Table of Contents

Course Learning Objectives v

Course Description / Introduction to the Course v

Chapter 1 - Provisions of Tax Cuts and Jobs Act 12

Chapter 1 Learning Objectives 12

Introduction. 12

In General 12

New Individual and Capital Gains Tax Rates 12

Standard Deduction Increased and Filing Requirements Changed. 13

Standard Deduction for Dependents 13

Standard Deduction for Blind and Senior Taxpayers 14

Standard Deduction Eligibility. 14

Filing Requirements 14

Personal Exemption Temporarily Reduced to Zero. 14

Income & Adjustments to Income 15

Alimony. 15

Moving Expense Deduction & Reimbursement 15

Moving Expenses in Military Relocations 15

Roth Recharacterization. 15

Schedule C Provisions 16

Entertainment Expenses 16

Food and Beverage Expenses 16

Section 179 Expense Limits 17

100% Expensing. 17

Qualified Property. 17

Luxury Auto Limits 18

Listed Property Updates 18

Itemized Deductions Schedule A. 18

Medical Expense AGI Threshold. 19

State and Local Tax Deductions 19

Home Mortgage Interest Deduction. 19

Exception for Binding Contracts 20

Indebtedness Refinancing. 20

Charitable Contributions 20

60% AGI Limit for Cash Contributions 21

Deduction for Athletic Tickets 21

Exception to Contemporaneous Written Acknowledgement 21

Content and Timing of Contemporaneous Written Acknowledgement 21

Casualty and Theft Loss Deduction. 22

Miscellaneous Itemized Deductions Subject to 2% of AGI Threshold. 22

Itemized Deductions Phase-Out Amounts 22

Tax Credits 22

Enhanced Child Tax Credit 22

Increase in Tax Credit Amount to $2,000. 23

Child Tax Credit Phaseout and Refundable/Nonrefundable Amounts 23

Social Security Number Requirement 24

Partial Child Tax Credit for Other Than Qualifying Child with SSN. 24

Chapter 1 Review Questions 25

Chapter 2 - Provisions of Tax Cuts and Jobs Act (contd) 26

Chapter 2 Learning Objectives 26

Introduction. 26

Overview. 26

Alternative Minimum Tax (AMT) 26

Alternative Minimum Tax Exemption Amount Increased. 26

Pass-Through Deduction for Qualified Trade or Business 27

Qualified Trade or Business 27

Exception for Specified Service Businesses Based on Taxpayers Income 27

Kiddie Tax Modifications 28

Section 529 (Qualified Savings Plan) Changes 29

ABLE Account Changes 29

Tax-Deferred Account 29

ABLE Account Distributions 29

ABLE Account Contributions 30

TCJA Changes to ABLE Accounts 30

Additional Designated Beneficiary Contributions Permitted. 30

Savers Credit 30

Discharge of Student Loan Indebtedness 31

Net Operating Loss Changes 31

Affordable Care Act (ACA) Provisions 32

Individual Requirement to Maintain Health Coverage 32

Penalty for Failure to Maintain Health Coverage 33

Penalty Examples 33

Exemptions from Penalty for Failure to Maintain Health Coverage 34

Individual Mandate Penalty 2019 and Later 34

Changes in Employee Fringe Benefits 35

Real Property Depreciation. 35

Chapter 2 Review Questions 37

Chapter 3 - General Income Tax Review. 38

Chapter 3 Learning Objectives 38

Introduction. 38

Annual Inflation Adjustments 38

Standard Mileage Rates 38

Business Use of a Taxpayers Personal Vehicle 38

Personal Vehicle for Charitable Purposes 39

Use of a Taxpayers Personal Vehicle to Obtain Medical Care 39

Education Savings Bond Program. 39

Qualified Education Expenses 40

Eligible Educational Institutions 40

Qualified Education Expenses Reduced by Certain Tax-free Benefits Received. 40

Figuring the Tax-Free Amount 40

Education Savings Bond Program Eligibility Subject to Income Limits/Filing Status 41

Qualified Long-Term Care Insurance Premiums and Benefits 42

Favorable Benefits Tax Treatment Reserved for Chronically-Ill 42

Tax-Qualified Long Term Care Premiums Deductible within Limits 43

Tax-Qualified Long Term Care Insurance Benefits Tax-Free within Limits 43

Social Security Taxable Earnings Limit 44

Retirement Savings Contribution Credit 44

Savers Credit Applicable to Range of Retirement Contributions 44

Savers Credit Eligibility Based on Income and Filing Status 44

Health Flexible Spending Arrangement Contributions 45

Refundable Premium Tax Credit to Assist in Purchase of Qualified Health Plan. 45

Eligibility for Credit 46

Federal Poverty Level 46

Amount of the Credit 46

Benchmark Plan. 46

Taxpayers Expected Contribution. 47

Small Business Tax Credit 47

Eligibility Requirements 47

Average Annual Wage Limitation. 48

Large Employer Shared Responsibility: The Employer Mandate 48

Employers Not Offering Coverage 48

Employers Offering Coverage 49

Archer Medical Savings Accounts 49

Archer MSA Benefits 50

Archer MSA Eligibility. 50

High Deductible Health Plan Requirement 50

Archer MSA Contributions 51

Penalty for Excess Contributions 51

Archer MSA Distributions 51

Account Transfer Incident to Divorce 52

Account Transfer at Death. 52

Archer MSA Tax Treatment 52

Contribution Tax Treatment 52

Distribution Tax Treatment 53

MSA Distributions not Exceeding Qualified Medical Expenses 53

MSA Distributions Exceeding Qualified Medical Expenses 53

Archer MSA Distribution Tax Penalty. 53

Health Savings Accounts 53

HSA Benefits 54

HSA Eligibility. 54

HSA High Deductible Health Plan Requirement 54

HSA Contributions 55

HSA Contributions from Multiple Sources 55

Additional Contributions for Age 55 and Older Account Holders 55

Maximum HSA Contributions may be Reduced. 55

Penalty for Excess Contributions 56

HSA Distributions 56

Account Transfer Incident to Divorce 56

Account Transfer at Death. 56

HSA Tax Treatment 57

Contribution Tax Treatment 57

Distribution Tax Treatment 57

Tax-Free HSA Distributions 57

Taxable HSA Distributions 58

HSA Distribution Tax Penalty. 58

Taxability of Earnings 58

Advance Commissions and Other Earnings 58

Allowances and Reimbursements 59

Back Pay Awards 59

Bonuses and Awards 59

Differential Wage Payments 60

Government Cost of Living Allowances 60

Nonqualified Deferred Compensation Plans 60

Notes Received for Services 60

Severance Pay. 61

Sick Pay. 61

Social Security and Medicare Taxes Paid by an Employer 61

Stock Appreciation Rights 61

Tip Income 61

Schedule B, Part III Foreign Accounts and Trusts 62

Self-Employment Income and Expenses 63

Income & Expenses Defined. 63

Business vs. Hobby. 64

Business Use of a Home 65

Methods of Figuring the Home-Office Deduction. 65

Actual Expense Method. 65

Nature of the Expense 66

Percentage of the Home Used for Business 66

Calculating Percentage of Home Used for Business 66

Deductible Expenses for Home-Office Deduction. 66

Expenses Deductible by All Homeowners 67

Expenses Deductible only by Taxpayers Using a Home for Business 67

Deduction Limit 68

Simplified Method. 68

Depreciation and Actual Expenses Related to Use of Home not Deductible 68

No Deduction of Actual Expense Carryover 68

Expenses Deductible Irrespective of Business Use 68

Special Rules Applicable to Simplified Method. 69

Gross Income Limitation. 69

Recordkeeping Requirements 69

Gross Receipts 70

Inventory. 70

Expenses 70

Chapter 3 Review Questions 71

Chapter 4 - General Income Tax Review (contd) 72

Chapter 4 Learning Objectives 72

Introduction. 72

Retirement Income Reporting and Taxability. 72

Social Security Benefits 72

Taxability of Benefits 72

Reporting. 73

Individual Retirement Accounts 74

Traditional IRAs 74

Premature Distributions 74

Premature Distributions Avoiding Tax Penalty. 75

Traditional-to-Roth IRA Conversions 75

Required Distributions during Owners Lifetime 75

Roth IRAs 75

Limits on Roth IRA Contributions 76

Non-Qualified Roth IRA Distributions of Gain before 59 = Subject to Tax Penalty. 76

No Required Roth IRA Lifetime Distributions 76

IRA Rollover Per-Year Limit 76

Simplified Employee Pension (SEP) IRA. 77

Required Minimum Distributions 77

Rollovers 77

SIMPLE IRA. 77

Employee Elective Contributions 77

Employer Contributions 78

Distributions 78

Minimum Required Distributions 78

Rollovers 78

Qualified Retirement Plans 78

Contributions to Qualified Employee Plans 78

Employee Plan Contributions 78

Qualified Retirement Plan Distributions 79

Early Distributions 79

Required Qualified Plan Minimum Distributions 79

Qualified Plan Rollovers 79

Plan Death Benefits 80

Designated Roth Account Distributions 80

Qualified Roth Account Distributions Tax-Free 80

Nonqualified Roth Account Distributions 80

Annuities 80

Nonqualified Annuity. 80

Capital Gains and Losses 81

Short-Term and Long-Term Capital Gains and Losses 81

Reporting Capital Gains and Losses 82

IRS Form 8949, Sales and Other Dispositions of Capital Assets 82

Schedule D. 82

Chapter 4 Review Questions 84

Chapter 5 - General Income Tax Review (contd) 85

Chapter 5 Learning Objectives 85

Introduction. 85

Credit Eligibility. 85

Child and Dependent Care Credit 85

Eligible Care Recipients Limited to Qualifying Persons 86

Eligible Taxpayers 86

Education Credits 86

American Opportunity Credit 86

Eligibility to Claim an American Opportunity Credit 87

Expenses Qualifying for an American Opportunity Credit 87

Figuring the American Opportunity Credit 88

Lifetime Learning Credit 88

Eligibility to Claim a Lifetime Learning Credit 89

Expenses Qualifying for a Lifetime Learning Credit 89

Figuring the Lifetime Learning Credit 89

Earned Income Tax Credit 89

Adjusted Gross Income Limits 90

Valid Social Security Number Required. 90

Citizenship or Residency. 90

EITC Rules That Apply Only if the Taxpayer Has a Qualifying Child. 91

Relationship, Age, Residence and Joint Return Tests 91

The Relationship Test 91

The Age Test 91

The Residency Test 92

Joint Return Test 92

Tiebreaker Rules 92

Qualifying Child of Another Taxpayer Rule 93

EITC Rules That Apply if Taxpayer Does Not Have a Qualifying Child. 93

Tax Withholding and Estimated Tax Payments 93

Tax Withholding. 94

Form W-4. 94

Exemption from Withholding. 94

Penalties 94

Withholding from Nonwage Income 95

Estimated Tax. 95

Requirement to Pay Estimated Tax. 95

Balance Due and Refund Options 96

Payment of Income Tax Owed. 96

Refunds 96

Limit on Direct Deposit Refunds 97

Federal Income Tax Return Filing Due Dates 97

Calendar Year and Fiscal Year Taxpayers 97

Extensions of Time to File 97

Automatic Extension of Time to File 98

Individuals Outside the United States 98

Individuals Serving in a Combat Zone 99

Chapter 5 Review Questions 100

Chapter 6 - Practices, Procedures & Professional Responsibility. 102

Chapter 6 Learning Objectives 102

Introduction. 102

Tax Related Identity Theft 102

Assisting Victims of Identity Theft 103

Safeguarding Taxpayer Data 103

Laws and Regulations Requiring Privacy/Security. 103

Best Practices to Safeguard Data 104

Individual Taxpayer Identification Numbers 104

Who Needs an ITIN? 104

ITIN Effect on Tax Credits 105

ITIN Renewals 105

ITINs Issued in 2013 or Later 105

ITINs Issued Before 2013. 105

Renewing an ITIN. 106

Preparer Penalties 106

Due Diligence in Tax Preparation. 107

Head of Household Filing Status 108

Taxpayer Considered Unmarried. 108

Required Marriage Test Supporting Documents 108

Keeping up the Taxpayers Home 109

Required Keeping Up a Home Test Supporting Documents 109

Qualifying Person. 109

Qualifying Child. 110

Required Qualifying Person Test Supporting Documents 110

Common Head of Household Errors 110

Earned Income Tax Credit 111

EITC Due Diligence Requirements 111

Most Common EITC Errors 111

Education Tax Credits 112

Most Common AOTC Errors 112

Child Tax Credit 112

Most Common CTC/ACTC Errors 113

Compliance with E-file Procedures 113

Affected Tax Return Preparers 113

Timing of Taxpayer Signature 113

Timing of Filing. 114

Recordkeeping. 114

Prohibited Filing with Pay Stub. 114

Proper Handling of Rejects 114

Chapter 6 Review Questions 116

Answers to Review Quizzes 117

Appendix A. 132

Glossary. 133

Index. 135

CPE Exam Answer Sheet 138

Final Examination. 140

CPASelfstudy.com Course Evaluation. 150