Hr Block Tax Course - Class Notes

Front 1

Filing Status - Order of preference (most favorable to least favorable)

Back 1

MFJ
QW
HH
Single
MFS

Front 2

Filing Status - Order of preference (most favorable to least favorable)

Back 2

MFJ
QW
HH
Single
MFS

Front 3

Head of Household

Back 3

o Taxpayer is unmarried or considered unmarried on the last day of the tax year
o Taxpayer paid over half the cost of running the house
o Taxpayer has either a qualifying child (or any other dependent) for more than 6 months OR parent for the entire year

Front 4

Requirements for Qualifying Child

Back 4

o Support – child does not provide more than 50% of their own support
o Age – child must be less than 19 or less than 24 if FT student
o Residency – child must live with taxpayer for more than 6 months
o Relationship – must be a child or descendent of family member.

• AND the following must be true
o The taxpayer is not a dependent
o Joint return – dependent cannot generally file a join return with spouse.
o Citizenship – US citizen or resident of Mexico, US or Canada

Front 5

Qualifying Widow

Back 5

o The taxpayer’s spouse died in either of the 2 tax years immediately preceding the current tax year
o Taxpayer paid over half the cost of maintaining his or her household which is the home of a dependent

Front 6

Requirements for Qualifying Relative

Back 6

o Support – taxpayer must provide more than 50% of support
o Relationship – must be relative or live with you for an entire year
o Not a qualifying child
o Gross Income – must have gross income of less than 3200

• AND the following must be true
o The taxpayer is not a dependent
o Joint return – dependent cannot generally file a join return with spouse.
o Citizenship – US citizen or resident of Mexico, US or Canada

Front 7

Standard Deduction for Single & Married Filing Separately

Back 7

5,000

Front 8

Standard Deduction for Married Filing Jointly & Qualifying Widower

Back 8

10,000

Front 9

Standard Deduction for Head of Household

Back 9

7,300

Front 10

What is the personal exemption amount?

Back 10

3,200

Front 11

What is the dependent exemption amount?

Back 11

3,200

Front 12

What are the additional Standard Deductions for Seniors and Blind?

Back 12

If 65 or greater, 1000 if married, 1250 if not married

If blind, 1000 if married, 1250 if not married (only not used to determine if you need to file)

Front 13

What is the Social Security tax?

Back 13

6.2%
But, on no more than 90K of wages or $5,580 (90K * 6.2%)

Front 14

What is the Medicare tax?

Back 14

1.45% with no limit

Front 15

How do you determine whether you should file?

Back 15

Calculate Standard deduction and personal exemption
If greater than income earned, do not file
May want to file to get money back that was withheld throughout the year

Front 16

How is personal exemption treated differently for Fed and state?

Back 16

Fed: Deduction against income
State: Credit against tax (calculate the tax first)

Front 17

What is the date used to determine marital status?

Back 17

If married at midnight December 31st, considered married.

Must file MFJ or MFS if married.

CA does not recognize common law marriage unless it is from another state

Front 18

What are the community propoerty states?

Back 18

As a Texan, I’d never call a man wishy washy

AZ TX ID NV CA LA NM WI WA

Front 19

If you are a dependent on another persons return, can you take a personal exemption?

Back 19

NO

Front 20

What is the Standard deduction for someone that can be claimed as a dependent on someone else’s return?

Back 20

Choose the greater of the two:
1) Earned Income + 250
2) 800

Cannot exceed the maximum for your filing status
Single & Married Filing Separately – 5,000
Married Filing Jointly & Qualifying Widower – 10,000
Head of Household – 7,300

Front 21

What are the three pieces of information that you need to know to determine if someone needs to file?

Back 21

Age
Filing status
Gross income – worldwide income that is not specifically exempt from tax

Front 22

Overpaid Social Security Tax

Back 22

o If two employers, and social security tax adds up to > 5580, enter in line 67 of 1040
o If one employer, and social security tax is > 5580, return to employer

Front 23

Overpaid state disability insurance (local taxes)

Back 23

o 857.71 is the maximum CA SDI
o If more than 1 employer, and CA SDI adds up to > 857.71, enter in line 41 of 1040

Front 24

What are the 3 things on a W-2 that you can change?

Back 24

o Name
o Address
o Social security number

Front 25

When are tips not subject to SS or Medicare?

Back 25

If they are less than $20 in any single month

Front 26

Tie-breaker Rules

Back 26

o The parent
o The parent who had the child for more time in the year
o If time is equal, the parent with the higher AGI
o If no parents, the taxpayer with the higher AGI

Front 27

Child Tax Credit

Back 27

o Taxpayer must be a qualifying child
o Qualifying child must be under the age of 17 at the end of the year
o Qualifying child must be a US Citizen or US resident

Front 28

What is the date used to determine marital status?

Back 28

If married at midnight December 31st, considered married.

Must file MFJ or MFS if married.

CA does not recognize common law marriage unless it is from another state

Front 29

What are the community propoerty states?

Back 29

As a Texan, I’d never call a man wishy washy

AZ TX ID NV CA LA NM WI WA

Front 30

If you are a dependent on another persons return, can you take a personal exemption?

Back 30

NO

Front 31

What is the Standard deduction for someone that can be claimed as a dependent on someone else’s return?

Back 31

Choose the greater of the two:
1) Earned Income + 250
2) 800

Cannot exceed the maximum for your filing status
Single & Married Filing Separately – 5,000
Married Filing Jointly & Qualifying Widower – 10,000
Head of Household – 7,300

Front 32

Taxable by FED, but not by CA

Back 32

o Direct US Obligations – treasury bills, savings bonds, other bonds and obligations of the U.S.)

Front 33

Taxable by CA

Back 33

o Interest from Fannie Mae bonds, Ginnie Mae bonds, FHLMC

Front 34

How does CA tax muni bond interest?

Back 34

CA does not tax interest received from muni bonds issued by CA. However, CA does tax muni bond interest from sources outside CA.

Front 35

Requirements for Educator Expenses

Back 35

• Position: Must be an educator, teacher, administrator, teacher’s aid, counselor
• K-12, not college level
• Hours: At least 900 hours per year (basically half-time)
o Doesn’t include home schooling
o $250 deduction/person
o Married educators can both take it, $500 total
o Only expenses that help/benefit the kids qualify for deduction
o CA does not recognize this deduction, must make adjustment on CA 540

Front 36

Limitations on itemized deductions and exemptions

Back 36

Itemized Deduction Limitiation

Line 28 – itemized deduction worksheet

If AGI exceeds 145,950 for MFJ or 72,975 for MFS, itemized deductions may be limited
o Exemption limitation
 Reduced by 2% for every 2500 above limit
 Single 145,950
 MFJ 218,950
 MFS 109,475
 HH 12,450
 Deduction for exemptions worksheet – line 42

Front 37

When do you use the Tax computation worksheet?

Back 37

o Taxable income of 100K or more

Front 38

Recovery of prior year’s itemized deduction

Back 38

o If itemized state income taxes as deduction in the previous year and received refund, refund is taxable ad treated as icome in the next year.
o If it was not a deduction in the prior year - taxpayer used standard deduction or used sales tax as itemized – refund is not taxable
o Partial deduction – if they deducted state income taxes. If 5015 was itemized, only 15 is what pushes it over standard deduction, if received 1K refund, 15 is considered taxable.

Front 39

Ordinary and Qualified Dividends

Back 39

o 1099 DIV
o if you didn’t receive, ask client did you ask to reinvest
o 1A – dividends
o 1B – qualified dividends
 stocks owned for at least 60 days
 preferred stock owned for 90 days
 preferential tax treatment – taxed as capital gain – 5% or 15% maximum
o taxed at a maximum of 15% for taxpayers in the 25% tax bracket or above
o taxed at 5% for taxpayers in the 10% and 15% tax bracket

Front 40

capital gain distributions

Back 40

o in a mutual fund, every time manager sells a position there is a profit or loss
o end of the year, mush push out all of the gains to shareholders
o if you own an individual stock, there is no capital gain until you sell the stock
o the gains on mutual funds are always long-term, unless you buy and sell the fund in less than one year.
o If all gains came from mutual fund, check box 13 – don’t need schedule D

Front 41

When to use Qualified dividends and capital gain tax worksheet?

Back 41

must use if entry on 1040 9b or 13, cannot use regular tax table to calculate tax

Front 42

Residency

Back 42

o CA
o 540 NR
o apportion the income that incomes between CA and non-CA
o in CA for any reason other than temporary or transitory purpose
o 2 part year residents
o pay tax on the money earned while in CA must file 540 NR
o definition of domicile – can have only one domicile at a time
o CA resident taxed on all worldwide income
o Nonresident of CA, CA course income is taxed
o Prorate standard deduction, exemptions

Front 43

Difference between Nonrefundable and refundable credit

Back 43

• Nonrefundable credit cannot reduce taxes below 0

Front 44

• Child and Dependent Care Credit

Back 44

nonrefundable
o What are the conditions you have to meet?
 Lower income levels
 If married, have to file joint
 Must have earned income, line 7 or 12
 If married, both parents must have earned income unless
• 1 spouse is disabled or
• 1 spouse going to school
• cannot have two students, one has to have earned income
o 250/month
o the person providing services can not be a dependent of the taxpayer
o qualifying persons:
 must be under 13 years old. As soon as they turn 13 expenses stop qualifying
 physically or mentally incapable of taking care of themselves
 must live in your home
 spouse in same house
o exception: sign away dependency to spouse can still take expenses
o student for at least 5 months out of the year $250/month/child
o on W-2, box 10 is the amount of dependent care $ given by employer, box 10 not included in box 1
o schedule H – nanny comes to the house. If pay them >1400/yr must pay the employers amount of social security and medicare, line 62
o can’t be eliminated by income level, only down to 20%
o In CA:
 Refundable credit

Front 45

• Adoption Credit

Back 45

o $10,630 tax relief credit
o add up all qualified expenses up to 10,630
o can roll excess to next year, up to 5 times or years
o includes fees to adoption agency, court and legal fees, transportation, medical
o In CA: legal fees not included

Front 46

• Special Needs Child

Back 46

o State helps certain children to get adopted
o Get 10,630 credit automatically, regardless of what you spent