1040 Workshop - 40 CPE Credit Hours
Course description and objectives: Designed to make the practitioner comfortable with “high traffic” issues, this program enables participants to discuss and handle individual tax essentials. The course examines and explains the practical aspects of return preparation and individual planning, bridging the gap between theory and application. Significant new developments are summarized with emphasis on tax savings ideas. Practical applications and illustrations are used to systematically explore tax deferral, reduction, and elimination opportunities accompanying return preparation. For example, the analysis of gross income is discussed together with income splitting techniques; property transactions are examined alongside like-kind exchanges and involuntary conversions. The result is an extraordinary blend of the latest developments affecting individual returns and their related planning ideas.
Completion Deadline & Exam: This course, including the examination, must be completed within one year of the date of purchase. In addition, unless otherwise indicated, no correct or incorrect feedback for any exam question will be provided.
Course Level: Overview. This program is appropriate for professionals at all organizational levels.
Field of Study: Taxes
Prerequisite: General understanding of federal income taxation.
Advanced Preparation: None
Learning Assignments & Objectives
As a result of studying each assignment, you should be able to meet the objectives listed below each assignment.
Chapter 1 Individual Tax Elements
At the start of Chapter 1, participants should identify the following major topics for study:
* Tax rates and tables
* Filing status
* Gross income
* Dividends and distributions
* Discharge of debt income
* Exclusions from income
* Nonbusiness and personal deductions
* Education and medical expenses
* Casualty and theft losses
* Tax credits
After reading Chapter 1, participants will be able to:
1. Name federal revenue tax sources recognize the definitive role of gross income, define a client’s tax liability using current rates, tables, and statutory amounts, and identify a client’s responsibility for withholding and/or estimated taxes.
2. State the various filing statuses listing advantages and disadvantages and naming the filing requirements of each.
3. Define gross income under §61 including the tax treatment of compensation, fringe benefits, rental income, Social Security benefits, alimony, prizes and awards, list dividend and distribution types including their tax differences, and show how debt discharge can result in taxable income.
4. Identify the mechanics of income exclusions including education-related exclusions, gift and inheritance exclusions, insurance, personal injury awards, interest on state and local obligations, and the foreign earned income exclusion.
5. Recognize income tax deductions and their use to reduce tax liability by:
a. Identifying personal, spousal and dependency exemptions and reporting requirements including pre-2005 dependency rules;
b. Stating the deductibility of five §163 interest categories, §162 educational expenses, §217 moving expenses, §165 casualty & theft losses, and §164 taxes along with their proper reporting and substantiation;
c. Listing four variables that impact the deductibility of charitable contributions, and identifying qualified organizations, permissible contributions contribution limitations, their tax treatment, and substantiation requirements;
d. Outlining the deductibility of medical care expenses including medical insurance, meals and lodging, transportation, home improvements and lifetime care payments including the impact of Medicare;
e. Naming at least twelve deductions that are subject to the 2% of AGI limitation, up to six deductions not subject to the 2% limit, and eleven nondeductible expenses.
6. Name several types of tax credits identifying the eligibility requirements and stating the cited changes created by recent tax legislation to individual tax returns.
After studying the materials in Chapter 1, answer the exam questions 1 to 49.
Chapter 2 Expenses, Deductions & Accounting
At the start of Chapter 2, participants should identify the following major topics for study:
* Landlord’s rental expenses
* Health insurance costs
* Home office deduction
* Travel and entertainment expenses
* Employee expense reimbursement and reporting
* Automobile deductions
* Fringe benefits
* Methods of accounting
* Expensing and depreciation
After reading Chapter 2, participants will be able to:
1. Recognize the tax treatment of rental property expenses noting their impact on landlords and tenants taking into consideration the tax differences given to rent, advance payments, and security deposits.
2. Identify the application of the hobby loss rules to a business, list deductible health insurance costs, state the requirements of the home-office deduction, define self-employment taxes, and name four available business and investment credits.
3. Show clients how to properly deduct travel and entertainment expenses by:
a. Naming at least nine types of business travel expenses, defining a taxpayer’s tax home, if any, and work locations based on the IRS’s definition, and stating the “away from home” requirement and “sleep and/or rest” rule;
b. Listing the key elements of deductible domestic and foreign business travel costs and stating the Reg. §1.162 deduction of convention and meeting expenses;
c. Identifying the three §274 entertainment deductibility tests, defining the limits on home entertaining, ticket purchases, and meals and entertainment, and naming eight exceptions to the percentage reduction rule; and
d. Listing substantiation requirements associated with business gifts, employee achievement awards, and sales incentive awards.
4. State the differences between accountable and nonaccountable plans listing three requirements for an accountable plan particularly adequately accounting for travel and other employee business expenses.
5. Define local transportation and commuting noting how nondeductible personal commuting relates to local business transportation expenses.
6. Identify the apportionment of automobile expenses between personal and business use, define the actual cost and standard mileage methods, and state the gas guzzler tax.
7. Name the various types of excluded fringe benefits that can increase employers’ deductions and incentive-based compensation of employees listing examples of each.
8. Recognize the cash, accrual, or other methods of accounting, identify available accounting periods noting their impact on income and expenses, and define expensing, depreciation, and amortization listing examples of each.
After studying the materials in Chapter 2, answer the exam questions 50 to 112.
Chapter 3 Property Transfers & Retirement Plans
At the start of Chapter 3, participants should identify the following major topics for study:
* Sales and exchanges of property
* Home sale exclusion
* Installment sales
* Involuntary conversions
* At-risk rules
* Like-kind exchanges
* Retirement plans
After reading Chapter 3, participants will be able to:
1. Recognize the tax treatment on sale of easements and state the holding period and basis of inherited property.
2. Outline the key elements of the §121 home sale exclusion showing its application particularly the three proration safe harbors.
3. State the importance of the installment method, name at least three §453 requirements, and define basic §453 terminology.
4. List the variables that determine which §1038 rules apply, outline distinctions between personal and real property repossessions, and show when a bad debt deduction may be taken on a repossession.
5. Identify the tax treatment of a §1033 involuntary conversion by:
a. Defining related terminology and the tax consequences of receiving a condemnation award or severance damages;
b. Recognizing gain or loss from condemnations and showing clients how to report involuntary conversion payments; and
c. Stating whether clients can postpone gain on condemned, damaged, destroyed, or stolen property and defining the related party rule.
6. Recognize the scope of the §465 at-risk rules and their effect on property depreciation, and outline the requirements, mechanics, and types of §1031 like-kind exchange.
7. Show the differences between qualified deferred compensation plans and nonqualified plans by:
a. Identifying the major benefit of the qualified deferred plans and explaining the basis of the benefits and contributions enabling the client to choose plan type and benefit; and
b. Listing the current and deferred advantages and disadvantages of corporate plans while defining fiduciary responsibilities and prohibited transactions.
8. Identify the requirements of the three basic forms of qualified pension plans permitting clients to compare and contrast such plans.
9. Define defined contribution and defined benefit plans, name the five types of defined contribution plans, and show their effect on retirement benefits.
10. Show the differences between self-employed and qualified plans used by other business types identifying key choice of entity factors, and list the requirements of IRAs and Roth IRAs.
11. Define SEPs and SIMPLEs identifying the mechanics and eligibility requirements of each.
After studying the materials in Chapter 3, answer the exam questions 113 to 171.
Chapter 4 Losses, AMT & Compliance
At the start of Chapter 4, participants should identify the following major topics for study:
* Passive loss rules
* Suspension of disallowed losses under §469
* Computing the alternative minimum tax
* Minimum AMT tax credit
* Reporting compliance rules and provisions
* Accuracy related penalties
* Information reporting penalty final regulations
* Penalty for unrealistic position
* Statute of limitations for assessments
* Examination of returns
After reading Chapter 4, participants will be able to:
1. Identify the two basic income types and three “buckets” under §469, define the suspension of disallowed losses including their relationship to total passive losses, and name six special transfers not deemed to be fully taxable dispositions.
2. State the differences between the regular and alternative minimum tax outlining the AMT by using tax preferences and adjustments, name ADS asset lives, and define, for AMT purposes, taxable income, passive loss, and ACE.
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