Exam (elaborations)
Enrolled Agent Part 1.
- Module
- A level Biology
- Institution
- A Level Biology
Enrolled Agent Part 1.
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Enrolled Agent Part 1On which Schedule would a self-employed farmer report their income and loss? -
ANS-Schedule F
What types of income are reported on Schedule E (Form 1040)? - ANS-Income from
rental real estate, royalties, partnerships, S corps, trusts, and estates.
What are some situations that make discharged debt non-taxable? - ANS-(1)
bankruptcy (2) insolvency (3) amounts cancelled as a gift or bequest (4) certain student
loan cancellations (5) qualified principal residence indebtedness
What is the Section 121 exclusion, as it pertains to the sale of a personal residence? -
ANS-Taxpayers may exclude up to $250,000 in capital gains from the sale of a main
home ($500,000 if married filing jointly)
What is the normal extended due date for individual tax returns? - ANS-October 15
What IRS forms are used by an individual taxpayer to report the gain or loss from the
sale of stock? - ANS-Schedule D and Form 8949. Form 8949 reports the details of each
capital asset transaction. Schedule D is used to report the net short-term and long-term
totals of the gains and losses.
When a taxpayer takes a distribution from a retirement plan, which form does the
retirement plan send to the taxpayer to report the distribution? - ANS-Form 1099-R,
Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans
What is an instalment sale? - ANS-A type of sale that occurs over the course of several
years. Gain on sale can be reported when instalment payments are collected, rather
than at the time of the sale. The most common type of instalment sale is the sale of real
estate.
Can a taxpayer with an amount due efile their return and still pay a balance due by
personal check or money order? - ANS-Yes, a taxpayer can efile their return and submit
a check payable to the United States Treasury with a form 1040-V and mail it to the IRS.
As long as the payment is postmarked by the orginal due date of the return, the
payment will be considered timely.
,What is a barter transaction? - ANS-Bartering is the exchange of goods or services. A
barter exchange is an organization whose members contract with each other (or with
the barter exchange) to exchange property or services
What is "Community Income" as it relates to married couples filing separate tax returns?
- ANS-Community income is considered to belong equally to both spouses. This can
affect federal tax reporting for separate returns (MFS), especially when spouses are
domiciled in a community property state.
What is a Qualified domestic relations order (QDRO), and how does it affect a
taxpayer's retirement plan reporting? - ANS-A Qualified domestic relations order
(QDRO) is a type of property settlement incident to divorce. A QDRO allows a taxpayer
roll over tax free all or part of a distribution from a qualified retirement plan that they
receive from an ex-spouse under a QDRO.
How does an annulment affect a taxpayer's filing status? - ANS-An annulment is a
voiding of the marriage contract. Unlike a divorce, an annulment is retroactive.
Amended returns must be filed for any open years affected by the annulment.
What is the IRS definition of a "custodial parent"? - ANS-The custodial parent is the
parent in whose home a child lived for the greater part of the year, i.e., the parent that
the child lived with the most days during the year.
Are tips taxable, or are they considered gifts? - ANS-All tips are taxable. Tips are
received as a gratuity for services performed. Tips go beyond the stated amount of the
bill and are given voluntarily.
What information is reported on Form W-2? - ANS-Form W-2 reports wages, salaries,
tips, and federal income tax withheld as well as Social Security and Medicare taxes
withheld.
How does the IRS define permanent disability? - ANS-The IRS defines "permanent
disability" as a disability that is expected to last at least a year and keeps an individual
from any gainful activity. Special exceptions apply to disabled persons who work in a
sheltered workshop.
How is tax-exempt interest income reported? - ANS-Tax-exempt interest income must
be reported on a taxpayer's Form 1040, but it is not taxable at the federal level.
Municipal bond interest is earned from bonds issued by states, cities, or counties.
, Is interest from a Certificate of Deposit taxable? - ANS-Interest from a certificate of
deposit (CD) is taxable in the year it is earned. A bank or credit union will usually issue
a Form 1099-INT that states the interest each year, unless the amount is under $10.
The amount of the standard deduction depends on: - ANS-Filing status, age of the
taxpayer, whether or not the taxpayer is blind, and whether the taxpayer is a dependent
on someone else's return.
What are personal property taxes? Where are these taxes reported? - ANS-Taxes on
personal property include DMV fees and property tax on real estate. Personal property
taxes are deductible on Schedule A, subject to certain limitations.
What is a tax credit, and how does it affect an individual's tax return? - ANS-A tax credit
is a dollar-for-dollar reduction in tax. Tax credits can be deducted directly from taxes
owed.
What is a pension? Is pension income taxable? - ANS-A pension is a series of
payments made to an employee or survivor (the beneficiary of a deceased employee's
pension) after the employee retires from work. Pension income is taxable as retirement
income.
What types of gifts are exempt from gift tax reporting? - ANS-Gifts under the annual gift
limit ($15,000 in tax year 2021), payments of medical expenses, payments of tuition,
donations to qualified charities, donations to political organizations, and gifts to a U.S.
citizen spouse.
Are state sales taxes deductible? - ANS-Yes. Taxpayers may deduct either (1) sales tax
or (2) state and local income tax as an itemized deduction on Schedule A, (but not
both).
Can an individual taxpayer deduct foreign income taxes? - ANS-Yes. Foreign income
taxes may be claimed either as an itemized deduction or as a non-refundable tax credit.
Taxpayers may choose whichever method gives them the best tax result.
Are gambling losses deductible? - ANS-Yes. Gambling losses are deductible as an
itemized deduction, but only up to the amount of gambling winnings. Losses in excess
of winnings are not deductible.
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