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Wiley Tax Preparer: A Guide to Form 1040

Book Description

Whether you're already a tax preparer or you're looking to become one, you need a firm grasp of the tax concepts on which individual taxation is based. We created the Wiley Tax Preparer as a refresher for the experienced tax preparer, and as a readable guide for the less-experienced tax preparer.

This timely guide is an essential tax resource providing you with useful information on tax principles and filing requirements that a preparer must know to complete a 1040 series return and associated schedules. You'll refer to it time and again, for information about:

Practices and Procedures

  • Penalties to be assessed by the IRS against a preparer for disregard of the rules and regulations

  • Furnishing a copy of a return to a taxpayer

  • Safeguarding taxpayer information

  • Treatment of Income and Assets

  • Taxability of wages, salaries, tips, and other earnings

  • Reporting requirements of Social Security benefits

  • Determination of basis of assets

  • Deductions and Credits

  • Medical and dental expenses

  • Types of interest and tax payments

  • Child and dependent care credit

  • Other Taxes

  • Alternative Minimum Tax

  • Self-Employment Tax

  • Preliminary Work and Collection of Taxpayer Data

  • Collecting a taxpayer's filing information and determining their status

  • Determine filing requirements, including extensions and amended returns

  • Personal exemptions and dependents

  • Completion of the Filing Process

  • Check return for completeness and accuracy

  • Tax withholding, payment and refund options, and estimated tax payments

  • Explaining and reviewing the tax return

  • Ethics and Circular 230

  • Preparer's due diligence for accuracy of representations made to clients and the IRS

  • Sanctions that may be imposed under Circular 230

  • Rules governing authority to practice before the IRS

  • If you're looking for a practical guide to the principles behind Form 1040, look no further. The Wiley Tax Preparer is the most accessible guide to understanding how complex tax laws affect individual taxpayers.

    Table of Contents

    1. Cover
    2. Title Page
    3. Copyright
    4. Part 1: The Income Tax Return
      1. Chapter 1: Filing Information
        1. Personal Information
        2. Filing Requirements and Thresholds
        3. Deadlines, Extensions, and Penalties
        4. Which Version of Form 1040 to Use
        5. Special Filing Rules for Aliens
      2. Chapter 2: Filing Status
        1. Five Filing Statuses
        2. Determining Marital Status
        3. Making Changes in Filing Status
      3. Chapter 3: Personal and Dependency Exemptions
        1. Personal Exemptions
        2. Dependency Exemptions
        3. Special Rules for Parents Who Are Divorced, Separated, or Not Married
        4. Taxpayer Identification Numbers
    5. Part 2: Income and Assets
      1. Chapter 4: Wages, Salaries, and Other Earnings
        1. Employee Compensation
        2. Special Topics
        3. Employee or Independent Contractor
      2. Chapter 5: Interest Income
        1. Taxable Interest Income
        2. Original Issue Discount
        3. Taxable Bond Interest
        4. State and Municipal Bonds
        5. Reporting Interest on the Return
        6. Foreign Account Reporting
      3. Chapter 6: Dividends and Other Corporate Distributions
        1. Ordinary versus Qualified Dividends
        2. Capital Gain Distributions
        3. Other Distributions
      4. Chapter 7: Rental Income and Expenses
        1. Rental Income
        2. Rental Expenses
        3. Deducting Rental Expenses—Special Rules
        4. Passive Loss Limitations
        5. Special Rules for Real Estate Professionals
        6. At-Risk Limitations
        7. Reporting Rental Income and Expenses
      5. Chapter 8: Retirement Plans, Pensions, and Annuities
        1. Qualified Retirement Plans
        2. IRA Distributions
        3. Rollovers
        4. Conversions
        5. Special Additional Taxes
        6. Commercial Annuities
        7. Life Insurance
      6. Chapter 9: Social Security and Equivalent Railroad Retirement Benefits
        1. Social Security Benefits
        2. Railroad Retirement Benefits
        3. Social Security Disability Benefits
      7. Chapter 10: Other Types of Income
        1. Scholarships and Grants
        2. Taxable Recoveries
        3. Alimony
        4. S Corporation and Partnership Income
        5. Royalties
        6. Unemployment Compensation
        7. Damages
        8. Cancellation of Debt Income
        9. Gambling Winnings
        10. Jury Duty Pay
        11. Barter
        12. Other Types of Income
      8. Chapter 11: Self-Employment Activities
        1. Who Files Schedule C (or Schedule C-EZ)?
        2. Reporting Income
        3. Business Expenses
        4. Farmers
        5. Self-Employment Tax
        6. Hobby Loss Limitation
        7. Benefits
        8. Recordkeeping
      9. Chapter 12: Basis of Property
        1. What Is Basis?
        2. Cost Basis
        3. Adjusted Basis
        4. Basis Other than Cost
      10. Chapter 13: Sale of Property
        1. Sales, Exchanges, and Transfers
        2. Reporting Sales on the Tax Return
        3. Gains and Losses on Business Assets
      11. Chapter 14: Sale of Home
        1. Determining Basis
        2. Figuring Gain or Loss
        3. Home Sale Exclusion
        4. Abandonments, Foreclosures, and Repossessions
        5. Reporting Home Sales
        6. Recapture
      12. Chapter 15: IRA and HSA Contributions
        1. Traditional IRAs
        2. Roth IRAs
        3. Other IRAs
        4. Health Savings Accounts
      13. Chapter 16: Education-Related Adjustments
        1. Tuition and Fees Deduction
        2. Educator Expenses Deduction
        3. Student Loan Interest Deduction
      14. Chapter 17: Business-Related Adjustments
        1. Deduction for a Portion of Self-Employment Tax
        2. Self-Employed Health Insurance Deduction
        3. Moving Expenses
        4. Other Business Adjustments
      15. Chapter 18: Alimony
        1. Payments that Are Alimony
        2. Payments that Are Not Treated as Alimony
        3. Alimony Deduction
        4. Alimony Income
        5. Alimony Recapture
    6. Part 3: Deductions and Credits
      1. Chapter 19: Standard and Itemized Deductions
        1. Standard Deduction
        2. Overview of Itemized Deductions
      2. Chapter 20: Medical and Dental Expenses
        1. Itemized Deduction
        2. Qualified Medical Expenses
        3. Deducting Medical Expenses
        4. Special Situations
      3. Chapter 21: Tax Payments
        1. Tests for Deducting Taxes
        2. State and Local Taxes
        3. Real Estate Taxes
        4. Personal Property Taxes
      4. Chapter 22: Interest Payments
        1. Home Mortgage Interest
        2. Points
        3. Mortgage Insurance Premiums
        4. Investment Interest
      5. Chapter 23: Charitable Contributions
        1. Qualifying Organizations
        2. Deductible Contributions
        3. Contributions of Property
        4. Nondeductible Contributions
        5. Recordkeeping and Substantiation
        6. When to Deduct Contributions
        7. Limits on Deductions
      6. Chapter 24: Nonbusiness Casualty and Theft Losses
        1. What Is a Casualty?
        2. What Is a Theft?
        3. Loss on Deposits
        4. Figuring the Loss
        5. Insurance and Other Reimbursements
        6. Deduction Limits
        7. Figuring a Gain
        8. When to Report Gains and Losses
      7. Chapter 25: Miscellaneous Itemized Deductions
        1. Miscellaneous Itemized Deductions Subject to the 2% Limit
        2. Deductions Not Subject to the 2% Limit
        3. Nondeductible Expenses
        4. How to Deduct Miscellaneous Itemized Expenses
      8. Chapter 26: Employee Business Expenses
        1. Overview of Employee Business Expenses
        2. Travel Away from Home
        3. Entertainment Expenses
        4. Business Gifts
        5. Local Transportation Expenses
        6. Work-Related Education Expenses
        7. Other Work-Related Expenses
        8. Recordkeeping and Substantiation
        9. Reimbursements
        10. Reporting Employee Business Expenses
      9. Chapter 27: Earned Income Credit
        1. Overview of the Earned Income Credit
        2. Who Can Claim the Credit? Rules that Apply to Everyone
        3. Taxpayers with a Qualifying Child
        4. Taxpayers with No Qualifying Child
        5. Who Cannot Claim the Credit?
        6. Figuring the Credit
        7. Claiming the Credit on the Return
        8. Paid Preparer Responsibilities
      10. Chapter 28: Child and Dependent Care Credit
        1. Overview of the Child and Dependent Care Credit
        2. Filing Status Requirement
        3. Qualifying Child or Other Person
        4. Earned Income
        5. Work-Related Expenses
        6. Figuring the Credit
        7. Reporting the Credit
      11. Chapter 29: Child Tax Credit
        1. Qualifying Child
        2. Amount of the Credit
        3. Claiming the Credit
        4. Additional Child Tax Credit
      12. Chapter 30: Education Credits
        1. Requirements for Education Credits
        2. American Opportunity Tax Credit
        3. Lifetime Learning Credit
        4. Credit Recapture
      13. Chapter 31: Other Tax Credits
        1. Credit for Qualified Retirement Savings Contributions (Saver's Credit)
        2. Adoption Credit
        3. Residential Energy Credits
        4. Foreign Tax Credit
        5. Alternative Motor Vehicle Credit
        6. Credit for the Elderly or Disabled
        7. Mortgage Interest Credit
        8. First-Time Homebuyer Credit
        9. Health Coverage Tax Credit
        10. Credit for Excess Social Security or Railroad Retirement Tax
    7. Part 4: Other Taxes
      1. Chapter 32: Figuring the Regular Tax
        1. Taxable Income
        2. Regular Tax Computation Options
        3. Tax Liability
      2. Chapter 33: The Alternative Minimum Tax
        1. Overview of the AMT
        2. Figure AMTI
        3. Figure AMT
        4. Reporting AMT
        5. Minimum Tax Credit
      3. Chapter 34: The Kiddie Tax
        1. General Rules of the Kiddie Tax
        2. Tax Treatment of a Child's Income
        3. Figuring the Tax on the Child's Return
        4. Parents' Election to Report Child's Interest and Dividends
      4. Chapter 35: Other Taxes
        1. Self-Employment Tax
        2. Additional Taxes on Qualified Retirement Plans, IRAs, and Qualified Health Plans
        3. Additional Tax on Qualified Health Plans (HSAs and MSAs)
        4. Education Credit and Adjustment Recapture
        5. Household Employment Taxes
        6. Allocated Tips
        7. Uncollected Social Security and Medicare Tax on Wages
        8. First-Time Homebuyer Credit Repayment
    8. Part 5: Completion of the Filing Process
      1. Chapter 36: Tax Payments and Refund Options
        1. Tax Payment and Withholding Information
        2. Paying a Balance Due
        3. Obtaining a Refund
        4. Interest and Penalties
      2. Chapter 37: Completing and Filing the Return
        1. Completing the Return
        2. Discuss the Significance of Signing a Return
        3. e-filing
    9. Part 6: Practices and Procedures
      1. Chapter 38: Preparer Responsibilities and Penalties
        1. Compliance with e-file Procedures
        2. Authorization for Tax Representation
        3. Safeguarding Taxpayer Information
        4. Penalties Related to Return Preparation
    10. Part 7: Ethics and Circular 230
      1. Chapter 39: Rules Governing Authority to Practice before the IRS
        1. What Is Circular 230?
        2. What Does “Practice before the IRS” Mean?
        3. Who May Practice Before the IRS?
        4. What Is the Application Process to Become an EA?
        5. How Do EAs Renew Their Status?
        6. Preparer Tax Identification Numbers
      2. Chapter 40: Duties and Restrictions Relating to Practice before the IRS
        1. Information to Be Furnished to the IRS—Section 10.20
        2. Knowledge of Client's Omission—Section 10.21
        3. Diligence as to Accuracy—Section 10.22
        4. Prompt Disposition of Pending Matters—Section 10.23
        5. Assistance from or to a Disbarred or Suspended Person—Section 10.24
        6. Practice by Former Government Employees—Section 10.25
        7. Notaries—Section 10.26
        8. Fees—Section 10.27
        9. Return of Client's Records—Section 10.28
        10. Conflicting Interests—Section 10.29
        11. Solicitation (Including Advertising)— Section 10.30
        12. Negotiating Checks—Section 10.31
        13. Practice of Law—Section 10.32
        14. Best Practices—Section 10.33
        15. Standards for Tax Returns and Other Documents—Section 10.34
        16. Covered Opinions—Section 10.35
        17. Procedures to Ensure Compliance— Section 10.36
        18. Requirements for Other Written Advice—Section 10.37
      3. Chapter 41: Sanctions for Violating Circular 230
        1. Sanctions—Section 10.50
        2. Incompetence and Disreputable Conduct—Section 10.51
        3. Violations Subject to Sanction—Section 10.52
        4. Receipt of Information—Section 10.53
        5. Scenarios of Disciplinary Actions
    11. Answers to Review Questions
    12. Appendix: IRS Resources
    13. Index