Filing Requirements Flashcards
Some expenses that do not qualify as household maintenance include
Clothing,
Education,
Medical treatment,
Life insurance,
Transportation,
Vacations,
Services by the taxpayer, and
Services by the dependent.
A married individual who lives with a dependent apart from the spouse will be considered unmarried and qualify for head of household status if, for the tax year,
(S)he files separately;
(S)he pays more than 50% toward maintaining the household;
The spouse is not a member of the household for the last 6 months;
The household is the principal home of the individual’s child, stepchild, or qualified foster child for more than half of the year; and
The individual can claim the child as a dependent.
When must an individual file as single?
An individual must file as single if (s)he neither is married nor qualifies for surviving spouse or head of household status.
Taxable income is adjusted gross income (AGI) minus
The greater of itemized deductions or the standard deduction.
When would a taxpayer elect to itemize deductions?
The taxpayer itemizes deductions if the total allowable itemized deductions, after all limits have been applied, is greater than the standard deduction.
When would a taxpayer choose to take the standard deduction?
The taxpayer takes the standard deduction if the standard deduction is greater than the total allowable itemized deductions (after all limits have been applied).
How does a taxpayer elect to itemize deductions?
Election to itemize deductions is made by filing Schedule A of Form 1040. Election in any other taxable year is not relevant.
The standard deduction may not be used by
Persons who itemize deductions
Nonresident alien individuals
Individuals who file a “short period” return
A married individual who files a separate return and whose spouse itemizes
Partnerships, estates, and trusts
The basic standard deduction amount depends on what two factors?
Filing status and
Dependency status on another’s return.
The basic standard deduction amount of a child under age 19 at the end of the year, a student under age 24 at the end of the year, or any age if permanently and totally disabled who can be claimed as a dependent on another individual’s income tax return is limited to the greater of either
$1,150 or
Earned income for the year plus $400 up to the applicable single standard deduction.
Who is entitled to the additional standard deduction?
An individual who has attained the age of 65 or is blind is entitled to the additional standard deduction.
What is the definition of “blind” for the purposes of claiming the additional standard deduction?
“Blind” in this context means no better than 20/200 vision in the better eye, even with corrective lenses.
Can an individual ever be entitled to twice the additional standard deduction?
Yes, an individual who has both reached age 65 and is blind is entitled to twice the amount.
When does an individual qualify as having reached age 65 for the purposes of claiming the additional standard deduction?
The individual is entitled to the amount if (s)he attains age 65 before the end of the tax year, even if (s)he dies before the end of the year (but not if (s)he dies before reaching age 65).
When does an individual not qualify as having reached age 65 for the purposes of claiming the additional standard deduction?
An individual is not entitled to the amount if (s)he dies before attaining age 65, even if (s)he would have otherwise reached age 65 before the year’s end
Must a taxpayer be blind for the entire year to claim the additional standard deduction?
No, a person who becomes blind on or before the last day of the taxable year is entitled to the full amount.
Is the standard deduction prorated if the taxpayer dies during a tax year?
No, once qualified, the standard deduction is allowed in full.
When must an individual file a federal income tax return?
When any of the following conditions are met:
Gross income is above a threshold
Net earnings from self-employment is $400 or more
(S)he is a dependent with more gross income than the standard deduction
Unearned income is over $1,100
The gross income threshold amount generally is
The standard deduction (excluding any amount for being blind)
If one spouse filing separately itemizes deductions, can the other spouse filing separately include the standard deduction in the threshold computation?
No. If one spouse married filing separately itemizes deductions, the other is required to itemize, as well.
Even if not required, what are some reasons a person should file a tax return?
To obtain a refund
To establish a record
To trigger the running of the statute of limitations
When must an income tax return be filed (postmarked)?
It must be filed no later than the 15th day of the fourth month following the close of the tax year.
For a calendar-year taxpayer, when must the income tax return be filed (postmarked)?
It must be filed by April 15.
How can a person obtain an automatic 6-month extension to file their tax return?
An automatic 6-month extension is provided for an individual who files Form 4868 or uses a credit card to make the required tax payment on or before the initial due date.
What happens if a U.S. citizen or resident who is on military or naval duty outside the U.S. (or Puerto Rico) files Form 4868 during their automatic 2-month extension?
The taxpayer will be allowed another 4-month extension.
What is the due date for a decedent’s final return?
The due date for a decedent’s final return is the date on which the return would have been due if death had not occurred.
A Form 1040-NR nonresident alien’s tax return (when not subject to wage withholding) must be filed by
The 15th day of the sixth month after the close of the tax year (unless extended).
A nonresident alien subject to wage withholding must file his or her tax return by
The 15th day of the fourth month after the close of the tax year (unless extended).
By what date must tax liability be paid?
Tax liability must be paid when the return must be filed. Automatic extension for filing the return does not extend time for payment.
If a taxpayer receives an extension for filing his or her tax return, does (s)he also receive an extension to pay his or her tax liability?
No, automatic extension for filing the return does not extend time for payment of tax liability.
When does the IRS begin charging interest on the late payment of tax liability?
Interest will be charged from the original due date of the tax return.
What is the penalty for failing to file a tax return?
A penalty of 5% per month up to 25% of unpaid liability is assessed for failure to file a return.
What is the penalty for failure to pay a tax liability by the due date?
The penalty for failure to pay is 0.5% per month of the tax not paid, up to 25%.
If a taxpayer fails to file their tax return and fails to pay their tax liability by the due date, will the taxpayer have to pay both penalties?
No, a failure to pay penalty may offset a failure to file penalty.
When an extension to file is timely requested, how may a taxpayer avoid paying a failure to pay penalty?
By paying an estimate of unpaid tax in conjunction with the extension request.
How long must employers keep records on employment taxes?
Employers are required to keep records on employment taxes until at least 4 years after the due date of the return or payment of the tax.
If an individual is required to report employment taxes or give tax statements to employees, what identification number must that individual have?
The individual must have an employer identification number (EIN).
What is an employer identification number (EIN)?
An EIN is a nine-digit number the IRS issues to identify the tax accounts of employers.
What is an identity protection personal identification number (IP PIN)?
An IP PIN is a six-digit number assigned to eligible taxpayers to help prevent the misuse of their Social Security numbers on federal income tax returns. The IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return.
What is the amount of the personal exemption for 2021?
From 2018 through 2025, the exemption amount is $0; in essence, the personal exemption is eliminated for these years.
To qualify as a dependent, the individual must be
A qualifying child or a qualifying relative. A spouse is never considered a dependent.
What four tests must be met to be considered a qualifying child?
Relationship
Age
Principal residence
Not self-supporting
What must a child be to satisfy the relationship test for a qualifying child?
The child must be the taxpayer’s son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or any descendant of any such relative. Adopted individuals and eligible foster children also meet the relationship test.
What age must a child be to satisfy the age test for a qualifying child?
The child must be under the age of 19 at the end of the year, a full-time student under the age of 24, or any age if permanently and totally disabled.
Where must a child reside to satisfy the principal residence test for a qualifying child?
The child must have the same principal place of abode as the taxpayer for more than half of the year.
What condition must a child meet in order to satisfy the not self-supporting test for a qualifying child?
The child must not have provided over half of his or her own support.
What four requirements must an individual meet to be considered a qualifying relative?
Relationship or residence
Gross income
Support
Not be a qualifying child of the taxpayer or any other taxpayer
To satisfy the relationship requirement for a qualifying relative, there must be
Existence of an extended (by blood) or immediate (by blood, adoption, or marriage) relationship.
To satisfy the gross income requirement for a qualifying relative, the gross income of the individual (to be claimed as a dependent) must be
Less than $4,300 for 2021.
What is included in gross income for the gross income dependency requirement?
All income received that is not exempt from tax is included.
To satisfy the support requirement for a qualifying relative, the person who claims an individual as a dependent must
Provide more than 50% of the (economic) support of the individual for the year.
To qualify as a dependent as a citizen or resident, an individual must be, for any part of the year,
A U.S. citizen, resident, or national;
A Canadian resident; or
A Mexican resident.
What is the standard deduction for a dependent with unearned income?
The standard deduction for a dependent with unearned income is limited to whichever is greater than
$1,100 or
amount of earned income plus $350.
What is the “Kiddie Tax?”
Net unearned income (NUI) of a dependent under 19 (under 24 for full-time students) at the close of the tax year is taxed to the dependent at the parent’s marginal rate. This is referred to as the “Kiddie Tax.”
When is a taxpayer considered a dual-status alien?
A taxpayer is considered a dual-status alien if the taxpayer was both a nonresident and resident alien during the year.
Generally, when is a taxpayer considered a resident alien?
Generally, a taxpayer is considered a resident alien if either the green card test or the substantial presence test is met.
When is a taxpayer considered a resident for tax purposes?
A taxpayer is a resident for tax purposes if (s)he was a lawful permanent resident (immigrant) of the United States at any time during the year.
How long must a taxpayer be physically present in the United States to be considered a U.S. resident?
The taxpayer must have been physically present for 31 days during 2020 and 183 days during 2020, 2019, and 2018, counting all days of physical presence in 2020 but only 1/3 the number of days of presence in 2019 and only 1/6 the number of days in 2018.
Under what circumstance may a nonresident alien file a joint return?
A nonresident alien may file a joint return if (s)he is married to a U.S. citizen or resident at the end of the year.
What income is a nonresident alien taxpayer and his or her spouse taxed on if that taxpayer chooses to be treated as a U.S. resident?
If a taxpayer chooses to be treated as a U.S. resident, both spouses are taxed on worldwide income.
If a taxpayer is a nonresident alien who is married to a U.S. citizen or resident at the end of the year and chooses to be treated as a U.S. resident, can (s)he take the standard deduction?
Yes, (s)he can take the standard deduction.
What is the tax rate for most types of U.S. source income received by a foreign taxpayer?
The tax rate is 30%.
How can using a prior year’s return for comparison help a tax return preparer?
It can prevent gross mathematical errors and identify significant changes.
If there were no significant changes between the current and prior year’s return, then the current-year return should result in
A similar amount of tax liability or refund as the previous year.
A taxpayer’s personal information (e.g., date of birth, age, marital status, dependents) is used to verify the identity of
The taxpayer and related dependents.
How can an individual’s age be relevant to a tax return?
The age of an individual determines if (s)he qualifies for additional deductions (65 and over), retirement distributions, dependency, etc.
If a taxpayer is an alien (not a U.S. citizen), (s)he is considered a nonresident alien unless either of which two tests is met?
The green card test
The substantial presence test
Which expenses are not deductible on a tax return?
A personal, living, or family expense is not deductible unless the Code specifically provides otherwise. Nondeductible expenses include
- Rent and insurance premiums paid for the taxpayer’s
own dwelling; - Life insurance premiums paid by the insured;
- Upkeep of an automobile;
- Personal interest; and
- Payments for food, clothing, or domestic help.
What are some items from the prior-year return that may be needed to complete the current-year return?
State income tax refund
AMT for credit
Gain or loss carryover
Charitable gift carryover
Schedule D
Form 8801
What are the reporting requirements for individuals who do business in the U.S. but have an ownership interest in a foreign account of over $10,000?
Generally, any U.S. citizen, resident, or person doing business in the United States who has an ownership interest in a financial account in a foreign country with an aggregate value in excess of $10,000 at any time during the calendar year must file a Form FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR), reporting certain information with respect to that account by April 15 of the subsequent year or the extension due date of October 15.
Individuals with 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 must file using
Form 8938.
Two individuals are treated as legally married for the entire year if, on the last day of the tax year, they are
- Legally married and cohabiting as spouses,
- Legally married and living apart but not separated
pursuant to a valid divorce decree or separate
maintenance agreement, or - Separated under a valid divorce decree that is not yet
final.
If a spouse dies, when is the status for each spouse determined?
Unless the surviving spouse remarries before the end of the tax year (in which case the decedent files married filing separate) status is determined when the spouse dies.
Under what circumstance may a joint return be filed if one of the spouses is a nonresident alien at any time during the tax year?
A joint return is not allowed if one spouse was a nonresident alien (NRA) at any time during the tax year unless the U.S. citizen and the NRA spouse so elect and agree to be taxed on their worldwide income.
If one spouse files separately, can the other spouse file jointly?
No. If one spouse files separately, so must the other.
If a joint return has been filed for the year and the time for filing the return of either spouse has expired, may the spouses amend their returns to file separately?
No, they may not amend their returns to file separately.
May married individuals who filed separate returns later file a joint (amended) return?
Yes, and payment of the entire joint tax liability is not required at the time the amended return is filed.
If an individual obtains a marriage annulment (no valid marriage ever existed), what is required?
The individuals must file amended returns claiming a filing status of single or head of household, whichever applies. All prior tax years not closed by the statute of limitations must be amended.
When a joint return is signed by both spouses, is one spouse generally liable for the entire amount of the tax due and any interest and penalties?
Generally, the spouses are jointly and severally liable for the tax due and any interest and penalties. This means that each spouse is individually liable for the entire amount of the tax due and any interest and penalties. One spouse may be relieved of joint and several liability under the “innocent spouse” provisions in very limited circumstances.
What filing status should married individuals who account for their items of income, deduction, and credit in the aggregate use?
The married filing jointly status.
May spouses with different tax years file a joint return?
No. However, a joint return is allowed when spouses use different accounting methods.
To be considered an injured spouse, the taxpayer must
- File a joint return,
- Have reported income (e.g., wages, interest, etc.),
- Have made and reported tax payments or claimed the
Earned Income Credit or other refundable credit - Not be required to pay a past-due amount, and
- File Form 8379.
How long is the qualifying widow(er) filing status available?
This status is available for 2 years following the year of death of the spouse and may be elected if
- The surviving spouse did not remarry during the tax
year, - The surviving spouse qualified for married filing a joint
return status for the tax year of the death of the spouse,
and - The surviving spouse maintained a household for a
dependent child for the taxable year.
For the purposes of the qualifying widow(er) filing status, for whom must the surviving spouse maintain the household?
The household must be the principal place of abode of a qualifying dependent of the surviving spouse. The spouse must be entitled to claim a dependency exemption amount for the dependent who must be a son/daughter, stepson/stepdaughter, or adopted child. This does not include a foster child.
A surviving spouse can file what kind of return for the tax year of the death of the spouse?
The surviving spouse can file a joint return.
In order for an individual to qualify for head of household filing status, (s)he must
- Not file as a surviving spouse,
- Not be a married person, and
- Maintain a household that is the principal place of abode
for a qualifying individual.
To maintain a household for federal filing status purposes, an individual must furnish
More than 50% of the mutual benefit costs of maintaining the household during the tax year.
Some expenses that qualify as household maintenance include
Property tax,
Mortgage interest,
Rent,
Utilities,
Upkeep,
Repairs,
Property insurance, and
Food consumed in-home.
Some expenses that do not qualify as household maintenance include
Clothing,
Education,
Medical treatment,
Life insurance,
Transportation,
Vacations,
Services by the taxpayer, and
Services by the dependent.
A married individual who lives with a dependent apart from the spouse will be considered unmarried and qualify for head of household status if, for the tax year,
- (S)he files separately;
- (S)he pays more than 50% toward maintaining the
household; - The spouse is not a member of the household for the
last 6 months; - The household is the principal home of the individual’s
child, stepchild, or qualified foster child for more than
half of the year; and - The individual can claim the child as a dependent.
