1. 1040 Individual Tax: Section A

2. 1040 Individual Tax: Section A

3. Timothy J. Sundstrom CPA, CFP – Some Call Me Tim
Tim is a CPA and financial planner located in Broomall, PA (suburban Philadelphia). He is the former president of the Pennsylvania Society of Public Accountants and for the last 13 years has been a lecturer with Thomson Reuters’ Gear Up Seminars and has authored several publications concerning tax and financial planning. Tim currently lives in Havertown, PA with his wonderful wife Carina, and their brand new puppy Dixie. When Tim is not working he enjoys reading, gardening, traveling and of course walking the dog.
1040 Individual Tax: Section A

4. Abe Carnow, CPA
1040 Individual Tax: Section A

5. Page 1
2016
2017
2018
Personal Exemptions
$4,050
Standard Deduction
Single
$6,300
$6,350
Married Jt. & QW
$12,600
$12,700
Married Filing Sep.
Head of Household
$9,300
$9,350
Additional Deductions for Elderly and Blind
$1,550
Married (each)
$1,250
Dependent of Another
Greater of $350 or ???
but not in excess of Std
$1,050
$4,150
$6,500
$13,000
$6,500
$9,550
$1,600
$1,300
$1,050
1040 Individual Tax: Section A

6. 1
Page 1
2016
2017
2018
Social Security Information based on SSA Estimates
FICA Wage Base
$118,500
$127,200
Age SS Limit
$15,720
$16,920
Age 65 – FRA Limit
$41,880
$44,880
Kiddie Tax
$2,100
Child Tax Credit
$1,000
Standard Mileage Rate
Business
54.0¢
53.5¢
Depreciation per mile
24.0¢
25.0¢
Charitable
14.0¢
Medical & Moving
19.0¢
17.0¢
$128,400
$17,040
$45,360
$2,100
$1,000 NA NA
14.0¢ NA
1040 Individual Tax: Section A

7. Qualified Parking Comm. Veh. & Transit Bus Pass
Page 1
2016
2017
2018
Qualified Parking Comm. Veh. & Transit Bus Pass
$255
Luxury (Non-electric) Auto Depreciation Limits
First Year Bonus Depr
$8,000
$8.000
Year 1
$3,160
Year 2
$5,100
Year 3
$3,050
Year 4 and After
$1,875
Page 1
$260 NA NA NA NA NA
1040 Individual Tax: Section A

8. Page 2
2016
2017
2018
IRC Section 179
Depreciation
$500,000
$510,000
Investment Limitation
$2.010 Mil
$2.030 Mil
SUV Limitation
$25,000
Estate Tax Unified Cr
$5.45 Mil
$5.49 Mil
Annual Gift Exclusion
$14,000
IRA
Base Contribution
$5,500
Age 50 Catch Up
$1,000
Simple IRA
$12,500
$3,000
$520,000
$2.070Mil
$25,000
$5.60 Mil
$15,000
$5,500
$1,000 NA NA
1040 Individual Tax: Section A

9. 2016 2017 2018 401(k), 403(b), and 457 Plans Base Contribution $18,000
Page 2
2016
2017
2018
401(k), 403(b), and 457 Plans
Base Contribution
$18,000
Age 50 Catch-Up
$6,000
Defined Cont. Limit
$53,000
$54,000
Defined Ben. Limit
$210,000
$215,000
IRC 415 Comp. Limit
$265,000
$270,000
Page 2 NA NA NA NA NA
1040 Individual Tax: Section A

10. 2016 2017 2018 HSA Limitations Self Plan $3,350 $3,400 $3,450
Page 2
2016
2017
2018
HSA Limitations
Self Plan
$3,350
$3,400
$3,450
Family-Plan
$6,750
$6,900
Age 55 Catch Up
$1,000
Min. Deductible-Sgl.
$1,300
$1,350
Min. Deductible-Fam.
$2,600
$2,700
Max. Deductible-Sgl.
$6,550
$6,650
Max Deductible-Fam.
$13,100
$13,300
Page 2
1040 Individual Tax: Section A

11. Long Term Care Deduction Limitations Age 40 or Younger $390 $410
Page 2
2016
2017
2018
Long Term Care Deduction Limitations
Age 40 or Younger
$390
$410
Age > 40 but < 50
$730
$770
Age > 50 but < 60
$1,460
$1,530
Age > 60 but < 70
$3,900
$4,090
Age > 70
$4,870
$5,110
Page 2
$420
$780
$1,560
$4,160
$5,200
1040 Individual Tax: Section A

12. Itemized Deduction Phase-Out & Personal Deductions Single $259,400
Page 3
Page 003
2016
2017
2018
Itemized Deduction Phase-Out & Personal Deductions
Single
$259,400
$261,500
Married
$311,300
$313,800
MFS
$155,650
$156,900
Head of Household
$285,350
$287,650
AMT Exemption
Single & HOH
$53,900
$54,300
Phase Out Begins
$119,700
$120,700
$83,800
$84,500
$159,700
$160,900
Page 3
$266,700
$320,000
$160,000
$293,350
$55,400
$123,100
$86,200
$164,100
1040 Individual Tax: Section A

13. Page 3
$952.50
$9,525
$5,328.75
$38,700
$19,078.75
$93,700
$47,568.75 $
$123,303.75
$424,950
$123,916.25
$426,700
$1,905.00
$19,050
$10,657.50
$77,400
$30,345.00
$156,150
$53,249.00
$237,950
$114,959.00
$424,950
$134,244.00
$480,050
$1,360.00
$13,600
$7,097.50
$51,850
$27,597.50
$133,850
$50,795.50
$216,700
$119,518.00
$424,950
$129,458.00
$453,350
1040 Individual Tax: Section A

14. Page 4
Fees based on $150 per hour preparer rate and $250 reviewer hourly rate
1040 Individual Tax: Section A

15. Chapter 1: AGI and Tax Planning
Page 5-12
Chapter 1: AGI and Tax Planning
1040 Individual Tax: Section A

16. Explain to clients how phase-outs work.
Page 5-12
Define planning terminology such as effective tax rate and marginal tax rate.
Explain to clients how phase-outs work.
Recognize the impact that a change in AGI can make
1040 Individual Tax: Section A

17. MAGI will be a modification of AGI. Page 6
Key Developments
AGI is a critical measure of finances and tax planning. For many tax benefits it is the starting point. Page 5
MAGI will be a modification of AGI. Page 6
AGI planning can help a taxpayer retain certain tax benefits. Page 6-7
Tables that demonstrate the phase out ranges. Page 9-12
1040 Individual Tax: Section A

18. B. AGI is a Key Measure of Finance5
B. AGI is a Key Measure of Finance
Tax rates
Tax deduction, exemption and credit – phase outs
Lending – starting point which is further adjusted
Financial aid
AGI basis of state taxation
Medicare Premium Charge
Affordable Care Credit
1040 Individual Tax: Section A

19. B. AGI is a Key Measure of Finance7
B. AGI is a Key Measure of Finance
The manual also tells us besides 2017 premiums being based on MAGI – AGI plus tax exempt interest income
1040 Individual Tax: Section A

20. Phase Out Sheets – Pages 9 -12
1040 Individual Tax: Section A

21. Chapter 2: Filing Status
Page 13-22
Chapter 2: Filing Status
1040 Individual Tax: Section A

22. Identify the correct filing status for a taxpayer.
Page 13-22
Identify the correct filing status for a taxpayer.
Describe the rules for head of household filing status eligibility.
1040 Individual Tax: Section A

23. Page 13-22
Key Developments
Divorce occurs on the date granted by the court not the date of the written decree. Page 14
IRS has finalized the same sex couple regulations, Reg. § Page 14-15
The cost savings of MFJ versus MFS with social security income. Page 17
T.C. Memo , Peter W Moss, taxpayer filed joint return without his wife’s authorization. Page 17-18
1040 Individual Tax: Section A

24. Qualifying Widower with a dependent child
Page 13
I. Filing Status
Our Choices
Single – Everyone is single by default, unless they qualify for one of the other statuses.
Married Filing Joint
Married Filing Separately – All married taxpayers have the right to choose this status, MFJ takes an agreement on the part of both spouses.
Head of Household
Qualifying Widower with a dependent child
1040 Individual Tax: Section A

25. When am I what – it depends?
Page 13
I. Filing Status
When am I what – it depends?
General Rule – The taxpayer is what they are on the stroke on midnight on 12/31
Except
Special Qualification for Head of Household for abandoned spouses.
The spouse of a deceased taxpayer (who has not remarried) AND the executor of the estate agrees to file as married.
1040 Individual Tax: Section A

26. If the certificate says married you are married for federal purposes. 14
Same Sex Couples
If the certificate says married you are married for federal purposes.
These rules apply starting in 2013
Married same sex couples can file an amended joint return to claim a refund for up to 3 years.
Domestic partnerships might be good for older seniors.
1040 Individual Tax: Section A

27. Domestic Partnerships for Same Sex Couples14
Domestic Partnerships for Same Sex Couples
Many states allow same sex couples to enter into domestic partnerships.
This could result in significant tax savings because of the marriage penalty
Many states recognized RDP for medical and benefit purposes.
Marriages in later life can have some un-intended consequences
Spousal consent rules.
1040 Individual Tax: Section A

28. Domestic Partnerships for Opposite Sex Couples14
Domestic Partnerships for Opposite Sex Couples
NJ, CA allow RDP over age 62
CO – regardless of age
NH – converted everyone to “married”
PA – does not recognized RDP but some cities do – Pittsburg and Philadelphia
1040 Individual Tax: Section A

29. You can however can amend from MFS to MFJ. 15
MFS to MFJ – TIP
If you file MFJ you cannot choose MFS after the due date of the return.
You can however can amend from MFS to MFJ.
Consider using MFS status when an individual is subject to a large unpaid tax liability or potential liability exists.
Page 166 and 17 provide a list of items that are affected by MFS
1040 Individual Tax: Section A

30. 17
AGI Sensitivity
1040 Individual Tax: Section A

31. Spousal Agreement to MFJ returns
If the spouse is mentally incompetent, refusing to file a joint return.
By a show of hands:
File the return and tell the IRS what is happening.
Obtain a court power indicating the competent spouse’s ability to file the return.
The competent spouse is out of luck, file the MFS return.
Either B or C.
1040 Individual Tax: Section A

32. Need a Power to Represent Wife
17-18
Need a Power to Represent Wife
1040 Individual Tax: Section A

33. V. Qualifying Widow(er)18
V. Qualifying Widow(er)
Must have dependent child
Spouse died within 2 years and not remarried.
Entitled to Joint Rates and highest standard deduction.
1040 Individual Tax: Section A

34. Must be unmarried or considered unmarried 18
VI. Head of Household
Must be unmarried or considered unmarried
Maintain a household for more than ½ year for
Qualifying child or
Dependent relative
Separate home can be maintained for parents if taxpayer can claim exemption.
1040 Individual Tax: Section A

35. Custodial parent losses the exemption and the child tax credit. 19
VI. Head of Household
Note: No unrelated individuals need apply, even though you can take exemption. Page 19
Custodial parent losses the exemption and the child tax credit.
Keeps – child care credit, EITC, exclusion for dependent care assistance benefits and HOH status.
1040 Individual Tax: Section A

36. Cost is based on actual cost of home not the rental value of the home.19
VI. Head of Household
Parents (box)
Must be able to claim exemption
Pay more than ½ of cost of keeping up home for entire year.
This applies to rest homes or homes for elderly.
Cost is based on actual cost of home not the rental value of the home.
1040 Individual Tax: Section A

37. Paid more than ½ cost of keeping up home 20
VI. Head of Household
Abandoned Spouse Rule
File separate return
Paid more than ½ cost of keeping up home
Spouse did not live during the last 6 months of the tax year.
Maintained home for qualifying child
Entitled to exemption even if released to other parent.
“Don’t tell them you can’t get rid of husband” – Hopkins
1040 Individual Tax: Section A

38. Chapter 3: Dependents and Kiddie Tax
Page 23-34
Chapter 3: Dependents and Kiddie Tax
1040 Individual Tax: Section A

39. Calculate the personal dependency exemption phase-out.
Page 23-34
Distinguish between two types of dependents: qualified children and qualified relatives.
Calculate the personal dependency exemption phase-out.
Determine whether a child is subject to the kiddie tax.
1040 Individual Tax: Section A

40. The PATH Act restricted the use of ITINs. Page 23
Key Developments
The PATH Act restricted the use of ITINs. Page 23
In addition ITINs must be renewed in certain circumstances. Page 23
Phase-outs were inflation adjusted for Page 29
1040 Individual Tax: Section A

41. ID numbers are required ITINS issued before 201323
ITINS and ID Numbers
ID numbers are required
ITINS issued before 2013
Renewed on a staggered schedule from 2017 to 2020.
All will expire by 2020.
ITINS issued after 2012
Will expire if not used for 3 years on a federal return.
More info
1040 Individual Tax: Section A

42. If child is under age 18 at end of year or 30
VIII. Kiddie Tax
Kiddie tax applies
If child is under age 18 at end of year or
Is 18 or full-time student(age 19-23) and has earned income less than or equal to half his or her support.
Child has more than $2,100 in investment income.
Has one parent living at the end of the year
Does not file joint return
1040 Individual Tax: Section A

43. Form 8814 – on parents return – cannot be used if child : 32
V. Kiddie Tax
Form 8814 – on parents return – cannot be used if child :
has capital gains other than capital gain distributions,
has income $10,500 or more
Made estimates or paid back-up withholding
NOTE: While convenient this leads to higher AGI – meaning phase-outs
1040 Individual Tax: Section A

44. Form 8615 – when filing a child’s return: 32
V. Kiddie Tax
Form 8615 – when filing a child’s return:
MFS – use spouse with greater income.
If custodial parent remarries, the step-parent is consider the other parent.
Custodial parent if parents are unmarried and not living together.
Parents were never married but living together – used higher income parent.
1040 Individual Tax: Section A

45. Manage investment income 33
IX. Avoiding the Kiddie
Manage investment income
Used Coverdale and 529 plans for college savings
Purchase growth oriented stock
Purchase tax-exempt securities
US EE Bonds – maturing beyond kiddie years
Annuities
Life insurance
IRA – if child has earned income
Coverdales can be established by parents with up to $190K – $2,000 per child.
529 Plans can use the 5 year rule with a gift tax return.
EE Bonds now electronic and are issued at face value
1040 Individual Tax: Section A

46. College is no longer the place to find yourself!33
IX. Avoiding the Kiddie
Children 18 and older paying more than ½ support not subject. High paying family job?
From – tax only applies to full-time students and not to part-time students.
College is no longer the place to find yourself!
1040 Individual Tax: Section A

47. Page 35-53
Chapter 4: Divorce
1040 Individual Tax: Section A

48. “Divorce is like ripping a man’s genitals out through his wallet”35
Divorce
“Divorce is like ripping a man’s genitals out through his wallet”
Robin Williams
1040 Individual Tax: Section A

49. “I’m not upset about my divorce. I’m only upset I’m not a widow.”35
Divorce
“I’m not upset about my divorce. I’m only upset I’m not a widow.”
Roseanne Barr
1040 Individual Tax: Section A

50. 35
Divorce
“Marriages don't last. When I meet a guy, the first question I ask myself is: is this the man I want my children to spend their weekends with?”
Rita Rudner
1040 Individual Tax: Section A

51. 35
Divorce
“My wife Mary and I have been married for forty-seven years and not once have we had an argument serious enough to consider divorce. Murder, yes, but divorce, never.”
Jack Benny
1040 Individual Tax: Section A

52. Divide tax attributes between divorcing taxpayers.
Page 35-53
Describe how to apply the special rule for divorced or separated parents.
Determine if payments to a spouse (or former spouse) constitute alimony.
Summarize income allocation rules for taxpayers in community property states.
Divide tax attributes between divorcing taxpayers.
1040 Individual Tax: Section A

53. Child lived with the father at the father’s mother’s home. 36
Key Developments
TC Memo , Davis, father granted exemptions without regard to dissolution agreement with ex-spouse.
Child lived with the father at the father’s mother’s home.
Custodial parent is the one the child lives with the longest.
1040 Individual Tax: Section A

54. B. Special Rule for Divorce or Separated Parents36
B. Special Rule for Divorce or Separated Parents
For the non – custodial parent to get the child;
Parents divorced, legally separated or lived apart at all times during the last 6 months
Child received over ½ support from parents
One or both parents have custody for more than ½ year.
Custodial parent signs a declaration which the non-custodial parent attaches to the return. Form 8332 or equivalent. (page 38. F.)
LLps are limited to 1,5,6
1040 Individual Tax: Section A

55. Special Rule for Divorce or Separated Parents38
Special Rule for Divorce or Separated Parents
Custodial parent signs Form 8332 or similar statement. Non-custodial parent attaches to return.
Prior to 2009, Non-custodial parent could attach divorce decree to return.
Revocation – See top of page 39
LLps are limited to 1,5,6
1040 Individual Tax: Section A

56. III. Alimony and Child Support40
III. Alimony and Child Support
Alimony – Paid under a divorce/Sep. Agr.
Payment is in cash.
Cannot be designated as excludible from income.
Spouses cannot be members of same household.
No liability to continue after death of the payee.
No treated as child support.
LLps are limited to 1,5,6
1040 Individual Tax: Section A

57. 41
Key Developments
Memo , Mudrich, pre-divorce payment in a divorce year paid to ex-spouse was not alimony.
Attorney was unable to deduct pre-divorce bonus as alimony in a self- styled bonus alimony agreement.
1040 Individual Tax: Section A

58. One time payment was a property settlement and not alimony. 41
Key Developments
Muniz – TC Memo , payment to former spouse was not alimony, it was property not cash.
One time payment was a property settlement and not alimony.
Penalties upheld.
1040 Individual Tax: Section A

59. III. Alimony and Child Support42
III. Alimony and Child Support
Payments to Third parties can be treated as alimony if the payee request the payment in writing.
Payments for jointly-owned home – may qualify. Once spouse gets deduction other gets income and offsetting interest and tax deductions.
Cannot be contingent on an event tied to the child. See H for more details.
LLps are limited to 1,5,6
1040 Individual Tax: Section A

60. Alimony payments for the first 2 years may be subject to recapture. 45
IV. Alimony Recapture
Alimony payments for the first 2 years may be subject to recapture.
Excess
Second year compared to third – by amount it exceeds $15,000.
First year compared to average of unrecaptured 2nd and 3rd year Plus $15,000
LLps are limited to 1,5,6
1040 Individual Tax: Section A

61. Payments exempt from A: Payment made under temporary support 46
IV. Alimony Recapture
Payments exempt from A:
Payment made under temporary support
Payments end within 3 years – remarriage
Payments that are fixed as a percentage of income.
The parties shift position in recapture!
LLps are limited to 1,5,6
1040 Individual Tax: Section A

62. V. Property Settlements46
V. Property Settlements
Generally, no gain or loss on the transfer of assets incident to divorce.
Even if one pays the other for assets.
LLps are limited to 1,5,6
1040 Individual Tax: Section A

63. VII. Retirement Benefits49
VII. Retirement Benefits
QDRO – make sure the distribution is after the court order.
Courts can back date “New Case” pg 50.
If you do it before the order the account holder has a distribution.
NOTE: If paid for a dependent it is treated as a distribution to the participant.
IRA transfers – not considered a taxable if also made by decree.
LLps are limited to 1,5,6
1040 Individual Tax: Section A

64. VIII. Estimated Tax Payments51
VIII. Estimated Tax Payments
Estimates may be allocated in any manner agreeable to the parties.
No agreement estimates are divided according to income.
Attach a schedule to the return showing payment allocation.
LLps are limited to 1,5,6
1040 Individual Tax: Section A

65. IX. Allocating Carryforwards52
IX. Allocating Carryforwards
Generally, the taxpayers carryforward their share of the carryforward as if they had been separately reported in the past.
No authority on AMT Credit carryforward
Suspended general business credits follow the property or business
Investment interest expense – no authority.
Passives are treated as disposed by gift.
LLps are limited to 1,5,6
1040 Individual Tax: Section A

66. Chapter 5: Personal Tax Credits
Page 55-68
Chapter 5: Personal Tax Credits
1040 Individual Tax: Section A

67. Due Diligence for EITC and CTC
Due diligence requirements for the two primary refundable personal credits EITC and CTC have been unified.
By a show of Hands:
The rules require greater levels of inquiry
The rules require more detailed documentation.
There is now a due diligence penalty for both credits
All of the above
1040 Individual Tax: Section A

68. EITC Personal Tax Credits
Page
Item
PATH – IRS remove EITC as math error. Without TP consent 56
ALERT
PATH – Prevents retroactively claiming EITC for any prior year which the taxpayer did not have a valid SSN/ITIN
D.1.
Penalty indexed to $510
E.1.
The penalty is now $510 per failure
1040 Individual Tax: Section A

69. EITC Personal Tax Credits
Page
Item
New Knowledge Rules 57 F
Need proof of residency school 58
Warning
Election for Combat Pay – election to include in income for EITC
Important
Investment income >$3,450 will kill the credit 60
I.1
1040 Individual Tax: Section A

70. EITC Personal Tax Credits
Page
Item
TC Memo , Tsehay. The court allows a MFS taxpayer to claim EITC 60
2.A
AOD IRS disagrees
2.b.
IRS verifies W2 but is unable to deal with 1099 and business 61 J.
1040 Individual Tax: Section A

71. Child Tax Credit – Personal Tax Credits
Page
Item
$1,000 per child up to 3 Kids 62
A.1
Must timely file
A.4
Combat election 63 D
New $510 penalty for the child tax credit starting 2016 E
Form 8867 Required F
PATH – No retroactive credit if no ITIN
NIM
What is the combat election so important? – in this case the refundable portion of the credit is deterimed by 15% of the earned income in excess of $3,000
1040 Individual Tax: Section A

72. Adoption Credit/Deduction Personal Tax Credits
Page
Item
Adoption Credit/Deduction increased to $13,570 with new phase outs. 63
B.1.
PATH – extended the $500 personal energy credit only until 12/31/16. It’s a goner.
NIM
NEW
PATH – Residential Efficient Property Credit extended and modified 67
VIII.
1040 Individual Tax: Section A

73. Adoption Credit/Deduction Personal Tax Credits
Page
Item
Savers Credit – $1,000 to $2,000 for modest income individuals 67
VII.
Savers Magi – $31,000 Single, $62,000 MFJ.
B.3.
1040 Individual Tax: Section A

74. VIII. Residential Energy Efficiency Property Credit68
VIII. Residential Energy Efficiency Property Credit
30% Credit on qualifying energy property expenditures
Credit includes cost of installation
NEW – Path Credit
30% until 12/31/19
26% for 2020
22% for 2021
Then it expires!
1040 Individual Tax: Section A

75. VIII. Residential Energy Efficiency Property Credit68
VIII. Residential Energy Efficiency Property Credit
1040 Individual Tax: Section A

76. 68
So What is a Fuel Cell?
1040 Individual Tax: Section A

77. 68
So What is a Fuel Cell?
1040 Individual Tax: Section A

78. NEW – PATH Extended credits for: Qualifying 2 wheel plug-in vehicles 68
Other Vehicles
NEW – PATH Extended credits for:
Qualifying 2 wheel plug-in vehicles
Non-hydrogen alternative fuel vehicles
Refueling property
Fuel cell motor vehicles
1040 Individual Tax: Section A

79. Chapter 6: Wages and Other Income
Page 69-84
Chapter 6: Wages and Other Income
1040 Individual Tax: Section A

80. Describe proper reporting for Form W-2
Page 69-84
Describe proper reporting for Form W-2
Identify tax implications of virtual currency.
Identify other taxable income and available exclusions
Understand the changes regarding gambling income reporting and record keeping.
1040 Individual Tax: Section A

81. Can paying $45 stop the recognition of $200,000,000 in income?
Quiz
Can paying $45 stop the recognition of $200,000,000 in income?
1040 Individual Tax: Section A

82. Imagine
You arrive at a garage sale 15 minutes late and all the items that were not sold were left there abandoned. You pick through the property and find old glass negatives of Yosemite National Park. You take them to an tax preparer that is also an appraiser.
1040 Individual Tax: Section A

83. Imagine
The slides are worth $200 million. What else does the accountant tell you?
Type of Income –
When is it reported –
1040 Individual Tax: Section A

84. When is it reported – The year you have “undisputed possession”.
Imagine
The slides are worth $200 million. What else does the accountant tell you?
Type of Income – Page 75-A. and 76.B. wealth accessions to wealth. Ordinary income.
When is it reported – The year you have “undisputed possession”.
1040 Individual Tax: Section A

85. So how does $45 Save $85 million in tax?
In 2000, Rick Norsigian, a California construction worker arrived at a sale and purchased 65 glass slides for $45.
After 6 months of examination a team of experts declared that the 65 negatives were the early work of Ansel Adams believe to have been destroyed in a 1937 fire at his Yosemite National Park Studio.
1040 Individual Tax: Section A

86. So how does $45 Save $85 million in tax?
The result is “no income recognition’ currently with capital gain treatment on the sale of the assets.
Reported from “$45 Garage Sale Find Worth $200 Million Chicago Sun- Times 7/28/10.
“treasurer-trove”
1040 Individual Tax: Section A

87. 1040 Individual Tax: Section A

88. 1040 Individual Tax: Section A

89. 208 III. Waiter beats IRS Partial Tip log beats IRS – page 70 70
1040 Individual Tax: Section A

90. Crowdfunding – IRS Informational Letter 2016-003671
Crowdfunding – IRS Informational Letter
No Rulings
Contributor receives nothing but satisfaction of helping – gift
Or receives a reward of nominal value
Might receive my contributions back if successful.
IRS looking at facts and circumstances.
1040 Individual Tax: Section A

91. 73
V. Virtual Currency
Bitcoin Created in 2009 by someone with the alias of “Satoshi Nakamoto” Buy anonymously Not Currency but property
1040 Individual Tax: Section A

92. 73
V. Virtual Currency
IRS has issued John Doe summons to access virtual currency US users. Blockchain is being investigated for commercial uses.
1040 Individual Tax: Section A

93. Reimbursements for additional taxes and costs were excludable.
Page 69-84
Key Developments
TC , Cosentino, if a taxpayer has a recovery of taxes, penalties or interest, what is the taxability of the award? Page 76
Reimbursements for additional taxes and costs were excludable.
1040 Individual Tax: Section A

94. There are several income exclusions available in the code
Income exclusions for physical injury awards must be “directly related” to the physical injury.
By a show of Hands:
A mental injury that affects the physical abilities of the taxpayer is excludable.
Worker’s compensation awards are associated with work place injury but are not always excludable.
To be excludable an award must have a direct connection to the physical injury.
Physical injury awards are no longer excludable.
We will be talking about these exclusions on page 76 and 77
1040 Individual Tax: Section A

95. Page 69-84
Key Developments
TC Summary Opinion , Maciu, Jec, the court rules of the taxability of an award “connected” with physical injury. Page 76
TC Memo , Rajcoomar, the taxpayer attempted to convert an Equal Opportunity settlement to a physical injury award. Page 77
CA 9th Cir 08/10/ AFTR 2d ¶ taxpayer suffers from failure to include worker’s compensation board to obtain settlement. Page 77
TC Memo Taylor, once payments were determined by retirement rules they were no longer workers compensation. Page 77
1040 Individual Tax: Section A

96. Page 69-84
Key Developments
TC Summary Opinion , in Keeter, payments by DOD as retirement were excludable to the extent they reflected what would have been due as VA benefits. Page 77-78
TC Summary Opinion , the taxpayer failed in his attempt to have Cohen rule invoked to account for gambling losses. Page 82
Reg. § new rules for W-9 verification for gambling winnings. Page 83
Discussion of taxation and reporting of fantasy sports betting. Page 83-84
1040 Individual Tax: Section A

97. Chapter 7: Individual Mandate & Premium Tax Credit
Page
Chapter 7: Individual Mandate & Premium Tax Credit
1040 Individual Tax: Section A

98. Reconcile the APTC from marketplace estimate to the PTC allowed.
Page
Assess the impact of the Affordable Care Act (ACA) provisions on the individual shared responsibility penalty and exceptions for uninsured clients.
Reconcile the APTC from marketplace estimate to the PTC allowed.
1040 Individual Tax: Section A

99. Pat Meehan 7 th congressional district of Pa
1040 Individual Tax: Section A

100. Page
Key Developments
IRS has announced they will continue to process “silent returns” that do not report their ACA status. Page 85
1040 Individual Tax: Section A

101. Summary of Penalty Exemptions. Page 89-90
Key Developments
Multiple 1095s from various sources continues to confuse taxpayers. Page 87
Summary of Penalty Exemptions. Page 89-90
Who is never subject to the shared responsibility penalty. Page 92
The update of the average bronze premium amount for the penalty threshold. Page 96
1040 Individual Tax: Section A

102. IX . Ind. Shared Responsibility Penalty95
IX . Ind. Shared Responsibility Penalty
Lesser of:
Penalty: Greater of
Sum of the flat dollar $695 limited to 300% of the flat dollar $2,085
2.5% of Income
Bronze Plan
1040 Individual Tax: Section A

103. IX . Ind. Shared Responsibility Penalty96
IX . Ind. Shared Responsibility Penalty
Example 1
Tom is single in 2017
No MEC
Household income – $140,000
Filing threshold – $10,400
In 2017 – 2.5%
Bronze Plan $2,760
1040 Individual Tax: Section A

104. Flat Dollar Amount Lesser of
EXAMPLE 1 – 2017 Example
Flat Dollar Amount Lesser of
Sum of Flat Dollar Amounts or
$695.
300% of the Flat Dollar Amount
$2,085
Flat Dollar Amount
$695
% of Income
Household income
$140,000
Filing Threshold (assumed)
$10,400
Household income over threshold
$129,600
% of Excess (2.5%)
$3,240
Greater of Flat Dollar or % of Income
Cost of Bronze Plan
$2,760
Penalty
1040 Individual Tax: Section A

105. Now We Look At Exceptions96
Now We Look At
Exceptions
1040 Individual Tax: Section A

106. A history of the PTC % and thresholds. Page 97
Key Developments
A history of the PTC % and thresholds. Page 97
1040 Individual Tax: Section A

107. Premium Assistance Credit
100
Premium Assistance Credit
Single Taxpayer
Household income = $30,150 which is 250% of FPL
Silver Plan costs $4,800 per year
Applicable percentage is 8.21%
Taxpayer’s contribution = $2,475.32($30,150 x 8.21)or $206.38
Credit will be $2, ($4,800 – $2,475.32) or $ per month.
1040 Individual Tax: Section A

108. Chapter 8: Education and Able Planning
Page
Chapter 8: Education and Able Planning
1040 Individual Tax: Section A

109. Tax Planning is Critical to Preserve Education Tax Benefits
When a client’s child receives a scholarship that relieves the parent of any tuition payments we should:
By a show of hands:
Congratulate the parent for their talented child.
Report the scholarship income on the parent’s return.
Consider making an election to tax some or all of the scholarship proceeds.
Report the elected scholarship income on the child’s return.
C and D, maybe A too.
1040 Individual Tax: Section A

110. List the advantages of using ABLE accounts.
Page
Identify the deduction, credits, exclusions, and investments allowable for education expenses.
Describe savings opportunities and planning strategies related to financing the cost of college.
List the advantages of using ABLE accounts.
1040 Individual Tax: Section A

111. Updated Thresholds for Education Benefits. Page 104-105
Key Developments
Updated Thresholds for Education Benefits. Page
The requirements of Form Page 107
The importance of maintaining credit records. Page 107
The PATH Act provided math error authority to IRS for the AOTC. Page 110
The PATH Act added due diligence penalties to the AOTC. Page 110
The AOTC can only be claimed on timely filed returns. Page 110
1040 Individual Tax: Section A

112. HEED deduction has expired. Page 111
Key Developments
HEED deduction has expired. Page 111
Expanded reporting requirements for Form 1098-T by institutions delayed. Page 112
Information requirements expanded on Form 1098-T. Page 112
Discussion on the election to allocate scholarships to taxable income. Page 113
An expanded discussion on student loan discharge. Page
Using proceeds of Education Savings Bonds to fund 529 plan is a QHEE. Page 123
1040 Individual Tax: Section A

113. Income submissions have changed for FAFSA reporting. Page 131
Key Developments
Income submissions have changed for FAFSA reporting. Page 131
An expansion of the number of states with ABLE Plans. Page 131
Tax benefits of ABLE funding for different states.
1040 Individual Tax: Section A

114. 529 A Plan – Achieving a Better Life Experience
XXIII. ABLE Accounts
529 A Plan – Achieving a Better Life Experience
Beneficiary must be disabled before age 26.
21 States have plans. – open in any state
G. Annual contribution limit; $14,000 – Only one plan per beneficiary.
Amounts > $100,000 cause issues with SSI.
1040 Individual Tax: Section A

115. Chapter 9: Identity Theft and Refund Fraud
Page
Chapter 9: Identity Theft and Refund Fraud
1040 Individual Tax: Section A

116. Tax Identity Theft has been Refocused
Increasingly practitioners have been the victims of ID theft with the breach of their IT systems.
By a show of hands:
IRS insists on immediate reporting to the service by the practitioner.
Will work with the practitioner to coordinate a response.
Request that the practitioner provide a complete list of all taxpayers in their database.
All of the above.
1040 Individual Tax: Section A

117. Recognize the threats that apply to practitioners.
Page
Recognize the threats that apply to practitioners.
Describe how to respond to identity theft or tax refund fraud.
Identify resources available to assist victims of identity theft.
1040 Individual Tax: Section A

118. The Security Summit impacts the filing season. Page 136
Key Developments
The Security Summit impacts the filing season. Page 136
Additional “data elements” have been added to business returns for the processing year. Page 136
The New Threat, Practitioners have become the preferred target of the fraudsters. Page
Surviving a data breach. Page
Putting in place safeguards from a breach. Page
The steps to take when your system is breached. Page 138
The response plan of the IRS. Page
1040 Individual Tax: Section A

119. What to expect from the fraudsters after a breach. Page 139
Key Developments
What to expect from the fraudsters after a breach. Page 139
How can we help our clients who are breached. Page
What the IRS response to our clients will be. Page
The notices used by IRS in processing affected returns. Page
The IRS IP PIN program assignment, including on tax return, and taxpayer timeline in the program. Page
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120. 1040 Individual Tax: Section A