-Presented by Jacky Sun,CPA-TSBPA
Table of Content:
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The U.S. Federal Income Taxes Introduction.
Important Tax Calendar.
Tax Forms and which to use?
Federal Tax Calculation Formula.
Important Tax Definitions.
Some Helpful Tax Credits & Deductions
New Tax Rates for year 2014 (2013 comparison)
What’s new for 2014
DIY – How to File Federal Tax Return by yourself Now!
Some Helpful Reference Materials For your Tax Return.
The U.S. Federal Income Tax
Introduction
 The Federal Government adopted income tax in 1861.
 The Federal Income Tax on Individuals was enacted in
1894.
 The first form of 1040 was due on March 1,1914 under the
Rev Act of 1913.
 Federal Income tax has become increasing complexity
nowadays.
 Income tax has proved to be a major source of revenue for
the Federal Government.
U.S. Fed Tax Receipt Pie Chart
Layout 2013
Dates to remember for Federal
Income Taxes-Tax Calendar
 March 15, 2014
 2013 Corporation Income Tax returns due and tax due (for
calendar year filers Form 1120).
 April 15, 2014
 2013 Personal Income Tax returns due and tax due(Form
1040, 1040A,1040EZ, or Form 4868 plus estimated taxes)
 October 15, 2014
 Extended due date for 2013 Personal Income Tax returns
Tax Forms and which to use?
 Use Form 1040EZ if you have:
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Income from wages, tips, interest only
No Adjustments
No Dependents
Income is less than $100,000
 Use Form 1040A if you have:
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Income from wages, interest, dividends, pensions
No investment transactions
No business income
Income is less than $100,000
Standard deduction only
 Use Form 1040 if you have:
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Income from wages, interest, dividends, pensions
Investment transactions
Business income
Itemized deductions
Any credits
Fed Tax Calculation Formula
Gross Income
(Exclusions) Sec.62
(Deductions for AGI) above the line
-----------------------------------------------------------Adjusted Gross Income (AGI)
(Standard Deduction) or (Itemized Deduction) - Deductions from AGI
(Personal and Dependency Exemptions)
-----------------------------------------------------------Taxable Income(TI)
x Tax Rate %
-----------------------------------------------------------Gross Tax Liability
(Prepaid Federal Income Tax, Federal Withholding)
(Credits)
-----------------------------------------------------------Net Tax Refund or Tax Due
Important Tax Definition:
 Gross Income: Per the Sec.61(a) of IRC, “Except as
otherwise provided in this subtitle, gross income means all
income from whatever source derived.”
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Which of the following should be considered as Gross Income ?
a. Receiving the Alimony or Child Support ruled by the court.
b. Receiving a Social Security Benefits.
c. Mr.Wang a CPA helped his neighbor Mr. Li an immigrant Attorney filed 1040
income tax return for recent years, and in return Mr.Li helped to file form I485, an adjustment for permanent resident request for Mr.Wang this year.
d. Worker’s Compensation received due to a work related accident.
e. Life insurance proceeds received by the dependents.
f. Group term life insurance Purchased by the ABC Company providing in favor
to its designated Chief Executives and senior managers.
g. Gain from sales of personal residency home.
H. Unemployment benefits received by a Texas resident.
Important Tax Definition(Conti):
 Deductions for AGI: IRC. Sec. 62 & partial Sec.162 bus rel.
 i.e. Alimony Paid, losses on sales of property, moving expenses etc.
 Deductions from AGI(Itemized):
 i.e. Qualified Charitable organization(% if AGI threshold), Medical Exp(>10%
AGI), State and local taxes, Casualty Losses, Personal interests etc.
 Standard Deduction VS. Itemized Deduction: Choose bigger Deduction
amount.
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Important Tax Definition(Conti):
 FICA Taxes: Federal Insurance Contributions
Act(Social Security Taxes, Medicare Taxes, both
Employer and employee liable)
 FUTA Taxes: Federal Unemployment Tax
Act(Employer liable)
Some Helpful Tax Credits &
Deductions
 Refundable VS Non-refundable Credits:
 Refundable: Taxes withheld on wages, Earned
income credit.
 Earned Income Credit(EIC): for certain people who
work and have earned income under $51,567.
 Non-Refundable: Credit for child care expense, credit
for elder and disabled, Foreign tax credit, adoption
expense credit, Child tax credit.
Some Helpful Tax Credits &
Deductions-Child Tax Credit
 Child Tax Credit:
 The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per
qualifying child depending upon your income. Here are 10 important facts from the IRS
about this credit and how it may benefit your family.
 Amount - With the Child Tax Credit, you may be able to reduce your federal income tax
by up to $1,000 for each qualifying child under the age of 17.
 Qualification - A qualifying child for this credit is someone who meets the qualifying
criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
 Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end
of 2013.
 Relationship Test - To claim a child for purposes of the Child Tax Credit, they must
either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister
or a descendant of any of these individuals, which includes your grandchild, niece or
nephew. An adopted child is always treated as your own child. An adopted child includes
a child lawfully placed with you for legal adoption.
Some Helpful Tax Credits &
Deductions-Child Tax Credit Conti..
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Support Test - In order to claim a child for this credit, the child must not have provided more than
half of their own support.
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Dependent Test - You must claim the child as a dependent on your federal tax return.
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Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S.
resident alien.
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Residence Test - The child must have lived with you for more than half of 2010. There are some
exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
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Limitations - The credit is limited if your modified adjusted gross income is above a certain amount.
The amount at which this phase-out begins varies depending on your filing status. For married
taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate
return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the
Child Tax Credit is generally limited by the amount of the income tax you owe as well as any
alternative minimum tax you owe.
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Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of
income tax you owe, you may be able to claim the Additional Child Tax Credit.
Some Helpful Tax Credits &
Deductions Conti…(EIC)
 Earned Income Credit(EIC) Req. for All Taxpayers
 To be eligible for the earned income credit, taxpayers need
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to meet the follow criteria:
Must have valid Social Security Numbers;
Must be U.S. citizen or resident alien* for the entire year;
Cannot use the married filling separately filing status;
You and your spouse (if married) cannot be claimed as a
qualifying child by someone else.
Cannot claim the foreign earned income exclusion (which
relates to wages earned while living abroad)
You and your spouse (if married) are between the ages of 25
and 64.
Some Helpful Tax Credits &
Deductions Conti…(EIC)
Single, HH, Q. Widow
Maximum Earnings
Maximum EIC
No Children
13,980
475
One Child
36,920
3,169
Two Children
41,952
5,236
Three Children
45,060
5,891
No Children
19,190
475
One Child
42,130
3,169
Two Children
47,162
5,236
Three Children
50,270
5,891
Married Filling Jointly
Some Helpful Tax Credits &
Deductions Conti…(EIC)
 Qualifying Child Rules(EIC)
 Relationship
 Your son, daughter, adopted child, stepchild, foster child or a descendent of any of them
such as your grandchild.
 Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of
them such as a niece or nephew
 Age
 At the end of the filing year, your child was younger than you (or your spouse if you file a
joint return) and younger than 19
 At the end of the filing year, your child was younger than you (or your spouse if you file a
joint return) younger than 24 and a full-time student
 At the end of the filing year, your child was any age and permanently and totally disabled3
 Residency
 Child must live with you (or your spouse if you file a joint return) in the United States4 for
more than half of the year
 Joint Return
 The child cannot file a joint return for the tax year unless the child and the child's spouse did
not have a separate filing requirement and filed the joint return only to claim a refund.
Some Helpful Tax Credits &
Deductions Conti…
 American Opportunity Tax Credit: Depending on your
income, you may receive up to $2,500 of the cost of
qualified tuition and course materials paid during the
taxable year. The student must be enrolled at least halftime for at least one academic period. This credit is
available on a per-student basis.
 Lifetime Learning Credit:The Lifetime Learning Credit
may be as high as $2,000 per eligible student. For 2013 the
full credit is available to eligible individual taxpayers who
make $52,000 or less, or married couples filing jointly who
make $104,000 or less.
Some Helpful Tax Credits &
Deductions Conti…
 Child and Dependent Care Credit: It's available to
people who must to pay for childcare for dependents under
age 13 in order to work or look for work. (up to 35 percent of
qualifying expenses)
 Health Savings Account: Health savings accounts (HSA)
are tax-deductible savings plans that allow a taxpayer to
save pre-tax dollars for future healthcare expenses. HSA are
paired with high-deductible health insurance plans.
Contributions to an HSA are tax-deductible. Earnings, such
as interest and dividends, in the health savings account are
tax-exempt at the federal level. Withdrawals from a health
savings account are tax-free as long as the funds are used
for qualified medical expenses.
Some Helpful Tax Credits &
Deductions Conti…
 Health Savings Account(HSA) Conti……
 Annual contribution limitation.
 For calendar year 2013, the annual limitation on deductions under §
223(b)(2)(A) for an individual with self-only coverage under a high
deductible health plan is $3,250. For calendar year 2013, the annual
limitation on eductions under § 223(b)(2)(B) for an individual with
family coverage under a high deductible health plan is $6,450.
 High deductible health plan.
 For calendar year 2013, a “high deductible health plan” is defined under
§ 223(c)(2)(A) as a health plan with an annual deductible that is not
less than $1,250 for self-only coverage or $2,500 for family coverage, and
the annual out-of-pocket expenses (deductibles, co-payments, and
other amounts, but not premiums) do not exceed $6,250 for self-only
coverage or $12,500 for family coverage.
Some Helpful Tax Credits &
Deductions Conti…
 Qualified Moving Expenses
If you moved due to a change in your job or business
location, or because you started a new job or business,
you may be able to deduct your reasonable moving
expenses but not any expenses for meals. You can
deduct your moving expenses if you meet all three of
the following requirements:
 Your move is closely related to the start of work
 You meet the distance test
 You meet the time test
Some Helpful Tax Credits &
Deductions Conti…
 Qualified Moving Expenses Conti….
 The distance test: Your new workplace must be at least 50 miles
farther from your old home than your old job location was from
your old home. If you had no previous workplace, your new job
location must be at least 50 miles from your old home.
 The time test: If you are an employee, you must work full-time
for at least 39 weeks during the first 12 months immediately
following your arrival in the general area of your new job
location. If you are self-employed, you must work full time for at
least 39 weeks during the first 12 months and for a total of at
least 78 weeks during the first 24 months immediately following
your arrival in the general area of your new work location. There
are exceptions to the time test in case of death, disability and
involuntary separation, among other things.
Some Helpful Tax Credits &
Deductions Conti…
 Traditional Individual Retirement Accounts(IRAs)
 A traditional IRA is a way to save for retirement that gives you tax
advantages.
 Contributions you make to a traditional IRA may be fully or partially
deductible, depending on your circumstances, and
 Generally, amounts in your traditional IRA (including earnings and
gains) are not taxed until distributed(deferred tax).
 For the year 2013, the dollar limits for IRA contributions
are:
 $5,500 if you are age 49 or younger
 $6,500 if you are age 50 or older
 *Withdrawal before 59.5 year, subject to 10% early
withdraw penalty.
Some Helpful Tax Credits &
Deductions Conti…
 401(k) Plan: Qualified profit-sharing plan:
 A 401(k) is a feature of a qualified profit-sharing plan that
allows employees to contribute a portion of their wages to
individual accounts.
 Elective salary deferrals are excluded from the employee’s
taxable income.
 Employers can contribute to employees’ accounts.
 Distributions, including earnings, are includible in taxable
income at retirement.
 Traditional 401(k) /Safe harbor 401(k)/SIMPLE 401(k)
plans.
Some Helpful Tax Credits &
Deductions Conti…
 401(k) Plan: Qualified profit-sharing plan Conti..
 Deferral limits for 401(k) plans
 The limit on employee elective deferrals (for traditional and safe
harbor plans) is:
 $17,500 (in 2013 and 2014)/12, 000(SIMPLE)
 Catch-up contributions for those age 50 and over
 If permitted by the 401(k) plan, participants who are age 50 or
over at the end of the calendar year can also make catch-up
contributions. The additional elective deferrals you may
contribute is:
 $5,500 to traditional and safe harbor 401(k) plans (in 2013 and
2014)
 $2,500 to SIMPLE 401(k) plans (in 2013 and 2014)
Some Helpful Tax Credits &
Deductions Conti…
 Your 401K Match.-Typically, you only receive a contribution into
your 401(k) plan if you make a contribution yourself. When you save
some of your paycheck by putting money into your 401(k), your
company does as well. But if you fail to save a dollar, than your
company match goes away too.
 i.e. There are companies offer 50% match up to the first 6%;
 dollar for dollar match up to 5%...
 How much do your company offer the 401K match????
 Beware of the Vest-No matter when or how you terminate
employment, the money you contribute to your 401(k) plan is yours to
keep. However, the contributions made by your employer may be
subject to a vesting schedule. Make sure you understand your vesting
program before you quit your job!
Tax Rates for the Year 2014---Single
Single
Ordinary
Long Term Gains
Taxable Income
Tax Rate
Tax Rate
over
to
10%
0%
0
9,075(8,925-2013)
15%
0%
9,075
36,900(36,250)
25%
15%
36,900
89,350(87,850)
28%
15%
89,350
186,350(183,250)
33%
15%
186,350
405,100(398,350)
35%
15%
405,100
406,750(400,000)
39.60%
20%
406,750
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Tax Rates for the Year 2014---MFJ
Married Filing Jointly
Ordinary
Long Term Gains
Taxable Income
Tax Rate
Tax Rate
over
to
10%
0%
0
18,150 (1.67%)
15%
0%
18,150
73,800
25%
15%
73,800
148,850
28%
15%
148,850
226,850
33%
15%
226,850
405,100
35%
15%
405,100
457,600
39.60%
20%
457,600
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Tax Rates for the Year 2014---MFS
Married Filing Separately
Ordinary
Long Term Gains
Taxable Income
Tax Rate
Tax Rate
over
to
10%
0%
0
9,075(1.67%)
15%
0%
9,075
36,900
25%
15%
36,900
74,425
28%
15%
74,425
113,425
33%
15%
113,425
202,500
35%
15%
202,500
228,800
39.60%
20%
228,800
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Tax Rates for the Year 2014--HH
Head of Household
Ordinary
Long Term Gains
Taxable Income
Tax Rate
Tax Rate
over
to
10%
0%
0
12,950(1.67%)
15%
0%
12,950
49,400
25%
15%
49,400
127,550
28%
15%
127,550
206,600
33%
15%
206,600
405,100
35%
15%
405,100
432,200
39.60%
20%
432,200
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What’s new for 2014
 In addition to the federal income taxes on ordinary income,
there are other taxes that may apply to personal income:
 Social Security Tax at a rate of 12.4% on wages and self
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employment income up to the annual Social Security Wage
base of $117,000 (it had been at 10.4% for 2011 and 2012).
Medicare Tax at a rate of 2.9% on wages and self-employment
income.
Additional Medicare Tax at a rate of 0.9% on wages and selfemployment income over the following thresholds:
Married Filing Jointly: $250,000
Single or Head of Household or Qualifying Widow(er): $200,000
Married Filing Separately: $125,000
What’s new for 2014 Conti…
 Affordable Care Act Tax: (OBAMA CARE)
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Open Enrollment for the Health Insurance Marketplace: The open enrollment period to
purchase health care coverage through the Health Insurance Marketplace for 2014 began Oct. 1, 2013
and runs through March 31, 2014. When you get health insurance through the marketplace, you may
be able to get advance payments of the premium tax credit that will immediately help lower your
monthly premium. Learn more at HealthCare.gov.
Premium Tax Credit: If you get insurance through the Marketplace, you may be eligible to claim the
premium tax credit. You can elect to have advance payments of the tax credit sent directly to your
insurer during 2014, or wait to claim the credit when you file your tax return in 2015. If you choose to
have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax
return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you
need do nothing at this time unless you have a change in circumstance.
Change in Circumstances: If you're receiving advance payments of the premium tax credit to help
pay for your insurance coverage, you should report life changes, such as income, marital status or
family size changes, to your marketplace. Reporting changes will help to make sure you are getting the
proper amount of advance payments.
Individual Shared Responsibility Payment: Starting January 2014, you and your family must have
health care coverage, have an exemption from coverage, or make a payment when you file your 2014
tax return in 2015. Most people already have qualifying health care coverage and will not need to do
anything more than maintain that coverage throughout 2014
What’s new for 2014 Conti…
 OBAMA CARE -The Penalty fee in 2014 and beyond
 The penalty in 2014 is calculated one of 2 ways. You’ll pay whichever of these amounts is
higher:
 1% of your yearly household income. (Only the amount of income above the tax filing
threshold, $10,150 for an individual, is used to calculate the penalty.) The maximum
penalty is the national average yearly premium for a bronze plan.
 $95 per person for the year ($47.50 per child under 18). The maximum penalty per
family using this method is $285.
 The way the penalty is calculated, a single adult with household income below $19,650
would pay the $95 flat rate. A single adult with household income above $19,650 would
pay an amount based on the 1 percent rate. (If income is below $10,150, no penalty is
owed.)
 The penalty increases every year. In 2015 it’s 2% of income or $325 per person. In 2016 and
later years it’s 2.5% of income or $695 per person. After that it's adjusted for inflation.
 If you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each
month you’re uninsured. If you’re uninsured for less than 3 months, you don’t have to
make a payment.
What’s new for 2014 Conti…
 Personal Exemptions. The personal exemption amount is
$3,950 in 2014, up from $3,900 in 2013. Phase-outs for
personal exemption amounts (sometimes called “PEP”)
begin with adjusted gross incomes (AGI) of $254,200 for
individuals and $305,050 for married couples filing jointly;
the personal exemptions phase out completely at $376,700
for individual taxpayers ($427,550 for married couples filing
jointly.)
 Federal Gift Tax Exclusion. The annual exclusion for gifts
remains at $14,000 for 2014.
 Individual Retirement Account Contributions. The
$5,500 limit on IRA contributions remains the same in
2014.
Do it yourself(DIY)Tax Preparation
 IRS sponsored Free Tax Return:
 http://www.youtube.com/watch?v=26ESO1dqip0
 http://www.irs.gov/Individuals/Free-Tax-Return-
Preparation-for-You-by-Volunteers : VITA or TCE

Provider
NTC-CCC
Dates
Hours
27 JAN 2014 MON
9800 TOWN PARK
DR,HOUSTON, TX
77036
713-957-4357
Languages Appointment
1:00PM -
6:00PM
15-Apr-14
VIETNAMES
E
SPANISH
TUE
1:00PM -
6:00PM
CHINESE
THU
1:00PM -
6:00PM
ENGLISH
SAT
1:00PM -
6:00PM
NOT
REQUIRED
Do it yourself(DIY)Tax PreparationConti…
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IRS Free File: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free
http://www.youtube.com/watch?v=ldZcsSGA3Cs&list=PL2A3E7A9BD8A8D41D
IRS recommended Free File Software:
TurboTax:
Adjusted Gross Income: $30,000 or less, or
$58,000 or less for Active military, or
Eligible for the Earned Income Tax Credit, and
Live in any state for a free Federal tax return.
Free Extensions
TaxACT Free File Edition:
Adjusted Gross Income: $52,000 or less, and
Age: between 18 and 57, and
Live in any state or U.S. Citizens and resident aliens with foreign addresses for a free
Federal tax return.
 Free Extensions
Do it yourself(DIY)Tax PreparationConti…
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H&R Block's Free File:
Adjusted Gross Income: $58,000 or less, and
Age: 52 or younger, and
Live in any state for a free Federal tax return.
 ezTaxReturn.com:
 Adjusted Gross Income: $58,000 or less, and
 Live in any of these states: AL, AR, AZ, CA, CO, GA, IL,
LA, MA, MD, MI, MS, NC, NJ, NY, OH, PA, VA, and
WI for a free Federal tax return.
References resources:
 IRS tax resources-help yourself:
 http://www.youtube.com/watch?v=XAZX8kjpalI&list=
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PLvDH25MKBe1eDq4jxQ3FxuvKyVhstJ45c
When will I get my refund?
http://www.youtube.com/watch?v=AnC8tt1wdhI&list
=PLvDH25MKBe1eDq4jxQ3FxuvKyVhstJ45c
IRS “Dirty Dozen”-TAX FRAUD!
http://www.youtube.com/watch?v=4Q85-NghrsY
How long to keep your tax return
and supporting docs?
 IRS documentation requirements:
 3 years statue of limitation—IRS recommended you to keep
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your returns and any supporting documents.
However:
if you under reported income by 25%, the IRS can go back
for 6 years(7 years if you claim loss for bad debt or
worthless securities).
IRS may have no statue of limitation, if you don’t file tax
return, or if you filed a fraudulent return.
Jacky’s Recommendation: keep your return as long as
possible!
References resources other:
 http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes
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for-Free
http://www.irs.gov/Individuals/Free-Tax-ReturnPreparation-for-You-by-Volunteers
https://www.freefilefillableforms.com
http://apps.irs.gov/app/freeFile
IRS Tax Guide for Alien:
http://www.irs.gov/publications/p519/ch03.html
Tax update for 2014: http://www.irs.gov/pub/irs-drop/rp13-35.pdf
http://www.youtube.com/watch?v=26ESO1dqip0