Tax Basics
What are the two most common outcomes of filing a tax return?
Owing additional taxes (underpaid taxes throughout the filing year) or receiving a refund (overpaid taxes throughout the filing year)
What is the difference between a nonrefundable credit and a refundable credit?
Nonrefundable credits reduce the taxpayer's tax liability – only to zero, while refundable credits allow the taxpayer to receive the remainder of the credit value as a refund.
Name 3 common tax forms:
W-2
1099-SSA
1099-R
How do I treat an ITIN as opposed to an SSN for tax filing purposes in TaxSlayer?
For our filing purposes, treat them the same way on TaxSlayer.
Does the 2024 Tax Year have larger or smaller income thresholds as opposed to 2023?
Larger
What type of deduction is typically applied to a client's tax return? How do you decide which deduction to apply?
I'm a second-year at UVA filing my taxes. Should I claim the American Opportunity Credit or Lifetime Learning Credit for my applicable expenses?
I should claim the American Opportunity Credit (partly refundable) because I am in the midst of my first 4 years of higher education. The Lifetime Learning Credit is less advantageous (nonrefundable) and should be applied after I am finished with my first 4 years of higher education.
What is a capital gain/loss?
When a person sells a capital asset, the sale normally results in a capital gain or loss. A capital asset includes inherited property (e.g., a car or a home) or property someone owns for personal use or as an investment (e.g., stocks and bonds).
When I finish filling out the return and I get to the Summary page of TaxSlayer, would I typically choose paper return or e-file?
E-file!!!! Unless otherwise specified and discussed with a PD/SM.
Why do income thresholds and tax brackets typically increase year-to-year?
Inflation
I'm filing for the 2024 Tax year. My spouse died in 2024, I have 2 children, and I didn't remarry. What Filing Status should I claim?
I would claim Married Filing Jointly with my deceased spouse for the year of death — since I didn't remarry during that tax year. For the next 2 years following my spouse's death I can claim the Qualifying Widow(er) status as long as:
After these 2 years following my spouse's death I would file normally (Single, Head of Household, Married Filing Jointly or Separately) depending on the normal criteria.
What is the difference between a credit and a deduction?
A credit is a direct reduction of the taxpayer’s liability, while a deduction is the amount subtracted from the AGI to further decrease taxable income
I received distributions of a company's earnings as a shareholder of a stock. What form would this be reported on?
I would have a 1099-DIV displaying this information.
What is the criteria that needs to be met in order to claim a dependent under normal circumstances(Name at least 2)?
The dependent cannot be the qualifying child or relative of any other person
The dependent cannot have provided more than 50% of their own support
The dependent must have had less than $5,050 of income within the tax year
The taxpayer must have provided more than 50% of support for the dependent
The taxpayer must have paid more than half the cost of maintaining a home for the dependent
It is important to note that if one of these criterion is not met, it doesn't automatically disqualify the person-in-question from being a dependent, which is why it is important to use the IRS website link provided in the training for ambiguous situations.
If I'm over 18 with no dependents, filing as single, and make $10,001 would I qualify for the Earned Income Credit for 2024?
Yes I would as long as all the other criteria is met. The income threshold for a taxpayer filing as single with zero dependents is $18,591 for the 2024 tax year.
List 2 common adjustments that you may have to make on a return:
Name 2 common itemized deductions that can be made on a client's tax return:
I am self-employed and have expenses I want to report to reduce my taxable income. What proof do I need to provde?
Tricky question. I don't necessarily need to provide receipts or anything physical at the time of the appointment. A paper with all my expenses written out will suffice for CASH documentation purposes, but the burden of proof will fall on me as the client if the IRS was to audit me.
Why would a client need to file an Amended Return?
The IRS may correct certain errors on a return and may accept returns without certain required forms or schedules. In these instances, there's no need to amend your return. However, file an amended return if there's a change in your filing status, income, deductions, credits, or tax liability.
What is the highest tax rate you would most likely see applied to our clients for the 2024 tax year? (Hint: most of our clients have annual income under $64,000)
22%
Name all 5 filing statuses and give a short overview of why each would be claimed:
Based on marital status and family situation
Single: Non-married individuals with no dependents
Married Filing Jointly: Married couple that agree to file a joint return
Married Filing Separately: Married couple that cannot agree to file a joint return
Qualifying Widower: Widow with a dependent in the two years following the death of their spouse
Head of Household: Non-married individual with dependent(s)
Name 2 nonrefundable credits and 2 refundable credits:
Nonrefundable Credits:
Lifetime Learning Credit
Child and Dependent Care Credit*
Saver’s Credit
Refundable Credits:
Earned Income Tax Credit
Child Tax Credit
American Opportunity Education Credit
Are social security benefits taxable?
It depends. Social security benefits may be taxable if the total of (1) one-half of the benefits, plus (2) all of the client's other income, including tax-exempt interest, is greater than the base amount for the client's filing status.
What is an IP Pin and why would a client be provided with one?
An Identity Protection PIN (IP PIN) is a 6-digit number that the IRS gives taxpayers who were victims of tax-related identity theft.The IP PIN validates a Social Security number's true owner and prevents future tax fraud. Most taxpayers don't need one.
What is the highest tax rate and lowest tax rate for the 2024 tax year?
The highest is 37%, while the lowest is 10%.