INDIVIDUAL - FILING CONSIDERATIONS

Question 1

Who must file a tax return?

Answer 1

An individual must file if their income is greater than the standard deduction for their filing status.

If your income is less than the minimums, you don’t owe taxes.

Question 2

Filing rule for Children and Other Dependents.

Answer 2

One must file if they are single and were able to be claimed as a dependent on someone else’s return (such as a parent), and who had

1. Unearned income more than $1,100 (2019 UPDATE) or
2. Earned income more than $12,200 (2019 UPDATE).

Note: If the dependent is older than 65, and/or blind, the thresholds for filing are higher.

Question 3

Self-employed individuals must file if their net earnings are over what threshold?

Answer 3

$400.00

Question 4

A taxpayer that owes a special tax must file. Name examples of these taxes.

Answer 4

1. AMT (Alternate Minimum Tax)
2. Add’l Tax on a Qualified Plan
3. Household Employment Taxes
4. Social Security and Medicare tax on tips
5. Write-in Taxes
6. Recapture Taxes

Question 5

What is the tax return filing rule for HSA, MSA, and Medicare distributions?

Answer 5

Taxpayer must file a tax return if they or their spouse received HSA, Archer MSA, or Medicare Advantage MSA distributions

Question 6

When does a church employee need to file a tax return?

Answer 6

A church employee must file when their wages are $108.28 or more from a church or church controlled organization that is exempt from employer social security and Medicare taxes

Question 7

A taxpayer must file if advance payments of the premium tax credit were made for the taxpayer, spouse, or dependent. True or False?

Answer 7

True

Question 8

A taxpayer must file if advance payments of health coverage tax credit were made for the taxpayer, spouse or dependent. True or False?

Answer 8

True

Question 9

What determines a Tax Year?

Answer 9

The tax year may be either a calendar tax year or any other fiscal year.

But, in order for a taxpayer to use something other that a calendar year, they must keep accurate books and records as proof.

Question 10

Taxpayers filing jointly must have the same tax year. True or False?

Answer 10

True.

And they both need to standard deduction or itemized. One can file standard while the other files itemized.

Question 11

What is the most common Accounting Method for taxed?

Answer 11

Usually, tax calculations are made on a cash basis of accounting method.

Cash can be received actually or constructively received.

Question 12

C corporations, taxpayers with inventories, and tax shelter entities must use the cash basis accounting method. True or False?

Answer 12

False.

C corporations, taxpayers with inventories, and tax shelter entities usually use the accrual method.

Question 13

When is a Tax Return due?

Answer 13

An individual tax return is due on (or about) the 15th day of the fourth month after the tax year.

If the 15th falls on a weekend, the tax return is due on the next business day.

Question 14

What form is used to file for an extension and what is the length of the extension?

Answer 14

Form 4868

Any individual is able to receive an automatic 6-month extension to file their return.

However, the extension does not apply to penalties for late payment. It is best to make an estimated payment on the original date your taxes are due to avoid penalties.

Question 15

Your tax return filing extension allows you an extra 6 months to file and pay. True or False?

Answer 15

False.

You are still required to estimate and pay any taxes due on the original due date, and will incur interest on taxes not paid on the due date.

Question 16

What is the statute of limitations on filing liabilities?

Answer 16

Generally, the government must assess all taxes within 3 years after the later of the filing date or due date.

Question 17

Explain the Statute of Limitations on Tax Liabilities - Exception One, Omitted Gross Income.

Answer 17

If the amount of omitted gross income is more than 25% of the gross income, the time period is extended to 6 years, or

Question 18

Explain the Statute of Limitations on Tax Liabilities - Exception Two, Fraud.

Answer 18

In the case of fraud, there is no statute of limitations and the taxpayer will always be liable in the future for any tax liabilities that were previously avoided through fraud.

Question 19

Statute of Limitations - Refund

Answer 19

Individuals must file with the IRS to claim a refund by the LATER of:

1. Three years from the time the return was filed, or
2. Two years after the tax was actually paid.

Question 20

A TIN is a Social Security Number, an individual taxpayer identification number (ITIN) or an adoption taxpayer identification number (ATIN). True or False?

Answer 20

True.

Question 21

An ITIN does NOT authorize work in the US or provide eligibility for Social Security. True or False?

Answer 21

True.

Question 22

A taxpayer applies for an ITIN by filing Form W-7, Application for IRS Individual Taxpayer Identification Number. True or False?

Answer 22

True.

Question 23

What triggers the expiration of an ITIN?

Answer 23

Any ITIN that is not used on a federal tax return for 3 consecutive tax years, either as the ITIN of an individual who files the return or as the ITIN of a dependent included on a return, will expire on December 31 of the 3rd consecutive tax year of income.

Question 24

If you are eligible for a SSN, you can still file with a ITIN. True or False?

Answer 24

False.

If you are eligible for an SSN, you must file with your SSN.

Question 25

What’s withheld on the W-2?

Answer 25

Every time an employer makes a salary payment to the employee, the employer is required to withhold an amount of the employee’s salary and make payment of that amount on behalf of the employee to the federal tax authorities.

This amount is for the ESTIMATED federal income tax liability that the employee is expected to owe over the course of the year.

Question 26

When does a TP need to pay Estimated Payments?

Answer 26

If a person does not have enough taxes withheld by his/her employer during the year and they expect to owe at least $1,000 after subtracting this withholding and any refundable credits they are entitled to, he or she must make estimated quarterly tax payments in order to avoid penalties for the underpayment of tax.

Question 27

How much should the Estimated Tax be for?

Answer 27

90% of the current year’s tax, or

A “safe harbor” of the prior year’s tax. Individuals with AGI less than $150,000 ($75,000 for MFS) must pay at least 100%. TPs with higher AGIs must pay at least 110% of the preceding year’s tax.

If underpayment is less than $1,000, there is no penalty.

Question 28

When are Estimated Payments due?

Answer 28

Estimated payments are due on the 15th day of the 4th, 6th, and 9th months of the tax year, and the 1st month of the following tax year.

Question 29

Are there penalties for not making enough in Estimated Payments?

Answer 29

YES.

If you didn’t make enough pre-payments through the year, a penalty will be assessed based on the difference between the final tax liability and the actual estimated tax payments and withheld taxes.

Question 30

What are the 3 ways Tax Liabilities can be settled?

Answer 30

1. Through a Tax Credit
2. Through withholdings from your salary by your employer
3. There can be a payment at the end, combined with possible Estimated Payments throughout the year.

Question 31

How many months does a taxpayer have to complete making installment payments?

Answer 31

72 months

EXPLANATION
Generally, the taxpayer can have up to 72 months to pay under an installment agreement. In certain circumstances, the taxpayer may be granted a longer period over which to pay or an agreement can be approved for an amount that is less than the amount of tax owed.

The IRS recently adopted new rules making it easier to obtain an installment agreement. The threshold for qualifying for an installment agreement without having to provide financial information was increased from $25,000 to the current $50,000 amount and the timeline for paying was increased to 72 months from 60 months.

A taxpayer with outstanding tax liability (including penalties and interest) of $50,000 or less may file Form 9465, or 9465-FS. This is known as a streamlined installment agreement because the IRS does not require a financial statement (Form 433-A, Form 433-B, Form 433-D, or Form 433-F) or substantial disclosure of financial information. A liability greater than $50,000 can be considered if the taxpayer pays down the liability to $50,000 or less prior to the agreement being granted. Generally, a taxpayer must pay off the balance due on a streamlined IA within a 72-month period.

If the total amount the taxpayer owes is greater than $25,000 but not more than $50,000, the taxpayer may use a slightly expanded Form 9465-FS Installment Agreement Request. This form has an extra page (Part II) with additional information to complete. A taxpayer using Form 9465-FS must agree to a Direct Debit Installment Agreement (DDIA) to qualify for an IA without completing a financial statement (Form 433-F, Collection Information Statement).

Question 32

What is the length of the automatic extension for a US Citizen serving in the military who are in service outside the United States and Puerto Rico?

Answer 32

Military service members receive an automatic 2 month extension to file and pay.

EXPLANATION
A taxpayer who is a U.S. citizen (or resident) may receive an automatic 2-month extension to file a return and pay any federal income tax due if, on the due date of the return, they are in the military or naval service on duty outside the US and Puerto Rico, or live and maintain a main place of business outside the United States and Puerto Rico. Interest applies from the due date until paid. The taxpayer must attach a statement to their return explaining which situation applies.

The 180-day plus 3 1/2 months extension does not apply since Germany is not a qualified combat zone.

Question 33

What are the 2 conditions that trigger ESTIMATED TAX LIABILITY?

Answer 33

1. Individuals will owe at least $1,000 in tax after subtracting withholding and credits
2. Withholding and credits will be LESS than the smaller of one of the following:
   90% of the tax to be shown on this year’s tax return
   100% of the tax shown on last year’s return (110% if AGI is more than $150,000)

Question 34

What information must be included with your estimated tax payment?

Answer 34

1. Name
2. Address
3. SS#

NOTE: Complete and send in the voucher only if you are making a payment by check or money order.

Question 35

What dates are Estimated Tax Payments to be made on?

Answer 35

The 15th day of the 4, 6, 9 months of the tax year, and 15th day of the 1st month of the following tax year?

January 1 – March 31 = April 15

April 1 – May 31 = June 15

June 1 – August 31 = Sept 15

Sept 1 – Dec 31 = Jan 15 of the next year