FUNDAMENTALS OF TAXATION IRS Provider Number: RP5CH IRSTAXTRAINING.COM, INC. 9 S. Elmhurst Road #943 Prospect Heights, IL 60070 Voice: 800 214 4307 Fax: 877 674 3472 www.irstaxtraining.com
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Introduction... viii Course Description... viii Course Learning Objectives... viii Taxes 101... xi... 1-1 General Filing Information... 1-1 Preliminary Work and Collection of Taxpayer Data... 1-1 Accounting Periods... 1-4 Accounting Methods... 1-6 Filing Dates... 1-8 Determining the Tax... 1-10 Completion of the Filing Process... 1-12 Safeguarding Taxpayer Information... 1-21 Significance of Signatures... 1-22 Rejected Electronically Filed Returns... 1-24 Refunds... 1-26 Paying the Tax... 1-28 Presidential Election Campaign Fund... 1-34 Review... 1-35 Review Questions... 1-35 Review Feedback... 1-36... 2-1 Tax Forms... 2-1 Returns not Qualifying for Use of the Tax Table... 2-4 Amended Returns and Claims for Refund... 2-4 Form W-4 - Employee's Withholding Allowance Certificate... 2-10 Form W-2 - Wage and Tax Statement... 2-16 Form W-3 - Transmittal of Wage and Tax Statements... 2-21 Various Form 1099... 2-21 Review... 2-25 Review Questions... 2-25 Review Feedback... 2-27... 3-1 Taxable Income, Filing Status... 3-1 Taxable and Nontaxable Income... 3-1 Who is Subject to the Tax... 3-1 Sources of Taxable and Non-Taxable Income... 3-5 Tax Liability... 3-11 Filing Status... 3-14 2017 IRSTaxTraining.com, Inc. i
Special Filing Situations... 3-19 Review... 3-27 Review Questions... 3-27 Review Feedback... 3-29... 4-1 Standard Deduction, Personal Exemptions... 4-1 The Standard Deduction... 4-1 Special Rules on the Standard Deduction... 4-2 Personal Exemptions... 4-4 Review... 4-12 Review Questions... 4-12 Review Feedback... 4-14... 5-1 Income... 5-1 Earned Income... 5-1 Foreign Earned Income... 5-2 Unemployment and Other Compensation... 5-3 Special Rules for Certain Employees... 5-16 Passive Income... 5-16 Rental Income... 5-17 Separation or Divorce Income... 5-18 Review... 5-20 Review Questions... 5-20 Review Feedback... 5-22... 6-1 Investment Income... 6-1 Dividends... 6-1 Interest Subject to the Tax... 6-5 How To Report Interest Income... 6-9 Review... 6-12 Review Questions... 6-12 Review Feedback... 6-13... 7-1 Capital Gains and Losses, Sale of Personal Residence... 7-1 Capital Gains and Losses... 7-5 Sale of Personal Residences... 7-9 Like-Kind Exchanges... 7-13 Involuntary Conversions... 7-16 Review... 7-17 Review Questions... 7-17 Review Feedback... 7-18... 8-1 2017 IRSTaxTraining.com, Inc. ii
Sole Proprietor, Small Business Income and Taxation... 8-1 Schedule C-EZ... 8-4 Schedule C - Profit or Loss From Business... 8-4 Self-Employment Tax... 8-13 Special Rules and Exceptions... 8-14 Household Employment - Schedule H... 8-16 Farming Taxation - Schedule F... 8-18 Rent... 8-19 Other Income... 8-19 Review... 8-21 Review Questions... 8-21 Review Feedback... 8-22... 9-1 Specialized Returns... 9-1 Corporation Filing Information... 9-1 Partnership Filing Information... 9-10 S Corporations... 9-15 Limited Liability Company (LLC)... 9-21 Trust and Estate Income Tax... 9-24 Tax Exempt Organizations... 9-29 Retirement Plans... 9-30 Farms... 9-34 Farm Sales and Exchanges... 9-37 Deductible Expenses... 9-38 Depreciation... 9-42 Rental Real Estate... 9-46 Review... 9-48 Review Questions... 9-48 Review Feedback... 9-50... 10-1 Depreciation... 10-1 Section 179 Election... 10-10 Capitalization and Repairs... 10-14 Review... 10-17 Review Questions... 10-17 Review Feedback... 10-19... 11-1 Retirement Income... 11-1 Social Security and Medicare Taxes... 11-1 Pensions and Annuities... 11-2 Individual Retirement Arrangements (IRAs)... 11-4 Review... 11-18 2017 IRSTaxTraining.com, Inc. iii
Review Questions... 11-18 Review Feedback... 11-19... 12-1 Exclusions, Deductions, Expenses, Employee Compensation... 12-1 Exclusions... 12-1 Deductions for Adjusted Gross Income... 12-3 Coverdell Education Savings Accounts (CESA)... 12-4 Health Savings Account Deduction... 12-8 Other Deductions... 12-9 Other Employee Compensation... 12-14 Review... 12-19 Review Questions... 12-19 Review Feedback... 12-21... 13-1 Itemized Deductions... 13-1 Medical Expenses... 13-2 Taxes... 13-4 Interest... 13-13 Contributions... 13-15 Casualty and Theft Losses... 13-17 Job Expenses and Other Miscellaneous Deductions... 13-20 Review... 13-31 Review Questions... 13-31 Review Feedback... 13-33... 14-1 Credits... 14-1 Earned Income Tax Credit... 14-2 Earned Income Tax Credit (EITC) Limitations... 14-5 Child and Dependent Care Credit... 14-7 Child Tax Credit... 14-9 Additional Child Tax Credit... 14-11 Credits and Deductions for Higher Education Tuition and Related Expenses... 14-11 Student Loan Interest Deduction... 14-12 American Opportunity Tax Credit (AOC) and Lifetime Learning Credit... 14-13 Affordable Care Act Tax Credits... 14-16 Adoption Credit... 14-20 Credit for the Elderly or the Permanently and Totally Disabled... 14-21 Retirement Savings Contribution Credit (Saver s Credit)... 14-22 Other Tax Credits... 14-22 Review... 14-25 Review Questions... 14-25 Review Feedback... 14-27 2017 IRSTaxTraining.com, Inc. iv
... 15-1 Additional Taxes... 15-1 Alternative Minimum Tax... 15-1 Affordable Care Act Tax Provisions... 15-4 Other Taxes... 15-17 Household Employment Taxes... 15-21 Voluntary Classification Settlement Program (VCSP)... 15-22 Review... 15-24 Review Questions... 15-24 Review Feedback... 15-25... 16-1 Penalties... 16-1 Civil Penalties... 16-1 Failure to File... 16-1 Accuracy... 16-2 Fraud... 16-2 Criminal Prosecution... 16-3 Review... 16-4 Review Questions... 16-4 Review Feedback... 16-5... 17-1 Professional Responsibilities, Ethics, Penalties... 17-1 Practice Before the IRS... 17-2 Sarbanes-Oxley Act of 2002... 17-7 Rules for Tax Preparers Circular 230... 17-7 Subpart A... 17-8 Subpart B... 17-17 Subpart C... 17-23 Subpart D... 17-24 Subpart E... 17-28 Individual Income Tax Penalties... 17-29 Tax Return Preparer Penalties... 17-30 Paid Preparer s Due Diligence Checklist... 17-31 Additional Tax Return Preparer Penalties... 17-33 Review... 17-36 Review Questions... 17-36 Review Feedback... 17-39... 18-1 2016 Federal Tax Legislation and Continuing Changes... 18-1 Administration... 18-1 Reminders... 18-2 2016 Federal Tax Legislation... 18-8 2017 IRSTaxTraining.com, Inc. v
Pension Plan Limitations... 18-14 Affordable Care Act Tax Provisions for Individuals... 18-19 Affordable Care Act Tax Provisions Employers... 18-28 Same-Sex Married Couples... 18-31 Other 2016 Tax Update Information... 18-31 Section 179 Deduction... 18-38 2016 Tax Credits and Deductions Updates... 18-40 Gift and Estate Tax... 18-49 Expiring Tax Benefits... 18-54 Filing Dates... 18-54 Review... 18-56 Review Questions... 18-56 Review Feedback... 18-58 Bibliography... I Index... VIII Tax Tables... A-1 Tax Return Preparation Instructions... RP-1 Scenario 1... RP-1 Scenario 2... RP-5 Scenario 3... RP-9 Scenario 4... RP-13 Scenario 5... RP-16 Scenario 6... RP-20 Scenario 7... RP-24 Scenario 8... RP-27 Examination Instructions - Fundamentals of Taxation... EX-1 Examination Questions - Fundamentals of Taxation... EX-2 Lesson 1... EX-2 Lesson 2... EX-5 Lesson 3... EX-7 Lesson 4... EX-9 Lesson 5... EX-13 Lesson 6... EX-15 Lesson 7... EX-18 Lesson 8... EX-20 Lesson 9... EX-23 Lesson 10... EX-24 Lesson 11... EX-25 Lesson 12... EX-28 Lesson 13... EX-32 Lesson 14... EX-37 Lesson 15... EX-39 2017 IRSTaxTraining.com, Inc. vi
Lesson 16... EX-40 Lesson 17... EX-41 Lesson 18... EX-42 Course Evaluation... CE-1 2017 IRSTaxTraining.com, Inc. vii