Liberty Tax Service Basic Income Tax Course welcome class one introduction


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Liberty Tax Service Basic Income Tax Course WELCOME CLASS ONE

Introduction

  • Welcome to the Liberty Tax Service Online Basic Income Tax Course.
  • This tax course is designed to teach you how to prepare basic forms and schedules for individual income tax returns. The manual is based on Internal Revenue Service (IRS) Publication 17, other relevant IRS Publications and form instructions for tax year 2008.
  • Publication extracts are provided at the end of each chapter. The chapter text compliments and supplements the publication extracts. The text and extracts must be read together for a full understanding of the material. Tests, problems, and examples will refer to both publication extracts and text material.

COMPANY PROFILE

  • Founded in 1997, Liberty Tax Service is the fastest growing retail tax preparation company in the industry’s history. Founder and CEO John T. Hewitt has 39 years of tax industry experience, the most of any CEO in the tax preparation business. Hewitt is also the founder of Jackson Hewitt Tax Service (NYSE: JTX).
  • Liberty Tax Service (www.libertytax.com) operates 3,200 offices throughout the United States and Canada, and has prepared over 5,000,000 individual income tax returns. The company focuses on computerized income tax preparation and electronic filing of returns. Emphasis on customer service including audit assistance, a money back guarantee and free tax return checking are just a few of the “above and beyond” features offered by Liberty Tax Service.

LIBERTY TAX SERVICE IS BUILDING THE #1 FRANCHISE TEAM IN THE INDUSTRY!

  • We have the #1 corporate culture in the industry. We are setting the standard and constantly improving while we’re having fun! Would you like to join the Liberty Tax Service team of franchisees, and grow with the fastest growing international tax service ever? Liberty’s franchise opportunity is noted in the franchise industry rankings for solid growth, excellence and affordability.
  • In January 2008, Entrepreneur magazine ranked Liberty Tax Service as #3 on its Franchise 500 overall list of best franchises.
  • Liberty Tax Service is the only tax service included on Hispanic Trends magazine’s 2006 and 2007 elite list of the “25 Top Franchises for Hispanics.”

My Background

  • Been doing individual, corporate and partnership returns for over 10 years
  • I have been with Liberty Tax since October 2006
  • I own/operate 3 offices currently (East Brunswick, Freehold, Trenton)
  • Exploring expansion opportunities

Liberty Mission

  • Set the standard
  • Improve each day
  • Have some Fun
  • These principles is what Liberty Tax Service
  • is built upon. Our goal is to be the #1 Tax
  • Prep company

Office Age & Our Goals

  • East Brunswick: 5th Tax Season
  • Freehold: 4th Tax Season
  • Trenton: 2nd Tax Season
  • Expansion
  • Increase Tax Return count 40%

Working for Liberty Tax

  • Examples of Qualities of our Employees
  • Friendly personality
  • Enjoys working with people
  • Enthusiastic and motivated
  • Works well within a team
  • Tax knowledge
  • Improves each day

THE TAX INDUSTRY

  • An industry dominated for 50 years by one major player, H&R Block.
  • The trend toward electronic tax filing is soaring, with a record 86 million individual returns e-filed in tax season 2008, up a robust 12 percent. The IRS reports that about 60% of all returns in 2008 were e-filed.
  • A growing market since more and more people pay taxes each year.
  • Approximately 62% of all tax return filers paid someone to prepare their tax return this year (up from 51% in 1996).

ONLINE INCOME TAX COURSE 2009 TABLE OF CONTENT

  • Introduction; Chapter 1: Filing Information
  • Chapter 2: Exemptions and Dependents
  • Chapter 3: Filing Status
  • Chapter 4: Wages, Salaries, Tips, etc and Withheld Taxes
  • Chapter 5: Interest, Dividends, and Other Income
  • Chapter 6: Standard Deduction and Your Income Tax
  • Chapter 7: Tax Credits & Midterm Exam (take home)
  • Chapter 8: Itemized Deductions
  • Chapter 9: Retirement Benefits
  • Chapter 10: Social Security Benefits & Other Credits

ONLINE INCOME TAX COURSE 2009 TABLE OF CONTENT

  • Chapter 11: Basis of Property and Capital Gains
  • Chapter 12: Depreciation
  • Chapter 13: Other Itemized Deductions
  • Chapter 14: Profit or Loss from Business
  • Chapter 15: Rental Real Estate, Royalties, Partnerships
  • Chapter 16: Adjustments
  • Chapter 17: Other Taxes
  • Chapter 18: Additional Payments, Penalties, etc.
  • Chapter 19: Extensions, Amended Returns, Electronic Filing, & Final Exam (take home)
  • Final Exam Review

Chapter 1: Filing Information

  • Chapter Content
    • Overview of Form 1040, U. S. Individual Income Tax Return
    • Who Must and Who Should File a Tax Return
    • Other Filing Information
    • Key Ideas
  • Objectives
    • Become Familiar with Form 1040
    • Identify Who Must and Who Should File a Return
    • Understand Other Basic Filing Information

FILING A TAX RETURN

  • Filing a Tax Return means sending your return to the Internal Revenue Service (IRS) by mail or by computer. The information on your return determines your tax liability on the income you received and the amount of the refund you are due or the amount you need to pay to the IRS.
  • Before preparing a return, you need to determine whether you are required to file or whether you should file even if you are not required to do so. Filing requirements are shown in charts prepared by the IRS. In this chapter, you will learn how to read the charts along with some other basic filing information.
  • First, to provide an overview of the tax preparation process and to introduce some of the terms and concepts you will need to know to prepare a tax return, let us take a look at each section of Form 1040, U.S. Individual Income Tax Return. The Form 1040 overview will also identify the chapters that discuss each topic in detail.

FORM 1040 OVERVIEW

  • Tax Year - Your tax is figured on the amount of income you receive and the expenses you incur during a tax year. For most individuals, the tax year is a calendar year. This Form 1040 is for tax year 2008.

FORM 1040 OVERVIEW

  • Tax Year

FORM 1040 OVERVIEW

  • Tax Year - Your tax is figured on the amount of income you receive and the expenses you incur during a tax year. For most individuals, the tax year is a calendar year.
  • Label - If you do not receive a preprinted label from the IRS, enter your name, address and social security number (and your spouse’s name and/or social security number if applicable) here.

FORM 1040 OVERVIEW

  • Label

FORM 1040 OVERVIEW

  • Tax Year - Your tax is figured on the amount of income you receive and the expenses you incur during a tax year. For most individuals, the tax year is a calendar year.
  • Label - If you do not receive a preprinted label from the IRS, enter your name, address and social security number (and your spouse’s name and/or social security number if applicable) here.
  • Filing Status (Covered in Chapter 3) - Your filing status generally depends on whether you are considered married or unmarried on the last day of the tax year.

FORM 1040 OVERVIEW

  • Filing status

FORM 1040 OVERVIEW

  • Tax Year - Your tax is figured on the amount of income you receive and the expenses you incur during a tax year. For most individuals, the tax year is a calendar year.
  • Label - If you do not receive a preprinted label from the IRS, enter your name, address and social security number (and your spouse’s name and/or social security number if applicable) here.
  • Filing Status (Covered in Chapter 3) - Your filing status generally depends on whether you are considered married or unmarried on the last day of the tax year.
  • Exemptions (Covered in Chapter 2) - Exemptions further reduce the amount of your income that is taxed. On page 2 of Form 1040, you subtract a certain dollar amount for each exemption you claim.

FORM 1040 OVERVIEW

  • Exemptions

FORM 1040 OVERVIEW

  • Income (Covered in Chapters 4, 5, 9, 10, 11, 14 & 15) - All income in the form of money, goods, services and property you receive during the tax year is reported here.

FORM 1040 OVERVIEW

  • Adjusted Gross Income (Covered in Chapter 16) - Adjustments are various items you are allowed to DEDUCT (subtract) from your total income. Total income minus adjustments is called ADJUSTED GROSS INCOME or AGI.

FORM 1040 OVERVIEW

  • Tax And Credits (Covered in Chapters 6, 7, 8, 13) - Your TAXABLE INCOME (the amount of income on which your income tax is computed) is figured here by subtracting the STANDARD DEDUCTION or your ITEMIZED DEDUCTIONS (a total dollar amount of certain expenses that may be used in place of the standard deduction) and exemptions from your AGI. Credits reduce your tax. The credits in this section of Form 1040 are called NONREFUNDABLE CREDITS (if you do not owe any income tax, these credits do not result in a refund of the unused amount of the credit).

FORM 1040 OVERVIEW

  • Non-refundable Credits
  • Taxable Income

FORM 1040 OVERVIEW

  • Other Taxes (Covered in Chapter 17) - Certain additional taxes such as self-employment tax or social security tax on tips are shown here. These taxes are added to your tax to arrive at your TOTAL TAX.

FORM 1040 OVERVIEW

  • Payments (Covered in Chapters 4, 10, 18) - Generally, as you receive income you are required to pay at least 90% of your income tax liability during the tax year. WITHHELD TAXES are paid to the IRS from money due to you by the payer (e.g., your employer). ESTIMATED TAX PAYMENTS are tax payments you paid directly to the IRS.

FORM 1040 OVERVIEW

  • Payments

FORM 1040 OVERVIEW

  • Payments (Covered in Chapters 4, 10, 18) - Generally, as you receive income you are required to pay at least 90% of your income tax liability during the tax year. WITHHELD TAXES are paid to the IRS from money due to you by the payer (e.g., your employer). ESTIMATED TAX PAYMENTS are tax payments you paid directly to the IRS.
  • Refund - You are entitled to a refund if the payments you made (and/or your refundable credits) are greater than the total tax.

FORM 1040 OVERVIEW

  • Refund

FORM 1040 OVERVIEW

  • Payments (Covered in Chapters 4, 10, 18) - Generally, as you receive income you are required to pay at least 90% of your income tax liability during the tax year. WITHHELD TAXES are paid to the IRS from money due to you by the payer (e.g., your employer). ESTIMATED TAX PAYMENTS are tax payments you paid directly to the IRS.
  • Refund - You are entitled to a refund if the payments you made (and/or your refundable credits) are greater than the total tax.
  • Amount You Owe (Covered in Chapter 18) - If you have not paid the full amount of the tax you are liable for, you must pay the additional amount due with your return.

FORM 1040 OVERVIEW

  • Amount You Owe

FORM 1040 OVERVIEW

  • Payments (Covered in Chapters 4, 10, 18) - Generally, as you receive income you are required to pay at least 90% of your income tax liability during the tax year. WITHHELD TAXES are paid to the IRS from money due to you by the payer (e.g., your employer). ESTIMATED TAX PAYMENTS are tax payments you paid directly to the IRS.
  • Refund - You are entitled to a refund if the payments you made (and/or your refundable credits) are greater than the total tax.
  • Amount You Owe (Covered in Chapter 18) - If you have not paid the full amount of the tax you are liable for, you must pay the additional amount due with your return.
  • Third Party Designee - You can allow the IRS to discuss your return with a friend, family member, any other person or the paid preparer by checking the “Yes” box and completing the requested information in this section of your return.

FORM 1040 OVERVIEW

  • Third Party Designee

FORM 1040 OVERVIEW

  • Payments (Covered in Chapters 8, 10, 18) - Generally, as you receive income you are required to pay at least 90% of your income tax liability during the tax year. WITHHELD TAXES are paid to the IRS from money due to you by the payer (e.g., your employer). ESTIMATED TAX PAYMENTS are tax payments you paid directly to the IRS.
  • Refund - You are entitled to a refund if the payments you made (and/or your refundable credits) are greater than the total tax.
  • Amount You Owe (Covered in Chapter 18) - If you have not paid the full amount of the tax you are liable for, you must pay the additional amount due with your return.
  • Third Party Designee - You can allow the IRS to discuss your return with a friend, family member, any other person or the paid preparer by checking the “Yes” box and completing the requested information in this section of your return.
  • Sign Here - You must sign and date the return and give your occupation. Both you and your spouse must sign even if only one of you had income. Generally, anyone you paid to prepare the return must sign in the PAID PREPARER’S USE ONLY section.

FORM 1040 OVERVIEW

  • Sign Here

WHO MUST FILE AND WHO SHOULD FILE

  • You must file if you are a:
    • U.S. citizen
    • U.S. resident
    • Resident of Puerto Rico
    • And you meet the filing requirements that apply to you.
  • Different requirements apply if you can be claimed as a dependent on another’s tax return or if you owe certain taxes in addition to income tax.

Filing Requirements For Most Taxpayers

  • The filing requirements for most taxpayers are determined by three factors. These are:
    • GROSS INCOME
    • FILING STATUS
    • AGE

Filing Requirements For Most Taxpayers

  • Gross Income - includes all income in the form of money, goods, services and property you received during the tax year that is not exempt from tax including any income from sources outside the U.S. (even if you may exclude part or all of it). Each type of income that must be reported will be discussed in subsequent chapters.
    • Income that is subject to tax includes the following:
    • Wages, salaries, bonuses and commissions
    • Certain types of fringe benefits
    • Tips
    • Unemployment compensation
    • Interest (some types of interest are tax exempt) and dividends
    • Refund of state and local taxes (for some taxpayers who itemize deductions)
    • Alimony or separate maintenance payments received
    • Income from self-employment
    • Others on pages 1-6 and 1-7 in your book.

Filing Requirements For Most Taxpayers

  • 2. Filing Status - Depends on whether you are single or married and on your family situation. Your filing status is determined on the last day of your tax year, which is December 31 for most taxpayers. Each filing status will be discussed in Chapter 3.
  • 3. Age - If you are age 65 or older on the last day of your tax year, your gross income for your filing requirement can generally be higher than that of other taxpayers. You are considered to be age 65 on the day before your 65th birthday. For example, if your 65th birthday was on January 1, 2009, you are considered to be 65 in 2008.

Filing Requirements For Most Taxpayers

  • If you are a U.S. citizen or resident alien who cannot be claimed as a dependent, you must file a return if your gross income is at least the amount shown for your age and filing status in Table 1-1.

Filing Requirements – Problem 1

  • Tom was not married at the end of 2008 and he lived alone. His marital status is single and his filing status is single. On December 31, 2008 he was 35 years old so he chooses under 65 as his age. In 2008, he had a part time job as a carpenter for which he received wages of $8,650. He also made $300 from his snow plowing business. Tom does not have to file a return.
  • True or False?

Filing Requirements – Problem 1

  • Tom was not married at the end of 2008 and he lived alone. His marital status is single and his filing status is single. On December 31, 2008 he was 35 years old so he chooses under 65 as his age. In 2008, he had a part time job as a carpenter for which he received wages of $8,650. He also made $300 from his snow plowing business. Tom does not have to file a return.
  • False
  • His income from wages ($8,650) plus his self-employment income ($300) gives him a gross income of $8,950. Because his gross income was at least $8,950, Tom must file a return.

Filing Requirements – Problem 2

  • Bob and Emily were married and living together at the end of 2008. Bob turned 65 on January 1, 2009 and Emily was 67 at the end of 2008. They are both retired. Bob receives a pension of $16,600 and they received $3,250 in interest and dividends. Their marital status is married living with spouse, and married filing a joint return is their filing status. They have no other income and they do not have to file a return.
  • True or False?

Filing Requirements – Problem 2

  • Bob and Emily were married and living together at the end of 2008. Bob turned 65 on January 1, 2009 and Emily was 67 at the end of 2008. They are both retired. Bob receives a pension of $16,600 and they received $3,250 in interest and dividends. Their marital status is married living with spouse, and married filing a joint return is their filing status. They have no other income and they do not have to file a return.
  • True
  • Because Bob turned 65 on January 1 he is considered to be 65 at the end of 2008, so both spouses are 65 or older. Their gross income is $19,850 (pension of $16,600 plus interest and dividends of $3,250). They do not have to file a return because their gross income is less than $20,000.

Filing Requirements – Problem 3

  • Joe is married but has not lived with his wife for two years. Their child lives with Joe. Joe was age 40 in 2008 and his gross income was $10,800. Joe’s marital status is married, with a child, living apart and his filing status is head of household. Joe does not have to file a return.
  • True or False?

Filing Requirements – Problem 3

  • Joe is married but has not lived with his wife for two years. Their child lives with Joe. Joe was age 40 in 2008 and his gross income was $10,800. Joe’s marital status is married, with a child, living apart and his filing status is head of household. Joe does not have to file a return.
  • True
  • The gross income limit for his age and filing status is $11,500 so he does not have to file a return. If Joe had to use the married filing separate filing status, he would have to file a return because his gross income is more than $3,500.

Filing Requirements For Dependents

  • If you can be claimed as a dependent on someone else’s tax return, the factors that determine if you must file are:
      • Gross Income
      • EARNED INCOME (includes wages, tips and professional fees)
      • UNEARNED INCOME (includes interest, dividends, pensions, unemployment compensation, and taxable social security benefits)
      • Marital Status
      • Age
      • Blindness

Filing Requirements For Dependents

Filing Requirements For Dependents

Filing Requirements For Dependents -Problem 1

  • Loretta was 16 years old and single in 2008 and can be claimed as a dependent by her parents. In 2008, Loretta received $901 in interest from a bank account. This was her only income. Does Loretta need to file a return?
  • Yes or No?

Filing Requirements For Dependents -Problem 2

  • Loretta’s sister, Eileen, was 15 years old and single in 2008 and can be claimed as a dependent by her parents. She earned $2,000 from her job at the supermarket. She also received $100 in interest from a bank account. Does Eileen have to file a return?
  • Yes or No?

Filing Requirements For Dependents -Problem Review

  • Problem 1, Yes
  • Because the interest is unearned income and is more than $900, Loretta must file a return. If her unearned income had been $900, she would not be required to file a return.
  • Problem 2, No
  • Eileen’s unearned income of $100 is not more than $900; her earned income of $2,000 is not more than $5,450 and her gross income ($2,100) is not more than the larger of $900 or $2,300 (her earned income of $2,000 + $300). Eileen does not have to file a return.
  • Table 1-3

Other Situations When You Must File a Return

Other Situations When You Must File a Return – Problem 1

  • May Day was not married and was age 67 in 2008. She received taxable pension benefits in the amount of $6,000 and $1,000 in interest and dividends. She makes extra money cleaning houses. In 2008, her net income from housecleaning was $800. May does have to file a return.
  • True or False?

Other Situations When You Must File a Return – Problem 1

  • May Day was not married and was age 67 in 2008. She received taxable pension benefits in the amount of $6,000 and $1,000 in interest and dividends. She makes extra money cleaning houses. In 2008, her net income from housecleaning was $800. May does have to file a return.
  • True
  • Even though her gross income of $7,800 is below $10,300 (see Table 1-1) she must file a return because her net self-employment income is at least $400 (see Table 1-4).

Other Filing Information

  • You must use either Form 1040EZ, 1040A or 1040 along with the appropriate additional forms and schedules to file your return. If you cannot use Form 1040EZ or Form 1040A, you must use Form 1040. Table 1-5 summarizes the requirements for using each form.

Other Filing Information

  • Filing Status
  • Number of
  • exemptions
  • Taxable
  • Income
  • Amount
  • Only income from
  • Form
  • 1040 EZ
  • Single
  • Married, Filing Joint (under age 65 and not blind)
  • No more than
  • two personal
  • exemptions
  • (yourself and
  • spouse-no
  • dependents)
  • Only if taxable
  • income (line 6)
  • less than
  • $100,000
  • Wages, Salaries, Tips, Taxable
  • Scholarship and Fellowship Grants,
  • taxable Interest of $1,500 or less,
  • Unemployment Compensation,
  • Alaska Permanent Fund Dividends
  • No advanced EIC payments
  • Form
  • 1040A
  • Single
  • Married, Filing Joint
  • Married, Filing Separate
  • Head of Household
  • Qualifying Widow(er) with
  • dependent child
  • All the
  • exemptions
  • you are entitled
  • to claim
  • Only if taxable
  • income (line
  • 27) less than
  • $100,000
  • Wages, Salaries, Tips, Taxable
  • Scholarship and Fellowship Grants,
  • Interest, Dividends, Capital Gains,
  • Pensions, Annuities, and IRA
  • distributions, Unemployment
  • Compensation, Taxable Social Security
  • and/or Railroad Retirement Benefits,
  • Form
  • 1040
  • Single
  • Married, Filing Joint
  • Married, Filing Separate
  • Head of Household
  • Qualifying Widow(er) with
  • dependent child
  • All the
  • Exemptions you
  • are entitled to
  • claim
  • Any amount of
  • taxable
  • income (line
  • 43)
  • Wages, Salaries, Tips, Taxable
  • Scholarship and Fellowship Grants,
  • Interest, Dividends, Pensions,
  • Annuities, and IRAs, Unemployment
  • Compensation, Taxable Social Security and/or Railroad Retirement
  • Benefits, Self-employment Income,
  • Taxable State and Local Income Tax
  • Refunds, Capital Gains, Gain from the
  • Sale of your Home, Alimony Received,
  • All other income sources
  • Table 1-5

Other Topics

  • Electronic Filing - Instead of mailing a paper return, you can electronically file by computer. If you file electronically using tax preparation software or through a tax professional, you can sign your return electronically by creating your own Personal Identification Number (PIN).
  • Taxpayer Identification Numbers
  • Social Security Number - You must enter a social security number for yourself, your spouse and each dependent you claim in the space provided on your return.
  • ITIN - If you are a resident or nonresident alien who is not eligible for a social security number, you must apply to the IRS for an Individual Taxpayer Identification Number (ITIN) using Form W-7, Application for IRS Individual Taxpayer Identification Number (ITIN)
  • ATIN - If you are in the process of adopting a child who is a U.S. citizen or resident and cannot get a social security number for the child until the adoption is final, you may be able to get an Adoption Taxpayer Identification Number (ATIN) from the IRS. Once the adoption is final, you must apply for a social security number for the child.

Other Topics

  • Presidential Election Campaign Fund - This fund was set up to help pay for presidential election campaigns. You may have $3 go to the presidential election campaign fund by checking the yes box in the heading of your tax return. If you check a box, it will not change the amount of your refund or the tax you pay.
  • Due Date - In general, individual income tax returns have a due date (the date by which they must be filed) of April 15 of the year following the tax year. If the 15th falls on a Saturday, Sunday or legal holiday, the due date is delayed until the next business day. You have filed on time if your return is properly addressed and postmarked by the due date. If you file after the due date, the return is considered filed when it is received by the IRS. This can be important if you are assessed penalties or interest or are filing a prior year return for a refund.

Other Topics

  • Accounting Method – Your accounting method determines how you report your income and expenses.
  • Cash Method - You report all items of income in the year you actually or constructively receive them. You constructively receive income when it is credited to your account or in any way becomes available to you. With the cash method, you deduct expenses in the year you pay them.
  • Most individual taxpayers use the cash method.

Accounting Method Problems

  • 1. Fred completes a carpentry job in November 2008 and is paid in 2008. Must he report that income on his 2008 tax return?
  • Yes or No?
  • 2. Janet receives a valid paycheck on December 31, 2008. Is this part of her 2008 gross income even if she cashes the check in January 2009?
  • Yes or No?
  • 3. Anita receives a bill from the hospital in December 2008. She does not pay the bill until January 2009. She cannot include this bill in figuring whether to take itemized deductions for 2008.
  • True or False?
  • 4. If Fred the carpenter in the above example used the accrual method, he would report the income from a job completed in November on his 2008 return whether he was paid in November or January.
  • True or False?

Accounting Method Problems

  • Fred completes a carpentry job in November 2008 and is paid in 2008. Must he report that income on his 2008 tax return?
  • Yes
  • Janet receives a valid paycheck on December 31, 2008. Is this part of her 2008 gross income even if she cashes the check in January 2009?
  • Yes
  • Anita receives a bill from the hospital in December 2008. She does not pay the bill until January 2009. She cannot include this bill in figuring whether to take itemized deductions for 2008.
  • True
  • If Fred the carpenter in the above example used the accrual method, he would report the income from a job completed in November on his 2008 return whether he was paid in November or January.
  • True

Other Topics

  • Rounding Off Dollars - On your tax return, you may round off cents to whole dollars. Do this by dropping amounts under 50¢ and increasing amounts of 50¢ and over to the next dollar.
      • $10.49 is rounded off to $10.00
      • $10.50 is rounded off to $11.00
  • Refunds - If you paid more income tax than you owed and are due a refund, you can choose to receive a paper check from the IRS or have the funds deposited directly into your savings or checking account or if using direct deposit you may be able to split your refund between two or three accounts. You can also apply all or part of the overpayment to your next year’s estimated tax.
  • Where To File - Where you file your tax return is determined by where you are living when you file the return. See Table 1-6 in your book.

Other Topics

  • Decedents (Persons Who Died) - The same filing requirements apply to decedents as apply to individuals. If the decedent met the filing requirements on the date of death, a final return must be filed by the surviving spouse, or other personal representative (executor, administrator or anyone in charge of the decedent’s property). When filing the return, the word “DECEASED”, the decedent’s name, and the date of death should be written across the top of the tax return. A decedent’s return may be filed electronically.

Filing Information

  • KEY IDEAS
  • The requirement to file a return is usually determined by your age, your filing status, and your gross income.
  • If you can be claimed as a dependent on another’s return, you may have to file even if you do not meet the gross income requirement for your age and filing status.
  • There are other conditions, such as earning $400 net income from self-employment, that require you to file.

Filing Information

  • CLASSWORK 1: True or False.
  • You do not need to enter a social security number or individual taxpayer identification number on your tax return.
  • You do not have to file a return if you do not earn wages.
  • If you are self-employed with no other income, you have to file a return if your net income from self-employment is $400 or more.
  • Generally, dependent children who meet the filing requirements have to file a tax return.
  • A single person who has wages of $2,000 and federal withholding of $120 should file a return even if he or she is not required to file.
  • Whether you are required to file a tax return depends only on the amount of income you receive.
  • 7. A dependent whose only income is interest from a savings account is not required to file a return.

Filing Information

  • CLASSWORK 1: True or False.
  • 8. A single person who is 68 during the tax year can have a higher amount of gross income before he or she must file than a single person who is 63.
  • 9. If you are not a dependent and your gross income is less than the filing requirement for your age and filing status on Table 1-1, you may still be required to file a return.
  • 10. You can file a 1040EZ if you are married filing separately.
  • 11. Exemptions and deductions are subtracted from taxable income.
  • 12. Interest from a savings account is an example of earned income.
  • 13. On Form 1040 taxable income is the same as the AGI.
  • 14. The total of all income minus any adjustments is called adjusted gross income.

Filing Information

  • CLASSWORK 1: True or False.
  • You do not need to enter a social security number or individual taxpayer identification number on your tax return. F
  • You do not have to file a return if you do not earn wages. F
  • If you are self-employed with no other income, you have to file a return if your net income from self-employment is $400 or more. T
  • Generally, dependent children who meet the filing requirements have to file a tax return. T
  • A single person who has wages of $2,000 and federal withholding of $120 should file a return even if he or she is not required to file. T
  • Whether you are required to file a tax return depends only on the amount of income you receive. F
  • 7. A dependent whose only income is interest from a savings account is not required to file a return. F

Filing Information

  • CLASSWORK 1: True or False.
  • 8. A single person who is 68 during the tax year can have a higher amount of gross income before he or she must file than a single person who is 63. T
  • 9. If you are not a dependent and your gross income is less than the filing requirement for your age and filing status on Table 1-1, you may still be required to file a return. T
  • 10. You can file a 1040EZ if you are married filing separately. F
  • 11. Exemptions and deductions are subtracted from taxable income. F
  • 12. Interest from a savings account is an example of earned income. F
  • 13. On Form 1040 taxable income is the same as the AGI. F
  • 14. The total of all income minus any adjustments is called adjusted gross income. T

Filing Information

  • CLASSWORK 2: Answer the following questions.
  • When does the tax year end for a calendar year taxpayer?
  • Most taxpayers use which accounting method?
  • What is the normal due date for a calendar year taxpayer’s return?
  • Which tax return form do you have to use if you receive self-employment income?
  • Which return form may be used (if other conditions are met) only by single taxpayers and joint filers with no dependents?
  • What three factors determine whether most individuals who are not claimed as dependents must file a tax return?
  • What are the circumstances when you should file even if you do not have to?

Filing Information

  • CLASSWORK 2: Answer the following questions.
  • When does the tax year end for a calendar year taxpayer? December 31
  • Most taxpayers use which accounting method? Cash
  • What is the normal due date for a calendar year taxpayer’s return? April 15
  • Which tax return form do you have to use if you receive self-employment income? Form 1040
  • Which return form may be used (if other conditions are met) only by single taxpayers and joint filers with no dependents? Form 1040EZ

Filing Information

  • CLASSWORK 2: Answer the following questions.
  • What three factors determine whether most individuals who are not claimed as dependents must file a tax return? Gross Income, Filing Status, Age
  • What are the circumstances when you should file even if you do not have to? If you had income tax withheld, if you qualify for the earned income credit, or if you qualify for the additional child tax credit, and if you qualify for the health coverage tax credit.

General Guidelines for Completing All Basic Course Problems

  • The excerpts from the IRS publications are written for the taxpayer so they refer to “you” (meaning the taxpayer). Our text also refers to “you.” When reading the text and the excerpts the student needs to remember that “you” does not refer to him or her but to the taxpayer and not to the student tax preparer.

General Guidelines

  • The following information applies to all problems unless specifically addressed.
    • Determination to contribute or not to contribute to the Presidential Election Campaign Fund is left up the student. The box(es) can be “yes,” “no,” or blank.
    • On Schedule B always indicate that there are no foreign bank accounts.
    • The decision to use or not use the Third Party Designee is left to the instructor. This area is left blank on the answers.
    • Federal estimated payments are always paid in equal installments on the exact due date unless stated otherwise.
    • Unless otherwise stated or from a state with no personal income tax, use state income tax withheld instead of sales tax.
    • Unless provided, the local sales tax will not be calculated.
    • Do not calculate the Recovery Rebate Credit (line 70 of Form 1040) for any of the problems
    • Unless otherwise stated, if eligible, the 50% special depreciation allowance was or will be used.

Questions & Answers


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