-presented by jacky sun,cpa-tsbpa. table of content: the u.s. federal income taxes introduction....

-Presented by Jacky Sun,CPA-TSBPA

Table of Content: The U.S. Federal Income Taxes Introduction. Important Tax Calendar. Tax Forms and which to use? Federal Tax Calculation Formula. Important Tax Definitions. Some Helpful Tax Credits & Deductions New Tax Rates for year 2014 (2013 comparison) Whats new for 2014 DIY How to File Federal Tax Return by yourself Now! Some Helpful Reference Materials For your Tax Return.

The U.S. Federal Income Tax Introduction The Federal Government adopted income tax in 1861. The Federal Income Tax on Individuals was enacted in 1894. The first form of 1040 was due on March 1,1914 under the Rev Act of 1913. Federal Income tax has become increasing complexity nowadays. Income tax has proved to be a major source of revenue for the Federal Government.

U.S. Fed Tax Receipt Pie Chart Layout 2013

Dates to remember for Federal Income Taxes-Tax Calendar March 15, 2014 2013 Corporation Income Tax returns due and tax due (for calendar year filers Form 1120). April 15, 2014 2013 Personal Income Tax returns due and tax due(Form 1040, 1040A,1040EZ, or Form 4868 plus estimated taxes) October 15, 2014 Extended due date for 2013 Personal Income Tax returns

Tax Forms and which to use? Use Form 1040EZ if you have: Income from wages, tips, interest only No Adjustments No Dependents Income is less than $100,000 Use Form 1040A if you have: Income from wages, interest, dividends, pensions No investment transactions No business income Income is less than $100,000 Standard deduction only Use Form 1040 if you have: Income from wages, interest, dividends, pensions Investment transactions Business income Itemized deductions Any credits

Fed Tax Calculation Formula Gross Income (Exclusions) Sec.62 (Deductions for AGI) above the line ------------------------------------------------------------ Adjusted Gross Income (AGI) (Standard Deduction) or (Itemized Deduction) - Deductions from AGI (Personal and Dependency Exemptions) ------------------------------------------------------------ Taxable Income(TI) x Tax Rate % ------------------------------------------------------------ Gross Tax Liability (Prepaid Federal Income Tax, Federal Withholding) (Credits) ------------------------------------------------------------ Net Tax Refund or Tax Due

Important Tax Definition: Gross Income: Per the Sec.61(a) of IRC, Except as otherwise provided in this subtitle, gross income means all income from whatever source derived. Which of the following should be considered as Gross Income ? a. Receiving the Alimony or Child Support ruled by the court. b. Receiving a Social Security Benefits. c. Mr.Wang a CPA helped his neighbor Mr. Li an immigrant Attorney filed 1040 income tax return for recent years, and in return Mr.Li helped to file form I- 485, an adjustment for permanent resident request for Mr.Wang this year. d. Workers Compensation received due to a work related accident. e. Life insurance proceeds received by the dependents. f. Group term life insurance Purchased by the ABC Company providing in favor to its designated Chief Executives and senior managers. g. Gain from sales of personal residency home. H. Unemployment benefits received by a Texas resident.

Important Tax Definition(Conti): Deductions for AGI: IRC. Sec. 62 & partial Sec.162 bus rel. i.e. Alimony Paid, losses on sales of property, moving expenses etc. Deductions from AGI(Itemized): i.e. Qualified Charitable organization(% if AGI threshold), Medical Exp(>10% AGI), State and local taxes, Casualty Losses, Personal interests etc. Standard Deduction VS. Itemized Deduction: Choose bigger Deduction amount.

Important Tax Definition(Conti): FICA Taxes: Federal Insurance Contributions Act(Social Security Taxes, Medicare Taxes, both Employer and employee liable) FUTA Taxes: Federal Unemployment Tax Act(Employer liable)

Some Helpful Tax Credits & Deductions Refundable VS Non-refundable Credits: Refundable: Taxes withheld on wages, Earned income credit. Earned Income Credit(EIC): for certain people who work and have earned income under $51,567. Non-Refundable: Credit for child care expense, credit for elder and disabled, Foreign tax credit, adoption expense credit, Child tax credit.

Some Helpful Tax Credits & Deductions-Child Tax Credit Child Tax Credit: The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family. Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17. Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence. Age Test - To qualify, a child must have been under age 17 age 16 or younger at the end of 2013. Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

Some Helpful Tax Credits & Deductions-Child Tax Credit Conti.. Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support. Dependent Test - You must claim the child as a dependent on your federal tax return. Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien. Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit. Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe. Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Some Helpful Tax Credits & Deductions Conti(EIC) Earned Income Credit(EIC) Req. for All Taxpayers To be eligible for the earned income credit, taxpayers need to meet the follow criteria: Must have valid Social Security Numbers; Must be U.S. citizen or resident alien* for the entire year; Cannot use the married filling separately filing status; You and your spouse (if married) cannot be claimed as a qualifying child by someone else. Cannot claim the foreign earned income exclusion (which relates to wages earned while living abroad) You and your spouse (if married) are between the ages of 25 and 64.

Some Helpful Tax Credits & Deductions Conti(EIC) Single, HH, Q. WidowMaximum EarningsMaximum EIC No Children13,980475 One Child36,9203,169 Two Children41,9525,236 Three Children45,0605,891 Married Filling Jointly No Children19,190475 One Child42,1303,169 Two Children47,1625,236 Three Children50,2705,891

Some Helpful Tax Credits & Deductions Conti(EIC) Qualifying Child Rules(EIC) Relationship Your son, daughter, adopted child, stepchild, foster child or a descendent of any of them such as your grandchild. Brother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephew Age At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) and younger than 19 At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) younger than 24 and a full-time student At the end of the filing year, your child was any age and permanently and totally disabled 3 Residency Child must live with you (or your spouse if you file a joint return) in the United States 4 for more than half of the year Joint Return The child cannot file a joint return for the tax year unless the child and the child's spouse did not have a separate filing requirement and filed the joint return only to claim a refund.

Some Helpful Tax Credits & Deductions Conti American Opportunity Tax Credit: Depending on your income, you may receive up to $2,500 of the cost of qualified tuition and course materials paid during the taxable year. The student must be enrolled at least half- time for at least one academic period. This credit is available on a per-student basis. Lifetime Learning Credit:The Lifetime Learning Credit may be as high as $2,000 per eligible student. For 2013 the full credit is available to eligible individual taxpayers who make $52,000 or less, or married couples filing jointly who make $104,000 or less.

Some Helpful Tax Credits & Deductions Conti Child and Dependent Care Credit: It's available to people who must to pay for childcare for dependents under age 13 in order to work or look for work. (up to 35 percent of qualifying expenses) Health Savings Account: Health savings accounts (HSA) are tax-deductible savings plans that allow a taxpayer to save pre-tax dollars for future healthcare expenses. HSA are paired with high-deductible health insurance plans. Contributions to an HSA are tax-deductible. Earnings, such as interest and dividends, in the health savings account are tax-exempt at the federal level. Withdrawals from a health savings account are tax-free as long as the funds are used for qualified medical expenses.

Some Helpful Tax Credits & Deductions Conti Health Savings Account(HSA) Conti Annual contribution limitation. For calendar year 2013, the annual limitation on deductions under 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,250. For calendar year 2013, the annual limitation on eductions under 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,450. High deductible health plan. For calendar year 2013, a high deductible health plan is defined under 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,250 for self-only coverage or $2,500 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,250 for self-only coverage or $12,500 for family coverage.

Some Helpful Tax Credits & Deductions Conti Qualified Moving Expenses If you moved due to a change in your job or business location, or because you started a new job or business, you may be able to deduct your reasonable moving expenses but not any expenses for meals. You can deduct your moving expenses if you meet all three of the following requirements: Your move is closely related to the start of work You meet the distance test You meet the time test

Some Helpful Tax Credits & Deductions Conti Qualified Moving Expenses Conti. The distance test: Your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home. The time test: If you are an employee, you must work full-time for at least 39 weeks during the first 12 months immediately following your arrival in the general area of your new job location. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months immediately following your arrival in the general area of your new work location. There are exceptions to the time test in case of death, disability and involuntary separation, among other things.

Some Helpful Tax Credits & Deductions Conti Traditional Individual Retirement Accounts(IRAs) A traditional IRA is a way to save for retirement that gives you tax advantages. Contributions you make to a traditional IRA may be fully or partially deductible, depending on your circumstances, and Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until distributed(deferred tax). For the year 2013, the dollar limits for IRA contributions are: $5,500 if you are age 49 or younger $6,500 if you are age 50 or older *Withdrawal before 59.5 year, subject to 10% early withdraw penalty.

Some Helpful Tax Credits & Deductions Conti 401(k) Plan: Qualified profit-sharing plan: A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. Elective salary deferrals are excluded from the employees taxable income. Employers can contribute to employees accounts. Distributions, including earnings, are includible in taxable income at retirement. Traditional 401(k) /Safe harbor 401(k)/SIMPLE 401(k) plans.

Some Helpful Tax Credits & Deductions Conti 401(k) Plan: Qualified profit-sharing plan Conti.. Deferral limits for 401(k) plans The limit on employee elective deferrals (for traditional and safe harbor plans) is: $17,500 (in 2013 and 2014)/12, 000(SIMPLE) Catch-up contributions for those age 50 and over If permitted by the 401(k) plan, participants who are age 50 or over at the end of the calendar year can also make catch-up contributions. The additional elective deferrals you may contribute is: $5,500 to traditional and safe harbor 401(k) plans (in 2013 and 2014) $2,500 to SIMPLE 401(k) plans (in 2013 and 2014)

Some Helpful Tax Credits & Deductions Conti Your 401K Match.- Typically, you only receive a contribution into your 401(k) plan if you make a contribution yourself. When you save some of your paycheck by putting money into your 401(k), your company does as well. But if you fail to save a dollar, than your company match goes away too. i.e. There are companies offer 50% match up to the first 6%; dollar for dollar match up to 5%... How much do your company offer the 401K match???? Beware of the Vest- No matter when or how you terminate employment, the money you contribute to your 401(k) plan is yours to keep. However, the contributions made by your employer may be subject to a vesting schedule. Make sure you understand your vesting program before you quit your job!

Tax Rates for the Year 2014---Single Single OrdinaryLong Term GainsTaxable Income Tax Rate overto 10%0%09,075(8,925-2013) 15%0%9,07536,900(36,250) 25%15%36,90089,350(87,850) 28%15%89,350186,350(183,250) 33%15%186,350405,100(398,350) 35%15%405,100406,750(400,000) 39.60%20%406,750--

Tax Rates for the Year 2014---MFJ Married Filing Jointly OrdinaryLong Term GainsTaxable Income Tax Rate overto 10%0%018,150 (1.67%) 15%0%18,15073,800 25%15%73,800148,850 28%15%148,850226,850 33%15%226,850405,100 35%15%405,100457,600 39.60%20%457,600--

Tax Rates for the Year 2014---MFS Married Filing Separately OrdinaryLong Term GainsTaxable Income Tax Rate overto 10%0%09,075(1.67%) 15%0%9,07536,900 25%15%36,90074,425 28%15%74,425113,425 33%15%113,425202,500 35%15%202,500228,800 39.60%20%228,800--

Tax Rates for the Year 2014--HH Head of Household OrdinaryLong Term GainsTaxable Income Tax Rate overto 10%0%012,950(1.67%) 15%0%12,95049,400 25%15%49,400127,550 28%15%127,550206,600 33%15%206,600405,100 35%15%405,100432,200 39.60%20%432,200--

Whats new for 2014 In addition to the federal income taxes on ordinary income, there are other taxes that may apply to personal income: Social Security Tax at a rate of 12.4% on wages and self- employment income up to the annual Social Security Wage base of $117,000 (it had been at 10.4% for 2011 and 2012). Medicare Tax at a rate of 2.9% on wages and self-employment income. Additional Medicare Tax at a rate of 0.9% on wages and self- employment income over the following thresholds: Married Filing Jointly: $250,000 Single or Head of Household or Qualifying Widow(er): $200,000 Married Filing Separately: $125,000

Whats new for 2014 Conti Affordable Care Act Tax: (OBAMA CARE) Open Enrollment for the Health Insurance Marketplace: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 began Oct. 1, 2013 and runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more at HealthCare.gov.HealthCare.gov Premium Tax Credit: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If youre already receiving advance payments of the credit, you need do nothing at this time unless you have a change in circumstance. Change in Circumstances: If you're receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to your marketplace. Reporting changes will help to make sure you are getting the proper amount of advance payments. Individual Shared Responsibility Payment: Starting January 2014, you and your family must have health care coverage, have an exemption from coverage, or make a payment when you file your 2014 tax return in 2015. Most people already have qualifying health care coverage and will not need to do anything more than maintain that coverage throughout 2014

Whats new for 2014 Conti OBAMA CARE -The Penalty fee in 2014 and beyond The penalty in 2014 is calculated one of 2 ways. Youll pay whichever of these amounts is higher: 1% of your yearly household income. (Only the amount of income above the tax filing threshold, $10,150 for an individual, is used to calculate the penalty.) The maximum penalty is the national average yearly premium for a bronze plan. $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285. The way the penalty is calculated, a single adult with household income below $19,650 would pay the $95 flat rate. A single adult with household income above $19,650 would pay an amount based on the 1 percent rate. (If income is below $10,150, no penalty is owed.) The penalty increases every year. In 2015 its 2% of income or $325 per person. In 2016 and later years its 2.5% of income or $695 per person. After that it's adjusted for inflation. If youre uninsured for just part of the year, 1/12 of the yearly penalty applies to each month youre uninsured. If youre uninsured for less than 3 months, you dont have to make a payment.

Whats new for 2014 Conti Personal Exemptions. The personal exemption amount is $3,950 in 2014, up from $3,900 in 2013. Phase-outs for personal exemption amounts (sometimes called PEP) begin with adjusted gross incomes (AGI) of $254,200 for individuals and $305,050 for married couples filing jointly; the personal exemptions phase out completely at $376,700 for individual taxpayers ($427,550 for married couples filing jointly.) Federal Gift Tax Exclusion. The annual exclusion for gifts remains at $14,000 for 2014. Individual Retirement Account Contributions. The $5,500 limit on IRA contributions remains the same in 2014.

Do it yourself(DIY)Tax Preparation IRS sponsored Free Tax Return: http://www.youtube.com/watch?v=26ESO1dqip0 http://www.irs.gov/Individuals/Free-Tax-Return- Preparation-for-You-by-Volunteers : VITA or TCE http://www.irs.gov/Individuals/Free-Tax-Return- Preparation-for-You-by-Volunteers ProviderDatesHoursLanguagesAppointment NTC-CCC27 JAN 2014 - MON1:00PM - 6:00PM VIETNAMES E NOT REQUIRED 9800 TOWN PARK DR,HOUSTON, TX 77036 713-957-4357 15-Apr-14 TUE1:00PM - 6:00PM SPANISH THU1:00PM - 6:00PM CHINESE SAT1:00PM - 6:00PM ENGLISH

Do it yourself(DIY)Tax Preparation- Conti IRS Free File: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Freehttp://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free http://www.youtube.com/watch?v=ldZcsSGA3Cs&list=PL2A3E7A9BD8A8D41D IRS recommended Free File Software: TurboTax: Adjusted Gross Income: $30,000 or less, or $58,000 or less for Active military, or Eligible for the Earned Income Tax Credit, and Live in any state for a free Federal tax return. Free Extensions TaxACT Free File Edition: Adjusted Gross Income: $52,000 or less, and Age: between 18 and 57, and Live in any state or U.S. Citizens and resident aliens with foreign addresses for a free Federal tax return. Free Extensions

Do it yourself(DIY)Tax Preparation- Conti H&R Block's Free File: Adjusted Gross Income: $58,000 or less, and Age: 52 or younger, and Live in any state for a free Federal tax return. ezTaxReturn.com: Adjusted Gross Income: $58,000 or less, and Live in any of these states: AL, AR, AZ, CA, CO, GA, IL, LA, MA, MD, MI, MS, NC, NJ, NY, OH, PA, VA, and WI for a free Federal tax return.

References resources: IRS tax resources-help yourself: http://www.youtube.com/watch?v=XAZX8kjpalI&list= PLvDH25MKBe1eDq4jxQ3FxuvKyVhstJ45c When will I get my refund? http://www.youtube.com/watch?v=AnC8tt1wdhI&list =PLvDH25MKBe1eDq4jxQ3FxuvKyVhstJ45c http://www.youtube.com/watch?v=AnC8tt1wdhI&list =PLvDH25MKBe1eDq4jxQ3FxuvKyVhstJ45c IRS Dirty Dozen-TAX FRAUD! http://www.youtube.com/watch?v=4Q85-NghrsY

How long to keep your tax return and supporting docs? IRS documentation requirements: 3 years statue of limitationIRS recommended you to keep your returns and any supporting documents. However: if you under reported income by 25%, the IRS can go back for 6 years(7 years if you claim loss for bad debt or worthless securities). IRS may have no statue of limitation, if you dont file tax return, or if you filed a fraudulent return. Jackys Recommendation: keep your return as long as possible!

References resources other: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes- for-Free http://www.irs.gov/Individuals/Free-Tax-Return- Preparation-for-You-by-Volunteers https://www.freefilefillableforms.com http://apps.irs.gov/app/freeFile IRS Tax Guide for Alien: http://www.irs.gov/publications/p519/ch03.html Tax update for 2014: http://www.irs.gov/pub/irs-drop/rp- 13-35.pdf http://www.youtube.com/watch?v=26ESO1dqip0

-presented by jacky sun,cpa-tsbpa. table of content: the u.s. federal income taxes introduction....

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