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Enrolled Agent Exam Prep Course, Part 1, Video 1/7, 2025
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welcome to video one of part one of the
EA tax training free EA exam Prep course for
for
2025 my name is Tom Norton I am both a
certified public accountant and an
enrolled agent and I will be your guide
and instructor throughout this course
before we get started I would like to
point out that you can get a free copy
of the slides for this video and for all
the videos in this course in the
description of each video is a link
where you can have a PDF of the slides
for that video emailed to you part one
of the EA exam is all about individual
taxation we've got seven videos for you
in part one this first video you're
watching now we call overview and
getting started video two is all about
income video three is about a special
kind of income called capital gains
video four is about adjustments and
deductions in video five we'll talk
about calculating the tax and tax
credits video six is all about
retirement accounts and Social Security
and finally video seven is about
specialized returns and
topics one important point about the
2025 exam and this course the 2025 EA
exam officially known as the special
enrollment examination or SE is based on the
the
2024 tax law specifically it is based on
the law as of the December 31st
2024 so that is what we will be dealing
with in this course I look forward to
guiding you through all of these topics
so without further Ado let's jump right
into video One overview and getting
started in this video we're going to do
an overview of the individual tax return
and the individual tax system in general
and we'll talk about what you need to do
in getting started to prepare a tax
return for a client
specifically what we'll cover is an
overview of forms 1040 and
1040sr then we'll talk about the sources
of information you need in order to do a
tax return then we'll talk about the
filing requirements in due date who's
even required to file a 1040 and if so
when are they required to file it and
then we'll go into detail about specific
items in the top section of the income
tax return the social security number
tax residency filing stat status
dependence and the check
boxes first near the beginning of each
of these videos in the course will be a
slide like this one where we've got free
resources from
irs.gov you can go out to
irs.gov and Download a pdf of each of
these and use those to study along with
these videos and here's a pro tip about
the EA exam it is based based primarily
on IRS Publications fors and form
instructions so that is mostly what you
are going to see here you don't
necessarily need every one of these that
is listed here so what I've done on each
slide is put into bold the ones that are
most important for you to see in this
video you can see the top two are in
bold so let's talk about these first of
all publication 17 your federal income
tax I consider this to be the textbook
for all of part one of the EA exam not
just this first video but all of part
one you will definitely want to get and
read and study publication 17 and if
publication 17 is the textbook for part
one then form 1040 and the instructions
to form 1040 is the workbook for part
one so you will definitely want to check
out the form as well as its instructions
and then you can see the rest of these
items that are listed here they are all
great as well I encourage you to check
them out but they're not absolutely
necessary and I know you've only got so
much time and so much energy so if
you're going to focus on something focus
on those that are in bold but if you're
looking for more information about any
of these topics then you can check out
those forms and those Publications for information
information
so now let's start by doing an overview
of the 1040 and the 1040 Sr before we
look at the forms themselves let's look
at an overall flow of the tax return so
this is kind of a big picture look at
what we're trying to do when we're doing
a tax return we're trying to ultimately
figure out does the taxpayer owe the IRS
money or do they have a refund that is
due so that's what we're trying to get
to but in order to do that we need to go
through all of these steps so we're
going to start up here with what's
called gross income so think of that as
the total income of the taxpayer then
we're going to subtract something called
adjustments to income and that's going
to leave us with a very important number
called adjusted gross income or AGI
you're going to want to focus on this
and remember this number because many
areas of the tax law refer back to AG I
so it's a very important kind of
checkpoint along the way of doing the
tax return once we have adjusted gross
income then we're going to subtract
deductions you're going to have either
standard or itemized deductions and then
some people will have something called a
qualified business income deduction as
well once we subtract those deductions
that leaves us with taxable income
obviously another very important number
then we'll take the taxable income and
we'll figure out our tax and the way we
do that is we use tax tables or we apply
tax rate schedules that then gives us
the amount of the income tax but we're
not finished yet because some taxpayers
will have tax credits that they can
subtract from their income tax and some
taxpayers will have other taxes that
they need to pay in addition to their
income tax and so once we subtract the
credits add the other taxes that leaves
us with a total tax then we're going to
subtract any tax payments that have been
made so this could be something as
simple as withholding from a job that's
shown on a W2 or it could be estimated
tax payments that have been made or
other types of payments that have been
made then once we subtract the payments
from the total tax that will then leave
us with the amount due to the IRS or the
overpayment or refund due from the IRS
so how does this actually look on the
tax form well let's have a look at the
form 1040 this is page one of the form
1040 and let's zoom in here so we can
get a better look at it at the top again
in this video we're going to go into
much more detail about all these things
at the top but it's got your basic
information to identify the taxpayers
choose your filing status Etc and then
you're going to get down into the income
remember we we talked about gross income
being at the top of that flowchart so
that's what you're going to have is the
various types of income are going to go
here and then you are also going to have
various adjustments to income which is
going to lead us down here to line 11
which is that very important number that
adjusted gross income then you're going
to have either your standard deduction
or your itemized deductions that qualify
business income deduction then that is
going to leave you with your taxable
income here it's the last line on the
first page line 15 is that taxable
income number then we're going to go
over to page two and we are going to
determine the amount of our tax and
we're going to have some credits in here
some other taxes that's going to leave
us with our total tax then we've got our
payments and the various types of
payments which will leave us with our
total payments which finally then tells
us how much either the taxpayer overpaid
so they get a refund or how much they
owe you can see there is a place here on
the return that the taxpayer if they
want to have that refund put straight
into their bank account they can put
their routing number and their account
number right here and the money will be
deposited right into their account and
then we'll get down under these refund
and amount you owe you have something
called the third party designate
and this is where you can put your name
and phone number and as long as the
taxpayer agrees then if the IRS has a
question about this particular tax
return the IRS knows that they can talk
to you about it so they don't have to
talk to the taxpayer themselves you can
talk to the IRS on their behalf we'll
get much more into how all of that works
in part three of this course and then
finally at the bottom are the signature
blocks so this is the signature block
for the taxpayer as well as for you as
the paid preparer and then it's
important to see that here under
penalties of perjury so anytime the
taxpayer and you are signing a tax
return they're doing so under penalties
of perjury and again we'll talk more
about that later in this course so that
is kind of an overview of form 1040 now
of course there can be many more pages
and there can be schedule
and other forms get that get attached to
the 1040 but this is the basic 1040
itself so now let's look at another Form
This is called the 1040 Sr the SR stands
for seniors so this is a form that is
designed for taxpayers who are a 65 or
older and the only substantial
difference between this form and the
1040 is that the font is larger so it is
designed for older taxpayers who
appreciate a larger font size so that
they can see it better so you can see it
starts it's all the same information
nothing here is any different than it is
on the regular 1040 all the amounts are
going to be the same the standard
deductions are going to be the same no
matter which form you use the the tax
that you owe is going to be the same so
none of the actual numbers change it's
just that the font is larger so instead
of doing everything on two pages it
takes three pages in order to get
through it all and then they do add a
fourth page here which just shows a
chart of the standard deduction so this
is just for the convenience of the
taxpayer that they don't have to go and
look up somewhere how much the standard
is deduction is it's shown to them right
there on page four now in the real world
when we're doing tax returns the vast
majority of income tax returns are filed
electronically these days so does the
font size really matter if you're filing
it electronically well not all that much
but to be fair of all the tax returns
that are filed on paper it's fair to
assume that a large percentage of those
comes from this population of folks who
are aged 65 and older because that's the
way they've always filed their tax
return that's what they're comfortable
with so many of them will continue to
file on paper and so this form
1040sr can be a convenience for them but
if you're doing tax returns of course
you're going to be using tax software
you're going to be filing
electronically so it's probably not
necessary for you to use the 1040 Sr
even for your taxpayers are who are
seniors but you can do so if you want to
but just know that it is voluntary it is
not something that you have to do moving
on now to sources of information so if
you're going to prepare a tax return of
course you need to be able to get the
information that you need in order to do
the return so where do you get that
information and what kinds of
information are you looking for well
your starting point the very best place
to start is with last year's tax return
you want to see the prior year tax
return if at all possible first of all
it's going to have the basic taxpayer
information names addresses Social
Security numbers Etc of course you're
going to want to verify all that because
things do change especially addresses
but at least it gives you a starting
point point it's also going to give you
a good idea of what to look for this
year taxpayers tend to have the same
sorts of things from years to years so
if they had a W2 and 1099 or any k1s or
anything like that they had those last
year likely they're going to have the
same sorts of things this year so it's
good to be able to know what you're
looking out for and there's going to be
some things that do carry over from year
to year you're going to have things like
net operating losses and different kinds
of carryovers there can be
depreciation which goes from year to
year so it's very helpful to have that
prior years tax return to be able to
look out and compute those things and
then finally it is good for you and the
taxpayer to compare once you're finished
with this year's return to compare it to
last year's return so it can help you as
the preparer find things that you might
have missed and it can be good just to
be able to see
okay this year you made this much money
last year you made that much money and
to compare and see those things and how
they change from year to year now what
if you don't have access to last year's
tax return well that is okay you can
still do the return you don't absolutely
have to have it it's just nice to have
it so if you can get it from the tax
preparer or obviously if you were the
tax preparer last year then you'll have
it then it's a great place for you to to
start what if when you're looking at
that last year's tax return you discover
that there was an error that was made
the previous preparer made an error or
maybe even you made an error hopefully
not but it does happen so if you're
looking at last year's return and you
notice an error then you do need to tell
the client about it and you need to
explain the consequences of that error
now obviously the error could go either
way it could result in the taxpayer
owing more money or it could result in
them getting a bigger refund so either
way you want to tell the client about
that and you want to explain here's what
happens for instance if they owe money
because of the error then you want to
explain all right you're going to owe
about this much money and there's going
to be penalties and interest on top of
that or if they're going to get a refund
then you want them to know here's how
much refund approximately that you would
get and that you would get interest on
that that's right if you have a refund
due the IRS will pay you interest on the
amount of that refund back from the time
that you should have gotten it so you
should have gotten it last year you
didn't so they will pay you interest on
that up and through the date that they
send you the check for the refund but
you explain that to the client and then
ultimately it is the client's choice
about whether or not to amend last
year's return and whether or not to fix
it it is not your choice they will make
that determination and then you will
abide by that if they choose to amend it
you do so on a form 1040x and again
we'll get much more into that in later
videos but the main thing to remember
here is that it is not your choice it is
theirs and if they decide not to amend
it you do not go off to the IRS and say
hey they didn't amend their return there
is confidentiality between tax preparers
and clients so it is not your job as a
matter of fact you are not allowed to
just go running off and tell the IRS or
anybody else that they need to amend
their return and they haven't done it
that is not your job now we're talking
about things like fraud or having
committed a crime we could have a
different set of rules that comes into
play and we'll talk about all that later
mostly in part three of the course but
if it's just a routine error and routine
errors get made all the time then client
decides whether or not to fix it and you
abide by that
choice okay so now let's talk about the
sources of information and what your
responsibilities are you are expected to
do what's called due diligence for the
information that you get from a client
but you are not an auditor you do not
work for the IRS you are not going to
ask your client to prove everything that
they tell you or to prove every single
number on the tax return you're going to
look at the various items and you are
just going to apply what I'm going to
call reasonableness standard what would
a reasonable well-informed tax preparer
do with this information so if they are
telling you that they've got a certain
deduction and it makes sense it seems
like it's reasonable based on that
particular client's life circumstances
the amount of their income Etc and so
forth then there's no reason for you to
question that or to make them prove it
or anything like that what you would be
looking for is something that just
doesn't pass what we call the smell test
something that just doesn't seem quite
right so to give you an extreme example
let's say you had a 30-year-old who has
a job and they make $50,000 per year
they don't have any dividends or
interests there's no evidence that
they've got a large investment account
or anything like that and they tell you
that they made a
$40,000 charitable account contribution
last year well is it possible that they
made a $40,000 charitable contribution
sure it's possible but it doesn't seem
likely they make $50,000 a year doesn't
look like they got any big investment
accounts how exactly would they be
making a $40,000 charitable contribution
so that would be one where you would say
you know you say you made this
charitable contribution and that's great
but that might raise a bit of a
flag with the IRS so explain that to me
what was that contribution and do you
have like a receipt or some evidence for
it things like that so things that just
don't seem quite right you are going to
want to ask questions about but if it
seems normal and it seems to make sense
then you do not need to question it now
there are some things that the IRS
actually does say no you as the preparer
you do have to get proof you do have to
get more information we'll talk more
about those later in the course but for
the vast majority of things that is not
the case so what types of items do you
need to even get information about well
it's all the things that might be on the
tax return so things about income
expenses credits the basis of assets so
if they taxpayer has sold assets during
the year then you need to know how much
the gain or loss is on the sale of that
asset in order to do that you need to
know how much the taxpayer paid for that
asset it's something we call the basis
of that asset and then there's other
items on the return also that you will
want to get information about so let's
look at each of these specifically so
when it comes to income you're going to
be looking for the taxpayers worldwide
taxable and non-t taxable income you
want to get get a good picture of their
total income so you'll be looking for
certain types of things W2s which if
you've ever had a job in the United
States you probably know what aw2 is
that's what the employer sends you at
the end of the year shows you what your
salary was you're withholding Etc and so
forth so all lots and lots of taxpayers
of course will have W2s they may also
have 1099 a 1099 will report certain
types of income like interest and
dividends and what's called non-employee
compensation in other types of income so
you can look for those there can be k1s
k1s will come from sub chapter S
corporations they'll come from
Partnerships they'll come from trusts
and the states they will show various
types of income so you can look for
those you might also be looking at bank
or brokerage statements and the
taxpayers own records maybe the taxpayer
has a business and they've got
bookkeeping records or receipts or
spreadsheets that they keep things like
that so all those types of things you
can look for in order to figure out how
much income the taxpayer has and there
can be other items as well when it comes
to expenses we can have things called
1098s 1099s we talked about for income
1098s can show different items of
expense so for example if the taxpayer
has a mortgage with a bank they will get
a 1098 showing the amount of mortgage
interest there can be 1098 that come
from a college or a university showing
tuition paid Etc so different types of
1098s can show different types of
possibly deductible expenses and then
those k1s that we talked about when we
talked about income k1s can also show
types of deductions and amounts of those
deductions and then there can be
receipts that the taxpayer has in bank
statements canceled checks from checks
they've written and again the taxpayers
own records
Etc assets again we need to have some
information about assets particularly
once they are being sold so you want to
know the cost or basis of those assets
so if it's real estate they will likely
have a closing statement so if they
bought a house for example there will be
a closing statement you'd like to have a
copy of that bank or brokerage
statements can help to understand stocks
and bonds and mutual funds there can be
certain forms that were issued to the
taxpayer again 1099s can help with this
k1s again and then there's this form
3922 that they might have if they had
stock options from an employer again
there could be receipts when they
purchased an asset or canceled checks
there can be appraisals of various types
of assets and other information to give
you information about those various
types of assets and then other
information on the tax return there can
be letters that they got from the IRS so
let's say last year the taxpayer filed
their return and then the IRS discovered
an error and they sent a letter and they
said we've made an adjustment to your
return and now your adjusted gross
income is this much your taxable income
is this much your tax is this much you
will want to obviously have a copy of
that letter or any other
letter that the client got from the IRS
you always want to ask did they get any
type of correspondence from the IRS and
if they did you would like to see a copy
of that things like school records if
you're dealing with children and with
various tax credits related to Children
sometimes it can help to have their
school records to establish that yes
they have this child that they're a
certain age Etc something as simple as a
driver's license if you're dealing with
a taxpayer
they walk in off the street so to speak
you have no idea who they are well
there's a lot of identity theft and tax
fraud that goes on so you're going to
want to know who you're dealing with so
you want to ask them for at least one
form of official identification so you
might get a driver's license and take a
copy of that and there could be other
things that you would ask for depending
on the
circumstances so now let's talk about
filing requirements and due date so who
is required to file a return so when we
talk about this 1040 who needs to file
it well here it is if you are a US
citizen or resident of the United States
or Puerto Rico and you meet the filing
requirements then you need to file a
form 1040 and the filing requirements
are going to be based on income
primarily or others so there are some
other things that regard less of your
income you still have to file a 1040 but
for most taxpayers there are minimum
amounts of income that you need to have
before you need to file a tax return so
this is it if you are a US citizen or a
resident of the United States or Puerto
Rico and you meet those minimum filing
requirements then you need to file a
form 1040 so you will want to know that
for the EA exam now it is also important
to point out that some
nonresidents that have us-based income
will also need to file a return they
don't file a regular 1040 they file this
other return called a 1040nr for
non-resident and we'll look at that a
little bit later but for most taxpayers
this is who needs to file the form
1040 when we are looking at those
minimum amounts of income in order to
file we need to understand a few basic
definitions of types of income we're
going to get into much more detail about
income in video two of part one when
we'll talk specifically about income but
for now we need just to understand these
basic definitions so first gross income
so this is all income received in the
form of money Goods property and
services that is not exempt from tax so
that is what gross income is and it
includes income from sources outside the
United States as well as inside the
United States it could include income
from the sale of your home it includes a
taxable portion of Social Security
benefits it includes your business gross
income but not losses and it includes
capital gains but not capital losses so
all of that is gross income and then
when you have your gross income it is
going to be broken down into two
different General types earned income
and unearned income so earned income
includes salaries wages professional
fees tips business income from a
business that the taxpayer has Etc so
those things are kind of intuitive the
one thing that maybe isn't intuitive is
taxable scholarships and grants are also
included in earned income so it maybe
doesn't seem like earned income but it
is included for these purposes unearned
income then is everything else so this
would include taxable interest dividends
capital gains unemployment compensation
taxable Social Security pensions now you
might say but wait a minute I worked for
that social security or I worked for
that pension and that is true you worked
for it in the past but you didn't work
for it this year so it is considered
unearned income now and then things like
annuities and distributions of unearned
income from trusts so when you take your
earned income and you add it to your
unearned income then that is going to
equal your gross income so just keep
these things in mind as we look at some
of these charts and definitions that we
are going to see speaking of charts
here's the first one we are going to
look at so this is the 2024 filing
requirements for most taxpayers so we're
going to look next the next chart we'll
look at is for the people that this does
not apply to but for most taxpayers this
is the chart that will apply by the way
this chart comes straight from
publication 17 that we talked about at
the beginning of this video so this is
showing who has to file a 1040 so it's
based first of all on your filing status
single married f jointly Etc we're going
to talk about those more in this video
but for now just take it for what it is
there are these five filing statuses so
based on the taxpayers filing status and
then whether or not they are under or
over age
65 these are the minimum amounts of
income that they need to have in order
to be required to file a tax return so
for example if you're single under age
65 then if you have 14 ,600 or more of
gross income then you must file a form
1040 if you are age 65 or older then
$6,550 and then you can see the others
for all the different filing statuses if
you are married and under 65 then it is
$29,800 not coincidentally that is twice
as much as the single amount because
there are two people involved instead of
just one and then you can see the
amounts if you are over age 65 if you
are married filing separately notice
this if your gross income is $5 or more
then you have to file a tax return so
basically anybody who is filing married
filing separately is going to have to
file a tax return then if you are head
of household you can see that is$ 21,900
is the minimum amount of income to file
a return and if you are qualified
surviving spouse then it is $229,200
again not coincidentally that is the
same as the married filing jointly
amount and because as you'll learn a
qualifying surviving spouse gets
essentially the same benefits as those
who are married filing jointly these
amounts when we get to the video about
the standard deduction you are going to
recognize these amounts because that's
what these amounts are so for a single
taxpayer who is under age 65 their
standard deduction is $14,600
therefore if they have got less than
that an income then they don't need to
worry about filing a tax return because
they are not going to owe any income tax
so that's what these amounts represent
so what about those people that are not
most taxpayers who is that and when do
they have to file a return well the
people that do not use that chart is
anybody who can be claimed as a
dependent on someone else's tax return
so for example a child a child that can
be claimed as a dependent on their
parents tax return would not use that
previous chart instead they would look
at this one so let's zoom in here here
and look more closely at this at the top
here it's basically saying if you can be
claimed as a dependent then you need to
use this chart instead of the other one
and then it just explains the various
types of income that we already talked
about earned unearned and gross income
and what those amounts mean so let's
look at this if you are single and you
are a dependent on someone else's tax
return then you're going to use this top
box here so then the question is are you
65 or older or not if you are not so
this would be the
stereotypical minor child who is a
dependent on their parents tax returns
so they are under 65 they are not
married so they are single so this would
apply to them that person needs to file
their own separate tax return if any of
the following apply if they had unearned
income income of more than $1,300 so
remember that's interest dividends Etc
if they had earned income of more than
$144,600 you'll recognize that number
from the previous chart so maybe this is
the 16-year-old who has a part-time job
and they've got earnings from that well
they have earned income of $144,600 and
more then just like everybody else on
that previous chart then they need to
file their own separate tax return and
then the final category is if their
gross incomes the combination of their
earned and unearned income if that gross
income is more than the larger of
$1,300 or their earned income plus
$450 then they must file a tax return so
this third category it sounds a little
bit convoluted but they're just trying
to kind of catch the people who don't
quite fall in to the unearned category
of 0000 or more and they don't quite
fall into the earned income of 14,600 or
more but they've got a combination of
earned and unearned income that is large
enough that they need to file a return
that's who this is talking about so you
will want to remember this for the exam
this $1,300 number the $14,600 number
and then the larger of 1,300 of unearned
income or their earned income plus 400
50 then next this is going to be the yes
people are the people who are single
they're not married but they were either
age 65 or older or they were blind if
that is the case so this might be for
example a parent of an adult child so
the adult child is claiming the parent
as a dependent that would be an example
well if that parents unearned income is
more than
$3,250 then that parent needs to file
their own tax return or if it is $5,200
if they are both age 65 or older and
blind but it's
$3,250 if they're just 65 or older and
not blind they also have to file their
own tax return if their earned income
$6,550 and people age 65 or older can
have earned income and then there's the
final category if their gross income
again the combination of their earned
and unearned income is more than the
larger of
$3,250 again or their earned income plus
$2400 then that person needs to file a
separate tax return so again this is
this top box this is for single
unmarried dependents then we're going to
move down to the bottom box which is for
married dependence this is not all that
common at least for younger people it
can be a little bit more common for
those age 65 or older but if you do have
someone who is married they are a
dependent on someone else's tax return
then again we're going to ask are you 65
or older or not if you are not so this
could be a child of a taxpayer that
child happens to be married and they
happen to qualify as a dependent so this
is not a lot of people we're going to
talk later about how you qualify as a
dependent but there's not going to be a
whole lot of people who are married and
a dependent on someone else's tax return
but it is possible so if you fall into
that category and your unearned income
again is more than
$1,300 same as above for an unmarried
dependent same numbers you're going to
see 1300
14,600 those numbers did not change and
again this bottom one the gross income
did not change so these numbers are
exactly the same whether you are a
married dependent or you are a single
dependent the one difference is if they
are married filing separate then
remember if they've got gross income of
at least
$5 and their spouse files a separate
return and itemizes deductions then that
married dependent has to file their own
tax return what if you have a married
dependent who is over age 65 so this
would be a little bit more common than
one who is under age 65 because this
could be for example a adult child who
is claiming both of their married
parents as dependents if you have that
situation then if the married dependent
has unearned income of more than
$2,850 or earned income of more than
$6,150 and these numbers are different
than up above here so unearned income of
more than 2850 earned income of more than
than
16150 got that same rule about $5 if
they're married filing separately or if
their gross income was more than the
larger of
$2,850 or their earned income plus
$2,000 then that person must file their
own separate tax return now on the EA
exam there will definitely be questions
about whether or not someone needs to
file a tax return so they may ask a
question that says Johnny is 16 years
old he is a dependent on his parents tax
return He is single and he earns
$177,000 from a part-time job does he
need to file a tax return and then you
would say well yes he does because he
had more than $14,600 so you may have
those questions or going back to this
other chart they'll have question
question s here they'll say that a
particular married couple is under age
65 and they have
$25,000 of gross income do they need to
file a return and then you would need to
know that no because it's under $29,800
they do not need to file a return so
they are going to ask those types of
questions on the exam the good news is
they will typically focus on the more
typical examples so spend most of your
time remembering the basic numbers like
from this chart and then you will want
to remember the basic numbers from here
a single dependent who's not married Etc
you don't have to worry so much about
that they're married they're underage
65 and then they've got this much earned
and this much unearned they don't tend
to get that tricky on the exam not that
you should ignore these numbers but
spend most of your time remembering the
basic more common
situations next we need to talk about
those situations where you need to file
a return regardless of the amount of
income you had remember we said you
might have to file a return because you
have a minimum amount of income which is
what we just talked about but some
people regardless of the amount of
income they have to file a tax return
anyway so that's what we're talking
about on this particular chart again
this is from publication 17 so even if
you don't meet those minimum income
requirements that we just went over you
must file a return if you meet any of
the things on this particular chart
first of all if you owe any of these
special taxes you have to file a 1040
regardless of your income if you owe the
Alternative Minimum Tax and we'll talk
more about that in a later video if you
owe this additional tax on a qualified
plan such as an individual retirement
account or other tax favored account
then you have to file a 1040 if you owe
any household employment taxes which
we'll talk about later if you owe Social
Security and Medicare tax on tips that
you did not report to your employ
employer or on wages that you received
from an employer who did not withhold
those taxes not a common situation but
if that happens then you have to file a
1040 if you have any uncollected Social
Security and Medicare tax on tips that
you reported to your employer or on
group term life insurance and additional
taxes on health savings accounts again
not very common but if you have those
things then you need to file a return
or if you owe certain recapture taxes
such as depreciation recapture that
we'll talk about later then you have to
file a
1040 next is if you or your spouse
received any distributions from a health
savings account or these other special
types of health related accounts then
you have to file a return if you had net
earnings from self-employment of at
least $400 this is one you will want to
know there will almost certainly be a
question on the exam about this so no
matter how much income you had if you
had net earnings from
self-employment of at least
$400 then you need to Fally form
1040 not because you'll necessarily owe
income tax but because you will owe
something called
self-employment tax that we will talk
about later so when we say net earnings
from self-employment again we're going
to go into this more when we talk about
Computing the self-employment tax but
for now just know that net earnings from
self-employment you take your
self-employment income so you've got
revenue from being self-employed and you
subtract your expenses from being
self-employed that's going to leave you
with a net income then you are going to
multiply that by this percentage it's by
.92 35 so it's 92.35% so you multiply
your net income from your
self-employment times
9235 that gives you your net earnings from
from
self-employment if when you do that it's
at least
$400 then you are going to owe
self-employment tax and you have to file
a form 1040 no matter how much your
gross income is next
if you had wages of
$18.20 and yes you are reading that
correctly if you are a church employee
so certain Church employees are exempt
from withholding for Social Security and
Medicare taxes so if one of those
employees has wages of
$182 or more then they have to file a
form 1040 so hopefully if you see a
question about this on the exam that
number will jump out at you as being
such an odd number and you'll remember
oh that's right Church employee and they
have to file a return if a taxpayer
received Advanced payments of the
premium tax credit then they have to
file a tax return we'll talk more about
that when we talk about tax credits then
you have this other one this is very
obscure not likely to be questioned on
the exam but if you have these amounts
under 965 which has to do with deferred
foreign income if you have those then
you have to file a form 1040 and then
finally and this is new for 2024 if you
purchased a new or used clean vehicle
from a registered dealer and reduced the
amount you paid for that vehicle at the
time of sale by transferring the credit
to the dealer then you must Fally form
1040s regardless of your amount of
income so let's do a couple of examples
of filing requirements so we can kind of
get the feel for this and kind of get a
feel for some of the types of questions
that you might see on the EA exam so
first Joey is 21 years old he's single
and he cannot be claimed as a dependent
on anyone else's tax return in 2024 he earned
earned
$111,000 at a part-time job and he had
dividend income of $25 00 and interest
income of
$11,000 does he need to file an income
tax return for
2024 well let's think about this he is
single and he's not claimed as a
dependent on anyone else's tax return so
we're thinking about that first chart he
is most taxpayers we use that chart his
total income was what
$1,000 from his job plus 2500 from
dividends so that's $
13,500 then he had interest income of
$14,500 is he required to file a form
1040 I'm sure that you got the right
answer no he is not his total income is only
only
$14,500 Which is less than the $14,600
$14,600
minimum required to file now just
because Joe
doesn't have to file a return does that
mean he's not allowed to file a return
no it doesn't he is allowed to file a
return he's just not required to file a
return now you might say why would
somebody file a return if they are not
required to well it could be a couple of
reasons first of all let's think about
that part-time job Joey made $111,000 at
a part-time job they may very well have
withheld federal income tax from his pay
if he wants to get that money back he
has to file a tax return and of course
he's going to want to get that money
back because he doesn't owe any income
tax because he had less than $14,600 so
if they withheld any federal income tax
he wants to get that money back so
therefore he would want to file a tax
return in order to get that refund there
could be other things as well so there
are certain credits such as the earned
income credit the additional child tax
credit the American Opportunity credit
the premium tax credit that you can only
get if you file a tax return and he
might qualify for one or more of those
credits so in that case he would want to
file a return in order to take advantage
of that let's move on to our second
example Monica is also 21 years old
she's also single and she cannot be
claimed as a dependent on anyone else's
return she earned $11,000 as well but
she earned it in her grass cutting
business and she had dividends of $2,500
and interest income of $1,000 does
Monica have to file an income tax return
for 2024 well on the surface it looks a
lot like her previous example right
she's 21 she's single she earned the
same amount of money so she's got
$14,500 you might say well that's below
$14,600 so she doesn't have to file but
wait I'm sure you notice that there is
one major difference here and that is
that Monica earned her income not from a
job but from her grass cutting business
so that is self-employment income and
remember if you have more than
$400 of net earnings from
self-employment you have to file a
return so Monica does in fact have to
file a form 1040 because her
self-employment earnings are $400 or
more she is not going to owe any income
tax because her total earnings were less
than the
14,600 but she will owe self-employment
tax so she does have to file a form
1040 now let's move on to the filing
deadline and I bet you already knew the
answer to this one one does the 1040
have to be filed has to be filed by
April 15th of 2025 so for the 2024
return it is due on April 15th of 2025
so the general rule is that a form 1040
is due on the 15th day of the fourth
month following the end of the tax year
so again that is going to be April 5th
however sometimes April 15th falls on a
weekend or it falls on a holiday when
that happens then the deadline is pushed
to the next business day so for example
if April 15th is on Sunday assuming
Monday is not a holiday then the return
would be due on Monday April 16th
instead of the 15th but for 2024 and we
are talking about the 2024 tax year year
for the 2025 EA exam it is due on April
15th of
2025 now you can get an extension of
time to file the tax return so you can
get what's called an automatic six-month
extension to file and you get that by
filing this form
4868 and it gives you this extension to
file to October 15
2025 and you don't have to head have a
good reason to file an extension that's
why it is called an automatic extension
because the IRS is not going to question
it they will automatically grant you
that extension but you do have to file
the form
4868 in order to get that extension now
very important to know and you will be
tested on this on the exam just because
you get an extension to file the return
that does not mean you have an extension
to pay any tax that is due you still
have to pay whatever is due by April
15th if you don't you will be subject to
penalties and interest for not paying on
time now you might be saying to yourself
Wait a Minute Tom if I don't have all
the information I need to look at my
return or I haven't even looked at
everything yet and I'm filing this
extension how am I supposed to know
whether or not I owe any tax well you're
going to have to do the best you can do
you're going to have to make some sort
of estimate and pay that in with your
4868 now you may look at it and maybe
you've got a refund du well if you have
a refund du you don't have to worry
about it just file the 4868 and you're
okay but if you are going to owe then
you need to estimate the amount you're
going to owe and you need to send that
in with the
4868 now there are some
exceptions to the normal April 15th
filing deadline so let's talk about some
of those first of all is the outside of
the US exception this is only for US
citizens or residents so if you are a
citizen or a resident of the US and you
are living outside of the United States
or Puerto Rico and your main place of
business or post of Duty is outside the
United States or Puerto
Rico then you get an automatic two-month
extension of time to file your return to
June 16th of 2025 normally it would be
June 15th it's a two-month extension but
June 15th is on a weekend so therefore
it is June 16th for 20125 so it's an
automatic two-month extension now this
is important though to know this is if
you are living outside of the US and
your main place of business or post of
Duty is outside the US this is not just
that you are on a European Vacation on
April 15th you do not automatically get
the extension it's not even that you're
traveling on business let's say you're
traveling on business to Australia on
April 15th well that does not qualify
for this exception either you need to
actually be living out outside the US
and your main place of business is
outside the US so if you are living in
Australia for work because that's where
you are now working that's your place of
business then you would qualify for this
exception so if you meet that criteria
then you don't even have to file a form
you automatically get this two-month
extension but again it is not an
extension to pay so if you are going
going to owe you still need to pay by
April 15th what you might do if you're
going to owe and what we usually do for
clients in this situation is we just go
ahead and file a
4868 on April 15th for this client so
even though it's not technically due
until June 15th you can file that
extension anytime before June 15th so we
would just file the 4868 on April 15th
and go ahead and send in the estimate of
the amount due at that time but let's
say you don't owe any money you think
you're going to get a refund you get the
automatic extension to June 16th of
2025 you can get another four months out
to that October 15th date by filing the
form 4868 but in this case you would
file it on June 15th and you'd only get
that additional four months to October 5th
5th
in order to file your tax
return the next exception to the April
15th deadline is the disaster area
exception so if the taxpayer is in a
presidentially declared Disaster Area
then the IRS will give an extension of
time to file and to pay the tax so this
is not just an extension of time to file
but also an extension of time to pay I
think they figure that if you're in a
disaster area then you've got enough
problems going on that they're not going
to then penalize you and charge you
interest for not paying by April 15 so
they will extend that time there is not
a set date in the law about when that
time will be because it's going to
depend on the nature of the disaster so
what will happen is the IRS will come
out with an announcement that says
anybody who is affected by that disaster
and they'll usually do it they'll say if
you live in a certain County within a
certain state for example then you are
considered to be in that disaster area
and so you will get an extension and
then they will announce what that date
is maybe they'll announce that it's May
31st or July 1st or whatever but they
will tell you what that date is this
will apply to individual and business
taxpayers who live in that disaster area
or whose tax records are in the disaster
area and also to relief workers who are
working in that disaster area so any of
those people who are affected by that
disaster will get this extension of time
to file and to
pay the next exception that we'll talk
about and final exception we'll talk
about is the combat zone exception so if
the taxpayers serve in a combat zone as
designated by the president then they will get an extension of time to file
will get an extension of time to file and pay their tax and this applies not
and pay their tax and this applies not only to military personnel but it's also
only to military personnel but it's also civilian support personnel as well as
civilian support personnel as well as redcross personnel and certain
redcross personnel and certain correspondents like press correspondents
correspondents like press correspondents who are working in the combat zone this
who are working in the combat zone this applies to them as well that get this
applies to them as well that get this extension of time to file and pay and
extension of time to file and pay and here how you determine the length of
here how you determine the length of time that they have they get a
time that they have they get a combination of these two things they get
combination of these two things they get 180 days from the later of their last
180 days from the later of their last day in the combat zone or their last day
day in the combat zone or their last day of a qualifying Hospital stay due to
of a qualifying Hospital stay due to being injured while in the combat zone
being injured while in the combat zone plus the number of days before April
plus the number of days before April 15th that they entered the combat zone
15th that they entered the combat zone so it could be up to 3 and a half
so it could be up to 3 and a half additional months so let's look at an
additional months so let's look at an example Nick is in the military and
example Nick is in the military and entered a combat zone on January 31st of
entered a combat zone on January 31st of 2024 and he served without injury
2024 and he served without injury through March 31st of
through March 31st of 2025 when is his tax return due his 2024
2025 when is his tax return due his 2024 tax return is due 255 days after March
tax return is due 255 days after March 31st to 2025 which is December 11th 2025
31st to 2025 which is December 11th 2025 how do we did we determine that 255 days
how do we did we determine that 255 days he gets his 180 days from March 31st
he gets his 180 days from March 31st 2025 plus 75 more days the 75 days is
2025 plus 75 more days the 75 days is February 1st through April 15th of 2024
February 1st through April 15th of 2024 because remember he went in on January
because remember he went in on January 31st of 2024 so he gets the rest of the
31st of 2024 so he gets the rest of the time through April 15th added on to the
time through April 15th added on to the 180 days so if you're trying to do this
180 days so if you're trying to do this calculation remember that 2024 was a
calculation remember that 2024 was a leap year so February had 29 days then
leap year so February had 29 days then March has 31 days and then 15 days in
March has 31 days and then 15 days in April penalties so if you fail to file
April penalties so if you fail to file on time so mostly we're going to be
on time so mostly we're going to be talking about people who fail to file by
talking about people who fail to file by April 15th but this would apply even to
April 15th but this would apply even to those people who meet an exception they
those people who meet an exception they still do have a date when they have to
still do have a date when they have to file and pay by
file and pay by so if you fail to file by the due date
so if you fail to file by the due date then there is a penalty the penalty is
then there is a penalty the penalty is 5% of the balance due per month or part
5% of the balance due per month or part of a month up to a maximum of 25% of the
of a month up to a maximum of 25% of the balance due so this can go on for up to
balance due so this can go on for up to five months so it's per month or part of
five months so it's per month or part of a month so if you are late filing by
a month so if you are late filing by four months and one day that is going to
four months and one day that is going to be treated as five months so you're
be treated as five months so you're going to have to pay 5% for each month
going to have to pay 5% for each month up to that maximum of
up to that maximum of 25% so let's say your amount due was
25% so let's say your amount due was $1,000 5% of that if my math is right is
$1,000 5% of that if my math is right is $50 and so you would owe $50 per month
$50 and so you would owe $50 per month for five months that's $250 which of
for five months that's $250 which of course that's 25% of the $1,000 and so
course that's 25% of the $1,000 and so you would owe to $250 for your penalty
you would owe to $250 for your penalty for failure to file if there was fraud
for failure to file if there was fraud involved then instead of 5% it goes up
involved then instead of 5% it goes up to 15% of the balance due per month or
to 15% of the balance due per month or part of a month up to a maximum of 75%
part of a month up to a maximum of 75% of the balance due if your return was
of the balance due if your return was more than 60 days
more than 60 days late then your penalty is going to be
late then your penalty is going to be the smaller of
the smaller of $485 or100 100% of the unpaid tax so
$485 or100 100% of the unpaid tax so let's say you owed
let's say you owed $400 that's your balance due well 5% of
$400 that's your balance due well 5% of that is only
that is only $20 so let's say you were five months
$20 so let's say you were five months late that's only $100 but because you
late that's only $100 but because you were more than 60 days late you're going
were more than 60 days late you're going to have to pay 400 as your failure to
to have to pay 400 as your failure to file
file penalty if you had an extension the the
penalty if you had an extension the the penalties start on the original due date
penalties start on the original due date so let's say you filed for your
so let's say you filed for your extension to October 15th but then you
extension to October 15th but then you didn't file by October 15th you filed
didn't file by October 15th you filed after October 15th well the penalties
after October 15th well the penalties are going to start all the way back at
are going to start all the way back at April 15th so just because you got an
April 15th so just because you got an extension to October 15th that's not
extension to October 15th that's not going to help you if you don't actually
going to help you if you don't actually file your return by October 15th you're
file your return by October 15th you're going to pay penalties and interest all
going to pay penalties and interest all the way back to April 15 but then very
the way back to April 15 but then very importantly we've been talking about
importantly we've been talking about percentages of the amount due if you
percentages of the amount due if you don't have a balance due so if you got a
don't have a balance due so if you got a refund coming or if it's zero you don't
refund coming or if it's zero you don't have a refund or a balance due then
have a refund or a balance due then there is no failure to file penalty so
there is no failure to file penalty so if you don't owe money you don't file
if you don't owe money you don't file your return on time then there is no
your return on time then there is no failure to file
failure to file penalty failure to pay penalty so this
penalty failure to pay penalty so this is separate from failure to file so you
is separate from failure to file so you may have filed your return on time but
may have filed your return on time but you didn't actually pay on time you
you didn't actually pay on time you could have a failure to pay penalty or
could have a failure to pay penalty or maybe you didn't file your return on
maybe you didn't file your return on time and of course you didn't pay either
time and of course you didn't pay either then you're going to have a failure to
then you're going to have a failure to pay penalty so this penalty is one half
pay penalty so this penalty is one half of 1% of the balance due per month or
of 1% of the balance due per month or part of a month up to 25% of the balance
part of a month up to 25% of the balance due so again if you owed $1,000 you
due so again if you owed $1,000 you didn't pay pay it well 1 12 of 1% of
didn't pay pay it well 1 12 of 1% of that is only $5 so it' be $5 per month
that is only $5 so it' be $5 per month but it goes for as long as you didn't
but it goes for as long as you didn't pay it so it could go until you owed
pay it so it could go until you owed $250 so it could keep going if you don't
$250 so it could keep going if you don't pay and you don't pay and you don't pay
pay and you don't pay and you don't pay $5 per month is what $60 per year so
$5 per month is what $60 per year so it's going to keep going all the way up
it's going to keep going all the way up until you owe 25% of the amount due if
until you owe 25% of the amount due if you extend if you get an extension and
you extend if you get an extension and you pay in at least
you pay in at least 90% of the balance due then there will
90% of the balance due then there will not be any failure to pay penalty so
not be any failure to pay penalty so let's say when you file your extension
let's say when you file your extension you estimate that you're going to owe
you estimate that you're going to owe $11,000 so you file your extension and
$11,000 so you file your extension and you pay in
you pay in $11,000 but then when you actually do
$11,000 but then when you actually do your return turns out you were a little
your return turns out you were a little bit off and you ended up owing
bit off and you ended up owing $1,100 that's the amount that you
$1,100 that's the amount that you actually would have owed well you paid
actually would have owed well you paid in a th000 that's more than 90% of
in a th000 that's more than 90% of 1,00 so therefore they are not going to
1,00 so therefore they are not going to charge you any penalty on that extra
charge you any penalty on that extra $100 that you did not pay in what
$100 that you did not pay in what they're basically saying is you did your
they're basically saying is you did your best you made an estimate and it was
best you made an estimate and it was close enough so we are not going to
close enough so we are not going to charge you any failure to file penalty
charge you any failure to file penalty since you did a pretty good job of
since you did a pretty good job of estimating how much that you were going
estimating how much that you were going to owe and then the failure to pay
to owe and then the failure to pay penalty again is based on the balance
penalty again is based on the balance due so if there's no balance due then
due so if there's no balance due then there is no failure to pay penalty what
there is no failure to pay penalty what if you don't file and you don't pay well
if you don't file and you don't pay well then you have to pay both penalties
then you have to pay both penalties however it's not quite as harsh as it
however it's not quite as harsh as it sounds because the fail faure to file
sounds because the fail faure to file penalty is reduced by the failure to pay
penalty is reduced by the failure to pay penalty which means your combined
penalty which means your combined penalty is that 5% per month that we
penalty is that 5% per month that we talked about for failure to file however
talked about for failure to file however the same greater than 60-day rule does
the same greater than 60-day rule does still apply so if you're greater than 60
still apply so if you're greater than 60 days late in filing then you're still
days late in filing then you're still going to have that smaller of 100% of
going to have that smaller of 100% of the tax due or 485
the tax due or 485 as your
as your penalty
penalty interest if you don't pay when you are
interest if you don't pay when you are supposed to pay the IRS will charge you
supposed to pay the IRS will charge you interest in addition to
interest in addition to penalties that interest will be charged
penalties that interest will be charged even if you get an extension of time for
even if you get an extension of time for filing and the interest is charged on
filing and the interest is charged on the penalty as well so if you don't file
the penalty as well so if you don't file Andor pay on time now not only are you
Andor pay on time now not only are you going to get charged
going to get charged penalties not only are you going to get
penalties not only are you going to get charged interest you are also going to
charged interest you are also going to get charged interest on your penalties
get charged interest on your penalties so this can really add up you've got
so this can really add up you've got taxpayers who owe a lot of money they
taxpayers who owe a lot of money they could have very large penalties and then
could have very large penalties and then they're going to have to pay interest on
they're going to have to pay interest on all of that as well on the original
all of that as well on the original balance due on the penalty itself so
balance due on the penalty itself so that can really
that can really add up and these interest rates are
add up and these interest rates are based on the federal short-term rate and
based on the federal short-term rate and they are compounded daily and updated
they are compounded daily and updated quarterly so what this means is and you
quarterly so what this means is and you will probably get a question on the exam
will probably get a question on the exam about this they're going to ask when are
about this they're going to ask when are the interest rates how are they
the interest rates how are they compounded a annually B quarterly c
compounded a annually B quarterly c monthly D daily Etc so they are
monthly D daily Etc so they are compounded daily so you will want to
compounded daily so you will want to know that they are updated quarterly
know that they are updated quarterly what that means is every quarter the IRS
what that means is every quarter the IRS will publish what are the interest rates
will publish what are the interest rates for that quarter so they're updated
for that quarter so they're updated quarterly but they are compounded daily
quarterly but they are compounded daily again you want to know
again you want to know that in some cases the interest can be
that in some cases the interest can be forgiven if it was due to an IRS error
forgiven if it was due to an IRS error or delay so we'll talk more about this
or delay so we'll talk more about this in part three of this course but for now
in part three of this course but for now now just know that it is possible that
now just know that it is possible that the interest can be forgiven but it's
the interest can be forgiven but it's only if it was due to an error or a
only if it was due to an error or a delay on the part of the IRS so it's not
delay on the part of the IRS so it's not actually granted all that often but it
actually granted all that often but it can
can happen then we also want to talk about
happen then we also want to talk about this penalty for perjury this will
this penalty for perjury this will almost certainly be on the
almost certainly be on the exam knowingly filing or helping to file
exam knowingly filing or helping to file a false tax return or aiding in fraud is
a false tax return or aiding in fraud is a felony and the maximum fine is
a felony and the maximum fine is $100,000 Andor up to three years in
$100,000 Andor up to three years in prison so this applies to the taxpayer
prison so this applies to the taxpayer and it applies to you as the preparer
and it applies to you as the preparer remember when we looked at the 1040 we
remember when we looked at the 1040 we had those signature blocks and we said
had those signature blocks and we said you were filing under penalty of
you were filing under penalty of perjury if you
perjury if you knowingly file a false return or a
knowingly file a false return or a fraudulent
fraudulent return or if you as the preparer help a
return or if you as the preparer help a client file a false or fraudulent tax
client file a false or fraudulent tax return and you do so
return and you do so knowingly then you Andor the taxpayer
knowingly then you Andor the taxpayer can be guilty of tax fraud and you can
can be guilty of tax fraud and you can go to prison for up to three years for
go to prison for up to three years for each count of that and you can be fined
each count of that and you can be fined up to
up to $100,000 the IRS wants to make sure that
$100,000 the IRS wants to make sure that you know that that it is a serious
you know that that it is a serious offense to knowingly file a false or
offense to knowingly file a false or fraudulent tax return so they will
fraudulent tax return so they will probably ask you a question about this
probably ask you a question about this so you will want to know this $100,000
so you will want to know this $100,000 in up to three years in prison again
in up to three years in prison again we'll get much more into that in part
we'll get much more into that in part three of this
three of this course let's talk now about the specific
course let's talk now about the specific items in the top section of the income
items in the top section of the income tax return so this is going to have a
tax return so this is going to have a lot of the basic information that is
lot of the basic information that is needed to file the return the name and
needed to file the return the name and address the dates of birth information
address the dates of birth information about their citizenship and residency
about their citizenship and residency marital status dependence Social
marital status dependence Social Security numbers you're going to have
Security numbers you're going to have all of those things so we're going to
all of those things so we're going to talk about each of these things in turn
talk about each of these things in turn so let's just revisit that top section
so let's just revisit that top section of the 1040 so we can remember the types
of the 1040 so we can remember the types of things that are asked so you can see
of things that are asked so you can see here at the top we've got all your B
here at the top we've got all your B basic information about names and social
basic information about names and social security number you can also see here at
security number you can also see here at the very top before even we get to the
the very top before even we get to the name says for the year January 1st to
name says for the year January 1st to December 31st 2024 or other tax year
December 31st 2024 or other tax year beginning on blank date and ending on
beginning on blank date and ending on blank date for individual tax
blank date for individual tax returns almost always we are calendar
returns almost always we are calendar year taxpayers so this is going to be a
year taxpayers so this is going to be a calendar year
calendar year 99.99% of the time it is theoretically
99.99% of the time it is theoretically possible to have a tax year other than a
possible to have a tax year other than a calendar year for an individual but it
calendar year for an individual but it is very likely you will go your entire
is very likely you will go your entire career without ever seeing it so for the
career without ever seeing it so for the vast majority of time you will do
vast majority of time you will do nothing with this because it's
nothing with this because it's automatically defaults to a calendar
automatically defaults to a calendar year if it is something other than a
year if it is something other than a calendar year January 1st Toc December
calendar year January 1st Toc December 31st then you would fill that in even if
31st then you would fill that in even if the taxpayer dies during the year they
the taxpayer dies during the year they still can file their return as if it was
still can file their return as if it was a full year return as if it was a
a full year return as if it was a calendar year return so you wouldn't
calendar year return so you wouldn't even need this in that case so it's
even need this in that case so it's going to be a very rare case that you
going to be a very rare case that you would use this so for purposes of the EA
would use this so for purposes of the EA exam forget about it you just know that
exam forget about it you just know that individual taxpayers are calendar year
individual taxpayers are calendar year taxpayers so we're always going to be
taxpayers so we're always going to be talking about the calendar year when we
talking about the calendar year when we get into business tax returns in part
get into business tax returns in part two of this we'll talk about other types
two of this we'll talk about other types of tax years that businesses may have
of tax years that businesses may have but individuals don't have to worry
but individuals don't have to worry about that so getting that out of the
about that so getting that out of the way we're going to get through all of
way we're going to get through all of this basic information then we've got a
this basic information then we've got a couple of check boxes we've got one up
couple of check boxes we've got one up here and we've got one down here about
here and we've got one down here about digital assets we'll talk about those
digital assets we'll talk about those later then we get to this filing status
later then we get to this filing status so we're going to go into detail detail
so we're going to go into detail detail about each of these but you need to
about each of these but you need to check what your filing status is and
check what your filing status is and then we're going to get down to a
then we're going to get down to a standard deduction so we'll talk about
standard deduction so we'll talk about standard deduction versus itemized
standard deduction versus itemized deductions in a later video but if
deductions in a later video but if you're taking the standard deduction
you're taking the standard deduction then you would check the appropriate
then you would check the appropriate boxes here then we get into your age and
boxes here then we get into your age and so this is asking were you born before
so this is asking were you born before January 2nd of 1960 what they're trying
January 2nd of 1960 what they're trying to get to is are you age 65 or older or
to get to is are you age 65 or older or not that's what these check boxes are
not that's what these check boxes are trying to get to but notice were you
trying to get to but notice were you born before January 2nd of 1960 so in
born before January 2nd of 1960 so in other words were you born on January 1st
other words were you born on January 1st of 1960 or before if you think about it
of 1960 or before if you think about it if someone was born on January 1st of
if someone was born on January 1st of 1960 then on December 31st of
1960 then on December 31st of 2024 they were sick
2024 they were sick 64 years old they were not yet 65 years
64 years old they were not yet 65 years old but what you're going to find when
old but what you're going to find when we talk about a person's age at the end
we talk about a person's age at the end of a year frequently the IRS gives you
of a year frequently the IRS gives you one extra day so that if you were born
one extra day so that if you were born on New Year's Day if you were born on
on New Year's Day if you were born on January 1st then they will consider you
January 1st then they will consider you to have been born on December 31st so
to have been born on December 31st so that's what they're saying here if you
that's what they're saying here if you were born on January 1st of 196 60 then
were born on January 1st of 196 60 then you can check this box and you are going
you can check this box and you are going to get credit for being age
to get credit for being age 65 on December 31st of
65 on December 31st of 2024 then they also have a box here for
2024 then they also have a box here for if you are blind then you would check it
if you are blind then you would check it then there's one if you are married then
then there's one if you are married then you would check the same for your spouse
you would check the same for your spouse so what you're going to do is when you
so what you're going to do is when you fill this out if you're married filing
fill this out if you're married filing jointly one spouse is going to be named
jointly one spouse is going to be named first
first and then the other spouse is going to be
and then the other spouse is going to be named second it doesn't matter which
named second it doesn't matter which spouse is named where but the first
spouse is named where but the first person listed when they say you that
person listed when they say you that means the first person listed and when
means the first person listed and when it says spouse that means the second
it says spouse that means the second person listed so you would check those
person listed so you would check those boxes if they are age 65 or older or
boxes if they are age 65 or older or blind and then we're going to get down
blind and then we're going to get down to the dependants so you see if you've
to the dependants so you see if you've got dependants then you need to put
got dependants then you need to put their name their social security number
their name their social security number what their relationship ship was to you
what their relationship ship was to you and then you need to check these boxes
and then you need to check these boxes if they are eligible for certain credits
if they are eligible for certain credits so this is what we talk about when we're
so this is what we talk about when we're talking about the top section of the tax
talking about the top section of the tax return and now we're going to look at
return and now we're going to look at some of these things in more detail so
some of these things in more detail so first we're going to look at the Social
first we're going to look at the Social Security number so it's the SSN or the
Security number so it's the SSN or the T so everyone on the tax return has to
T so everyone on the tax return has to have either a social security number or
have either a social security number or a taxpayer identification number known
a taxpayer identification number known as a 10 a t or a 10 they have to have
as a 10 a t or a 10 they have to have one or the other the vast majority of
one or the other the vast majority of people are going to have a Social
people are going to have a Social Security number so that's what you're
Security number so that's what you're going to have so the taxpayers
going to have so the taxpayers themselves you have to put their social
themselves you have to put their social security number and any dependants you
security number and any dependants you have to put their social security
have to put their social security numbers the only time a dependent does
numbers the only time a dependent does not have to have a Social Security
not have to have a Social Security number is if you have the unfortunate
number is if you have the unfortunate situation of a baby that was born and
situation of a baby that was born and died in
died in 2024 in that case you do not have to
2024 in that case you do not have to have a Social Security number but any
have a Social Security number but any other dependent does have to have a
other dependent does have to have a Social Security number or a taxpayer
Social Security number or a taxpayer identification number so there are
identification number so there are certain people who will not have a
certain people who will not have a Social Security number and cannot get a
Social Security number and cannot get a Social Security number but still need to
Social Security number but still need to either file a tax return or be claimed
either file a tax return or be claimed as a dependent on a tax return so if you
as a dependent on a tax return so if you have that situation then that person
have that situation then that person needs to file for an individual taxpayer
needs to file for an individual taxpayer identification number so this would be
identification number so this would be for a nonresident or resident alien who
for a nonresident or resident alien who is not eligible for a social security
is not eligible for a social security number they would file for this ittin
number they would file for this ittin this individual taxpayer identification
this individual taxpayer identification number this includes children and
number this includes children and dependents because remember you have to
dependents because remember you have to put their number on the return as well
put their number on the return as well you get this I by filing this form W7
you get this I by filing this form W7 with the IRS and it is used for tax
with the IRS and it is used for tax purposes only so it can't be used for
purposes only so it can't be used for identification or for anything else like
identification or for anything else like that it is only for use with the tax
that it is only for use with the tax return the other class of individuals
return the other class of individuals who may not have a Social Security
who may not have a Social Security number is a child who is in the process
number is a child who is in the process of being adopted so the taxpayers in the
of being adopted so the taxpayers in the middle of adopting a child they cannot
middle of adopting a child they cannot get the social security number until the
get the social security number until the adoption is final but that child might
adoption is final but that child might still qualify as a dependent on that
still qualify as a dependent on that taxpayer's tax return so if they have
taxpayer's tax return so if they have that case then they can file form w7a
that case then they can file form w7a with the IRS and they can get that A1
with the IRS and they can get that A1 that adoption taxpayer identification
that adoption taxpayer identification number so remember most taxpayers going
number so remember most taxpayers going to have a Social Security number that is
to have a Social Security number that is what you need except for these
what you need except for these exceptions where instead you will have a
exceptions where instead you will have a taxpayer identification
taxpayer identification number let's talk next about tax
number let's talk next about tax residency we've already talked a little
residency we've already talked a little bit about this about Resident aliens and
bit about this about Resident aliens and non-resident aliens so what does all of
non-resident aliens so what does all of that mean so for purposes of the tax law
that mean so for purposes of the tax law an alien is any non US citizen so if
an alien is any non US citizen so if you're not a US citizen then you are
you're not a US citizen then you are considered an alien under the tax law
considered an alien under the tax law and there are three types of aliens
and there are three types of aliens resident aliens nonresident aliens and
resident aliens nonresident aliens and dual status aliens which is a mixture of
dual status aliens which is a mixture of the two of Resident and non-resident so
the two of Resident and non-resident so let's talk first about Resident aliens
let's talk first about Resident aliens if you are considered a resident alien
if you are considered a resident alien then you are going to be taxed just like
then you are going to be taxed just like a US citizen which means you are taxed
a US citizen which means you are taxed on your worldwide income so if you are a
on your worldwide income so if you are a US citizen or you are a resident alien
US citizen or you are a resident alien then you are going to be taxed on your
then you are going to be taxed on your income no matter where it comes from
income no matter where it comes from whether it comes from the United States
whether it comes from the United States or it comes from outside of the United
or it comes from outside of the United States you are taxed on that income as a
States you are taxed on that income as a US citizen or resident alien and alien
US citizen or resident alien and alien is going to be considered a nonresident
is going to be considered a nonresident by default
by default so you are a nonresident alien unless
so you are a nonresident alien unless you meet one of the two tests to be
you meet one of the two tests to be considered a resident
considered a resident alien those two tests are called the
alien those two tests are called the green card test in the substantial
green card test in the substantial presence test so you will want to
presence test so you will want to remember that for the exam again the
remember that for the exam again the default is to be a
default is to be a nonresident but if you meet either of
nonresident but if you meet either of these two tests then you are a resident
these two tests then you are a resident and from from a tax standpoint it's
and from from a tax standpoint it's actually better to be a
actually better to be a nonresident why because if you are a
nonresident why because if you are a resident alien you are taxed on your
resident alien you are taxed on your worldwide income if you are a
worldwide income if you are a nonresident alien as we'll see later you
nonresident alien as we'll see later you are not taxed on your worldwide income
are not taxed on your worldwide income you are only taxed on your us Source
you are only taxed on your us Source income but in any case you are
income but in any case you are considered a non-resident unless you
considered a non-resident unless you pass one of the two tests so first is
pass one of the two tests so first is the green card test you meet the green
the green card test you meet the green card test if you are a lawful permanent
card test if you are a lawful permanent resident at any time during the tax year
resident at any time during the tax year if you are a lawful permanent resident
if you are a lawful permanent resident then you will have a permanent resident
then you will have a permanent resident card also known as a green card due to
card also known as a green card due to its color so if the taxpayer has a green
its color so if the taxpayer has a green card then they are a resident alien and
card then they are a resident alien and this is one of those things that you
this is one of those things that you would want to get copy of so when you're
would want to get copy of so when you're talking to the taxpayer and they say yes
talking to the taxpayer and they say yes I'm a lawful permanent resident then you
I'm a lawful permanent resident then you would ask for a copy of their green card
would ask for a copy of their green card and you would get a copy of that so
and you would get a copy of that so that's the first one that's pretty
that's the first one that's pretty straightforward either they have the
straightforward either they have the green card they are a lawful permanent
green card they are a lawful permanent resident or they do not have the card
resident or they do not have the card and so that's how you know if they meet
and so that's how you know if they meet that test the next test is the
that test the next test is the substantial presence test so even if
substantial presence test so even if they don't have a green card they could
they don't have a green card they could still be a resident alien if they meet
still be a resident alien if they meet this substantial presence test in order
this substantial presence test in order to meet this test they must be
to meet this test they must be physically present in the United States
physically present in the United States on at least 31 days during the year so
on at least 31 days during the year so we're talking about 2024 here so they
we're talking about 2024 here so they have to have been physically present in
have to have been physically present in the United States for at least 31 days
the United States for at least 31 days during
during 2024
2024 and 183 days during the three-year
and 183 days during the three-year period that includes 2024 and the two
period that includes 2024 and the two years immediately before that however it
years immediately before that however it is not just 183 days the way you would
is not just 183 days the way you would normally count days you have to count
normally count days you have to count those days in a special way so the way
those days in a special way so the way you count those days is you count all of
you count those days is you count all of the days that they were present in the
the days that they were present in the current year so in 2024 so every day
current year so in 2024 so every day that they were present in the United
that they were present in the United States in 2024 counts towards this 183
States in 2024 counts towards this 183 days but we only count onethird of the
days but we only count onethird of the day days that they were present the year
day days that they were present the year before so that would be 2023 and we only
before so that would be 2023 and we only count one six of the days that they were
count one six of the days that they were present in the year before that which
present in the year before that which would be 2022 so you count all of the
would be 2022 so you count all of the days 2024 onethird of the days in 2023
days 2024 onethird of the days in 2023 and one sixth of the days in 2022 so
and one sixth of the days in 2022 so let's look at an example Bjorn was
let's look at an example Bjorn was physically present in the United States
physically present in the United States on 120 days in each of the years 2024
on 120 days in each of the years 2024 2023 and 2022 so we know that he meets
2023 and 2022 so we know that he meets this first test which is 31 days during
this first test which is 31 days during 2024 he was physically present for 120
2024 he was physically present for 120 days in 2024 so definitely meets this
days in 2024 so definitely meets this first test so the question is does he
first test so the question is does he meet the second test for the 183 days so
meet the second test for the 183 days so how do we determine that we count the
how do we determine that we count the full 120 days in 2024 we count oneir of
full 120 days in 2024 we count oneir of of the days in 2023 so 1/3 of 120 is 40
of the days in 2023 so 1/3 of 120 is 40 days and we count one 16 of the days in
days and we count one 16 of the days in 2022 and one 16 of 120 is 20 days in
2022 and one 16 of 120 is 20 days in 2022 so when you add that together it's
2022 so when you add that together it's 120 + 40 + 20 that's
120 + 40 + 20 that's 180 days so 180 days is less than 183
180 days so 180 days is less than 183 days therefore Bjorn is not considered a
days therefore Bjorn is not considered a resident alien for 2024 he would be a
resident alien for 2024 he would be a nonresident alien for
nonresident alien for 2024 so what does it mean to be a
2024 so what does it mean to be a nonresident alien well as we hinted at
nonresident alien well as we hinted at earlier a non-resident alien is taxed
earlier a non-resident alien is taxed only on their income from sources within
only on their income from sources within the United States and on certain income
the United States and on certain income connected with the conduct of a Trader
connected with the conduct of a Trader business in the United States so I'm
business in the United States so I'm just going to call that United States
just going to call that United States source income so non-resident aliens are
source income so non-resident aliens are not taxed on their worldwide income they
not taxed on their worldwide income they are only taxed on their us Source income
are only taxed on their us Source income so for example if you have a
so for example if you have a non-resident alien and they've got a
non-resident alien and they've got a bank account in France which is where
bank account in France which is where they're from and so they have interest
they're from and so they have interest on that bank account they're a
on that bank account they're a non-resident alien that interest on that
non-resident alien that interest on that French bank account is not taxable for
French bank account is not taxable for United States tax purposes if they are a
United States tax purposes if they are a resident alien and they have that same
resident alien and they have that same bank account then that interest that
bank account then that interest that they earned on that French bank account
they earned on that French bank account would be taxable on their us tax return
would be taxable on their us tax return so that's the difference between a
so that's the difference between a resident and non-resident alien for
resident and non-resident alien for either of them if they've got a bank
either of them if they've got a bank account in the United States and they
account in the United States and they have interest either way resident or
have interest either way resident or non-resident that will be taxable in the
non-resident that will be taxable in the US a nonresident alien may be required
US a nonresident alien may be required to file form
to file form 1040nr and we're going to look at that
1040nr and we're going to look at that here in a minute you don't have to go
here in a minute you don't have to go into the specifics you're not likely to
into the specifics you're not likely to be asked a question on the exam about
be asked a question on the exam about the 1040 NR don't worry about all of the
the 1040 NR don't worry about all of the requirements and all of that for filing
requirements and all of that for filing it I just want you to know that it
it I just want you to know that it exists and that these non-residents may
exists and that these non-residents may need to file it
need to file it there's a special case for a nonresident
there's a special case for a nonresident alien spouse so if a US citizen or
alien spouse so if a US citizen or resident alien has a spouse who is a
resident alien has a spouse who is a nonresident alien they can choose to
nonresident alien they can choose to treat that spouse as if they were a
treat that spouse as if they were a resident alien so in other words you can
resident alien so in other words you can file a joint return with your spouse and
file a joint return with your spouse and you consider that spouse to be a
you consider that spouse to be a resident alien if you choose to the IRS
resident alien if you choose to the IRS is okay with this why because again the
is okay with this why because again the resident alien is going to be taxed on
resident alien is going to be taxed on their worldwide income if they were a
their worldwide income if they were a non-resident alien it would only be
non-resident alien it would only be their us Source income so the IRS is
their us Source income so the IRS is either going to be ahead of the game or
either going to be ahead of the game or they're going to break even if that
they're going to break even if that nonresident alien spouse chooses instead
nonresident alien spouse chooses instead to be taxed as a resident alien so let's
to be taxed as a resident alien so let's look quickly at that 1040 NR the NR is
look quickly at that 1040 NR the NR is for nonresident so you can see just at
for nonresident so you can see just at first glance it looks a lot like the
first glance it looks a lot like the 1040 so we will zoom in here and you can
1040 so we will zoom in here and you can see it really is a lot like the regular
see it really is a lot like the regular 1040 it's got a lot of the same basic
1040 it's got a lot of the same basic information you can see here though that
information you can see here though that it can also be filed by an estate or a
it can also be filed by an estate or a trust as well as an individual but it's
trust as well as an individual but it's got most of the same types of
got most of the same types of information it's got the income that's
information it's got the income that's effectively connected with the United
effectively connected with the United States and you've got all of those
States and you've got all of those things that you would put in there it
things that you would put in there it gets down to your adjusted gross income
gets down to your adjusted gross income just like a 1040 and then deductions Etc
just like a 1040 and then deductions Etc and then we go to page two and you can
and then we go to page two and you can see again it's got the tax and tax
see again it's got the tax and tax credits payments that were made refund
credits payments that were made refund or amount due so it looks a lot like the
or amount due so it looks a lot like the 1040 but it does have some different
1040 but it does have some different requirements about what is included
requirements about what is included remember this is for nonresident aliens
remember this is for nonresident aliens which means it is only going to include
which means it is only going to include us sourced income not worldwide
us sourced income not worldwide income let's now talk about this last
income let's now talk about this last status which is a dual status alien so
status which is a dual status alien so it is possible to be a non-resident
it is possible to be a non-resident alien for part of the year and a
alien for part of the year and a resident alien for part of the year so
resident alien for part of the year so usually this happens either in the year
usually this happens either in the year of arrival to the United States or the
of arrival to the United States or the year of departure from the United States
year of departure from the United States for the part of the year that they are a
for the part of the year that they are a resident alien they are taxed on their
resident alien they are taxed on their income from all sources from worldwide
income from all sources from worldwide income just like any other resident
income just like any other resident alien and what counts is when that
alien and what counts is when that income was
income was received so if they have income from
received so if they have income from sources outside the United States if
sources outside the United States if they received that while they were a
they received that while they were a resident alien then it is taxable if
resident alien then it is taxable if they received it while they were a
they received it while they were a non-resident alien then that
non-resident alien then that income would not be taxable to them
income would not be taxable to them because it comes from outside of the
because it comes from outside of the United States for the part of the year
United States for the part of the year that they are a non-resident alien then
that they are a non-resident alien then they are taxed only on their income from
they are taxed only on their income from us sources so really the Dual status
us sources so really the Dual status alien is pretty easy to understand once
alien is pretty easy to understand once you understand the difference between a
you understand the difference between a resident alien and a non-resident alien
resident alien and a non-resident alien it's just that they are one for part of
it's just that they are one for part of the year and the other part of the year
the year and the other part of the year so while they're a resident alien they
so while they're a resident alien they are taxed on all of their worldwide
are taxed on all of their worldwide income while they are a non-resident
income while they are a non-resident alien they are taxed only on their us
alien they are taxed only on their us Source income that's what it means to be
Source income that's what it means to be a dual status alien so let's just do a
a dual status alien so let's just do a quick recap of this topic remember
quick recap of this topic remember what's an alien it's any non- US citizen
what's an alien it's any non- US citizen three types resident alien taxed on
three types resident alien taxed on worldwide income non-resident alien
worldwide income non-resident alien taxed only on us Source income or dual
taxed only on us Source income or dual status alien which is a combination of
status alien which is a combination of the two and for more information check
the two and for more information check out publication
out publication 519 now let's talk about filing status
519 now let's talk about filing status we've already mentioned these before but
we've already mentioned these before but here they are there are five different
here they are there are five different filing statuses single married filing
filing statuses single married filing jointly married filing separately head
jointly married filing separately head of household and qualifying surviving
of household and qualifying surviving spouse this used to be called a
spouse this used to be called a qualifying widow or widower so if you've
qualifying widow or widower so if you've been around a while you might remember
been around a while you might remember that but they changed the wording in
that but they changed the wording in 2022 to qualifying surviving spouse so
2022 to qualifying surviving spouse so if you're out Googling around sometimes
if you're out Googling around sometimes you may still see references to
you may still see references to qualifying widow or qualifying widower
qualifying widow or qualifying widower but just know that it is now called a
but just know that it is now called a qualifying surviving spouse also you'll
qualifying surviving spouse also you'll see these abbreviations s mfj Etc get
see these abbreviations s mfj Etc get used to those because it's a lot easier
used to those because it's a lot easier to put the abbreviations on the slide
to put the abbreviations on the slide than write this out each time so you are
than write this out each time so you are going to want to familiarize yourself
going to want to familiarize yourself with those abbreviations and what they
with those abbreviations and what they stand for so we're going to talk about
stand for so we're going to talk about each of these and who qualifies single
each of these and who qualifies single single means you were not married on
single means you were not married on December 31st 2024 so anytime we're
December 31st 2024 so anytime we're talking about marital status what counts
talking about marital status what counts is your status on December 31st of
is your status on December 31st of 2024 so you are single if you are not
2024 so you are single if you are not married as of December 31st 2024 so you
married as of December 31st 2024 so you could have been married for all of
could have been married for all of 2024 but your divorce becomes Final on
2024 but your divorce becomes Final on December 31st of 2024 you are considered
December 31st of 2024 you are considered single for
single for 2024 single also includes if you were
2024 single also includes if you were widowed
widowed before
before 2024 if you were widowed during 2024
2024 if you were widowed during 2024 then you are considered married for 20
then you are considered married for 20 24 but if you were widowed before
24 but if you were widowed before 2024 then you are considered not married
2024 then you are considered not married during 2024 however you may qualify for
during 2024 however you may qualify for a different filing status either
a different filing status either qualifying surviving spouse or head of
qualifying surviving spouse or head of household as we will talk about married
household as we will talk about married filing jointly to file married filing
filing jointly to file married filing jointly you must have been married on or
jointly you must have been married on or before December 31st 2024 because
before December 31st 2024 because remember you are considered married all
remember you are considered married all year so if you were single all year you
year so if you were single all year you got married on December 31st 2024 you
got married on December 31st 2024 you are considered married for all of 2024
are considered married for all of 2024 and this is true even if your spouse
and this is true even if your spouse died during the year you are still
died during the year you are still considered married on December 31st
considered married on December 31st 2024 also both spouses must agree to
2024 also both spouses must agree to file jointly if either spouse does not
file jointly if either spouse does not want to file jointly then you cannot
want to file jointly then you cannot file married filing
file married filing jointly if you file married filing
jointly if you file married filing jointly you report your combined income
jointly you report your combined income and allowable expenses you are
and allowable expenses you are considered to be one taxpayer you are
considered to be one taxpayer you are married filing jointly you are one
married filing jointly you are one taxpayer which means both spouses are
taxpayer which means both spouses are both generally going to be liable for
both generally going to be liable for any tax that is due you sign the tax
any tax that is due you sign the tax return you are liable for that tax both
return you are liable for that tax both spouses are equally liable so the IRS
spouses are equally liable so the IRS can go go after either or both spouses
can go go after either or both spouses for the money there are sometimes
for the money there are sometimes exceptions to that that we'll talk about
exceptions to that that we'll talk about later but that is the general rule
later but that is the general rule married filing jointly usually has more
married filing jointly usually has more favorable tax treatment than married
favorable tax treatment than married filing separately what you can do is you
filing separately what you can do is you can run it each way if you've got good
can run it each way if you've got good professional level tax software usually
professional level tax software usually you can choose to run it both ways in
you can choose to run it both ways in other words you can say let's see what
other words you can say let's see what they would owe if they are married
they would owe if they are married filing jointly and let's see what they
filing jointly and let's see what they would owe if they were married filing
would owe if they were married filing separately and then you can compare the
separately and then you can compare the two and take whichever is most favorable
two and take whichever is most favorable what you are going to find is most often
what you are going to find is most often it is most favorable from a tax
it is most favorable from a tax standpoint to be married filing jointly
standpoint to be married filing jointly we'll talk later about some of the times
we'll talk later about some of the times that you might want to file separately
that you might want to file separately anyway then also if you are filing
anyway then also if you are filing married filing jointly and this is
married filing jointly and this is important to know for the exam you
important to know for the exam you cannot amend
cannot amend to file separately after the due date
to file separately after the due date for the return has passed so once April
for the return has passed so once April 15th has passed if you file married
15th has passed if you file married filing jointly you cannot later amend to
filing jointly you cannot later amend to file married filing separately so if
file married filing separately so if you're going to file jointly you want to
you're going to file jointly you want to make sure you're okay with that because
make sure you're okay with that because you're not allowed to change it
you're not allowed to change it later now let's talk about married
later now let's talk about married filing separately in order to qualify
filing separately in order to qualify for married filing separately again you
for married filing separately again you must have been married on her before
must have been married on her before December
December 31st for this each spouse files their
31st for this each spouse files their own tax return with only their own
own tax return with only their own income and expenses and each spouse is
income and expenses and each spouse is liable only for their own tax return so
liable only for their own tax return so you are not liable for the taxes of your
you are not liable for the taxes of your spouse if you are filing separately
spouse if you are filing separately again this is often less favorable tax
again this is often less favorable tax treatment than married filing jointly
treatment than married filing jointly and you cannot elect to file single so
and you cannot elect to file single so you can't just say well instead of
you can't just say well instead of filing married filing separately I'll
filing married filing separately I'll just file single that is not allowed if
just file single that is not allowed if you were married on December 31st
you were married on December 31st 2024 then you need to file as a married
2024 then you need to file as a married person whether you are filing married
person whether you are filing married filing jointly or married filing
filing jointly or married filing separately there is one minor exception
separately there is one minor exception to that that we will talk about here in
to that that we will talk about here in a little while but for the vast majority
a little while but for the vast majority of time if you're married you have to
of time if you're married you have to file as a married person
file as a married person with a married filing separately return
with a married filing separately return you can amend it to file jointly if you
you can amend it to file jointly if you change your mind later so again you're
change your mind later so again you're going to want to know this for the exam
going to want to know this for the exam if you filed married filing jointly you
if you filed married filing jointly you cannot amend to file married filing
cannot amend to file married filing separately but if you originally filed
separately but if you originally filed married filing separately you can amend
married filing separately you can amend later to file jointly as long as you do
later to file jointly as long as you do so during the normal amendment period
so during the normal amendment period which is usually 3 years from the
which is usually 3 years from the original due date next filing status is
original due date next filing status is head of
head of household to be head of household you
household to be head of household you have to be unmarried on December 31st
have to be unmarried on December 31st 2024 you can also see this considered
2024 you can also see this considered unmarried so let's set that aside for a
unmarried so let's set that aside for a moment we'll talk about that but for now
moment we'll talk about that but for now you have to be unmarried on December
you have to be unmarried on December 31st 2024 you have to pay more than half
31st 2024 you have to pay more than half the cost of keeping up a home for the
the cost of keeping up a home for the year you have to have a qualif if Ying
year you have to have a qualif if Ying person that lives with you in the home
person that lives with you in the home for more than half the year now they do
for more than half the year now they do not count temporary absences against you
not count temporary absences against you so in other words let's say you've got a
so in other words let's say you've got a single parent and their child lives with
single parent and their child lives with them but their child is in college so
them but their child is in college so they're off out of town in college for a
they're off out of town in college for a part of the year that will not be
part of the year that will not be considered against them as long as their
considered against them as long as their home is still the parents home then they
home is still the parents home then they will be considered to have lived in that
will be considered to have lived in that home even for that time that they were
home even for that time that they were away in college then also it's important
away in college then also it's important to note here if the qualifying person is
to note here if the qualifying person is a dependent parent so head of household
a dependent parent so head of household it does not have to be your child that
it does not have to be your child that is living with you it could be another
is living with you it could be another qualifying person that qualifying person
qualifying person that qualifying person could be your parent who is a dependent
could be your parent who is a dependent of
of yours they the the parent does not have
yours they the the parent does not have to live with you in order for you to
to live with you in order for you to qualify as head of household so for
qualify as head of household so for example the parent may live in a nursing
example the parent may live in a nursing home and that's fine that will still
home and that's fine that will still qualify for head of household as long as
qualify for head of household as long as all of the other requirements are met
all of the other requirements are met the benefit of head of household is it
the benefit of head of household is it is a lower tax rate and a higher
is a lower tax rate and a higher standard deduction than either single or
standard deduction than either single or married filing separately so it's not
married filing separately so it's not quite as good as married filing joint
quite as good as married filing joint Point l or qualified surviving spouse
Point l or qualified surviving spouse but it is better than being single or
but it is better than being single or married filing separately so it's kind
married filing separately so it's kind of in between so they're saying okay
of in between so they're saying okay you're not married however because
you're not married however because you've got this person living with you
you've got this person living with you we're going to give you a bit of a break
we're going to give you a bit of a break and so that is what head of household
and so that is what head of household does so let's talk about this considered
does so let's talk about this considered unmarried and what does that mean well
unmarried and what does that mean well you'll be considered unmarried mared
you'll be considered unmarried mared even if you actually are legally married
even if you actually are legally married if you meet all of these following tests
if you meet all of these following tests you have to file a separate return you
you have to file a separate return you have to have paid more than half the
have to have paid more than half the cost of keeping up the home your spouse
cost of keeping up the home your spouse did not live in the home for the last
did not live in the home for the last six months of the year and here the
six months of the year and here the temporary absences work in the other
temporary absences work in the other direction you don't get to count
direction you don't get to count temporary absences as meaning the spouse
temporary absences as meaning the spouse did not live in the home for the last 6
did not live in the home for the last 6 months of year so if the spouse was out
months of year so if the spouse was out of town on business for the last 6
of town on business for the last 6 months of the year but their home was
months of the year but their home was still your home then you don't get to
still your home then you don't get to count as being unmarried in other words
count as being unmarried in other words it doesn't count as them not living with
it doesn't count as them not living with you for those last six months they just
you for those last six months they just happen to be out of town so they have to
happen to be out of town so they have to actually have a separate
actually have a separate residence for at least the last 6 months
residence for at least the last 6 months of the year in order to qualify as being
of the year in order to qualify as being unmarried next the taxpayers home was
unmarried next the taxpayers home was the main home for their child stepchild
the main home for their child stepchild or foster child for more than half the
or foster child for more than half the year so
year so here another person other than the child
here another person other than the child does not count so we're talking about
does not count so we're talking about being considered unmarried we're not
being considered unmarried we're not talking about qualifying for head of
talking about qualifying for head of household these are two separate tests
household these are two separate tests remember you can qualify for head of
remember you can qualify for head of household even if the person that's
household even if the person that's living with you is not your child but if
living with you is not your child but if you want to be considered
you want to be considered unmarried that person who's living with
unmarried that person who's living with you does in fact have to be your child
you does in fact have to be your child and then finally the taxpayer must be
and then finally the taxpayer must be able to claim that child as a dependent
able to claim that child as a dependent so not only does it have to be your
so not only does it have to be your child but you have to be able to claim
child but you have to be able to claim that child as a dependent however if you
that child as a dependent however if you could claim them as a dependent but you
could claim them as a dependent but you don't because of something called the
don't because of something called the tiebreaker rules so sometimes the
tiebreaker rules so sometimes the non-custodial
non-custodial parent will get to claim the child as a
parent will get to claim the child as a dependent because of something called
dependent because of something called the tiebreaker rules that we will talk
the tiebreaker rules that we will talk about later but if the taxpayer could
about later but if the taxpayer could have claimed the child as a dependent
have claimed the child as a dependent except for those tiebreaker rules then
except for those tiebreaker rules then they can still meet this considered
they can still meet this considered unmarried
unmarried test cost of keeping up home so when we
test cost of keeping up home so when we talk about head of house household
talk about head of house household remember the person had to pay more than
remember the person had to pay more than half the cost of keeping up a home so
half the cost of keeping up a home so what does that mean the cost of keeping
what does that mean the cost of keeping up a home means the rent mortgage
up a home means the rent mortgage interest real estate taxes homeowners
interest real estate taxes homeowners insurance repairs utilities in food
insurance repairs utilities in food that's eaten in the home so not food out
that's eaten in the home so not food out in restaurants but food in the home is
in restaurants but food in the home is considered part of the cost of keeping
considered part of the cost of keeping up the home it does not include things
up the home it does not include things like clothing education medical
like clothing education medical treatment vacation life insurance
treatment vacation life insurance Transportation or value of services that
Transportation or value of services that were provided so those things at least
were provided so those things at least the clothing education medical treatment
the clothing education medical treatment those things may count as part of
those things may count as part of support so when we talk about dependence
support so when we talk about dependence later that might count for whether or
later that might count for whether or not you are
not you are supporting that person for depend depy
supporting that person for depend depy purposes but for cost of keeping up a
purposes but for cost of keeping up a home those things do not count it's only
home those things do not count it's only the things specifically related to the
the things specifically related to the home that count as a cost of keeping up
home that count as a cost of keeping up a
a home so now let's talk about a
home so now let's talk about a qualifying person remember in order to
qualifying person remember in order to qualify as head of household you have to
qualify as head of household you have to have a qualifying person that lives with
have a qualifying person that lives with you so let's talk about what a
you so let's talk about what a qualifying person is there are three
qualifying person is there are three categories of qualifying persons a
categories of qualifying persons a qualifying child a qualifying parent or
qualifying child a qualifying parent or other qualifying relative so a
other qualifying relative so a qualifying child so this would be a son
qualifying child so this would be a son or daughter or even a grandchild who
or daughter or even a grandchild who lived with you for more than half the
lived with you for more than half the year and meets certain other tests so
year and meets certain other tests so it's a qualifying child or
it's a qualifying child or grandchild if that child is not married
grandchild if that child is not married they are single then they are a
they are single then they are a qualifying person
qualifying person automatically for purposes of head of
automatically for purposes of head of household if they are
household if they are married and you can claim that child as
married and you can claim that child as a dependent they are also a qualifying
a dependent they are also a qualifying person the only time a child will not
person the only time a child will not count for head of household status is if
count for head of household status is if they are married and you cannot claim
they are married and you cannot claim them as a dependent so again not going
them as a dependent so again not going to apply to very many people but if you
to apply to very many people but if you have that case they are not a qualifying
have that case they are not a qualifying person so basically if you have a child
person so basically if you have a child or a grandchild that lives with you for
or a grandchild that lives with you for more than half the year that child is
more than half the year that child is going to qualify as a qualifying person
going to qualify as a qualifying person unless they're married and you cannot
unless they're married and you cannot claim them as a
claim them as a dependent next category is qualified
dependent next category is qualified parents so if that person is your father
parents so if that person is your father or your mother and you can claim them as
or your mother and you can claim them as a dependent then they are a qualifying
a dependent then they are a qualifying person if you cannot claim them as a
person if you cannot claim them as a dependent they are not a qualifying
dependent they are not a qualifying person so that's a pretty easy one to
person so that's a pretty easy one to know if it is a parent either they are a
know if it is a parent either they are a dependent or they are not if they are
dependent or they are not if they are dependent they are a qualifying person
dependent they are a qualifying person if they are not a dependent they are not
if they are not a dependent they are not a qualifying person and remember if they
a qualifying person and remember if they are your parent they do not have to live
are your parent they do not have to live with you for more than half the year the
with you for more than half the year the third category is
third category is qualifying relatives and it gives
qualifying relatives and it gives examples such as grandparent brother
examples such as grandparent brother sister who meet certain tests so for
sister who meet certain tests so for this test they have to have lived with
this test they have to have lived with you for more than half the year and they
you for more than half the year and they have to be related to you in one of the
have to be related to you in one of the ways listed under this special list it's
ways listed under this special list it's called relatives who don't have to live
called relatives who don't have to live with you but that's just the name of it
with you but that's just the name of it don't get hung up on the don't have to
don't get hung up on the don't have to live with you part that's not the issue
live with you part that's not the issue that that's just the name of the list
that that's just the name of the list and we will go over that list later but
and we will go over that list later but for now just know they have to be listed
for now just know they have to be listed on this special list called relatives
on this special list called relatives you don't have to live with you and you
you don't have to live with you and you have to be able to claim them as a
have to be able to claim them as a dependent so if they're on this special
dependent so if they're on this special list they lived with you for more than
list they lived with you for more than half the year and you can claim them as
half the year and you can claim them as a
a dependent then they are are a qualifying
dependent then they are are a qualifying person these last three boxes here are
person these last three boxes here are actually redundant they're saying the
actually redundant they're saying the same thing that this box says so first
same thing that this box says so first it says if your relative did not live
it says if your relative did not live with you for more than half the year
with you for more than half the year then they're not a qualifying person
then they're not a qualifying person well we already said that up here they
well we already said that up here they have to have lived with you for more
have to have lived with you for more than half the year then it says if
than half the year then it says if they're not on that special list of
they're not on that special list of relatives then they don't qualify well
relatives then they don't qualify well we already said they have to be on that
we already said they have to be on that special list and then it says if you
special list and then it says if you cannot claim them as a dependent then
cannot claim them as a dependent then they're not a qualifying person but we
they're not a qualifying person but we already said that you have to be able to
already said that you have to be able to claim them as a dependent so really just
claim them as a dependent so really just know what's in this top box here and you
know what's in this top box here and you will understand this third category so
will understand this third category so those are the people who are considered
those are the people who are considered a qualifying person for the head of
a qualifying person for the head of household test so if you meet all of the
household test so if you meet all of the tests for head of household then you get
tests for head of household then you get that special head of household
that special head of household status next filing status is qualifying
status next filing status is qualifying surviving
surviving spouse this is designed for a widow or
spouse this is designed for a widow or widower who has at least one dependent
widower who has at least one dependent child and what it does is it allows that
child and what it does is it allows that person to use the married filing jointly
person to use the married filing jointly tax rates and standard deduction even
tax rates and standard deduction even though they're technically not married
though they're technically not married it applies for the two years
it applies for the two years following the year of
following the year of death so if the person died in
death so if the person died in 2024 they would be considered married
2024 they would be considered married still in 2024 they would not be a
still in 2024 they would not be a qualifying surviving spouse but if they
qualifying surviving spouse but if they meet the criteria they could be a
meet the criteria they could be a qualifying surviving spouse in 2025 and
2026 for the year of death as we said they will file either married filing
they will file either married filing jointly or married filing separately so
jointly or married filing separately so here are the eligibility rules first
here are the eligibility rules first they had to have been entitled to file a
they had to have been entitled to file a joint return with their spouse in the
joint return with their spouse in the year of death even if they didn't
year of death even if they didn't actually file jointly so they may have
actually file jointly so they may have filed separately that's fine as long as
filed separately that's fine as long as they were entitled to file a joint
they were entitled to file a joint return then they can qualify as a
return then they can qualify as a qualifying surviving spouse if they meet
qualifying surviving spouse if they meet the other criteria secondly their spouse
the other criteria secondly their spouse must have died within the last two years
must have died within the last two years so within either 2022 or
so within either 2022 or 2023 and they have not remarried by the
2023 and they have not remarried by the end of 2024 if they have remarried then
end of 2024 if they have remarried then they have to file either married filing
they have to file either married filing jointly or married filing separately
jointly or married filing separately with their current spouse next they have
with their current spouse next they have to have a child or a stepchild and can
to have a child or a stepchild and can claim them as a
claim them as a dependent notice it has to be a child so
dependent notice it has to be a child so it can't be for instance a parent that
it can't be for instance a parent that they are claiming as a dependent it has
they are claiming as a dependent it has to actually be a child and then there is
to actually be a child and then there is this exception that says they could have
this exception that says they could have claimed them as a dependent but they
claimed them as a dependent but they weren't allowed to be for one of these
weren't allowed to be for one of these reasons that is listed here I wouldn't
reasons that is listed here I wouldn't spend too much time worrying about that
spend too much time worrying about that just be generally familiar with it the
just be generally familiar with it the main thing to know here is that they had
main thing to know here is that they had to have a child who is a dependent or
to have a child who is a dependent or qualified to be a dependent except that
qualified to be a dependent except that they met one of these exceptions the
they met one of these exceptions the next test is that the child lived in the
next test is that the child lived in the taxpayer's home all year and again we do
taxpayer's home all year and again we do not count temporary absences against
not count temporary absences against them and the taxpayer has to have paid
them and the taxpayer has to have paid more than half the cost of keeping up
more than half the cost of keeping up the home just like we talked about for
the home just like we talked about for the head of household so if they meet
the head of household so if they meet all of this criteria then they would
all of this criteria then they would qualify as a qualified surviving spouse
qualify as a qualified surviving spouse and they would get the benefits of the
and they would get the benefits of the married filing jointly standard
married filing jointly standard deduction and tax
deduction and tax rates so when we are looking looking at
rates so when we are looking looking at the various tax statuses this is the
the various tax statuses this is the hierarchy from most beneficial to least
hierarchy from most beneficial to least beneficial so you've got one and two
beneficial so you've got one and two here are actually equal married filing
here are actually equal married filing jointly and qualified surviving spouse
jointly and qualified surviving spouse next best is head of household next is
next best is head of household next is single and then finally we have married
single and then finally we have married filing separately is the least
filing separately is the least beneficial from a tax standpoint so if
beneficial from a tax standpoint so if you have a taxpayer they could qualify
you have a taxpayer they could qualify for more than one filing status so if
for more than one filing status so if they qualify for both qualifying
they qualify for both qualifying surviving spouse and head of household
surviving spouse and head of household you would choose qualifying surviving
you would choose qualifying surviving spouse because that's higher up on that
spouse because that's higher up on that hierarchy if they qualify for both head
hierarchy if they qualify for both head of household and single then you would
of household and single then you would choose head of household if they qualify
choose head of household if they qualify for both head of household and married
for both head of household and married filing separately remember they can be
filing separately remember they can be considered unmarried for the year so
considered unmarried for the year so they could qualify for both potentially
they could qualify for both potentially so then you would choose head of
so then you would choose head of household as we said before married
household as we said before married couples are usually going to be better
couples are usually going to be better off from a tax standpoint with married
off from a tax standpoint with married filing jointly however there can be non
filing jointly however there can be non tax reasons that people might want to
tax reasons that people might want to file married filing separately so
file married filing separately so student loan repayment programs there
student loan repayment programs there are some student loan programs where the
are some student loan programs where the government will actually pay off your
government will actually pay off your student loan for you if you are in
student loan for you if you are in certain profession SS whether or not you
certain profession SS whether or not you get paid back is dependent partly on how
get paid back is dependent partly on how much money you
much money you earn when they look at that frequently
earn when they look at that frequently they will look at your income based on
they will look at your income based on your tax return if you are married
your tax return if you are married filing jointly they will look at your
filing jointly they will look at your total income including your spouse's
total income including your spouse's income but if you are married filing
income but if you are married filing separately then they will only look at
separately then they will only look at the income on your separate tax return
the income on your separate tax return so a person might be able to save more
so a person might be able to save more in student loan
in student loan payments than they could save in tax by
payments than they could save in tax by filing married filing jointly so they
filing married filing jointly so they may choose to file married filing
may choose to file married filing separately for that purpose also there
separately for that purpose also there could be a case where one spouse is
could be a case where one spouse is taking very aggressive tax positions or
taking very aggressive tax positions or just committing tax fraud and the other
just committing tax fraud and the other spouse doesn't want to get involved so
spouse doesn't want to get involved so they want to file separately so they
they want to file separately so they don't have to worry about that sometimes
don't have to worry about that sometimes the spouses are in the middle of a
the spouses are in the middle of a divorce where just don't trust each
divorce where just don't trust each other so they want to file separately
other so they want to file separately and sometimes spouses just want to keep
and sometimes spouses just want to keep their finances separate for their own
their finances separate for their own reasons and that's perfectly fine they
reasons and that's perfectly fine they are allowed to do that remember both
are allowed to do that remember both spouses have to agree in order to file
spouses have to agree in order to file married filing jointly if one of them
married filing jointly if one of them does not agree for any reason whatsoever
does not agree for any reason whatsoever then they would file married filing
then they would file married filing separately so let's look at a couple of
separately so let's look at a couple of filing status examples Carol was
filing status examples Carol was divorced in
divorced in 2023 and has two young children with
2023 and has two young children with David or ex-husband in 2024 the children
David or ex-husband in 2024 the children lived with Carol for more than half the
lived with Carol for more than half the year and Carol paid the cost of
year and Carol paid the cost of maintaining the home but per the divorce
maintaining the home but per the divorce agreement David claim the children as
agreement David claim the children as his dependents does Carol qualify for
his dependents does Carol qualify for head of household filing status well
head of household filing status well let's think about it she was not married
let's think about it she was not married so that's the first thing she's
so that's the first thing she's unmarried she did have qualifying
unmarried she did have qualifying children that lived with her for more
children that lived with her for more than half the year and she did pay the
than half the year and she did pay the cost of maintaining the
cost of maintaining the home but she doesn't have the children
home but she doesn't have the children as dependents but remember an unmarried
as dependents but remember an unmarried child does not have to be a dependent in
child does not have to be a dependent in order to be a qualifying person for head
order to be a qualifying person for head of household
of household status so therefore Carol does in fact
status so therefore Carol does in fact qualify as head of household the
qualify as head of household the children are qualifying persons for
children are qualifying persons for Carol even though David claimed them as
Carol even though David claimed them as dependent so this is actually a pretty
dependent so this is actually a pretty common situation you've got a single
common situation you've got a single parent they have primary custody of the
parent they have primary custody of the children they're maintaining the home
children they're maintaining the home for the children but the other parent
for the children but the other parent gets to take the children as dependence
gets to take the children as dependence on the tax return well that single
on the tax return well that single parent where the children live still
parent where the children live still qualifies as head of
qualifies as head of household next Eduardo's wife Maria died
household next Eduardo's wife Maria died in
in 2023 2024 he's still single and he is
2023 2024 he's still single and he is raising his two young children alone
raising his two young children alone he's paying all of their expenses and he
he's paying all of their expenses and he is claiming them as dependants since he
is claiming them as dependants since he is unmarried and he is providing a house
is unmarried and he is providing a house for the children a friend of eduardos
for the children a friend of eduardos advised him to file as head of household
advised him to file as head of household should Ed Ardo follow his friend's
should Ed Ardo follow his friend's advice well let's think about it does he
advice well let's think about it does he qualify as head of household well yes
qualify as head of household well yes he's unmarried because his spouse died
he's unmarried because his spouse died in 2023 so seems like it he's got two
in 2023 so seems like it he's got two young children those are qualifying
young children those are qualifying people pays all their bills they live
people pays all their bills they live with them so yes he does qualify as head
with them so yes he does qualify as head of household so Eduardo's friend seems
of household so Eduardo's friend seems like maybe they're on to something here
like maybe they're on to something here but should Eduardo follow his friend's
but should Eduardo follow his friend's advice well I'm sure you figured out by
advice well I'm sure you figured out by now maybe Eduardo actually qualifies for
now maybe Eduardo actually qualifies for an even better filing status than head
an even better filing status than head of household maybe he qualifies as a
of household maybe he qualifies as a qualified surviving spouse so let's
qualified surviving spouse so let's think about it Maria died in 2023 so
think about it Maria died in 2023 so that's one year
that's one year before he's not
before he's not remarried he's got two children they are
remarried he's got two children they are dependent sounds to me like Eduardo
dependent sounds to me like Eduardo qualifies for qualifying surviving
qualifies for qualifying surviving spouse which is better than head of
spouse which is better than head of household so the answer to our question
household so the answer to our question is no Eduardo should not listen to his
is no Eduardo should not listen to his friend Eduardo needs to find a good
friend Eduardo needs to find a good enrolled agent to do his tax return and
enrolled agent to do his tax return and point out to him that he can qualify as
point out to him that he can qualify as a qualifying surviving spouse which is a
a qualifying surviving spouse which is a more favorable tax status than head of
more favorable tax status than head of household so now let's talk about
household so now let's talk about dependence we've talked about whether or
dependence we've talked about whether or not someone is a dependent several times
not someone is a dependent several times already so what does it mean to be a
already so what does it mean to be a dependent and to qualify as a dependent
dependent and to qualify as a dependent well the term dependent means a
well the term dependent means a qualifying child or a qualifying
qualifying child or a qualifying relative so you will want to know that
relative so you will want to know that for the exam and that sounds pretty
for the exam and that sounds pretty straightforward qualifying child or
straightforward qualifying child or qualifying relative but we're going to
qualifying relative but we're going to find out it's not quite as
find out it's not quite as straightforward as it sounds as is true
straightforward as it sounds as is true with a lot of things in the text law but
with a lot of things in the text law but one important thing to know is that it
one important thing to know is that it does not include housekeepers maid or
does not include housekeepers maid or servants who work for the taxpayer and
servants who work for the taxpayer and so yes that means at some point there
so yes that means at some point there were people trying to take their
were people trying to take their housekeepers maids and servants as
housekeepers maids and servants as dependent so the IRS had to come out and
dependent so the IRS had to come out and explicitly say those people do not
explicitly say those people do not qualify as dependent so remember to be a
qualify as dependent so remember to be a dependent you need to be a qualifying
dependent you need to be a qualifying child or a qualifying relative so what
child or a qualifying relative so what does that mean so we have another chart
does that mean so we have another chart again this is from publication 17 so
again this is from publication 17 so what it says at the top here is that
what it says at the top here is that there are certain people you cannot
there are certain people you cannot claim as a dependent so first of all you
claim as a dependent so first of all you cannot claim any dependence if you
cannot claim any dependence if you yourself could be claimed as a dependent
yourself could be claimed as a dependent by another taxpayer and it does have
by another taxpayer and it does have this exception which says that the only
this exception which says that the only reason that that person that claimed you
reason that that person that claimed you as a dependent filed a return was in
as a dependent filed a return was in order to get a refund of amounts
order to get a refund of amounts withheld or estimated taxes paid but the
withheld or estimated taxes paid but the main rule you want to remember is if you
main rule you want to remember is if you can be claimed as a dependent on someone
can be claimed as a dependent on someone else's tax return then you cannot claim
else's tax return then you cannot claim any dependence yourself next you cannot
any dependence yourself next you cannot claim a married person who files a joint
claim a married person who files a joint return as a dependent unless that joint
return as a dependent unless that joint return is only filed in order to get a
return is only filed in order to get a refund of amounts that are already paid
refund of amounts that are already paid in so again the main rule you want to
in so again the main rule you want to remember is that if someone is married
remember is that if someone is married filing jointly then you cannot claim
filing jointly then you cannot claim them as a dependent next you cannot
them as a dependent next you cannot claim a person as a dependent unless
claim a person as a dependent unless that person is a United States citizen a
that person is a United States citizen a resident alien a US national or a
resident alien a US national or a resident of Canada or Mexico so they
resident of Canada or Mexico so they have to fall into one of those
have to fall into one of those categories in order for you to claim
categories in order for you to claim them as a dependent and you cannot claim
them as a dependent and you cannot claim a person person as inde dependent unless
a person person as inde dependent unless that person is your qualifying child or
that person is your qualifying child or your qualifying relative and of course
your qualifying relative and of course that is the definition of a dependent is
that is the definition of a dependent is that they are your qualifying child or
that they are your qualifying child or your qualifying relative so it only
your qualifying relative so it only makes sense that you cannot claim
makes sense that you cannot claim someone as a dependent if they don't
someone as a dependent if they don't meet those qualifications so what does
meet those qualifications so what does it mean to be a qualifying child well
it mean to be a qualifying child well I'm going to zoom in here a little bit
I'm going to zoom in here a little bit to make it a little bit easier to see in
to make it a little bit easier to see in order to be a qualifying child the child
order to be a qualifying child the child must be your son your daughter stepchild
must be your son your daughter stepchild foster child brother sister half brother
foster child brother sister half brother half sister step brother stepsister or a
half sister step brother stepsister or a descendant of any of them so remember I
descendant of any of them so remember I said it's not quite as simple as it
said it's not quite as simple as it seems so a qualifying child does not
seems so a qualifying child does not necessarily even have to be your child
necessarily even have to be your child it could be your brother or your sister
it could be your brother or your sister or it could be your niece or your nephew
or it could be your niece or your nephew and of course it could be your actual
and of course it could be your actual child in one form or another but that's
child in one form or another but that's the first test is they have to be in one
the first test is they have to be in one of those categories secondly the child
of those categories secondly the child has to be either underage 19 meaning
has to be either underage 19 meaning they have to be 18 or younger so they
they have to be 18 or younger so they have to either be underage 19 or under
have to either be underage 19 or under age 24 and a full-time student and also
age 24 and a full-time student and also it says they have to be younger than you
it says they have to be younger than you so if you're dealing here with your
so if you're dealing here with your brother or your sister that person has
brother or your sister that person has to be younger than you you but the main
to be younger than you you but the main rule here is that they are underage 24
rule here is that they are underage 24 and a full-time student then the other
and a full-time student then the other thing they could be is any age if they
thing they could be is any age if they are permanently or totally disabled so
are permanently or totally disabled so just remember this they have to be under
just remember this they have to be under age 19 so 18 or younger or under age 24
age 19 so 18 or younger or under age 24 and a full-time student or permanently
and a full-time student or permanently and totally disabled no matter what
and totally disabled no matter what their age is next that child to be a
their age is next that child to be a qualifying child must have lived with
qualifying child must have lived with you for more than half the year and
you for more than half the year and again we don't count those temporary
again we don't count those temporary absences against them the child must not
absences against them the child must not have provided more than half of their
have provided more than half of their own
own support and the child must not be filing
support and the child must not be filing a joint return for the year again we
a joint return for the year again we talked about that up there anybody who
talked about that up there anybody who is filing a joint tax return for the
is filing a joint tax return for the year you cannot claim them as a
year you cannot claim them as a dependent even if they are your
dependent even if they are your qualifying child
qualifying child and then there is that exception that if
and then there is that exception that if the only reason they filed that joint
the only reason they filed that joint return was to get a refund of amounts
return was to get a refund of amounts paid in then that's okay so these are
paid in then that's okay so these are the tests to be a qualifying child so
the tests to be a qualifying child so you will want to know those for the exam
you will want to know those for the exam next is a qualifying relative so
next is a qualifying relative so remember the person has to be either a
remember the person has to be either a qualifying child or a qualifying
qualifying child or a qualifying relative so the first rule to be a
relative so the first rule to be a qualifying relative is they cannot be
qualifying relative is they cannot be your qualifying child or the qualifying
your qualifying child or the qualifying child of any other taxpayer so if the
child of any other taxpayer so if the person's not your qualifying child but
person's not your qualifying child but they are the qualifying child say of
they are the qualifying child say of your ex-spouse then they cannot be your
your ex-spouse then they cannot be your qualifying relative so they cannot be a
qualifying relative so they cannot be a qualifying child for
qualifying child for anyone secondly they have to be on that
anyone secondly they have to be on that special list that we talked about that
special list that we talked about that we will look at here in a little
we will look at here in a little while or if they weren't on that special
while or if they weren't on that special list they must have lived with you all
list they must have lived with you all year as a member of your household and
year as a member of your household and the relationship must not violate local
the relationship must not violate local law so what are we saying here in order
law so what are we saying here in order to be a qualifying relative you don't
to be a qualifying relative you don't necessarily have to actually be a
necessarily have to actually be a relative as long as that person lived
relative as long as that person lived with you all year as a member of your
with you all year as a member of your household even if they weren't related
household even if they weren't related to you in any way they can still be a
to you in any way they can still be a qualifying relative as long as they meet
qualifying relative as long as they meet all of the other tests next the person
all of the other tests next the person gross income for the year must be less
gross income for the year must be less than
than $5,050 so that's gross income has to be
$5,050 so that's gross income has to be less than
less than $5,050 and then the last thing we have
$5,050 and then the last thing we have here is that you must have provided more
here is that you must have provided more than half of the person's total support
than half of the person's total support for the year so let's think about a
for the year so let's think about a stereotypical example of this might be a
stereotypical example of this might be a child who is not related to the taxpayer
child who is not related to the taxpayer but the taxpayer is taking taking care
but the taxpayer is taking taking care of that child maybe there was some sort
of that child maybe there was some sort of tragedy with the parents or some sort
of tragedy with the parents or some sort of situation where the parents aren't in
of situation where the parents aren't in any shape to take care of the child and
any shape to take care of the child and So a family friend has taken that child
So a family friend has taken that child in and is caring for them so even though
in and is caring for them so even though the child's not related to them they
the child's not related to them they would still be able to take that child
would still be able to take that child as a dependent as long as they meet all
as a dependent as long as they meet all of these
of these tests so now finally you say finally
tests so now finally you say finally we're going to see this list they've
we're going to see this list they've been talking about of relatives who
been talking about of relatives who don't have to live with you so this is
don't have to live with you so this is that special list that we said for
that special list that we said for various
various circumstances the person needs to be on
circumstances the person needs to be on so they are related to you in one of the
so they are related to you in one of the ways on this list and the list looks
ways on this list and the list looks kind of intimidating and busy at first
kind of intimidating and busy at first glance but if you look at it kind of big
glance but if you look at it kind of big picture it's not that hard first of all
picture it's not that hard first of all they could be your child in one form or
they could be your child in one form or another so that's pretty easy to
another so that's pretty easy to remember if they're your child they're
remember if they're your child they're on the list they could be your sibling
on the list they could be your sibling in one form or another they're on the
in one form or another they're on the list it could be your mother or father
list it could be your mother or father or a
or a grandparent they are on the list even a
grandparent they are on the list even a stepmother or stepfather on the list
stepmother or stepfather on the list they could be a niece or a nephew they
they could be a niece or a nephew they could be an an aunt or an uncle or they
could be an an aunt or an uncle or they could be an in-law either a son-in-law
could be an in-law either a son-in-law daughter-in-law father-in-law
daughter-in-law father-in-law mother-in-law brother-in-law
mother-in-law brother-in-law sister-in-law so any of those so again
sister-in-law so any of those so again if you think about it it's close
if you think about it it's close relatives a child a sibling a parent a
relatives a child a sibling a parent a grandparent a niece a neew an in-law
grandparent a niece a neew an in-law those are the people who count as a
those are the people who count as a relative who is on this list and then
relative who is on this list and then finally what we say here is any of these
finally what we say here is any of these relationships that are established by
relationships that are established by marriage do not end due to death or
marriage do not end due to death or divorce so once someone is your
divorce so once someone is your mother-in-law they're always your
mother-in-law they're always your mother-in-law even if you end up getting
mother-in-law even if you end up getting divorced once someone is your stepchild
divorced once someone is your stepchild they're always your stepchild again even
they're always your stepchild again even if you end up getting divorced or if the
if you end up getting divorced or if the other parent dies they still count as
other parent dies they still count as your stepchild or as your in-law so
your stepchild or as your in-law so that's what we are saying so you will
that's what we are saying so you will want to know this for the exam but again
want to know this for the exam but again just think about it in big categories
just think about it in big categories don't worry about memorizing every word
don't worry about memorizing every word in every exact
in every exact relationship so the support test
relationship so the support test remember we said for a qualifying
remember we said for a qualifying relative that the taxpayer has to
relative that the taxpayer has to provide that relative's support so what
provide that relative's support so what does that mean well they have to provide
does that mean well they have to provide more than half of that person's total
more than half of that person's total support total support includes amounts
support total support includes amounts spent to provide food lodging clothing
spent to provide food lodging clothing education medical and dental care
education medical and dental care Recreation transportation and similar
Recreation transportation and similar Necessities so all of those things are
Necessities so all of those things are included when we're talking about
included when we're talking about support lodging is based on Fair rental
support lodging is based on Fair rental value in other words what would that
value in other words what would that person the the dependent have to pay
person the the dependent have to pay to get similar lodging somewhere else
to get similar lodging somewhere else you can use that fair rental value when
you can use that fair rental value when you're determining whether or not you
you're determining whether or not you provide more than half of that person's
provide more than half of that person's total support and that relative's own
total support and that relative's own income and funds count toward their
income and funds count toward their support only if it's actually used for
support only if it's actually used for the support so they could have a million
the support so they could have a million dollars in the bank but if they don't
dollars in the bank but if they don't use that million dollars for their
use that million dollars for their support then it does not count towards
support then it does not count towards their own support let us do a couple of
their own support let us do a couple of examples for dependants George's wife
examples for dependants George's wife Marilyn died in
Marilyn died in 2022 in 2024 Marilyn's mother Mabel
2022 in 2024 Marilyn's mother Mabel lived with George and he provided
lived with George and he provided virtually all of her financial support
virtually all of her financial support her only income was $5,000 in Social
her only income was $5,000 in Social Security which she donated to her church
Security which she donated to her church can George claim Mabel as a dependent
can George claim Mabel as a dependent well what do you think let's think about
well what do you think let's think about it if is Mabel on the list well she was
it if is Mabel on the list well she was a mother-in-law mother-in-law is
a mother-in-law mother-in-law is definitely on the list however remember
definitely on the list however remember his wife died two years ago in 2022 so
his wife died two years ago in 2022 so does Mabel still count as George's
does Mabel still count as George's mother-in-law and of course you know the
mother-in-law and of course you know the answer yes she does because those
answer yes she does because those relationships do not end due to death or
relationships do not end due to death or divorce so Mabel does count has his
divorce so Mabel does count has his mother-in-law he's providing all of her
mother-in-law he's providing all of her support she does not have more than
support she does not have more than $5,050 of income and she's not using
$5,050 of income and she's not using that money to support herself so the
that money to support herself so the answer here is yes George can claim her
answer here is yes George can claim her as a
as a dependent next example Patrick and Irene
dependent next example Patrick and Irene have healthy twin Sons living at home
have healthy twin Sons living at home John and Joe they are 20 years old and
John and Joe they are 20 years old and single at the end of 2024 Patrick and
single at the end of 2024 Patrick and Irene support both of them them John is
Irene support both of them them John is a full-time college student he earns
a full-time college student he earns $15,000 at a part-time job Joe is
$15,000 at a part-time job Joe is unemployed not in school and only earned
unemployed not in school and only earned $1,000 hous sitting for some friends
$1,000 hous sitting for some friends while they're on vacation maybe Patrick
while they're on vacation maybe Patrick and Irene need to have a conversation
and Irene need to have a conversation with Joe about what he's going to do
with Joe about what he's going to do with his life but uh in any case it is
with his life but uh in any case it is what it is so the question is can
what it is so the question is can Patrick and Irene claim John as
Patrick and Irene claim John as independent and can they claim Joe as a
independent and can they claim Joe as a dependent so let's talk about John first
dependent so let's talk about John first that's the easy one John is 20 so he's
that's the easy one John is 20 so he's over age
over age 18 but he is under age 24 and he is a
18 but he is under age 24 and he is a full-time student now he does earn
full-time student now he does earn $15,000 at a part-time job but that's
$15,000 at a part-time job but that's not relevant to the question because we
not relevant to the question because we already said that Patrick and Irene
already said that Patrick and Irene support him and he lives with them so
support him and he lives with them so the fact that he earned that money at a
the fact that he earned that money at a job is not relevant for purposes of
job is not relevant for purposes of determining whether or not he is a
determining whether or not he is a dependent so we do know that John counts
dependent so we do know that John counts as a qualifying child he is under age 24
as a qualifying child he is under age 24 he is a full-time student he counts as a
he is a full-time student he counts as a qualifying child therefore Patrick and
qualifying child therefore Patrick and Irene can claim John as a dependent so
Irene can claim John as a dependent so now let's talk about Joe is Joe a
now let's talk about Joe is Joe a qualifying child well he is over AG 18
qualifying child well he is over AG 18 and he is not a full-time student
and he is not a full-time student therefore we know that Joe does not
therefore we know that Joe does not qualify as a qualifying child so does
qualify as a qualifying child so does that mean that Patrick and Irene cannot
that mean that Patrick and Irene cannot take him as a dependent well we don't
take him as a dependent well we don't know yet because remember there's two
know yet because remember there's two ways that a person can be a dependent
ways that a person can be a dependent they can either be a qualifying child or
they can either be a qualifying child or a qualifying relative so does Joe count
a qualifying relative so does Joe count as a qualifying relative well first of
as a qualifying relative well first of all he cannot be a qualifying child is
all he cannot be a qualifying child is he a qualifying child no we've already
he a qualifying child no we've already established that so we're good there
established that so we're good there next next he has to be on that special
next next he has to be on that special list of relatives is he on that list
list of relatives is he on that list well yes remember the very first thing
well yes remember the very first thing on that list is a child of the taxpayer
on that list is a child of the taxpayer so he's on the
so he's on the list then they have to provide him more
list then they have to provide him more than half his support they did that he
than half his support they did that he cannot have more than $5,050 of gross
cannot have more than $5,050 of gross income we only had
income we only had ,000 so sounds to me like he does count
,000 so sounds to me like he does count as a qualifying relative and that is the
as a qualifying relative and that is the answer they can claim him as a dependent
answer they can claim him as a dependent because even though he's not a
because even though he's not a qualifying child he is a qualifying
qualifying child he is a qualifying relative so you will want to remember
relative so you will want to remember two tests qualifying child and
two tests qualifying child and qualifying relative if they meet either
qualifying relative if they meet either of those then they can be a
of those then they can be a dependent multiple support
dependent multiple support agreements if two or more people provide
agreements if two or more people provide the support of a qualifying relative you
the support of a qualifying relative you can have what is called a multiple
can have what is called a multiple support agreement so this most often is
support agreement so this most often is adult children who are supporting one or
adult children who are supporting one or both of their parents and they're all
both of their parents and they're all sharing in the costs of supporting that
sharing in the costs of supporting that parent those children what they can do
parent those children what they can do is they can enter into a multiple
is they can enter into a multiple support agreement and they can agree who
support agreement and they can agree who is going to take the dependency
is going to take the dependency exemption so as long as the person who's
exemption so as long as the person who's claiming the dependent provides at least
claiming the dependent provides at least 10% of the total support of that parent
10% of the total support of that parent or those parents
or those parents then they are eligible to claim the
then they are eligible to claim the parent as a dependent so what happens is
parent as a dependent so what happens is let's say you've got three adult
let's say you've got three adult children who are caring for a parent
children who are caring for a parent they're caring for their elderly mother
they're caring for their elderly mother and they're all sharing the costs and
and they're all sharing the costs and maybe the mother lives in a nursing home
maybe the mother lives in a nursing home and they're all helping to share those
and they're all helping to share those costs equally what they can do is decide
costs equally what they can do is decide who each year is going to take Mom as a
who each year is going to take Mom as a dependent because any person can only be
dependent because any person can only be taken as a dependent once per year can't
taken as a dependent once per year can't have more than one person claiming them
have more than one person claiming them as a dependent so the children in this
as a dependent so the children in this case can agree who's going to take Mom
case can agree who's going to take Mom as a dependent and they could rotate
as a dependent and they could rotate each year so maybe one takes one year
each year so maybe one takes one year and the other the next year and the
and the other the next year and the other the next year Etc they can decide
other the next year Etc they can decide how they want to do that and the IRS
how they want to do that and the IRS will go ahead and honor that agreement
will go ahead and honor that agreement in order to do that though the others
in order to do that though the others who are not taking the parent as a
who are not taking the parent as a dependent for that year will sign this
dependent for that year will sign this consent form this form
consent form this form 2120 divorced or separated parents so
2120 divorced or separated parents so when you've got divorced or separated
when you've got divorced or separated parents there can often be
parents there can often be disagreements about who is going to
disagreements about who is going to claim the children as dependent so we
claim the children as dependent so we have to have a way of figuring that out
have to have a way of figuring that out so usually the custodial parent will
so usually the custodial parent will claim the child as they dependent and
claim the child as they dependent and the custodial parent is the one that the
the custodial parent is the one that the child lived with for the greatest number
child lived with for the greatest number of nights during the year so we look at
of nights during the year so we look at overnights so where was the child
overnights so where was the child overnight for the greatest number of
overnight for the greatest number of nights per year that parent is the
nights per year that parent is the custodial parent they are the one who
custodial parent they are the one who claims the
claims the child however the custodial parent can
child however the custodial parent can agree to let the non-custodial parent
agree to let the non-custodial parent claim them instead so sometimes it'll
claim them instead so sometimes it'll actually be part of a divorce agreement
actually be part of a divorce agreement that they'll let the custodial parent do
that they'll let the custodial parent do it or they'll rotate one year one parent
it or they'll rotate one year one parent will take the child the next year the
will take the child the next year the next parent will take the child so if
next parent will take the child so if they have some sort of agreement like
they have some sort of agreement like that then the IRS will honor that or it
that then the IRS will honor that or it may not be in the agreement but On Any
may not be in the agreement but On Any Given year the custodial parent may
Given year the custodial parent may agree that okay this year I'm going to
agree that okay this year I'm going to let you take the child as a dependent
let you take the child as a dependent instead in that case they fill out this
instead in that case they fill out this Form
Form 8332 or a statement similar to 8332 that
8332 or a statement similar to 8332 that says give you permission to take the
says give you permission to take the child as a dependent or instead of the
child as a dependent or instead of the 8332 if you have an older divorce so it
8332 if you have an older divorce so it was a pre2 2009 divorce then you can
was a pre2 2009 divorce then you can just attach the pages of the divorce
just attach the pages of the divorce decree you don't need the form if the
decree you don't need the form if the divorce was after 2009 then even if it
divorce was after 2009 then even if it was called for in the divorce you still
was called for in the divorce you still have to have the Form 8332 filled out
have to have the Form 8332 filled out and the non-custodial parent then
and the non-custodial parent then attaches that to their tax return
attaches that to their tax return because they're the ones taking the
because they're the ones taking the dependency exemption even though they
dependency exemption even though they don't have custody of the child what
don't have custody of the child what this does is it allows the non-custodial
this does is it allows the non-custodial parent to get the child tax credit so it
parent to get the child tax credit so it used to be that you got an exemption for
used to be that you got an exemption for each of your dependence well we don't
each of your dependence well we don't have that anymore it might come back we
have that anymore it might come back we may have exemptions again in the future
may have exemptions again in the future but for right now for 2024 there is no
but for right now for 2024 there is no dependency exemption so the benefit is
dependency exemption so the benefit is the non-custodial parent gets the child
the non-custodial parent gets the child tax credits however it does not qualify
tax credits however it does not qualify them for head of household status or to
them for head of household status or to take dependent care benefit credit or
take dependent care benefit credit or exclusions or for the earned income
exclusions or for the earned income credit the custodial parent still gets
credit the custodial parent still gets all of those things the only thing the
all of those things the only thing the non-custodial parent gets in this case
non-custodial parent gets in this case is the child tax credit and we'll talk
is the child tax credit and we'll talk more about all of those things in later
more about all of those things in later videos qualifying child of two or more
videos qualifying child of two or more people so as we said before only one
people so as we said before only one person can claim any particular child in
person can claim any particular child in any particular year for any of these
any particular year for any of these things for the child tax credit for the
things for the child tax credit for the head of household status the child care
head of household status the child care expense credit exclusion of income for
expense credit exclusion of income for dependent care benefits and the earned
dependent care benefits and the earned income credit so two people cannot claim
income credit so two people cannot claim the same child for any of these things
the same child for any of these things so what do we do if one child qualifies
so what do we do if one child qualifies for two or more people we we have to
for two or more people we we have to have tiebreaker rules and we referred to
have tiebreaker rules and we referred to these
these earlier first of all if only one of the
earlier first of all if only one of the people is the child's parent then the
people is the child's parent then the parent wins so maybe you've got a parent
parent wins so maybe you've got a parent the child qualifies for and a
the child qualifies for and a grandparent on the other side that the
grandparent on the other side that the child qualifies for the parent would be
child qualifies for the parent would be the one that gets to take the child in
the one that gets to take the child in that instance if both parents try to
that instance if both parents try to claim the child then it goes to the one
claim the child then it goes to the one that the child lived with for most of
that the child lived with for most of the year so we already talked about this
the year so we already talked about this it goes to the custodial parent however
it goes to the custodial parent however what if the child lived with each parent
what if the child lived with each parent equally well in that case it's the
equally well in that case it's the parent with a higher adjusted gross
parent with a higher adjusted gross income so the higher AGI wins in that
income so the higher AGI wins in that case if both parents qualify they both
case if both parents qualify they both had the child equally if neither parent
had the child equally if neither parent can treat the child as a qualifying
can treat the child as a qualifying child then the person with the highest
child then the person with the highest adjusted gross income wins so let's say
adjusted gross income wins so let's say the parents don't qualify
the parents don't qualify but grandparents on either side do so
but grandparents on either side do so you've got grandparents on the Father's
you've got grandparents on the Father's Side grandparents on the mother's side
Side grandparents on the mother's side they're trying to figure out who gets to
they're trying to figure out who gets to take the child we look at the higher
take the child we look at the higher adjusted gross income that is who wins
adjusted gross income that is who wins in that case if no parent claims the
in that case if no parent claims the child then it's the person with the
child then it's the person with the highest adjusted gross incomes however
highest adjusted gross incomes however there's a Proviso here as long as their
there's a Proviso here as long as their AGI is high higher than any of the
AGI is high higher than any of the parents who can claim the child so what
parents who can claim the child so what are they talking about here it seems
are they talking about here it seems pretty convoluted so what you could have
pretty convoluted so what you could have here is a high income taxpayer who is
here is a high income taxpayer who is the parent of the child the child tax
the parent of the child the child tax credit gets phased out the more money
credit gets phased out the more money you earn so if you have a parent who
you earn so if you have a parent who earns quote unquote too much money if
earns quote unquote too much money if there is such a thing but if they earn
there is such a thing but if they earn so much money that the child tax credit
so much money that the child tax credit is not going to do them any good then
is not going to do them any good then what they might do is say you know what
what they might do is say you know what I'm not going to take this child as my
I'm not going to take this child as my dependent I'm going to let the
dependent I'm going to let the grandparents take the child as a
grandparents take the child as a dependent that way then the
dependent that way then the grandparent could take the child tax
grandparent could take the child tax credit and so what the IRS is saying is
credit and so what the IRS is saying is no you can't play these games cuz what
no you can't play these games cuz what this High income parent might do is let
this High income parent might do is let the grandparents do it grandparents get
the grandparents do it grandparents get the $2,000 child tax credit then they
the $2,000 child tax credit then they just give that $2,000 right back to
just give that $2,000 right back to their son and so the son has gotten
their son and so the son has gotten around the child tax credit income phase
around the child tax credit income phase out Rules by playing games with the
out Rules by playing games with the dependent and so the IRS is saying you
dependent and so the IRS is saying you are not allowed to do that so what
are not allowed to do that so what they're saying is if the person who
they're saying is if the person who claims the child if their AGI is not
claims the child if their AGI is not higher than a than the parent
higher than a than the parent then they can't claim the child as a
then they can't claim the child as a dependent the parent has to claim the
dependent the parent has to claim the child in that
child in that instance now let's move on to our last
instance now let's move on to our last topic which is the checkboxes and it is
topic which is the checkboxes and it is a quick topic so we are almost
a quick topic so we are almost finished there are two checkboxes as
finished there are two checkboxes as you'll recall on the 1040 the first is
you'll recall on the 1040 the first is the presidential election campaign which
the presidential election campaign which says check here if you or your spouse of
says check here if you or your spouse of filing jointly want $3 to go to this
filing jointly want $3 to go to this fund checking a box below will not
fund checking a box below will not change your tax or your refund so this
change your tax or your refund so this is a box that they can either check or
is a box that they can either check or not check as it says if you check the
not check as it says if you check the box it doesn't mean that you owe $3 more
box it doesn't mean that you owe $3 more that you get $3 less of a refund it just
that you get $3 less of a refund it just means that $3 of your taxes that you're
means that $3 of your taxes that you're paying will be allocated to this special
paying will be allocated to this special presidential election campaign fund and
presidential election campaign fund and each spouse can decide independently if
each spouse can decide independently if they're married by jointly whether or
they're married by jointly whether or not they want $33 to go to the fund if
not they want $33 to go to the fund if you don't check it then the money won't
you don't check it then the money won't go to that fund and in the real world
go to that fund and in the real world very few people actually check these
very few people actually check these boxes but they can if they want to the
boxes but they can if they want to the next check box is for digital assets so
next check box is for digital assets so the IRS is still trying to get their
the IRS is still trying to get their hands around all of this Bitcoin and
hands around all of this Bitcoin and digital assets and tokens and all these
digital assets and tokens and all these things so they want to make sure that
things so they want to make sure that taxpayers are properly reporting these
taxpayers are properly reporting these things so they make you check a box yes
things so they make you check a box yes or no answering these question at any
or no answering these question at any time during 2024 did you a receive as a
time during 2024 did you a receive as a reward award or payment for property or
reward award or payment for property or services or B sell exchange gift or
services or B sell exchange gift or otherwise dispose of a digital asset or
otherwise dispose of a digital asset or a financial interest in a digital asset
a financial interest in a digital asset and you must check either yes or no and
and you must check either yes or no and remember everything you're doing on the
remember everything you're doing on the tax return is under penalty of perjury
tax return is under penalty of perjury they're signing that return so you have
they're signing that return so you have to make sure you either check it yes or
to make sure you either check it yes or no and if you did have any of these
no and if you did have any of these transactions you want to make sure that
transactions you want to make sure that you check yes if you are talking to your
you check yes if you are talking to your client and they tell you they did not
client and they tell you they did not and you don't have any reason to believe
and you don't have any reason to believe they're lying to you then it's fine you
they're lying to you then it's fine you don't have to worry about it just go
don't have to worry about it just go ahead and check no if you happen to know
ahead and check no if you happen to know the client you know that they did have
the client you know that they did have these trans transactions well that's a
these trans transactions well that's a different matter then you need to check
different matter then you need to check the box yes and if the taxpayer has a
the box yes and if the taxpayer has a problem with that then frankly you need
problem with that then frankly you need to not do their tax return you do not
to not do their tax return you do not want to sign that tax return if they are
want to sign that tax return if they are lying and if they want to check that box
lying and if they want to check that box no and you know that they did have these
no and you know that they did have these transactions then they are lying you do
transactions then they are lying you do not want to sign that tax return so you
not want to sign that tax return so you want to talk to the taxpayer and just
want to talk to the taxpayer and just explain to them hey look you don't want
explain to them hey look you don't want to lie about this you can go to prison
to lie about this you can go to prison for that usually they'll fall in line
for that usually they'll fall in line and go ahead and agree for you to go
and go ahead and agree for you to go ahead and check that box
ahead and check that box yes and that my friends is the end of
yes and that my friends is the end of video one of part one only 19 more
video one of part one only 19 more videos to go as with all of these videos
videos to go as with all of these videos go back and watch any parts of it or all
go back and watch any parts of it or all of it as many times as you need to study
of it as many times as you need to study the slides and I do thank you for
the slides and I do thank you for joining me on this journey and I will
joining me on this journey and I will see you in video two
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