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Enrolled Agent Part 1 > Part 1 - Video 1 > Flashcards

Part 1 - Video 1 Flashcards

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1
Q

What is the purpose of Form 1040?

A

Used for U.S. Individual Income Tax Return

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2
Q

What is the purpose of Form 1040-SR?

A

U.S. Income Tax Return for Seniors

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3
Q

What is the first step in the flow of the tax return?

A

Gross income

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4
Q

What do you subtract from gross income to find Adjusted Gross Income (AGI)?

A

Adjustments to income

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5
Q

What is the definition of gross income?

A

All income received in the form of money, goods, property, and services that isn’t exempt from tax

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6
Q

What types of income are included in earned income?

A
  • Salaries
  • Wages
  • Tips
  • Professional fees
  • Taxable scholarships and grants
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7
Q

What is unearned income?

A

Taxable interest, dividends, capital gains, unemployment compensation, taxable social security benefits, pensions, and annuities

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8
Q

Who is required to file Form 1040?

A

U.S. Citizens or Residents who meet the filing requirements

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9
Q

What is the filing deadline for tax returns?

A

April 15, 2025

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10
Q

What is Form 4868 used for?

A

Automatic 6-month extension to file

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11
Q

What is the penalty for failure to file?

A

5% of balance due per month, up to 25% of balance due

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12
Q

What is the failure to pay penalty rate?

A

½ of 1% of balance due per month, up to 25% of balance due

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13
Q

What is the maximum fine for penalty for perjury?

A

$100,000 and/or up to 3 years in prison

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14
Q

What is required for dependents in terms of identification?

A

Must have a Social Security Number (SSN) or Taxpayer Identification Number (TIN)

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15
Q

What types of aliens are recognized for tax purposes?

A
  • Resident alien
  • Nonresident alien
  • Dual status aliens
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16
Q

What test must a resident alien meet to be taxed on worldwide income?

A

Green card test or substantial presence test

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17
Q

What is included in the sources of information for tax preparation?

A
  • Prior year tax return
  • W-2s
  • 1099s
  • K-1s
  • Bank and brokerage statements
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18
Q

What is the consequence of filing a false return?

A

Felony with a maximum fine of $100,000 and/or up to 3 years in prison

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19
Q

What is the purpose of IRS Publication 17?

A

Your Federal Income Tax

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20
Q

What is the definition of taxable income?

A

Adjusted gross income minus deductions

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21
Q

What happens if a taxpayer is outside the U.S. and qualifies for an extension?

A

Automatic 2-month extension to June 16, 2025

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22
Q

What is the form used to amend a tax return?

A

Form 1040-X

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23
Q

What should you do if you find an error on a prior year tax return?

A

Inform the client and explain the consequences

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24
Q

Filing Status is determined based on what factors?

A
  • Marital status
  • Dependents
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25
What is the definition of a taxpayer's residency?
Determined by citizenship and physical presence in the U.S.
26
What date is the due date for tax returns if April 15 falls on a weekend?
Next business day
27
What is the difference between earned and unearned income?
Earned income comes from work, while unearned income comes from investments or other non-work sources
28
What is the adjusted gross income (AGI)?
Gross income minus adjustments to income
29
Fill in the blank: Taxable income equals adjusted gross income minus _______.
[deductions]
30
True or False: A nonresident alien does not need to file Form 1040.
True
31
What is the tax status of a Resident Alien?
Taxed on worldwide income ## Footnote Just like U.S. citizens.
32
What are the two tests to determine if an alien is a Resident Alien?
1. Green card test 2. Substantial presence test
33
What defines the Green Card Test?
Lawful permanent resident at any time during the year ## Footnote Will have a Permanent Resident Card, known as a 'green card'.
34
What is the requirement for the Substantial Presence Test?
Must be physically present in the U.S. on at least: * 31 days during the year * 183 days during the 3-year period
35
How is the 183 days calculated in the Substantial Presence Test?
Count: * All days present in current year * 1/3 of days present the year before * 1/6 of days present 2 years before
36
What is the tax status of a Nonresident Alien?
Taxed only on their income from U.S. sources ## Footnote File Form 1040-NR.
37
What can a U.S. citizen or resident alien do if their spouse is a Nonresident Alien?
They can choose to treat the spouse as a resident alien.
38
What is a Dual Status Alien?
An individual who is a nonresident alien for part of the year and a resident alien for another part.
39
What is the tax implication for a Dual Status Alien?
Taxed on worldwide income while a resident, and on U.S. source income while a nonresident.
40
Define 'Alien' in tax terms.
Any non-U.S. citizen.
41
List the three types of aliens.
* Resident Alien * Nonresident Alien * Dual Status Alien
42
What are the five filing statuses?
* Single (S) * Married Filing Jointly (MFJ) * Married Filing Separately (MFS) * Head of Household (HOH) * Qualifying Surviving Spouse (QSS)
43
What qualifies someone as Single (S) for tax purposes?
Not married on 12/31/2024 ## Footnote Includes divorced or legally separated.
44
What are the requirements for Married Filing Jointly (MFJ)?
Married on or before 12/31/2024 and both spouses must agree to file jointly.
45
What is the tax treatment for Married Filing Separately (MFS)?
Each spouse files their own return, with only their income and expenses.
46
What are the qualifications for Head of Household (HOH)?
Must be unmarried or considered unmarried and pay more than half the cost of keeping up a home.
47
What is a Qualifying Surviving Spouse (QSS)?
Designed for widow(er) with at least one dependent child, allows MFJ tax rates.
48
What are the eligibility rules for QSS?
* Was entitled to file a joint return with the spouse in the year of death * Spouse died in 2022 or 2023 * Has a child or stepchild and can claim them as a dependent
49
What is the most beneficial filing status hierarchy?
* MFJ * QSS * HOH * S * MFS
50
What is the definition of a dependent?
A qualifying child or a qualifying relative.
51
List relatives who do not have to live with you to be considered dependents.
* Child, stepchild, or foster child * Sibling * Parent or grandparent * Stepparents * In-laws
52
What is the support test for a qualifying relative?
Must provide more than half the person’s total support.
53
What can be included in total support?
* Food * Lodging * Clothing * Education * Medical care * Transportation
54
What is a Multiple Support Agreement?
When two or more people provide for the support of a qualifying relative and agree that any one can claim the relative.
55
Who usually claims the child in divorced or separated parent situations?
The custodial parent.
56
What must the noncustodial parent do to claim a child as a dependent?
Attach Form 8332 or a similar statement to their tax return.
57
What happens if two or more people try to claim the same child?
Tiebreaker rules apply.
58
What is the child tax credit?
A tax credit available for qualifying dependents under certain conditions ## Footnote The child tax credit helps reduce the tax liability for taxpayers who have dependent children.
59
What does HOH status stand for?
Head of Household status ## Footnote HOH status often provides a higher standard deduction and more favorable tax rates.
60
What is the child care expense credit?
A credit that allows taxpayers to claim expenses for child care to enable work or education ## Footnote This credit can help offset the costs associated with child care services.
61
What does the exclusion of income for dependent care benefits refer to?
The exclusion of certain benefits received for dependent care from taxable income ## Footnote This can include benefits provided by an employer for child care services.
62
What is the Earned Income Credit (EIC)?
A tax credit for low to moderate-income workers, particularly those with children ## Footnote The EIC is designed to reduce the tax burden and encourage employment.
63
What are the tiebreaker rules for claiming a qualifying child of two or more people?
1. If only one person is the child’s parent, the parent wins. 2. If both parents claim the child, the one the child lived with most wins. 3. If the child lived with each parent equally, the parent with the higher AGI wins. 4. If neither parent can claim the child, the person with the highest AGI wins. 5. If no parent claims the child, the person with the highest AGI wins if higher than any parents. ## Footnote AGI stands for Adjusted Gross Income and is used to determine eligibility for various tax benefits.
64
What is the purpose of the checkbox for the Presidential Election Campaign on tax forms?
To allow taxpayers to contribute $3 to the election fund ## Footnote Checking this box does not affect the taxpayer's overall tax liability or refund.
65
What must taxpayers indicate regarding digital assets on their tax forms?
Whether they received, sold, exchanged, gifted, or disposed of a digital asset during the year ## Footnote Taxpayers must answer 'Yes' or 'No' to this question.
66
Fill in the blank: If the child lived with each parent equally, the parent with the ______ wins.
higher AGI
67
True or False: A non-parent can claim a child if they have a higher AGI than the parents who can claim the child.
True

Enrolled Agent Part 1 (3 decks)

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