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Introduction Welcome to the Liberty Tax Service Online Basic Income Tax Course. This tax course is designed to teach you how to prepare basic forms and schedules for individual income tax returns. The manual is based on Internal Revenue Service (IRS) Publication 17, other relevant IRS Publications and form instructions for tax year 2008. Publication extracts are provided at the end of each chapter. The chapter text compliments and supplements the publication extracts. The text and extracts must be read together for a full understanding of the material. Tests, problems, and examples will refer to both publication extracts and text material.
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Liberty Tax Service Basic Income Tax Course WELCOME CLASS ONE
Introduction Welcome to the Liberty Tax Service Online Basic Income
Tax Course. This tax course is designed to teach you how to prepare
basic forms and schedules for individual income tax returns. The
manual is based on Internal Revenue Service (IRS) Publication 17,
other relevant IRS Publications and form instructions for tax year
2008. Publication extracts are provided at the end of each
chapter.The chapter text compliments and supplements the
publication extracts. The text and extracts must be read together
for a full understanding of the material. Tests, problems, and
examples will refer to both publication extracts and text material.
COMPANY PROFILE Founded in 1997, Liberty Tax Service is the fastest
growing retail tax preparation company in the industrys
history.Founder and CEO John T. Hewitt has 39 years of tax industry
experience, the most of any CEO in the tax preparation
business.Hewitt is also the founder of Jackson Hewitt Tax Service
(NYSE: JTX). Liberty Tax Service (www.libertytax.com) operates
3,200 offices throughout the United States and Canada, and has
prepared over 5,000,000 individual income tax returns.The company
focuses on computerized income tax preparation and electronic
filing of returns.Emphasis on customer service including audit
assistance, a money back guarantee and free tax return checking are
just a few of the above and beyond features offered by Liberty Tax
Service. LIBERTY TAX SERVICE IS BUILDING THE #1 FRANCHISE TEAM IN
THE INDUSTRY!
We have the #1 corporate culture in the industry.We are setting the
standard and constantly improving while were having fun!Would you
like to join the Liberty Tax Service team of franchisees, and grow
with the fastest growing international tax service ever? Libertys
franchise opportunity is noted in the franchise industry rankings
for solid growth, excellence and affordability. In January 2008,
Entrepreneur magazine ranked Liberty Tax Service as #3 on its
Franchise 500 overall list of best franchises. Liberty Tax Service
is the only tax service included on Hispanic Trends magazines 2006
and 2007 elite list of the 25 Top Franchises for Hispanics. My
Background Been doing individual, corporate and partnership returns
for over 10 years I have been with Liberty Tax since October 2006 I
own/operate 3 offices currently (East Brunswick, Freehold, Trenton)
Exploring expansion opportunities Liberty Mission Set the standard
Improve each day Have some Fun
These principles is what Liberty Tax Service is built upon. Our
goal is to be the #1 Tax Prep company Office Age & Our Goals
East Brunswick: 5th Tax Season
Freehold:4th Tax Season Trenton: 2nd Tax Season Expansion Increase
Tax Return count 40% Working for Liberty Tax
Examples of Qualities of our Employees Friendly personality Enjoys
working with people Enthusiastic and motivated Works well within a
team Tax knowledge Improves each day THE TAX INDUSTRY An industry
dominated for 50 years by one major player, H&R Block. The
trend toward electronic tax filing is soaring, with a record 86
million individual returns e-filed in tax season 2008, up a robust
12 percent. The IRS reports that about 60% of all returns in 2008
were e-filed. A growing market since more and more people pay taxes
each year. Approximately 62% of all tax return filers paid someone
to prepare their tax return this year (up from 51% in 1996). ONLINE
INCOME TAX COURSE 2009 TABLE OF CONTENT
Introduction; Chapter 1: Filing Information Chapter 2: Exemptions
and Dependents Chapter 3: Filing Status Chapter 4: Wages, Salaries,
Tips, etc and Withheld Taxes Chapter 5: Interest, Dividends, and
Other Income Chapter 6: Standard Deduction and Your Income Tax
Chapter 7: Tax Credits & Midterm Exam (take home) Chapter 8:
Itemized Deductions Chapter 9: Retirement Benefits Chapter 10:
Social Security Benefits & Other Credits ONLINE INCOME TAX
COURSE 2009 TABLE OF CONTENT
Chapter 11: Basis of Property and Capital Gains Chapter 12:
Depreciation Chapter 13: Other Itemized Deductions Chapter 14:
Profit or Loss from Business Chapter 15: Rental Real Estate,
Royalties, Partnerships Chapter 16: Adjustments Chapter 17: Other
Taxes Chapter 18: Additional Payments, Penalties, etc. Chapter 19:
Extensions, Amended Returns, Electronic Filing, & Final Exam
(take home) Final Exam Review Chapter 1: Filing Information
Chapter Content Overview of Form 1040, U. S. Individual Income Tax
Return Who Must and Who Should File a Tax Return Other Filing
Information Key Ideas Objectives Become Familiar with Form 1040
Identify Who Must and Who Should File a Return Understand Other
Basic Filing Information FILING A TAX RETURN Filing a Tax Return
means sending your return to the Internal Revenue Service (IRS) by
mail or by computer. The information on your return determines your
tax liability on the income you received and the amount of the
refund you are due or the amount you need to pay to the IRS. Before
preparing a return, you need to determine whether you are required
to file or whether you should file even if you are not required to
do so. Filing requirements are shown in charts prepared by the
IRS.In this chapter, you will learn how to read the charts along
with some other basic filing information. First, to provide an
overview of the tax preparation process and to introduce some of
the terms and concepts you will need to know to prepare a tax
return, let us take a look at each section of Form 1040, U.S.
Individual Income Tax Return. The Form 1040 overview will also
identify the chapters that discuss each topic in detail. FORM 1040
OVERVIEW Tax Year - Your tax is figured on the amount of income you
receive and the expenses you incur during a tax year.For most
individuals, the tax year is a calendar year. This Form 1040 is for
tax year 2008. FORM 1040 OVERVIEW Tax Year FORM 1040 OVERVIEW Tax
Year - Your tax is figured on the amount of income you receive and
the expenses you incur during a tax year.For most individuals, the
tax year is a calendar year. Label - If you do not receive a
preprinted label from the IRS, enter your name, address and social
security number (and your spouses name and/or social security
number if applicable) here. FORM 1040 OVERVIEW Label FORM 1040
OVERVIEW Tax Year - Your tax is figured on the amount of income you
receive and the expenses you incur during a tax year.For most
individuals, the tax year is a calendar year. Label - If you do not
receive a preprinted label from the IRS, enter your name, address
and social security number (and your spouses name and/or social
security number if applicable) here. Filing Status (Covered in
Chapter 3) - Your filing status generally depends on whether you
are considered married or unmarried on the last day of the tax
year. FORM 1040 OVERVIEW Filing status FORM 1040 OVERVIEW Tax Year
- Your tax is figured on the amount of income you receive and the
expenses you incur during a tax year.For most individuals, the tax
year is a calendar year. Label - If you do not receive a preprinted
label from the IRS, enter your name, address and social security
number (and your spouses name and/or social security number if
applicable) here. Filing Status (Covered in Chapter 3) - Your
filing status generally depends on whether you are considered
married or unmarried on the last day of the tax year. Exemptions
(Covered in Chapter 2) -Exemptions further reduce the amount of
your income that is taxed. On page 2 of Form 1040, you subtract a
certain dollar amount for each exemption you claim. FORM 1040
OVERVIEW Exemptions FORM 1040 OVERVIEW Income (Covered in Chapters
4, 5, 9, 10, 11, 14 & 15) - All income in the form of money,
goods, services and property you receive during the tax year is
reported here. FORM 1040 OVERVIEW Adjusted Gross Income (Covered in
Chapter 16) - Adjustments are various items you are allowed to
DEDUCT (subtract) from your total income. Total income minus
adjustments is called ADJUSTED GROSS INCOME or AGI. FORM 1040
OVERVIEW Tax And Credits (Covered in Chapters 6, 7, 8, 13) - Your
TAXABLE INCOME (the amount of income on which your income tax is
computed) is figured here by subtracting the STANDARD DEDUCTION or
your ITEMIZED DEDUCTIONS (a total dollar amount of certain expenses
that may be used in place of the standard deduction) and exemptions
from your AGI.Credits reduce your tax. The credits in this section
of Form 1040 are called NONREFUNDABLE CREDITS (if you do not owe
any income tax, these credits do not result in a refund of the
unused amount of the credit). FORM 1040 OVERVIEW
Non-refundableCredits Taxable Income FORM 1040 OVERVIEW Other Taxes
(Covered in Chapter 17) - Certain additional taxes such as
self-employment tax or social security tax on tips are shown here.
These taxes are added to your tax to arrive at your TOTAL TAX. FORM
1040 OVERVIEW Payments (Covered in Chapters 4, 10, 18) - Generally,
as you receive income you are required to pay at least 90% of your
income tax liability during the tax year. WITHHELD TAXES are paid
to the IRS from money due to you by the payer (e.g., your
employer). ESTIMATED TAX PAYMENTS are tax payments you paid
directly to the IRS. FORM 1040 OVERVIEW Payments FORM 1040 OVERVIEW
Payments (Covered in Chapters 4, 10, 18) - Generally, as you
receive income you are required to pay at least 90% of your income
tax liability during the tax year. WITHHELD TAXES are paid to the
IRS from money due to you by the payer (e.g., your employer).
ESTIMATED TAX PAYMENTS are tax payments you paid directly to the
IRS. Refund - You are entitled to a refund if the payments you made
(and/or your refundable credits) are greater than the total tax.
FORM 1040 OVERVIEW Refund FORM 1040 OVERVIEW Payments (Covered in
Chapters 4, 10, 18) - Generally, as you receive income you are
required to pay at least 90% of your income tax liability during
the tax year. WITHHELD TAXES are paid to the IRS from money due to
you by the payer (e.g., your employer). ESTIMATED TAX PAYMENTS are
tax payments you paid directly to the IRS. Refund - You are
entitled to a refund if the payments you made (and/or your
refundable credits) are greater than the total tax. Amount You Owe
(Covered in Chapter 18) - If you have not paid the full amount of
the tax you are liable for, you must pay the additional amount due
with your return. FORM 1040 OVERVIEW Amount You Owe FORM 1040
OVERVIEW Payments (Covered in Chapters 4, 10, 18) - Generally, as
you receive income you are required to pay at least 90% of your
income tax liability during the tax year. WITHHELD TAXES are paid
to the IRS from money due to you by the payer (e.g., your
employer). ESTIMATED TAX PAYMENTS are tax payments you paid
directly to the IRS. Refund - You are entitled to a refund if the
payments you made (and/or your refundable credits) are greater than
the total tax. Amount You Owe (Covered in Chapter 18) - If you have
not paid the full amount of the tax you are liable for, you must
pay the additional amount due with your return. Third Party
Designee - You can allow the IRS to discuss your return with a
friend, family member, any other person or the paid preparer by
checking the Yes box and completing the requested information in
this section of your return. FORM 1040 OVERVIEW Third Party
Designee FORM 1040 OVERVIEW Payments (Covered in Chapters 8, 10,
18) - Generally, as you receive income you are required to pay at
least 90% of your income tax liability during the tax year.
WITHHELD TAXES are paid to the IRS from money due to you by the
payer (e.g., your employer). ESTIMATED TAX PAYMENTS are tax
payments you paid directly to the IRS. Refund - You are entitled to
a refund if the payments you made (and/or your refundable credits)
are greater than the total tax. Amount You Owe (Covered in Chapter
18) - If you have not paid the full amount of the tax you are
liable for, you must pay the additional amount due with your
return. Third Party Designee - You can allow the IRS to discuss
your return with a friend, family member, any other person or the
paid preparer by checking the Yes box and completing the requested
information in this section of your return. Sign Here - You must
sign and date the return and give your occupation. Both you and
your spouse must sign even if only one of you had income.
Generally, anyone you paid to prepare the return must sign in the
PAID PREPARERS USE ONLY section. FORM 1040 OVERVIEW Sign Here WHO
MUST FILE AND WHO SHOULD FILE
You must file if you are a: U.S. citizen U.S. resident Resident of
Puerto Rico And you meet the filing requirements that apply to you.
Different requirements apply if you can be claimed as a dependent
on anothers tax return or if you owe certain taxes in addition to
income tax. Filing Requirements For Most Taxpayers
The filing requirements for most taxpayers are determined by three
factors. These are: GROSS INCOME FILING STATUS AGE Filing
Requirements For Most Taxpayers
Gross Income - includes all income in the form of money, goods,
services and property you received during the tax year that is not
exempt from tax including any income from sources outside the U.S.
(even if you may exclude part or all of it). Each type of income
that must be reported will be discussed in subsequent chapters.
Income that is subject to tax includes the following: Wages,
salaries, bonuses and commissions Certain types of fringe benefits
Tips Unemployment compensation Interest (some types of interest are
tax exempt) and dividends Refund of state and local taxes (for some
taxpayers who itemize deductions) Alimony or separate maintenance
payments received Income from self-employment Others on pages 1-6
and 1-7 in your book. Filing Requirements For Most Taxpayers
2. Filing Status - Depends on whether you are single or married and
on your family situation. Your filing status is determined on the
last day of your tax year, which is December 31 for most taxpayers.
Each filing status will be discussed in Chapter 3. 3. Age - If you
are age 65 or older on the last day of your tax year, your gross
income for your filing requirement can generally be higher than
that of other taxpayers. You are considered to be age 65 on the day
before your 65th birthday. For example, if your 65th birthday was
on January 1, 2009, you are considered to be 65 in 2008. Filing
Requirements For Most Taxpayers
If you are a U.S. citizen or resident alien who cannot be claimed
as a dependent, you must file a return if your gross income is at
least the amount shown for your age and filing status in Table 1-1.
Filing Requirements Problem 1
Tom was not married at the end of 2008 and he lived alone. His
marital status is single and his filing status is single. On
December 31, 2008 he was 35 years old so he chooses under 65 as his
age. In 2008, he had a part time job as a carpenter for which he
received wages of $8,650. He also made $300 from his snow plowing
business. Tom does not have to file a return. True or False? Filing
Requirements Problem 1
Tom was not married at the end of 2008 and he lived alone. His
marital status is single and his filing status is single. On
December 31, 2008 he was 35 years old so he chooses under 65 as his
age. In 2008, he had a part time job as a carpenter for which he
received wages of $8,650. He also made $300 from his snow plowing
business. Tom does not have to file a return. False His income from
wages ($8,650) plus his self-employment income ($300) gives him a
gross income of $8,950. Because his gross income was at least
$8,950, Tom must file a return. Filing Requirements Problem 2
Bob and Emily were married and living together at the end of Bob
turned 65 on January 1, 2009 and Emily was 67 at the end of They
are both retired. Bob receives a pension of $16,600 and they
received $3,250 in interest and dividends. Their marital status is
married living with spouse, and married filing a joint return is
their filing status. They have no other income and they do not have
to file a return. True or False? Filing Requirements Problem
2
Bob and Emily were married and living together at the end of Bob
turned 65 on January 1, 2009 and Emily was 67 at the end of They
are both retired. Bob receives a pension of $16,600 and they
received $3,250 in interest and dividends. Their marital status is
married living with spouse, and married filing a joint return is
their filing status. They have no other income and they do not have
to file a return. True Because Bob turned 65 on January 1 he is
considered to be 65 at the end of 2008, so both spouses are 65 or
older. Their gross income is $19,850 (pension of $16,600 plus
interest and dividends of $3,250). They do not have to file a
return because their gross income is less than $20,000. Filing
Requirements Problem 3
Joe is married but has not lived with his wife for two years. Their
child lives with Joe. Joe was age 40 in 2008 and his gross income
was $10,800. Joes marital status is married, with a child, living
apart and his filing status is head of household.Joe does not have
to file a return. True or False? Filing Requirements Problem
3
Joe is married but has not lived with his wife for two years. Their
child lives with Joe. Joe was age 40 in 2008 and his gross income
was $10,800. Joes marital status is married, with a child, living
apart and his filing status is head of household.Joe does not have
to file a return. True The gross income limit for his age and
filing status is $11,500 so he does not have to file a return. If
Joe had to use the married filing separate filing status, he would
have to file a return because his gross income is more than $3,500.
Filing Requirements For Dependents
If you can be claimed as a dependent on someone elses tax return,
the factors that determine if you must file are: Gross Income
EARNED INCOME (includes wages, tips and professional fees) UNEARNED
INCOME (includes interest, dividends, pensions, unemployment
compensation, and taxable social security benefits) Marital Status
Age Blindness Filing Requirements For Dependents Filing
Requirements For Dependents Filing Requirements For Dependents
-Problem 1
Loretta was 16 years old and single in 2008 and can be claimed as a
dependent by her parents.In 2008, Loretta received $901 in interest
from a bank account. This was her only income. Does Loretta need to
file a return? Yes or No? Filing Requirements For Dependents
-Problem 2
Lorettas sister, Eileen, was 15 years old and single in 2008 and
can be claimed as a dependent by her parents. She earned $2,000
from her job at the supermarket. She also received $100 in interest
from a bank account. Does Eileen have to file a return? Yes or No?
Filing Requirements For Dependents -Problem Review
Table 1-3 Problem 1, Yes Because the interest is unearned income
and is more than $900, Loretta must file a return. If her unearned
income had been $900, she would not be required to file a return.
Problem 2, No Eileens unearned income of $100 is not more than
$900; her earned income of $2,000 is not more than $5,450 and her
gross income ($2,100) is not more than the larger of $900 or $2,300
(her earned income of $2,000 + $300). Eileen does not have to file
a return. Other Situations When You Must File a Return Other
Situations When You Must File a Return Problem 1
May Day was not married and was age 67 in She received taxable
pension benefits in the amount of $6,000 and $1,000 in interest and
dividends. She makes extra money cleaning houses.In 2008, her net
income from housecleaning was $800. May does have to file a return.
True or False? Other Situations When You Must File a Return Problem
1
May Day was not married and was age 67 in She received taxable
pension benefits in the amount of $6,000 and $1,000 in interest and
dividends. She makes extra money cleaning houses.In 2008, her net
income from housecleaning was $800. May does have to file a return.
True Even though her gross income of $7,800 is below $10,300 (see
Table 1-1) she must file a return because her net self-employment
income is at least $400 (see Table 1-4). Other Filing
Information
You must use either Form 1040EZ, 1040A or 1040 along with the
appropriate additional forms and schedules to file your return. If
you cannot use Form 1040EZ or Form 1040A, you must use Form Table
1-5 summarizes the requirements for using each form. Other Filing
Information
Table 1-5 Filing Status Number of exemptions Taxable Income Amount
Only income from Form 1040 EZ Single Married, Filing Joint (under
age 65 and not blind) No more than two personal (yourself and
spouse-no dependents) Only if taxable income (line 6) less than
$100,000 Wages, Salaries, Tips, Taxable Scholarship and Fellowship
Grants, taxable Interest of $1,500 or less, Unemployment
Compensation, Alaska Permanent Fund Dividends No advanced EIC
payments 1040A Married, Filing Joint Married, Filing Separate Head
of Household Qualifying Widow(er) with dependent child All the you
are entitled to claim income (line 27) less than Interest,
Dividends, Capital Gains, Pensions, Annuities, and IRA
distributions, Unemployment Compensation, Taxable Social Security
and/or Railroad Retirement Benefits, 1040 Exemptions you are
entitled to claim Any amount of taxable 43) Interest, Dividends,
Pensions, Annuities, and IRAs, Unemployment Compensation, Taxable
Social Security and/or Railroad Retirement Benefits,
Self-employment Income, Taxable State and Local Income Tax Refunds,
Capital Gains, Gain from the Sale of your Home, Alimony Received,
All other income sources Other Topics Electronic Filing - Instead
of mailing a paper return, you can electronically file by
computer.If you file electronically using tax preparation software
or through a tax professional, you can sign your return
electronically by creating your own Personal Identification Number
(PIN). Taxpayer Identification Numbers Social Security Number - You
must enter a social security number for yourself, your spouse and
each dependent you claim in the space provided on your return. ITIN
- If you are a resident or nonresident alien who is not eligible
for a social security number, you must apply to the IRS for an
Individual Taxpayer Identification Number (ITIN) using Form W-7,
Application for IRS Individual Taxpayer Identification Number
(ITIN) ATIN - If you are in the process of adopting a child who is
a U.S. citizen or resident and cannot get a social security number
for the child until the adoption is final, you may be able to get
an Adoption Taxpayer Identification Number (ATIN) from the IRS.Once
the adoption is final, you must apply for a social security number
for the child. Other Topics Presidential Election Campaign Fund -
This fund was set up to help pay for presidential election
campaigns. You may have $3 go to the presidential election campaign
fund by checking the yes box in the heading of your tax return. If
you check a box, it will not change the amount of your refund or
the tax you pay. Due Date - In general, individual income tax
returns have a due date (the date by which they must be filed) of
April 15 of the year following the tax year. If the 15th falls on a
Saturday, Sunday or legal holiday, the due date is delayed until
the next business day. You have filed on time if your return is
properly addressed and postmarked by the due date. If you file
after the due date, the return is considered filed when it is
received by the IRS. This can be important if you are assessed
penalties or interest or are filing a prior year return for a
refund. Other Topics Accounting Method Your accounting method
determines how you report your income and expenses. Cash Method -
You report all items of income in the year you actually or
constructively receive them. You constructively receive income when
it is credited to your account or in any way becomes available to
you. With the cash method, you deduct expenses in the year you pay
them. Most individual taxpayers use the cash method. Accounting
Method Problems
1. Fred completes a carpentry job in November 2008 and is paid in
Must he report that income on his 2008 tax return? Yes or No? 2.
Janet receives a valid paycheck on December 31, Is this part of her
2008 gross income even if she cashes the check in January 2009? 3.
Anita receives a bill from the hospital in December She does not
pay the bill until January She cannot include this bill in figuring
whether to take itemized deductions for 2008. True or False? 4. If
Fred the carpenter in the above example used the accrual method, he
would report the income from a job completed in November on his
2008 return whether he was paid in November or January. Accounting
Method Problems
Fred completes a carpentry job in November 2008 and is paid in Must
he report that income on his 2008 tax return? Yes Janet receives a
valid paycheck on December 31, Is this part of her 2008 gross
income even if she cashes the check in January 2009? Anita receives
a bill from the hospital in December She does not pay the bill
until January She cannot include this bill in figuring whether to
take itemized deductions for 2008. True If Fred the carpenter in
the above example used the accrual method, he would report the
income from a job completed in November on his 2008 return whether
he was paid in November or January. Other Topics Rounding Off
Dollars - On your tax return, you may round off cents to whole
dollars. Do this by dropping amounts under 50 and increasing
amounts of 50 and over to the next dollar. $10.49 is rounded off to
$10.00 $10.50 is rounded off to $11.00 Refunds - If you paid more
income tax than you owed and are due a refund, you can choose to
receive a paper check from the IRS or have the funds deposited
directly into your savings or checking account or if using direct
deposit you may be able to split your refund between two or three
accounts. You can also apply all or part of the overpayment to your
next years estimated tax. Where To File - Where you file your tax
return is determined by where you are living when you file the
return.See Table 1-6 in your book. Other Topics Decedents (Persons
Who Died) - The same filing requirements apply to decedents as
apply to individuals. If the decedent met the filing requirements
on the date of death, a final return must be filed by the surviving
spouse, or other personal representative (executor, administrator
or anyone in charge of the decedents property).When filing the
return, the word DECEASED, the decedents name, and the date of
death should be written across the top of the tax return. A
decedents return may be filed electronically. Filing Information
KEY IDEAS
The requirement to file a return is usually determined by your age,
your filing status, and your gross income. If you can be claimed as
a dependent on anothers return, you may have to file even if you do
not meet the gross income requirement for your age and filing
status. There are other conditions, such as earning $400 net income
from self-employment, that require you to file. Filing Information
CLASSWORK 1: True or False.
You do not need to enter a social security number or
individualtaxpayer identification number on your tax return. You do
not have to file a return if you do not earn wages. If you are
self-employed with no other income, you have to file a return if
your net income from self-employment is $400 or more. Generally,
dependent children who meet the filing requirements have to file a
tax return. A single person who has wages of $2,000 and federal
withholding of $120 should file a return even if he or she is not
required to file. Whether you are required to file a tax return
depends only on the amount of income you receive. 7.A dependent
whose only income is interest from a savings account is not
required to file a return. Filing Information CLASSWORK 1: True or
False.
8. A single person who is 68 during the tax year can have a higher
amount of gross income before he or she must file than a single
person who is 63. 9. If you are not a dependent and your gross
income is less than the filing requirement for your age and filing
status on Table 1-1, you may still be required to file a return.
10. You can file a 1040EZ if you are married filing separately. 11.
Exemptions and deductions are subtracted from taxable income. 12.
Interest from a savings account is an example of earned income. 13.
On Form 1040 taxable income is the same as the AGI. 14. The total
of all income minus any adjustments is called adjusted gross
income. Filing Information CLASSWORK 1: True or False.
You do not need to enter a social security number or
individualtaxpayer identification number on your tax return. F You
do not have to file a return if you do not earn wages. F If you are
self-employed with no other income, you have to file a return if
your net income from self-employment is $400 or more. T Generally,
dependent children who meet the filing requirements have to file a
tax return. T A single person who has wages of $2,000 and federal
withholding of $120 should file a return even if he or she is not
required to file. T Whether you are required to file a tax return
depends only on the amount of income you receive. F 7.A dependent
whose only income is interest from a savings account is not
required to file a return. F Filing Information CLASSWORK 1: True
or False. 8. A single person who is 68 during the tax year can have
a higher amount of gross income before he or she must file than a
single person who is 63. T 9. If you are not a dependent and your
gross income is less than the filing requirement for your age and
filing status on Table 1-1, you may still be required to file a
return. T 10. You can file a 1040EZ if you are married filing
separately. F 11. Exemptions and deductions are subtracted from
taxable income. F 12. Interest from a savings account is an example
of earned income. F 13. On Form 1040 taxable income is the same as
the AGI. F 14. The total of all income minus any adjustments is
called adjusted gross income. T Filing Information CLASSWORK 2:
Answer the following questions.
When does the tax year end for a calendar year taxpayer? Most
taxpayers use which accounting method? What is the normal due date
for a calendar year taxpayers return? Which tax return form do you
have to use if you receive self-employment income? Which return
form may be used (if other conditions are met) only by single
taxpayers and joint filers with no dependents? What three factors
determine whether most individuals who are not claimed as
dependents must file a tax return? What are the circumstances when
you should file even if you do not have to? Filing Information
CLASSWORK 2: Answer the following questions.
When does the tax year end for a calendar year taxpayer? December
31 Most taxpayers use which accounting method? Cash What is the
normal due date for a calendar year taxpayers return? April 15
Which tax return form do you have to use if you receive
self-employment income? Form 1040 Which return form may be used (if
other conditions are met) only by single taxpayers and joint filers
with no dependents? Form 1040EZ Filing Information CLASSWORK 2:
Answer the following questions. What three factors determine
whether most individuals who are not claimed as dependents must
file a tax return? Gross Income, Filing Status, Age What are the
circumstances when you should file even if you do not have to? If
you had income tax withheld, if you qualify for the earned income
credit, or if you qualify for the additional child tax credit, and
if you qualify for the health coverage tax credit. General
Guidelines for Completing All Basic Course Problems
The excerpts from the IRS publications are written for the taxpayer
so they refer to you (meaning the taxpayer). Our text also refers
to you. When reading the text and the excerpts the student needs to
remember that you does not refer to him or her but to the taxpayer
and not to the student tax preparer. General Guidelines The
following information applies to all problems unless specifically
addressed. Determination to contribute or not to contribute to the
Presidential Election Campaign Fund is left up the student. The
box(es) can be yes, no, or blank. On Schedule B always indicate
that there are no foreign bank accounts. The decision to use or not
use the Third Party Designee is left to the instructor. This area
is left blank on the answers. Federal estimated payments are always
paid in equal installments on the exact due date unless stated
otherwise. Unless otherwise stated or from a state with no personal
income tax, use state income tax withheld instead of sales tax.
Unless provided, the local sales tax will not be calculated. Do not
calculate the Recovery RebateCredit(line 70 of Form 1040) for any
of the problems Unless otherwise stated, if eligible, the 50%
special depreciation allowance was or will be used. Questions &
Answers