file information returns not automatically imposed?

To ensure, among other things, compliance with prior audits, adjustments, or judgments

Why should a taxpayer's previous correspondence with the IRS be reviewed?

To prevent gross mathematical errors and identify significant changes

Why use prior year's returns for comparison?