Unit 1: Preliminary Work With Taxpayer Data

Question 1

Use of Prior Year Returns

Answer 1

• Carryovers
• Net operating losses
• Tax credit carryovers
• Prior year depreciation and asset basis

Question 2

Taxpayer Biographical Information

Answer 2

• Legal name, date of birth, marital status
• Residency Status and/ or citizenship
• Dependent information
• The taxpayer’s identification number (SSN, ITIN, or ATIN)

Question 3

Three types of Taxpayer Identification Numbers (TIN)s

Answer 3

• (SSN) Social Security number
• (ITIN) Individual taxpayer identification number
• (ATIN) Adoption taxpayer identification number

Question 4

ITINs are generally for

Answer 4

Nonresident aliens with a U.S. tax liability

Question 5

Form W-7

Answer 5

(ITIN) application

Question 6

(ATIN) and form used for applying

Answer 6

• Adopted child who does not have an (SSN)
• Form W-7A

Question 7

Record-keeping Requirements for Individuals

Answer 7

Tax return and supporting documentation for 3 Years:
- Identifying sources of income
- Expenses for deductions
- Owned Property improvement costs
- Substantiating items reported
- Aiding in accurate preparation for future tax returns

Question 8

Records Taxpayer should keep

Answer 8

• Income: Forms W-2, 1099, bank statements, pay stubs, brokerage statements, Schedules K-1.
• Expenses: invoices, receipts, Form 1098 mortgage interest.
• Home Purchase or Sale: closing statements, insurance records, receipts for improvement costs.
• Investments: Brokerage statement, mutual fund statement, Forms 1098-DIV.

Question 9

Basic Tax Forms for Individuals

Answer 9

Form 1040
- Schedule 1: Additional Income and Adjusted Income
- Schedule 2: Additional Taxes owed
- Schedule 3: Additional Credits and Payments
Form 1040-SR: Seniors 65 or older
Form 1040-NR: Non-resident “alien” (Not a U.S. citizen)

Question 10

Form 1040-X

Answer 10

Amended U.S. Individual Income Tax Return

Question 11

Federal Income Tax Rates

Answer 11

The applicable tax rate for each successive bracket applies only to the additional amounts of taxable income that fall within that particular bracket

Question 12

Normal Due Date for filing Individual tax return?

Answer 12

April 15

Question 13

Form 4868

Answer 13

Application for Automatic Extension of Time to File

Question 14

3 Groups of taxpayers granted an automatic two-month extension?

Answer 14

• Nonresident aliens, who do not have wage income subject to U.S withholding.
• U.S. citizens or legal U.S. residents who are living outside of the United States.
• Taxpayers on active military service duty outside the U.S.

Question 15

Failure to File penalty

Answer 15

5% of the unpaid tax for each month or part of the month that return is late. This penalty will not exceed 25% of taxpayers unpaid taxes.

Question 16

Failure to Pay penalty

Answer 16

.5% of unpaid taxes for each month.

Question 17

Interest on the amount due

Answer 17

Interest cannot be reduced or abated for reasonable cause.

Question 18

Estimated Taxes Safe Harbor Rule

Answer 18

• 100% of the tax liability on their prior year return.
• 90% of the tax liability on their current year return.

Question 19

Safe Harbor Rule for higher income taxpayers with adjusted gross income higher than $150,000 ($75,000 if MFS)

Answer 19

90% of their expected tax liability for the current year or 110% of the tax shown on their prior year return to avoid an estimated tax penalty.

Question 20

Estimated tax due dates for individuals

Answer 20

• April 15
• June 15
• September 15
• January 15 (of the following year).

Question 21

Estimated taxes for farmers and fisherman

Answer 21

• March 1 deadline: does not have to pay estimate tax if return is filed and all tax owed is paid.
• January 15 deadline: if estimated tax is required.