Study Unit One: Filing Requirements: Preliminary Work To Prepare Tax Returns

Question 1

What does having the prior-year return help you do to when filing a current-year return?

Answer 1

• Prevent gross mathematical errors
• identify significant changes
• increase accuracy and efficiency

Question 2

What items should you collect from the taxpayer in order to prepare their tax return correctly?

Answer 2

-Prior-year tax return
-Previous IRS Correspondence
-Biographical Information
-Nationality
-Information Returns - Providing potential sources of taxpayer gross income
-Determine if Individual or Business
-Items affecting Future Returns
-All Required Taxes Filed
-Special Filing Requirements
-Reporting Foreign Financial Accounts and Specified
Foreign Assets (FBAR)
-Global Intangible Low-Taxed Income (GILTI)
-Transactions with Foreign Trusts
-Interest in Foreign Partnerships
-Voluntary Disclosure Program

Question 3

What Biographical information should you request from the taxpayer when preparing their tax return?

Answer 3

age
date of birth
marital status
dependents

Question 4

If you are liable for Income Tax which Form(s) should you fill out and when is it due?

Answer 4

1040 and Schedule C

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

Question 5

If you are liable for Self-Employment Tax, which Form(s) would you fill out and when is it due?

Answer 5

Schedule SE

Filed with Form 1040
same deadline as 1040

Question 6

If you are liable for Estimated Tax, which Form(s) would you fill out and when is it due?

Answer 6

Form 1040-ES

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

Question 7

If you are liable for Social Security and Medicare Taxes and Income Tax Withholding, which Form(s) would you fill out and when is it due?

Answer 7

Form 941 or 944

April 30, July 31, October 31, and January 31
See Pub. 15

Question 8

If you are liable for providing information on SS and Medicare taxes adn Income Tax WH, which Form(s) would you fill out and what are their due dates?

Answer 8

Form W-2 (to employee) - Jan. 31

Forms W-2 and W-3 (to the SS Administration) - Jan. 31

Question 9

If you are liable for Federal Unemployment (FUTA) Tax, which Form(s) would you fill out and when are they due?

Answer 9

Form 940

January 31

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

Question 10

Why is it important to find out the age of the TP?

Answer 10

Determines if (s)he qualifies for additional deductions (65 and over), retirement distributions, dependency, etc.

Question 11

Which filing status tends to increase beneficial dollar limits for deductions and credits?

Answer 11

Married Filing Jointly

Question 12

What does would previous IRS correspondences (e.g., letters, notices) likely provide to you as a tax preparer?

Answer 12

Insight into issues still affecting the current return. IRS correspondences should be reviewed to ensure, among other things, compliance with prior audits, adjustments, and judgements.

Question 13

What are the 3 nationality status for tax filing purposes?

Answer 13

U.S. Citizen

Resident Alien (passed Green card and Substantial Presence Tests)

Nonresident Alient (not a U.S. Citizen)

Question 14

What is a Dual-Status Alien?

Answer 14

Choose to be treated as a U.S. resident for part of the year. This usually occurs in the year of arrival in or departure from the United States.

Question 15

What do information Returns Provide? List the top 3 information returns.

Answer 15

Information Returns Provide potential sources of taxpayer gross income.

Top 3 are:

W-2 - Wage and Tax Statement
W-2G - Certain Gambling Winnings
Forms 1099 (B, C, DIV, G, INT, K, MISC, OID, PATR, Q, R, S, SA) - Procedes from various financial situations.

Question 16

Why is it important to determin if an individual and/or a business entity is involved?

Answer 16

Because businesses have certain deductible taxes that individual returns do not.

Personal, living, or family expenses are not deductible unless the Code specifically provides otherwise. Nondeductible expenses include:

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

Question 17

Name certain items that can affect future returns that may be needed to file current-year returns?

Answer 17

State Income Tax Refund
AMT for credit
gain or loss carryover
charitable gift carryover
Schedule D
Form 8801
Etc…

Question 18

Under All Required Taxes filed, which taxes may a individual tax payer be required to file?

Answer 18

Income Tax
Withholding (estimated tax)
FICA (SE Tax) 
FUTA
AMT
Estate Tax
Gift Tax
GST Tax

Question 19

Which Taxpayers responsible for their world wide income?

Answer 19

U.S. Citizens and Resident Aliens (or those choosing to be treated as U.S. resident like those who want to file a joint return and are married to a US citizen or resident alien).

Question 20

When do you have to file Form FinCEN Report 114

Answer 20

If you are a U.S. Citizen, resident, or person doing business in the US who as an ownership interest in, or signatory authority or other authority over, a financial account (or several accounts) in a foreign country with an aggregate value in excess of $10,000 at any time during the calendar year.

Question 21

When is FinCEN Report 114 Due and how do you submit it?

Answer 21

It is due on April 15th or October 15th with an extension.

FBAR is filed online with the Financial Crimes Enforcement Network each year.

Question 22

What determines if a TP income tax return must be filed

Answer 22

TP’s income, filing status, and age - generally.

Question 23

What penalties are you subject to if you fail to file FBAR?

Answer 23

Subject to Civil and criminal penalties.

Question 24

What are some differences between Form 8938 and FBAR?

Answer 24

Form 8938 is filed with your return, where FBAR is filed online with the Financial Crimes Enforcement Network (FCEN) by april 15th every year.

Form 8938 is filed with any annual return.

Filing thresholds for Form 8938 and FBAR are different, and the foreign financial assets that must be reported on Form 8938 are not limited to bank and financial accounts.

Question 25

What if Form 5471?

Answer 25

Information Return of U.S. Persons With Respect
to Certain Foreign Corporations

used by certain US Citizens and residents who are officers, directors, or shareholders in certain foreign corporations.

This form is filed with the tax return.

Question 26

What is Form 8938?

Answer 26

Statement of Specified Foreign Financial Assets

Use Form 8938 to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.

With 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 (doubles with MFJ).

Not required to file if not required to file a tax return.