TAX RETURNS
Filing status
Retirees
Students/student athletes
Gamblers
Home buyers
Donors/Charitable givers
Parents/those with Dependents/All other Tax Credits
Sick/Injured/those with significant Medical expenses
Military members/military families/all State vs Federal issues
Small business owners - QBI
Divorced couples - Alimony
Enrolled Agents vs CPAs
Reportable income vs not
Miscellaneous income
AGI/deductions/exclusions
Business deductions
Employee/personal deductions
Tax calculations
Detailed contents:
◦ FILING STATUS (Identify whether it is required or recommended to file a return/Identify eligible dependents)
◦ RETIREMENT + INT/DIVS (Determine eligibility requirements for IRA contributions/Explain IRA conversions, rollovers and contributions/Explain RMD/Identify key elements of Form 1099R/Reporting retirement distributions/ROTH IRA, Traditional IRA and 1099R/Understand tax implications of social security lump sum distributions/Evaluate social security income situations based on filing status and personal information/Interpret 1099-SA and accurately apply the income to the 1040/Evaluate social security income situations based on filing status and personal information/Explain Rollovers and Excess Contributions/Identify key elements of Form 1099R/Reporting retirement distributions/Reporting retirement distributions OI_6796/Understand tax implications of social security lump sum distributions/Roth IRA - Traditional IRA - 1099-R/Explain RMD/Identify situations in which there is an early withdrawal penalty/ RETIREMENT DISTRIBUTIONS UNDER OI_6796/Interpret 1099-SA and accurately apply the income to the 1040/Evaluate social security income situations based on filing status and personal information/Identify key elements of Form 1099R)
◦ IF YOU KEEP WORKING PASSED THE RETIREMENT AGE THERE ARE BENEFITS
◦ EXCESS RETIREMENT CONTRIBUTIONS ARE NOT A PROBLEM!
◦ PENALTY FREE RET. ACCT. WITHDRAWALS NOT JUST FIRST TIME HOME PURCHASE BUT ALSO BIRTH OF A CHILD
◦ RMD’S
◦ LUMP SUM DISTRIBUTIONS
◦ Form 1099R
◦ IRA vs ROTH
◦ Traditional IRA vs ROTH IRA
◦ INTEREST AND DIVIDENDS (Analyze and summarize taxes due on interest and dividends/Analyze and summarize taxes due on interest and dividends).
◦ WHEN TO FILE SCHEDULE B (INTEREST INCOME)
◦ STUDENTS AND GAMBLERS
◦ YOUR EMPLOYER CAN PAY YOUR STUDENT LOANS - UP TO A LIMIT
◦ Student athlete income and self employment taxes
◦ Student loan deduction
◦ Student athlete income
◦ Explain when gambling losses offset gambling winnings(Explain when gambling losses offset gambling winnings)
◦ FEES ON EARLY WITHDRAWAL OF A CD INVESTMENT (EG TO BUY A HOUSE)
◦ CHANGE IN CHARITABLE CONTRIBUTIONS
◦ ADJUSTMENTS IN SCHEDULE 1
◦ MEDICAL EXPENSES
◦ QBI (Research and determine qualifications for QBI/Research and determine qualifications for QBI/Research and determine qualifications for QBI/Research and determine qualifications for QBI).
◦ TAX CREDITS (Explain income limitations on credits; Determine eligibility for specific tax credits/Determine eligibility for specific tax credits)
◦ GENERAL
◦ REFUNDABLE CHILD TAX CREDIT PORTION
◦ CHILD AND DEPENDENT CARE CREDIT / CHILD CARE CREDIT
◦ AGI ADJUSTMENTS AND EXCLUSIONS(Categorize sources of income as taxable or non-taxable/Identify exclusions and other adjustments to gross income/Explain how to calculate adjusted gross income/Explain the difference between above the line and below the line deductions)
◦ TAXABLE OR NON TAXABLE INCOME (Categorize sources of income as taxable or non-taxable)
◦ INCLUSIONS VS EXCLUSIONS(income from Various Sources: Identifying and correctly classifying different types of income, including foreign income, rental income, and side-gig income, can present difficulties/Identify exclusions and other adjustments to gross income/Categorize common transactions as exclusions or deductions from gross income/Calculate adjusted gross income based on exclusions)
◦ REPORTABLE INCOME VS TAXABLE INCOME VS NON TAXABLE EXCLUDED INCOME (EXCLUSIONS) (explain the difference between reportable and taxable income)
◦ MISCELLANEOUS INCOME(Identify miscellaneous sources of income/Incorporate miscellaneous sources of income into gross income)
◦ AGI / ALIMONY / SALE OF RESIDENCE
◦ FEDERAL VS STATE (Identify the differences in item treatments between federal and state, or between states).
◦ ENROLLED AGENTS AND CPA’S.
◦ TAXATION (Taxation calculations/FORM 1040 (Prepare a 1040 form based on common tax situations/Prepare a 1040 form based on common tax situations/what income is reportable vs not?/what expenses are deductible vs not?)
◦ Prepare a 1040 form based on common tax situations (Apply the basic income tax formula for individuals)
◦ Taxation (138/300) 46% what does this cover??
◦ Identify common deductions, including alimony, IRA, student loan interest, educator expenses, and penalty on early withdrawal of savings
◦ Explain how to calculate adjusted gross income/Explain the difference between above the line and below the line deductions
◦ PERSONAL DEDUCTIONS/EMPLOYEE DEDUCTIONS/BUSINESS DEDUCTIONS (Research and explain whether or not an item is deductible/Employment and Business Expenses: Determining which expenses are deductible, especially for self-employed individuals or those with complex employee expense situations, often involves detailed knowledge of IRS guidelines. Deductions: Navigating the nuances of different deductions (like itemized vs. standard)/Research and explain whether or not an item is deductible)
◦ IS THIS ANYWHERE?: Capital Gains and Losses: Varying rules for short-term versus long-term gains.
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FILING STATUS
(Identify whether it is required or recommended to file a return/Identify eligible dependents)
◦ Based on the last day of the year (December 31)
◦ Single: Unmarried; divorced or legally separated
◦ Married Filing Jointly: Married or spouse passed away during the year
◦ Married Filing Separately: Married and do not wish to file jointly
◦ Head of Household: Unmarried or considered unmarried for tax purposes and paid more than half of living expenses for yourself and qualifying dependent
◦ Qualifying Surviving Spouse: Spouse passed during the past 2 years and you have a dependent child
RETIREMENT
IF YOU KEEP WORKING PASSED THE RETIREMENT AGE THERE ARE BENEFITS:
74-year-old person can contribute to an IRA, provided they have sufficient earned income and meet other eligibility requirements, such as income limits for a Roth IRA. The SECURE Act removed the age limit for contributing to a traditional IRA, allowing contributions at any age as long as there is taxable compensation.
Traditional and Roth IRAs
Traditional IRA: You can contribute as long as you have taxable compensation, such as from a job or self-employment. The IRS removed the age 70½ limit, so there is no maximum age for contributing.
Roth IRA: You can contribute at any age, as long as you have taxable compensation and your modified adjusted gross income is below the legal limits.
What you need to contribute
Earned income: You must have earned income to contribute to either type of IRA. The amount you can contribute is limited by your earned income for the year.
Age 50 or older catch-up contribution: For 2025, individuals age 50 or older can contribute an extra amount in addition to the standard limit. For 2025, the limit is $8,000 for those age 50 and over, which is a $1,000 catch-up contribution.
Income limits: Roth IRA contributions have income limits, and your ability to contribute can be reduced or eliminated if your income is too high.
Key difference between Traditional and Roth IRAs
Traditional IRA: Contributions may be tax-deductible, lowering your taxable income now. You will pay income tax on your withdrawals in retirement.
Roth IRA: Contributions are not tax-deductible, but qualified withdrawals in retirement are tax-free. This can be advantageous if you expect to be in a higher tax bracket in retirement.
EXCESS RETIREMENT CONTRIBUTIONS ARE NOT A PROBLEM!
you can apply an excess IRA contribution from one year toward the contribution limit of a subsequent year. This is one of the methods the IRS allows to correct an excess contribution.
How it Works
No "rollover" on Form 1040: You do not report the excess amount as a rollover or directly on Line 1 of Form 1040 for the subsequent year's contributions. Instead, the process is handled through specific forms and procedures to designate the prior year's excess amount as a current year contribution.
Paying the Penalty: The excess amount is subject to a 6% excise tax for every year it remains in the IRA at the end of the tax year.
Using the Excess: To use the excess in a later year, you simply contribute less than the maximum allowed for that later year by the amount of the excess.
Reporting:
You must report the 6% excise tax on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for each year the excess remains.
On the Form 5329 for the subsequent year, you report how much of the prior year's excess you are applying to the current year's limit.
Example
If in Year 1 you had an excess contribution of $1,000, and the contribution limit for Year 2 is $7,000, you could contribute only $6,000 in cash for Year 2 and apply the $1,000 excess from Year 1 to fill the remaining limit. You would pay the 6% penalty for Year 1, but not for Year 2 (assuming the excess is fully absorbed).
It is highly recommended to consult a tax advisor or IRS Publication 590-A and Form 5329 instructions for detailed guidance on how to properly report this on your tax forms.
PENALTY FREE RET. ACCT. WITHDRAWALS NOT JUST FIRST TIME HOME PURCHASE BUT ALSO BIRTH OF A CHILD:
birth of a child is a qualifying reason to avoid the 10% early withdrawal penalty on distributions from an IRA (or 401(k) plan), up to a limit of $5,000 per parent, per child. This provision, known as a Qualified Birth or Adoption Distribution (QBAD), was introduced as part of the SECURE Act of 2019. Key Rules - Limit: You can withdraw up to $5,000 without penalty for each birth or adoption. Per Parent, Per Child: Each parent can withdraw $5,000 from their own eligible retirement account for the same child, totaling up to $10,000 per couple, per child. Timing: The distribution must be taken during the one-year period beginning on the date the child is born. The withdrawal cannot be made before the birth. Taxable Income: While the 10% penalty is waived, the distribution from a traditional IRA is still subject to ordinary income tax. (For a Roth IRA, only the earnings portion is taxed, and the penalty is waived on that portion). Repayment Option: You have the option to repay the distributed amount back into your retirement account, which effectively acts as a rollover, allowing you to replenish your savings and potentially receive a refund of the income taxes paid. The repayment generally must be made within three years of the distribution. No Spending Requirement: You do not need to prove the money was spent on specific birth or child expenses; the birth is the qualifying event itself. Reporting: To claim the exception, you must include the name, age, and Social Security number of the child on your income tax return for the year the distribution was made.
RMD’S:
required minimum distributions (RMDs) from an inherited retirement account usually start immediately, specifically in the year following the account owner's death, though there are exceptions. If the deceased had already started taking RMDs, the beneficiary must take an RMD in the year after death, potentially including the deceased's final, unpaid RMD. If the deceased had not yet started RMDs, the beneficiary must generally take annual distributions over a 10-year period, starting the year after death.
LUMP SUM DISTRIBUTIONS
Understand the tax implications of social security lump sum distributions - Social Security lump-sum distributions are taxable based on your "combined income," which includes the lump sum itself, up to a maximum of 85% of the total benefit. To potentially reduce the tax impact, the IRS allows you to use a special "lump-sum election method" which taxes portions of the payment as if they were received in the prior years they were due. Key Tax Implications - Taxability Thresholds: The amount of your Social Security benefits that is taxable (0%, 50%, or 85%) depends on your "combined income" (adjusted gross income plus nontaxable interest plus half of your Social Security benefits) and your filing status.
Single, Head of Household, or Qualifying Widow(er): Combined income of $25,000 or less: None of your benefits are taxable. Combined income between $25,000 and $34,000: Up to 50% of your benefits may be taxable.Combined income of more than $34,000: Up to 85% of your benefits may be taxable. Married Filing Jointly: Combined income of $32,000 or less: None of your benefits are taxable. Combined income between $32,000 and $44,000: Up to 50% of your benefits may be taxable. Combined income of more than $44,000: Up to 85% of your benefits may be taxable. Married Filing Separately and lived with your spouse at any time during the year: Up to 85% of your benefits may be taxable. Potential for Higher Tax Bracket: Receiving a large lump sum in one tax year could significantly increase your combined income, potentially pushing you into a higher tax bracket and resulting in a larger tax liability than if you had received monthly payments over time. The Lump-Sum Election Method. The IRS provides the lump-sum election method to help mitigate the impact of being pushed into a higher tax bracket. This method allows you to: Calculate the taxable portion of the benefits for earlier years using the income and tax rules of those specific years. Add that amount to the taxable portion of your current year's benefits. Report the total taxable amount on your current year's tax return (Form 1040 or 1040-SR, line 6b, with the box on line 6c checked). This prevents you from having to amend prior years' returns and potentially results in a lower overall tax burden than simply including the entire sum in your current year's income. Worksheets in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, can help you calculate the taxable portion using this method. Reporting and Withholding. You will receive Form SSA-1099, Social Security Benefit Statement, by early February, showing the total benefits received during the previous year. You can choose to have federal income tax withheld from your ongoing Social Security benefits by submitting Form W-4V, Voluntary Withholding Request, to the SSA, which may help you avoid a large tax bill at year-end.
IRAs and ROTH IRAs
Determine eligibility requirements for IRA contributions - To determine IRA contribution eligibility, you must have earned income (wages, salaries, or net self-employment income). For a Traditional IRA, you only need earned income, but deductibility may be limited by income if you have a workplace retirement plan. For a Roth IRA, your Modified Adjusted Gross Income must be below a certain threshold, which depends on your filing status and the contribution year. General requirements for both Traditional and Roth IRAs Earned Income: You must have earned income to contribute. The amount you can contribute is limited to the lesser of your earned income or the annual contribution limit ($7,000 for 2025 if under 50, or $8,000 if 50 or older).Spousal IRA: If you are married filing jointly, your working spouse can contribute to an IRA for you, provided they have enough earned income to cover both contributions.Age: There is no age limit for contributing to a Traditional or Roth IRA. Roth IRA specific requirements Income Limits: Eligibility is determined by your Modified Adjusted Gross Income (MAGI).Single filers: You can contribute the full amount if your MAGI is less than $150,000 (for 2025). A partial contribution is possible if your MAGI is between $150,000 and $165,000.Married filing jointly: You can contribute the full amount if your MAGI is less than $236,000 (for 2025). A partial contribution is possible if your MAGI is between $236,000 and $246,000.Other status: For those married filing separately, a partial contribution may be possible if MAGI is between \(\$0\) and \(\$10,000\). Traditional IRA specific requirements Income Limits: Unlike a Roth IRA, there are no income limits to contribute to a Traditional IRA, but there are income limits that can phase out your ability to deduct your contributions.Workplace retirement plan: If you or your spouse is covered by a retirement plan at work, your income level will determine how much of your contribution can be deducted.
