Tuesday, December 15, 2015

1040 preparation training in 7 days ???? | 1040 tax training in 7 days..

Most of us are gearing for tax season 2015 !!!.. 

Most of the tax rates are ready from IRS. As a preparer you might be fresher or with some idea about tax or a pure fresher who wish to prepare tax return for the season ending by 15th of April for the tax year  1st of January 2014 to 31st of December 2014....

One must read Instructions to 1040 as a first point of preparation. It will give fair idea about preparation of tax return. Understand terminology used in source documents.

Tax preparation is very simple one need to identify from source documents weather it is Income or Adjustment to Income or credit or Tax withheld and it is eligible to be claimed as deduction or not.

W2: means Source document showing total income received by tax payer/ Federal tax withheld/ State income / State income tax withheld / Local income / Locality tax with held...

It will be shown in line 7 of 1040, Tax with held will appear on line Line 64 of 1040

1099 INT and DIV will show interest / Dividend received and tax withheld if any. Interest will appear in line no 8A and Dividend on 9A.

Non taxable will be shown on line 8b and 9b

Line no.10 of 1040 will have Taxable refund amount if the amount is itemized last year.

Line 11 will show Alimony received from the divorced spouse as per divorce decree and the will be shown as expense in line no.31a

Line 12 is just a single line stating Schedule C or C-EZ but it is not so easy to arrive at final amount. It part of business income getting taxed in 1040. It will generate Schedule -c which will provide detailed information of the business , Activity code, Gross receipts, Returns and Expenses directly or indirectly related to business will be mentioned in the schedules.

One of the main point to be remembered is Home office expenses i.e Using part of the primary home for business purpose. Generally common expenses will be pro-rated based on SFT used for business use.

In case of vehicle miles run for business purpose will be counted and as per the miles v/s cent allowed will appear as expense deductible under tax return

Line 13 of 1040 will show gain or loss from sale of capital assets. The same will be shown in schedule D. The point to be captured from broker statement will be Sale of assets or stocks , Gross receipts, Date of sale, Date of purchase to determine short term or long term. and Purchase price.

Long term capital loss can be carried forward for the period of 5 years and set-off can happen against capital gain only.

Line no.14 of 1040 will have gain or loss from sale of business property reported on form no,4797

Line no. 15 a will show IRA distribution and subject to rule it will be get taxed and taxable portion appear on 15b.