1.1 Prelim Work to File Taxes

Question 1

What is the purpose of using last year’s returns?

Answer 1

-helps prevent gross mathematical errors
-helps identify significant changes
-increases efficiency in completing the current return

Question 2

Why should you review a client’s previous IRS correspondence?

Answer 2

To ensure compliance with prior audits, adjustments, or judgements.

Question 3

How is the taxpayer’s personal information used for their return? (DOB, age, marital status, dependents, etc.)

Answer 3

-Their age determines if they qualify for additional deductions (65+), retirement distributions, dependency, etc.
-Married filing jointly status often increases beneficial $ limits for deductions and credits.

Question 4

If a taxpayer is an alien (not a US citizen), they are considered a nonresident alien unless…?

Answer 4

Unless either the green card test or the substantial presence test for the calendar year be met.

Question 5

Any individual required to have a US taxpayer identification number but not eligible for a SSN needs to obtain what from the IRS?

Answer 5

An ITIN: Individual Taxpayer Identification Number

Question 6

If you are liable for income tax, what form do you use?

Answer 6

Form 1040 and Schedule C

Question 7

If you are liable for self-employment tax, what form do you use?

Answer 7

Schedule SE

Question 8

If you are liable for estimated tax, what form do you use?

Answer 8

Form 1040-ES

Question 9

If you are liable for social security and Medicare taxes and income tax withholding, what form do you use?

Answer 9

Form 941 or 944

Question 10

If you are liable for providing information on social security and Medicare taxes and income tax withholding, what forms do you use?

Answer 10

-Form W-2 (to employee)
-Forms W-2 & W-3 (to the Social Security administration)

Question 11

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

Answer 11

Form 940

Question 12

The W-2 return states:

Answer 12

Wage and tax statement

Question 13

W-2G return states:

Answer 13

Certain gambling winnings

Question 14

Form 1099-B states:

Answer 14

Proceeds from Broker and Barter Exchange Transactions

Question 15

Form 1099-C states:

Answer 15

Cancellation of debt

Question 16

Form 1099-DIV states:

Answer 16

Dividends and distributions

Question 17

Form 1099-G states:

Answer 17

Certain government payments

Question 18

Form 1099-INT states:

Answer 18

Interest income

Question 19

Form 1099-K states:

Answer 19

Payment card and third party network transactions

Question 20

Form 1099- MISC states:

Answer 20

Miscellaneous income

Question 21

Form 1099-NEC states:

Answer 21

Nonemployee compensation

Question 22

Form 1099-OID states:

Answer 22

Original issue discount

Question 23

Form 1099-PATR states:

Answer 23

Taxable distributions received from cooperatives

Question 24

Form 1099-Q states:

Answer 24

Payments from qualified education programs (under sections 529 and 530)

Question 25

Form 1099-R states:

Answer 25

Distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.

Question 26

Form 1099-S states:

Answer 26

Proceeds from real estate transactions

Question 27

Form 1099-SA states:

Answer 27

Distributions from an HSA, Archer MSA, or Medicare Advantage MSA

Question 28

Schedule K-1 (Form 1065) states:

Answer 28

Partner’s share of income, deductions, credits, etc.

Question 29

Schedule K-1 (Form 1120-S) states:

Answer 29

Shareholder’s share of income, deductions, credits, etc.

Question 30

Non-deductible expenses can include:

Answer 30

-Rent and insurance premiums paid for the taxpayer’s own dwelling
-Life insurance premiums paid by the insured
-Upkeep of a personal automobile
-Personal interest
-Payments for food, clothing or domestic help

Question 31

Certain items from the prior-year return may be needed to complete the current-year return, such as:

Answer 31

-state income tax refund
-AMT for credit
-gain or loss carryover
-charitable gift carryover
-Schedule D
-Form 8801

Question 32

True or False: If a taxpayer is a US citizen or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether the taxpayer is in the United States or abroad.

Answer 32

True.

Question 33

What factors generally determine whether a taxpayer needs to file an income tax return?

Answer 33

Income, filing status and age.

Question 34

Generally, US citizens and resident aliens are taxed on their worldwide income. Generally, nonresident aliens are only taxed on US source income. What is an exception to this general rule?

Answer 34

If a nonresident elects to be treated as a US resident, e.g., in order to file a joint return with the spouse who is a citizen or a resident alien.

Question 35

When does a US citizen or resident alien need to file Form FinCEN Report 114, Report of Foreign Bank and Financial Accounts? AKA FBAR.

Answer 35

When they have an ownership interest in, or signatory authority or other authority over, a financial account(s) in a foreign country with an aggregate value in excess of $10,000 at ANY TIME during the calendar year.

Question 36

When must individuals living in the US use Form 8938?

Answer 36

To report 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. These thresholds double for married individuals filing jointly.