Liberty Tax Service
Basic Income Tax Course
WELCOME
CLASS ONE
Introduction
Welcome to the Liberty Tax Service Online Basic Income
Tax Course.
This tax course is designed to teach you how to
prepare basic forms and schedules for individual
income tax returns. The manual is based on Internal
Revenue Service (IRS) Publication 17, other
relevant IRS Publications and form instructions for
tax year 2008.
Publication extracts are provided at the end of each
chapter. The chapter text compliments and
supplements the publication extracts. The text and
extracts must be read together for a full
understanding of the material. Tests, problems, and
examples will refer to both publication extracts and
text material.
2
COMPANY PROFILE
Founded in 1997, Liberty Tax Service is the fastest
growing retail tax preparation company in the
industry’s history. Founder and CEO John T. Hewitt
has 39 years of tax industry experience, the most of
any CEO in the tax preparation business. Hewitt is
also the founder of Jackson Hewitt Tax Service
(NYSE: JTX).
Liberty Tax Service (www.libertytax.com) operates
3,200 offices throughout the United States and
Canada, and has prepared over 5,000,000 individual
income tax returns. The company focuses on
computerized income tax preparation and electronic
filing of returns. Emphasis on customer service
including audit assistance, a money back guarantee
and free tax return checking are just a few of the
“above and beyond” features offered by Liberty Tax
Service.
3
LIBERTY TAX SERVICE IS BUILDING THE #1
FRANCHISE TEAM IN THE INDUSTRY!
We have the #1 corporate culture in the
industry. We are setting the standard and
constantly improving while we’re having
fun! Would you like to join the Liberty Tax
Service team of franchisees, and grow with
the fastest growing international tax service
ever? Liberty’s franchise opportunity is
noted in the franchise industry rankings for
solid growth, excellence and affordability.
 In January 2008, Entrepreneur magazine
ranked Liberty Tax Service as #3 on its
Franchise 500 overall list of best franchises.
 Liberty Tax Service is the only tax service
included on Hispanic Trends magazine’s
2006 and 2007 elite list of the “25 Top
Franchises for Hispanics.”
4
My Background
 Been doing individual, corporate and
partnership returns for over 10 years
 I have been with Liberty Tax since October
2006
 I own/operate 3 offices currently (East
Brunswick, Freehold, Trenton)
 Exploring expansion opportunities
Liberty Mission
 Set the standard
 Improve each day
 Have some Fun
These principles is what Liberty Tax Service
is built upon. Our goal is to be the #1 Tax
Prep company
Office Age & Our Goals
East Brunswick: 5th Tax Season
Freehold: 4th Tax Season
Trenton: 2nd Tax Season
Expansion
Increase Tax Return count 40%
Working for Liberty Tax
Examples of Qualities of our Employees
• Friendly personality
• Enjoys working with people
• Enthusiastic and motivated
• Works well within a team
• Tax knowledge
• Improves each day
THE TAX INDUSTRY
 An industry dominated for 50 years by
one major player, H&R Block.
 The trend toward electronic tax filing is
soaring, with a record 86 million individual
returns e-filed in tax season 2008, up a
robust 12 percent. The IRS reports that
about 60% of all returns in 2008 were efiled.
 A growing market since more and more
people pay taxes each year.
 Approximately 62% of all tax return filers
paid someone to prepare their tax return
this year (up from 51% in 1996).
9
ONLINE INCOME TAX COURSE 2009
TABLE OF CONTENT
 Introduction; Chapter 1: Filing Information
 Chapter 2: Exemptions and Dependents
 Chapter 3: Filing Status
 Chapter 4: Wages, Salaries, Tips, etc and Withheld
Taxes
 Chapter 5: Interest, Dividends, and Other Income
 Chapter 6: Standard Deduction and Your Income Tax
 Chapter 7: Tax Credits & Midterm Exam (take home)
 Chapter 8: Itemized Deductions
 Chapter 9: Retirement Benefits
 Chapter 10: Social Security Benefits & Other Credits
10
ONLINE INCOME TAX COURSE 2009
TABLE OF CONTENT
 Chapter 11: Basis of Property and Capital Gains
 Chapter 12: Depreciation
 Chapter 13: Other Itemized Deductions
 Chapter 14: Profit or Loss from Business
 Chapter 15: Rental Real Estate, Royalties, Partnerships
 Chapter 16: Adjustments
 Chapter 17: Other Taxes
 Chapter 18: Additional Payments, Penalties, etc.
 Chapter 19: Extensions, Amended Returns, Electronic
Filing, & Final Exam (take home)
 Final Exam Review
11
Chapter 1: Filing Information
 Chapter Content
 Overview of Form 1040, U. S. Individual
Income Tax Return
 Who Must and Who Should File a Tax
Return
 Other Filing Information
 Key Ideas
 Objectives
 Become Familiar with Form 1040
 Identify Who Must and Who Should File a
Return
 Understand Other Basic Filing Information12
FILING A TAX RETURN
 Filing a Tax Return means sending your return to the
Internal Revenue Service (IRS) by mail or by computer.
The information on your return determines your tax liability
on the income you received and the amount of the refund
you are due or the amount you need to pay to the IRS.
 Before preparing a return, you need to determine whether
you are required to file or whether you should file even if
you are not required to do so. Filing requirements are
shown in charts prepared by the IRS. In this chapter, you
will learn how to read the charts along with some other
basic filing information.
 First, to provide an overview of the tax preparation process
and to introduce some of the terms and concepts you will
need to know to prepare a tax return, let us take a look at
each section of Form 1040, U.S. Individual Income Tax
Return. The Form 1040 overview will also identify the
chapters that discuss each topic in detail.
13
FORM 1040 OVERVIEW
Tax Year - Your tax is figured on the amount
of income you receive and the expenses
you incur during a tax year. For most
individuals, the tax year is a calendar year.
This Form 1040 is for tax year 2008.
14
FORM 1040 OVERVIEW
Tax Year
15
FORM 1040 OVERVIEW
Tax Year - Your tax is figured on the
amount of income you receive and the
expenses you incur during a tax year. For
most individuals, the tax year is a
calendar year.
Label - If you do not receive a preprinted
label from the IRS, enter your name,
address and social security number (and
your spouse’s name and/or social security
number if applicable) here.
16
FORM 1040 OVERVIEW
Label
17
FORM 1040 OVERVIEW
Tax Year - Your tax is figured on the amount of
income you receive and the expenses you incur
during a tax year. For most individuals, the tax
year is a calendar year.
Label - If you do not receive a preprinted label
from the IRS, enter your name, address and
social security number (and your spouse’s name
and/or social security number if applicable) here.
Filing Status (Covered in Chapter 3) - Your filing
status generally depends on whether you are
considered married or unmarried on the last day
of the tax year.
18
FORM 1040 OVERVIEW
Filing status
19
FORM 1040 OVERVIEW
Tax Year - Your tax is figured on the amount of
income you receive and the expenses you incur
during a tax year. For most individuals, the tax
year is a calendar year.
Label - If you do not receive a preprinted label
from the IRS, enter your name, address and
social security number (and your spouse’s name
and/or social security number if applicable) here.
Filing Status (Covered in Chapter 3) - Your filing
status generally depends on whether you are
considered married or unmarried on the last day
of the tax year.
Exemptions (Covered in Chapter 2) - Exemptions
further reduce the amount of your income that is
taxed. On page 2 of Form 1040, you subtract a
certain dollar amount for each exemption you
20
claim.
FORM 1040 OVERVIEW
Exemptions
21
FORM 1040 OVERVIEW
Income (Covered in Chapters 4, 5, 9, 10, 11, 14 &
15) - All income in the form of money, goods,
services and property you receive during the tax
year is reported here.
22
FORM 1040 OVERVIEW
Adjusted Gross Income (Covered in Chapter 16) Adjustments are various items you are allowed to DEDUCT
(subtract) from your total income. Total income minus
adjustments is called ADJUSTED GROSS INCOME or
AGI.
23
FORM 1040 OVERVIEW
Tax And Credits (Covered in Chapters 6, 7, 8, 13)
- Your TAXABLE INCOME (the amount of
income on which your income tax is computed) is
figured here by subtracting the STANDARD
DEDUCTION or your ITEMIZED DEDUCTIONS
(a total dollar amount of certain expenses that
may be used in place of the standard deduction)
and exemptions from your AGI. Credits reduce
your tax. The credits in this section of Form 1040
are called NONREFUNDABLE CREDITS (if you
do not owe any income tax, these credits do not
result in a refund of the unused amount of the
credit).
24
FORM 1040 OVERVIEW
Non-refundable Credits
Taxable Income
25
FORM 1040 OVERVIEW
Other Taxes (Covered in Chapter 17) - Certain
additional taxes such as self-employment tax or
social security tax on tips are shown here. These
taxes are added to your tax to arrive at your
TOTAL TAX.
26
FORM 1040 OVERVIEW
Payments (Covered in Chapters 4,
10, 18) - Generally, as you receive
income you are required to pay at
least 90% of your income tax liability
during the tax year. WITHHELD
TAXES are paid to the IRS from
money due to you by the payer
(e.g., your employer). ESTIMATED
TAX PAYMENTS are tax payments
you paid directly to the IRS.
27
FORM 1040 OVERVIEW
Payments
28
FORM 1040 OVERVIEW
Payments (Covered in Chapters 4, 10, 18) Generally, as you receive income you are
required to pay at least 90% of your income tax
liability during the tax year. WITHHELD TAXES
are paid to the IRS from money due to you by
the payer (e.g., your employer). ESTIMATED
TAX PAYMENTS are tax payments you paid
directly to the IRS.
Refund - You are entitled to a refund if the
payments you made (and/or your refundable
credits) are greater than the total tax.
29
FORM 1040 OVERVIEW
Refund
30
FORM 1040 OVERVIEW
Payments (Covered in Chapters 4, 10, 18) Generally, as you receive income you are
required to pay at least 90% of your income tax
liability during the tax year. WITHHELD TAXES
are paid to the IRS from money due to you by
the payer (e.g., your employer). ESTIMATED
TAX PAYMENTS are tax payments you paid
directly to the IRS.
Refund - You are entitled to a refund if the
payments you made (and/or your refundable
credits) are greater than the total tax.
Amount You Owe (Covered in Chapter 18) - If
you have not paid the full amount of the tax you
are liable for, you must pay the additional
amount due with your return.
31
FORM 1040 OVERVIEW
Amount You Owe
32
FORM 1040 OVERVIEW
Payments (Covered in Chapters 4, 10, 18) - Generally, as you
receive income you are required to pay at least 90% of your
income tax liability during the tax year. WITHHELD TAXES are
paid to the IRS from money due to you by the payer (e.g., your
employer). ESTIMATED TAX PAYMENTS are tax payments you
paid directly to the IRS.
Refund - You are entitled to a refund if the payments you made
(and/or your refundable credits) are greater than the total tax.
Amount You Owe (Covered in Chapter 18) - If you have not paid
the full amount of the tax you are liable for, you must pay the
additional amount due with your return.
Third Party Designee - You can allow the IRS to discuss your
return with a friend, family member, any other person or the paid
preparer by checking the “Yes” box and completing the requested
information in this section of your return.
33
FORM 1040 OVERVIEW
Third Party Designee
34
FORM 1040 OVERVIEW
Payments (Covered in Chapters 8, 10, 18) - Generally, as you receive
income you are required to pay at least 90% of your income tax liability
during the tax year. WITHHELD TAXES are paid to the IRS from money
due to you by the payer (e.g., your employer). ESTIMATED TAX
PAYMENTS are tax payments you paid directly to the IRS.
Refund - You are entitled to a refund if the payments you made (and/or your
refundable credits) are greater than the total tax.
Amount You Owe (Covered in Chapter 18) - If you have not paid the full
amount of the tax you are liable for, you must pay the additional amount
due with your return.
Third Party Designee - You can allow the IRS to discuss your return with a
friend, family member, any other person or the paid preparer by checking
the “Yes” box and completing the requested information in this section of
your return.
Sign Here - You must sign and date the return and give your occupation.
Both you and your spouse must sign even if only one of you had income.
Generally, anyone you paid to prepare the return must sign in the PAID
PREPARER’S USE ONLY section.
35
FORM 1040 OVERVIEW
Sign Here
36
WHO MUST FILE AND WHO SHOULD FILE
You




must file if you are a:
U.S. citizen
U.S. resident
Resident of Puerto Rico
And you meet the filing requirements that
apply to you.
Different requirements apply if you can be
claimed as a dependent on another’s tax
return or if you owe certain taxes in addition
to income tax.
37
Filing Requirements For Most Taxpayers
The filing requirements for
most taxpayers are
determined by three factors.
These are:
1.GROSS INCOME
2.FILING STATUS
3.AGE
38
Filing Requirements For Most Taxpayers
Gross Income - includes all income in the form of money, goods,
services and property you received during the tax year that is not
exempt from tax including any income from sources outside the
U.S. (even if you may exclude part or all of it). Each type of
income that must be reported will be discussed in subsequent
chapters.
Income that is subject to tax includes the following:
$ Wages, salaries, bonuses and commissions
$ Certain types of fringe benefits
$ Tips
$ Unemployment compensation
$ Interest (some types of interest are tax exempt) and
dividends
$ Refund of state and local taxes (for some taxpayers who
itemize deductions)
$ Alimony or separate maintenance payments received
$ Income from self-employment
$ Others on pages 1-6 and 1-7 in your book.
39
Filing Requirements For Most Taxpayers
2. Filing Status - Depends on whether you are
single or married and on your family situation.
Your filing status is determined on the last day of
your tax year, which is December 31 for most
taxpayers. Each filing status will be discussed in
Chapter 3.
3. Age - If you are age 65 or older on the last day
of your tax year, your gross income for your filing
requirement can generally be higher than that of
other taxpayers. You are considered to be age 65
on the day before your 65th birthday. For
example, if your 65th birthday was on January 1,
2009, you are considered to be 65 in 2008.
40
Filing Requirements For Most Taxpayers
If you are a U.S. citizen or resident alien who cannot be
claimed as a dependent, you must file a return if your gross
income is at least the amount shown for your age and filing
status in Table 1-1.
41
Filing Requirements – Problem 1
Tom was not married at the end of 2008 and
he lived alone. His marital status is single
and his filing status is single. On December
31, 2008 he was 35 years old so he chooses
under 65 as his age. In 2008, he had a part
time job as a carpenter for which he
received wages of $8,650. He also made
$300 from his snow plowing business. Tom
does not have to file a return.
True or False?
42
Filing Requirements – Problem 1
Tom was not married at the end of 2008 and he lived
alone. His marital status is single and his filing status
is single. On December 31, 2008 he was 35 years old
so he chooses under 65 as his age. In 2008, he had a
part time job as a carpenter for which he received
wages of $8,650. He also made $300 from his snow
plowing business. Tom does not have to file a return.
False
His income from wages ($8,650) plus his selfemployment income ($300) gives him a gross income
of $8,950. Because his gross income was at least
$8,950, Tom must file a return.
43
Filing Requirements – Problem 2
Bob and Emily were married and living
together at the end of 2008. Bob turned 65
on January 1, 2009 and Emily was 67 at the
end of 2008. They are both retired. Bob
receives a pension of $16,600 and they
received $3,250 in interest and dividends.
Their marital status is married living with
spouse, and married filing a joint return is
their filing status. They have no other income
and they do not have to file a return.
True or False?
44
Filing Requirements – Problem 2
Bob and Emily were married and living together at the
end of 2008. Bob turned 65 on January 1, 2009 and
Emily was 67 at the end of 2008. They are both
retired. Bob receives a pension of $16,600 and they
received $3,250 in interest and dividends. Their
marital status is married living with spouse, and
married filing a joint return is their filing status. They
have no other income and they do not have to file a
return.
True
Because Bob turned 65 on January 1 he is considered to
be 65 at the end of 2008, so both spouses are 65 or
older. Their gross income is $19,850 (pension of
$16,600 plus interest and dividends of $3,250). They
do not have to file a return because their gross
income is less than $20,000.
45
Filing Requirements – Problem 3
Joe is married but has not lived with his
wife for two years. Their child lives
with Joe. Joe was age 40 in 2008 and
his gross income was $10,800. Joe’s
marital status is married, with a child,
living apart and his filing status is
head of household. Joe does not have
to file a return.
True or False?
46
Filing Requirements – Problem 3
Joe is married but has not lived with his wife
for two years. Their child lives with Joe. Joe
was age 40 in 2008 and his gross income
was $10,800. Joe’s marital status is
married, with a child, living apart and his
filing status is head of household. Joe does
not have to file a return.
True
The gross income limit for his age and filing
status is $11,500 so he does not have to file
a return. If Joe had to use the married filing
separate filing status, he would have to file
a return because his gross income is more
than $3,500.
47
Filing Requirements For Dependents
If you can be claimed as a dependent on
someone else’s tax return, the factors that
determine if you must file are:
1. Gross Income
2. EARNED INCOME (includes wages, tips
and professional fees)
3. UNEARNED INCOME (includes interest,
dividends, pensions, unemployment
compensation, and taxable social
security benefits)
4. Marital Status
5. Age
6. Blindness
48
Filing Requirements For Dependents
49
Filing Requirements For Dependents
50
Filing Requirements For Dependents Problem 1
Loretta was 16 years old and single in
2008 and can be claimed as a
dependent by her parents. In 2008,
Loretta received $901 in interest from
a bank account. This was her only
income. Does Loretta need to file a
return?
Yes or No?
51
Filing Requirements For Dependents Problem 2
Loretta’s sister, Eileen, was 15 years
old and single in 2008 and can be
claimed as a dependent by her
parents. She earned $2,000 from her
job at the supermarket. She also
received $100 in interest from a bank
account. Does Eileen have to file a
return?
Yes or No?
52
Filing Requirements For Dependents Problem Review
Problem 1, Yes
Because the interest is unearned
income and is more than
$900, Loretta must file a
return. If her unearned income
had been $900, she would not
be required to file a return.
Problem 2, No
Eileen’s unearned income of
$100 is not more than $900;
her earned income of $2,000
is not more than $5,450 and
her gross income ($2,100) is
not more than the larger of
$900 or $2,300 (her earned
income of $2,000 + $300).
Eileen does not have to file a
return.
Table 1-3
53
Other Situations When You Must File a
Return
54
Other Situations When You Must File a
Return – Problem 1
May Day was not married and was age
67 in 2008. She received taxable
pension benefits in the amount of
$6,000 and $1,000 in interest and
dividends. She makes extra money
cleaning houses. In 2008, her net
income from housecleaning was
$800. May does have to file a return.
True or False?
55
Other Situations When You Must File a
Return – Problem 1
May Day was not married and was age 67 in
2008. She received taxable pension benefits
in the amount of $6,000 and $1,000 in
interest and dividends. She makes extra
money cleaning houses. In 2008, her net
income from housecleaning was $800. May
does have to file a return.
True
Even though her gross income of $7,800 is
below $10,300 (see Table 1-1) she must file
a return because her net self-employment
income is at least $400 (see Table 1-4).
56
Other Filing Information
You must use either Form 1040EZ,
1040A or 1040 along with the
appropriate additional forms and
schedules to file your return. If
you cannot use Form 1040EZ or
Form 1040A, you must use Form
1040. Table 1-5 summarizes the
requirements for using each
form.
57
Other Filing Information
Table 1-5
Filing Status
Number of
exemptions
Taxable
Income
Amount
Only income from
Form
1040 EZ
Single
Married, Filing Joint (under age
65 and not blind)
No more than
two personal
exemptions
(yourself and
spouse-no
dependents)
Only if taxable
income (line 6)
less than
$100,000
Wages, Salaries, Tips, Taxable
Scholarship and Fellowship Grants,
taxable Interest of $1,500 or less,
Unemployment Compensation,
Alaska Permanent Fund Dividends
No advanced EIC payments
Form
1040A
Single
Married, Filing Joint
Married, Filing Separate
Head of Household
Qualifying Widow(er) with
dependent child
All the
exemptions
you are entitled
to claim
Only if taxable
income (line
27) less than
$100,000
Wages, Salaries, Tips, Taxable
Scholarship and Fellowship Grants,
Interest, Dividends, Capital Gains,
Pensions, Annuities, and IRA
distributions, Unemployment
Compensation, Taxable Social Security
and/or Railroad Retirement Benefits,
Form
1040
Single
Married, Filing Joint
Married, Filing Separate
Head of Household
Qualifying Widow(er) with
dependent child
All the
Exemptions you
are entitled to
claim
Any amount of
taxable
income (line
43)
Wages, Salaries, Tips, Taxable
Scholarship and Fellowship Grants,
Interest, Dividends, Pensions,
Annuities, and IRAs, Unemployment
Compensation, Taxable Social Security
and/or Railroad Retirement
Benefits, Self-employment Income,
Taxable State and Local Income Tax
Refunds, Capital Gains, Gain from the
Sale of your Home, Alimony Received,
All other income sources
58
Other Topics
Electronic Filing - Instead of mailing a paper return, you can electronically
file by computer. If you file electronically using tax preparation
software or through a tax professional, you can sign your return
electronically by creating your own Personal Identification Number
(PIN).
Taxpayer Identification Numbers
1.
Social Security Number - You must enter a social security number for
yourself, your spouse and each dependent you claim in the space
provided on your return.
2.
ITIN - If you are a resident or nonresident alien who is not eligible for
a social security number, you must apply to the IRS for an Individual
Taxpayer Identification Number (ITIN) using Form W-7, Application
for IRS Individual Taxpayer Identification Number (ITIN)
3.
ATIN - If you are in the process of adopting a child who is a U.S.
citizen or resident and cannot get a social security number for the child
until the adoption is final, you may be able to get an Adoption
Taxpayer Identification Number (ATIN) from the IRS. Once the
adoption is final, you must apply for a social security number for the 59
child.
Other Topics
Presidential Election Campaign Fund - This fund
was set up to help pay for presidential election
campaigns. You may have $3 go to the
presidential election campaign fund by checking
the yes box in the heading of your tax return. If
you check a box, it will not change the amount of
your refund or the tax you pay.
Due Date - In general, individual income tax
returns have a due date (the date by which they
must be filed) of April 15 of the year following
the tax year. If the 15th falls on a Saturday,
Sunday or legal holiday, the due date is delayed
until the next business day. You have filed on
time if your return is properly addressed and
postmarked by the due date. If you file after the
due date, the return is considered filed when it is
received by the IRS. This can be important if
you are assessed penalties or interest or are
60
filing a prior year return for a refund.
Other Topics
Accounting Method – Your accounting method
determines how you report your income and
expenses.
Cash Method - You report all items of income in
the year you actually or constructively receive
them. You constructively receive income when it
is credited to your account or in any way
becomes available to you. With the cash method,
you deduct expenses in the year you pay them.
Most individual taxpayers use the cash method.
61
Accounting Method Problems
1. Fred completes a carpentry job in November 2008
and is paid in 2008. Must he report that income on
his 2008 tax return?
Yes or No?
2. Janet receives a valid paycheck on December 31,
2008. Is this part of her 2008 gross income even if
she cashes the check in January 2009?
Yes or No?
3. Anita receives a bill from the hospital in December
2008. She does not pay the bill until January 2009.
She cannot include this bill in figuring whether to
take itemized deductions for 2008.
True or False?
4. If Fred the carpenter in the above example used the
accrual method, he would report the income from a
job completed in November on his 2008 return
whether he was paid in November or January.
True or False?
62
Accounting Method Problems
Fred completes a carpentry job in November 2008 and
is paid in 2008. Must he report that income on his
2008 tax return?
Yes
Janet receives a valid paycheck on December 31, 2008.
Is this part of her 2008 gross income even if she
cashes the check in January 2009?
Yes
Anita receives a bill from the hospital in December
2008. She does not pay the bill until January 2009.
She cannot include this bill in figuring whether to
take itemized deductions for 2008.
True
If Fred the carpenter in the above example used the
accrual method, he would report the income from a
job completed in November on his 2008 return
whether he was paid in November or January.
True
63
Other Topics
Rounding Off Dollars - On your tax return, you may round
off cents to whole dollars. Do this by dropping amounts
under 50¢ and increasing amounts of 50¢ and over to the
next dollar.
a) $10.49 is rounded off to $10.00
b) $10.50 is rounded off to $11.00
Refunds - If you paid more income tax than you owed and
are due a refund, you can choose to receive a paper
check from the IRS or have the funds deposited directly
into your savings or checking account or if using direct
deposit you may be able to split your refund between two
or three accounts. You can also apply all or part of the
overpayment to your next year’s estimated tax.
Where To File - Where you file your tax return is determined
by where you are living when you file the return. See
Table 1-6 in your book.
64
Other Topics
Decedents (Persons Who Died) - The
same filing requirements apply to
decedents as apply to individuals. If the
decedent met the filing requirements on
the date of death, a final return must be
filed by the surviving spouse, or other
personal representative (executor,
administrator or anyone in charge of the
decedent’s property). When filing the
return, the word “DECEASED”, the
decedent’s name, and the date of death
should be written across the top of the tax
return. A decedent’s return may be filed
electronically.
65
Filing Information
KEY IDEAS
 The requirement to file a return is usually
determined by your age, your filing status,
and your gross income.
 If you can be claimed as a dependent on
another’s return, you may have to file
even if you do not meet the gross income
requirement for your age and filing status.
 There are other conditions, such as
earning $400 net income from selfemployment, that require you to file.
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Filing Information
CLASSWORK 1: True or False.
1.
You do not need to enter a social security number or
individual taxpayer identification number on your tax
return.
2.
You do not have to file a return if you do not earn wages.
3.
If you are self-employed with no other income, you have
to file a return if your net income from self-employment
is $400 or more.
4.
Generally, dependent children who meet the filing
requirements have to file a tax return.
5.
A single person who has wages of $2,000 and federal
withholding of $120 should file a return even if he or she
is not required to file.
6.
Whether you are required to file a tax return depends
only on the amount of income you receive.
7. A dependent whose only income is interest from a savings
account is not required to file a return.
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Filing Information
CLASSWORK 1: True or False.
8. A single person who is 68 during the tax year can have a
higher amount of gross income before he or she must file
than a single person who is 63.
9. If you are not a dependent and your gross income is less
than the filing requirement for your age and filing status on
Table 1-1, you may still be required to file a return.
10. You can file a 1040EZ if you are married filing separately.
11. Exemptions and deductions are subtracted from taxable
income.
12. Interest from a savings account is an example of earned
income.
13. On Form 1040 taxable income is the same as the AGI.
14. The total of all income minus any adjustments is called
adjusted gross income.
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Filing Information
CLASSWORK 1: True or False.
1.
You do not need to enter a social security number or
individual taxpayer identification number on your tax
return. F
2.
You do not have to file a return if you do not earn wages.
F
3.
If you are self-employed with no other income, you have
to file a return if your net income from self-employment
is $400 or more. T
4.
Generally, dependent children who meet the filing
requirements have to file a tax return. T
5.
A single person who has wages of $2,000 and federal
withholding of $120 should file a return even if he or she
is not required to file. T
6.
Whether you are required to file a tax return depends
only on the amount of income you receive. F
7. A dependent whose only income is interest from a savings69
account is not required to file a return. F
Filing Information
CLASSWORK 1: True or False.
8. A single person who is 68 during the tax year can have a higher
amount of gross income before he or she must file than a single
person who is 63. T
9. If you are not a dependent and your gross income is less than the
filing requirement for your age and filing status on Table 1-1, you
may still be required to file a return. T
10. You can file a 1040EZ if you are married filing separately. F
11. Exemptions and deductions are subtracted from taxable income. F
12. Interest from a savings account is an example of earned income.
F
13. On Form 1040 taxable income is the same as the AGI. F
14. The total of all income minus any adjustments is called adjusted
gross income. T
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Filing Information
CLASSWORK 2: Answer the following questions.
1.
When does the tax year end for a calendar year taxpayer?
2.
Most taxpayers use which accounting method?
3.
What is the normal due date for a calendar year taxpayer’s
return?
4.
Which tax return form do you have to use if you receive selfemployment income?
5.
Which return form may be used (if other conditions are met)
only by single taxpayers and joint filers with no dependents?
6.
What three factors determine whether most individuals who are
not claimed as dependents must file a tax return?
7.
What are the circumstances when you should file even if you do
not have to?
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Filing Information
CLASSWORK 2: Answer the following questions.
1.
When does the tax year end for a calendar year
taxpayer? December 31
2.
Most taxpayers use which accounting method? Cash
3.
What is the normal due date for a calendar year
taxpayer’s return? April 15
4.
Which tax return form do you have to use if you receive
self-employment income? Form 1040
5.
Which return form may be used (if other conditions are
met) only by single taxpayers and joint filers with no
dependents? Form 1040EZ
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Filing Information
CLASSWORK 2: Answer the following questions.
6. What three factors determine whether most individuals
who are not claimed as dependents must file a tax
return? Gross Income, Filing Status, Age
7. What are the circumstances when you should file even if
you do not have to? If you had income tax withheld, if
you qualify for the earned income credit, or if you qualify
for the additional child tax credit, and if you qualify for
the health coverage tax credit.
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General Guidelines for Completing All
Basic Course Problems
The excerpts from the IRS publications are
written for the taxpayer so they refer to
“you” (meaning the taxpayer). Our text
also refers to “you.” When reading the
text and the excerpts the student needs to
remember that “you” does not refer to
him or her but to the taxpayer and not to
the student tax preparer.
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General Guidelines
The following information applies to all problems unless specifically
addressed.

Determination to contribute or not to contribute to the
Presidential Election Campaign Fund is left up the student. The
box(es) can be “yes,” “no,” or blank.

On Schedule B always indicate that there are no foreign bank
accounts.

The decision to use or not use the Third Party Designee is left
to the instructor. This area is left blank on the answers.

Federal estimated payments are always paid in equal
installments on the exact due date unless stated otherwise.

Unless otherwise stated or from a state with no personal
income tax, use state income tax withheld instead of sales tax.


Unless provided, the local sales tax will not be calculated.
Do not calculate the Recovery Rebate Credit (line 70 of Form
1040) for any of the problems
Unless otherwise stated, if eligible, the 50% special
depreciation allowance was or will be used.

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Questions & Answers