Unit 1 Prelim Work & Taxpayer Data

Question 1

What should tax preparers do if they find errors and/or omissions from a taxpayers PY tx forms?

Answer 1

Inform tax payer of errors but taxpayer must decide to amend the mistake

Question 2

What should tax preparer check for PY tax forms?

Answer 2

NOLs
Prior depreciation
Asset basis
TC carryover

Question 3

What are the taxpayers biographical info to be gathered?

Answer 3

Legal name, Birthday, Marital Status
Dependents
Applicable TINs

Question 4

Why is gathering bio info important?

Answer 4

To avoid fraud
Trust but verify

Question 5

What is a Identity Protection Personal Identification Number (IP PIN)?

Answer 5

Alternate ITIN that IRS will accept on tax returns to protect taxpayer from using SSN.

Question 6

What happens if a taxpayer does not have a SSN?

Answer 6

Must apply for ITIN

Question 7

Is a non resident authorized to work in US if they have a ITIN?

Answer 7

No

Question 8

Is SS benefits and EITC available for a taxpayer that has a ITIN?

Answer 8

No

Question 9

How to obtain ITIN?

Answer 9

Fill W7
Help from IRS-authorized Cert Acceptance Agent (CAA)
In person at IRS Taxpayer Assistance Center

Question 10

What form is used for ATIN?

Answer 10

W-7A

Question 11

What happens to a baby that didn’t live within a year?

Answer 11

The Child can still be claimed as a dependent for that year; Stillborns do not count

Question 12

How long should a taxpayer keep their Tax forms and supporting documentation?

Answer 12

3 year from the filing date or due date; whichever is later

Question 13

What are some of the support docs to keep?

Answer 13

W-2, 1099, Bank Statements, pay stubs, brokerage statements, Schedule K-1 for income
Expenses such as 1098 forms, sales slip, CC statements
HUD statements for home purchases and sales
Investments: Forms 1099-DIV

Question 14

Who else uses 1040 tax form besides US Citizens?

Answer 14

US Residence; different from Nonresident Aliens.

Question 15

What is 1040-SR for?

Answer 15

Form for Taxpayers that are 65 or older

Question 16

What is 1040-NR?

Answer 16

Form for Nonresident Aliens

Question 17

What form is used to make an amendment on tax returns current and/or prior?

Answer 17

1040-X

Question 18

What form does a Taxpayer need to file to request extension on filing for taxes?

Answer 18

Form 4868, App for Auto Extension of Time to File

Question 19

Who qualifies for Auto 2 month Extension (6/15)?

Answer 19

NR Aliens w/ no income subject to US withholding
US Citizen/Resident living outside US or PR
Active military outside US

Question 20

Who can request their filing extension to Dec 15th and why?

Answer 20

US Citizens/Residents living abroad

Question 21

How many days after leaving combat zone is a military personnel tax deadline suspended til?

Answer 21

180 days

Question 22

What is the Failure to file Penalty?

Answer 22

5% a month from deadline until 25% of unpaid taxes

Question 23

If failure to file is fraudulent, how much?

Answer 23

15% a month from deadline until 75% of unpaid taxes

Question 24

What is the amount if filing was 60 days late?

Answer 24

Penalty must be no less than $485 or 100% of the taxes due on return

Question 25

How much is penalty for failure to pay?

Answer 25

0.5% per month of unpaid taxes until 25%; penalty can increase to 1% the day after demand for repay or 10 after levying certain assets

Question 26

How much if both failure to pay and file?

Answer 26

Penalties are charge the same way as failure to pay.

Question 27

Will there be a penalty to taxpayer that fails to pay or file if they receive a refund?

Answer 27

No

Question 28

Is interest added to the unpaid taxes in addition to penalties?

Answer 28

Yes

Question 29

What is the interest rate for amount due?

Answer 29

Federal short-term interest rate determined quarterly plus 3% compound daily

Question 30

What is the least a Taxpayer must owe to not be penalized?

Answer 30

$1k

Question 31

What is safe harbor rule?

Answer 31

Taxpayer should pay 100% of PY tax in estimated payments for CY or 90% of CY.

Question 32

What is the Safe Harbor rule for High-income earners?

Answer 32

110% of PY in estimated payments or 90% of CY

Question 33

When are the days for estimated payments?

Answer 33

4/15, 6/15, 9/15 & 1/15/FY

Question 34

When is Statute of limitations?

Answer 34

3 years

Question 35

Why would the Statute of Limitations be 6 year?

Answer 35

If Gross Income is understated by more than 25%

Question 36

How long is the Collection Statute Expiration Date (CSED) and when does it start?

Answer 36

10 years, starting from date of tax assessment