Table of Contents. Overview Filing Status... 35

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1 Table of Contents Overview Preliminary Matters....1 Preparer Tax Identification Number....1 Electronic Filing Identification Number....2 State Matters...5 Filing Requirements....5 Individuals....6 Dependents...7 Self-employed....8 Other Situations...9 Which Form to File...10 Form 1040EZ...10 Form 1040A Form Due Dates General Rule Extensions...18 Heading...25 Tax Year...25 Name...26 Address...26 Identification Number...27 Separate Returns Nonresident Spouse Undocumented Workers Presidential Election Campaign Fund...29 Questions to Ask Overview Review Questions...31 Overview Review Answers Filing Status Marital Status...35 Unmarried...35 Married Filing Status...37 Single Married Filing Jointly NATP vii

2 Married Filing Separately Head of Household Qualifying Widow(er) With Dependent Child Death or Birth Questions to Ask Filing Status Review Questions Filing Status Review Answers Exemptions Dependency Qualifications General Tests...51 Qualifying Child Tiebreaker Test Qualifying Relative Child of Divorced or Separated Parents Social Security Numbers for Dependents...68 Exemptions Review Questions...69 Exemptions Review Answers...73 Income Rounding...77 Method of Accounting...78 Cash Method...78 Accrual Method Wages, Salaries, Tips, etc Form W Tips Household Employee...84 Garnished Wages Scholarships Interest Income Taxable Interest U.S. Savings Bonds Tax-exempt Interest Dividends...96 Ordinary Dividends...96 Qualified Dividends viii NATP

3 Nondividend Distribution Reporting Requirements Refunds, Credits, or Offsets Alimony Business Income or (Loss) Capital Gain or Loss Holding Period Basis Form Other Gains or (Losses) IRA Distributions Traditional IRA Roth IRA Reporting Requirements Rollovers Pension Distribution Reporting Requirements Rental Real Estate, Royalties, Partnerships, S Corporations, Trusts, etc Rental Income Rental Expenses Depreciation Farm Income or (Loss) Unemployment Compensation Social Security Benefits Other Income Gambling Winnings Prizes and Awards Coverdell Education Savings Account or Qualified Tuition Program Distributions Qualified ABLE Programs Jury Duty Canceled Debts Hobby vs. Profit Motive Factors Determining Profit Motive Presumption of Profit Impact of Hobby Determination NATP ix

4 HSA Distributions Taxable HSA Distributions Other Income Questions to Ask Income Review Questions Income Review Answers Adjustments to Income Educator Expenses Expenses of Reservists, Performing Artists, and Fee-basis Government Officials Health Savings Account Benefits Eligible Individuals High Deductible Health Plan Contributions Rollovers and Qualified HSA Funding Distributions Moving Expenses Standard Mileage Rate Tests for Deductibility of a Move Deductible Part of Self-employment Tax Self-employed SEP, SIMPLE, and Qualified Plans Self-employed Health Insurance Deduction Penalty on Early Withdrawal of Savings Alimony Paid IRA Deduction Student Loan Interest Deduction Tuition and Fees Deduction Domestic Production Activities Deduction Pass-through Deduction Other Adjustments Questions to Ask Adjustments to Income Review Questions Adjustments to Income Review Answers x NATP

5 Standard Deduction vs. Itemized Deductions Standard Deduction Age and Blindness Component of Standard Deduction Standard Deduction Amounts Itemized Deductions Medical and Dental Expenses Taxes Interest Charitable Contributions Casualty and Theft Losses Miscellaneous Deductions Subject to 2% Miscellaneous Deductions Not Subject to 2% Nondeductible Expenses The Pease Limitation Exemption Deduction Questions to Ask Standard Deduction vs. Itemized Deductions Review Questions Standard Deduction vs. Itemized Deductions Review Answers Tax and Nonrefundable Credits Tax Computation Kiddie Tax Tax Table Tax Computation Worksheet Other Taxes Alternative Minimum Tax Excess Advance Premium Tax Credit Repayment Nonrefundable Credits Foreign Tax Credit Child and Dependent Care Credit Education Credits Retirement Savings Contributions Credit Child Tax Credit Residential Energy Credit Credit for the Elderly or the Disabled Adoption Credit NATP xi

6 District of Columbia First-time Homebuyer Credit Questions to Ask Tax and Nonrefundable Credits Review Questions Tax and Nonrefundable Credits Review Answers Other Taxes, Payments, and Refundable Credits Other Taxes Self-employment Tax Tax on Unreported Tips Early Distribution Tax Household Employment Tax First-time Homebuyer Credit Repayment Health Care Individual Responsibility Additional Medicare Tax Net Investment Income Tax Federal Income Tax Withholding Estimated Tax Payments Refund Applied From Prior Year Refundable Credits Earned Income Tax Credit Additional Child Tax Credit American Opportunity Tax Credit Net Premium Tax Credit Amounts Paid With Extension Excess Social Security Withheld Credit for Federal Tax on Fuels Other Payments Due Diligence Form Due Diligence Penalty Questions to Ask Other Taxes, Payments, and Refundable Credits Review Questions Other Taxes, Payments, and Refundable Credits Review Answers xii NATP

7 Completing the Return Refund Owe Tax Estimated Tax Penalty Submitting the Return Amending the Return Safeguarding Taxpayer Information Wrongful Disclosure or Use Knowing or Reckless Disclosure or Use Completing the Return Review Questions Completing the Return Review Answers Case Study Overview Appendix Appendix A: Solution Case Study Appendix B: Due Diligence Questionnaire Appendix C: QBI Deduction Flowchart 199A Appendix D: Draft Forms 2018 Form 1040 and Schedules NATP xiii