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Enrolled Agent Exam Prep Course, Part 1, Video 1/7, 2025

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Video Transcript

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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YouTube Transcript:Enrolled Agent Exam Prep Course, Part 1, Video 1/7, 2025

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Enrolled Agent Exam Prep Course, Part 1, Video 1/7, 2025