Filing
What is the filing requirement for MFS?
$5
What is the difference between tax credits and tax deductions?
Tax credits reduce tax dollar for dollar
Tax deductions reduce income dollar for dollar
Due Diligence applies to which areas of the tax return.
CTC EIC HOH AOC
What is the maximum student loan deduction per person/per return?
$2500 per return - combo of taxpayer and spouse
Are scholarships and fellowships taxable?
It depends :O).
Generally, it is excludible if the scholarship/fellowship is used for qualified education expenses. If the scholarship/fellowship is used for room and board and or living expenses, it is taxable.
What requirements must be met for a taxpayer to qualify to file a head of household?
The taxpayer must be unmarried (or qualify as unmarried for tax purposes). The taxpayer must pay over half the cost of maintaining a home which for over half the year was the main home for the taxpayer and their qualifying child or qualifying relative.
How much is the Child Tax Credit worth?
How much is the Additional Child Tax Credit worth?
How much is the Other Dependent worth?
Up to $2,000 per qualifying child.
Up to $1400 per qualifying child.
Up to $500 per qualifying dependent.
A Tax Professional should ask additional questions whenever the taxpayer's information seems:
Incorrect, inconsistent, or incomplete.
Who is an eligible educator?
A teacher, teacher’s aide, counselor or administrator in an elementary or secondary school and who worked at least 900 hours during the school year.
How will the taxpayer’s employer paying $500 of a taxpayer’s $2,000 childcare expenses affect the Child and Dependent Care Credit, and on which form is it reported to the taxpayer?
Eligible expenses must be reduced by the $500. Cannot double dip tax benefits for this money.
This is reported in Box 10 on Form W2.
Under what circumstances might a taxpayer be required to file a return, even though they do not meet the gross income filing requirements?
If they owe social security/Medicaid on unreported tips, received HAS, MSA distributions, had self-employment profit of $400 or more, or received the premium tax credit.
What additional requirements must be met for a taxpayer to be eligible to claim the Child Tax Credit for their qualifying child.
The child must be a qualifying child
The child must be the taxpayers dependent
The child must be under 17 years old at the end of the tax year
The child must be a citizen, national or resident of the United States.
What taxpayer information is confidential?
Any information that could potentially identify the taxpayer. This includes name, address, phone number, social security number, place of employment and any other information from the tax return.
Who may not claim a student loan interest deduction?
Someone claimed as a dependent by someone else and someone filing MFS.
What is the purpose of Form 2120, Multiple Support Declaration?
If two or more persons provided more than half the support for a person, they can agree among themselves who will claim the dependent. The person not claiming has to sign and agree not to claim the dependent.
Under what circumstances might a taxpayerwant to file a return, even though they do not meet the gross income filing requirements?
Refund of withholdings/estimated payments or potential refundable credit.
If a taxpayer has no qualifying children, what are the four qualifications they must meet to receive the Earned Income Tax Credit?
1) be at least 25 but younger than 65
2) not be claimed as a dependent on another taxpayers return
3) live in the United states for more than half the year
4) have earned income and AGI of less than $15,270 ($20,950 if MFJ)
What do I do if the answers to my questions seem to be incorrect, incomplete or inconsistent?
be specific
Ask more questions and document all questions and answers in your preparer notes.
What is the maximum educator expense deduction?
Return shows $250 but we enter total amount
What is the difference between injured spouse allocation and innocent spouse relief?
Injured spouse allocation – protects the taxpayer’s share of the refund from being taken for the other spouse’s separate debts for federal or state income tax, unpaid student loans, unpaid child or spousal support or unemployment repayments. Innocent spouse relief protects a taxpayer who has filed a joint return and their spouse has underestimated income and/or overestimated expenses/credits and the taxpayer did not know this to be false.
What are some deterrents to using the Married Filing Separately filing status?
State at least 3
Ineligible for some credits
Ineligible for some deductions
No Net Operating Losses allowed
Lower Standard Deduction
Very low filing requirement
Cost of two returns
What are the six qualifications that must be met for any taxpayer to be eligible to claim the Earned Income Tax Credit?
1) have earned income
2) have a valid SSN
3) not be MFS
4) Be a US citizen or resident alien for the entire year
5) not file Form 2555 for foreign earned income
6) have investment income of 3500 or less
What is the third due diligence requirement for the EITC, CTC/ACTC, AOTC and HH, and how does a paid preparer meet this requirement for EITC, and CTC/ACTC?
Satisfy the knowledge requirement. The paid preparer cannot know of or have any reason to know that any information used to determine the taxpayer’s eligibility for the credit is incorrect, incomplete or inconsistent. The paid preparer must know the law and use adequate questions to determine eligibility.
$707
10000 x 92.53% = 9235
9235 x 15.3% = 1413
1413 x 50% = 707
What is a thorough interview?
Starting the interview with general questions and then following up with specific questions as needed if the information is incorrect, incomplete or inconsistent.