Estimated Taxes for Individuals
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Questions and Answers

What is required for the IRS to accept an electronically filed tax return?

  • A federal employee identification number (FEIN)
  • A personal identification number issued by the state
  • A unique customer reference number (UCRN)
  • An Identity Protection Personal Identification Number (IP PIN) (correct)

    • Which individual is NOT required to have a valid Taxpayer Identification Number (TIN) on a federal income tax return?

  • The taxpayer
  • Any dependents listed on the return
  • The spouse if married
  • The tax preparer (correct)

    • Which of the following statements about ITINs is TRUE?

  • ITINs can be used for purposes other than federal tax reporting.
  • ITINs are required for nonresident aliens with U.S. tax liabilities. (correct)
  • ITINs allow individuals to work legally in the United States.
  • ITIN holders are eligible for Earned Income Tax Credit.

    • What must a taxpayer do if they cannot obtain a Social Security number (SSN)?

    <p>Apply for an Individual Taxpayer Identification Number (ITIN)</p> Signup and view all the answers

    What action could potentially lead to civil and criminal charges for a tax preparer?

    <p>Wrongfully disclosing a taxpayer’s confidential information</p> Signup and view all the answers

    What special form is needed for an Adoption Taxpayer Identification Number (ATIN) request?

    <p>Form W-7A</p> Signup and view all the answers

    Who is generally NOT eligible to obtain a Social Security number?

    <p>Individuals awaiting immigration status approval</p> Signup and view all the answers

    What is the primary purpose of an Individual Taxpayer Identification Number (ITIN)?

    <p>For federal tax reporting only</p> Signup and view all the answers

    What is required to apply for an ITIN using Form W-7?

    <p>Original documentation such as a passport or birth certificate</p> Signup and view all the answers

    In what situation can a foreign person apply for an ITIN without filing a tax return?

    <p>For claiming tax treaty benefits</p> Signup and view all the answers

    Which of the following is NOT true regarding the Adoption Taxpayer Identification Number (ATIN)?

    <p>An ATIN can be used to obtain the Child Tax Credit</p> Signup and view all the answers

    What is the role of a Certified Acceptance Agent (CAA)?

    <p>To assist individuals in obtaining ITINs</p> Signup and view all the answers

    Under which circumstance can an ATIN be requested for an adopted child?

    <p>If the taxpayer cannot obtain an existing SSN for the child</p> Signup and view all the answers

    What must be included in the Form W-7 when applying for an ITIN?

    <p>Original documents proving identity</p> Signup and view all the answers

    How can a taxpayer extend the validity of an ATIN?

    <p>By submitting Form 15100</p> Signup and view all the answers

    Which statement regarding a child who dies within the same tax year is correct?

    <p>The child can be claimed as a dependent if an SSN is not obtained</p> Signup and view all the answers

    What resource did Tosha H. Knelangeon primarily use to prepare for the EA exams?

    <p>PassKey study guide and workbook</p> Signup and view all the answers

    Which student emphasized the ease of understanding the PassKey textbook for someone with little knowledge of tax and accounting?

    <p>Jake Bavaro</p> Signup and view all the answers

    What does Vishnu Kali Osirion suggest purchasing in addition to the main study material for better exam preparation?

    <p>The accompanying workbook</p> Signup and view all the answers

    Which characteristic of the PassKey resources is highlighted by multiple students?

    <p>Comprehensive and detailed explanations</p> Signup and view all the answers

    Which statement best describes the general sentiment regarding the effectiveness of PassKey materials?

    <p>Most users expressed confidence in passing due to these resources.</p> Signup and view all the answers

    What did William Collins specifically use to study for the EA SEE 2 exam?

    <p>PassKey Part 2 textbook</p> Signup and view all the answers

    What aspect of the PassKey resources was highlighted by Sharlene D. as particularly beneficial?

    <p>The organized layout and examples</p> Signup and view all the answers

    How did E.De La Garza suggest one could prepare for the EA exam while managing expenses?

    <p>By utilizing the PassKey system</p> Signup and view all the answers

    What action can taxpayers take to request an abatement of interest?

    <p>File Form 843 or submit a request by letter.</p> Signup and view all the answers

    Under what circumstances will interest abatement generally be granted?

    <p>In cases of mathematical errors made by the IRS.</p> Signup and view all the answers

    Who is responsible for filing and signing the late tax returns for a deceased taxpayer?

    <p>An appointed executor must file on behalf of the deceased.</p> Signup and view all the answers

    How can taxpayers ensure they have enough tax withheld to avoid estimated tax payments?

    <p>Use Form W-4 to adjust withholding amounts.</p> Signup and view all the answers

    What does the federal income tax system primarily rely on for revenue collection?

    <p>A pay-as-you-go mechanism through withholding or estimated payments.</p> Signup and view all the answers

    What must a taxpayer use to request an increase in tax withholding through their employer?

    <p>Form W-4.</p> Signup and view all the answers

    What are estimated tax payments primarily used to cover?

    <p>Income tax, self-employment tax, and alternative minimum tax.</p> Signup and view all the answers

    What is the penalty for individual taxpayers related to estimated taxes?

    <p>Different penalty amounts apply to individual and business entities.</p> Signup and view all the answers

    What is the minimum tax due for a taxpayer to generally have to make estimated tax payments?

    <p>$1,000 after withholding and tax credits</p> Signup and view all the answers

    In order to avoid an estimated tax penalty, what percentage of the prior year's tax liability must higher-income taxpayers pay?

    <p>110</p> Signup and view all the answers

    What was Massimo's tax liability for 2023, which impacts his estimated payments for 2024?

    <p>$30,000</p> Signup and view all the answers

    What will happen if Yvonne's total tax liability after withholding is under $1,000?

    <p>She will not face an underpayment penalty</p> Signup and view all the answers

    What is the tax liability condition that defines if Massimo needs to pay estimates for 2024?

    <p>Adjusted gross income over $150,000</p> Signup and view all the answers

    What must a taxpayer do to avoid penalties if they expect a significantly higher income next year?

    <p>Estimate and pay at least 110% of the previous year's tax</p> Signup and view all the answers

    If a taxpayer's total tax withholding exceeds the total tax liability, which of the following statements is true?

    <p>They are guaranteed a refund.</p> Signup and view all the answers

    What consequence does Granville face for not filing his 2023 tax return by March 1, 2024?

    <p>He will be required to make a payment of estimated taxes by January 15, 2024.</p> Signup and view all the answers

    Which of the following farmers is required to pay quarterly estimated taxes?

    <p>Aaron, due to his diverse sources of income.</p> Signup and view all the answers

    What condition must be met for the safe harbor provision for estimated payments to apply to partnerships?

    <p>The majority of the partnership's income must be from farming or fishing.</p> Signup and view all the answers

    Which of the following is NOT a reason for backup withholding to be required by the IRS?

    <p>The taxpayer receives less than $600 in interest payments.</p> Signup and view all the answers

    What type of businesses are generally not eligible for the special estimated tax payments rule?

    <p>C corporations, regardless of their activity.</p> Signup and view all the answers

    What is one of the conditions that might require backup withholding?

    <p>Failing to report dividends or interest adequately.</p> Signup and view all the answers

    Which situation allows a taxpayer to avoid penalties for underpaying estimated taxes?

    <p>Paying their full tax amount owed before the due date.</p> Signup and view all the answers

    In the examples provided, which payment types are subject to backup withholding?

    <p>Wages, rents, and interest payments.</p> Signup and view all the answers

    Study Notes

    Estimated Taxes for Individuals

    • Federal income tax is a "pay-as-you-go" system; most taxes are paid during the year through withholding or estimated payments.
    • Estimated taxes can cover income tax, self-employment tax, and alternative minimum tax.
    • Use Form W-4 (Employee's Withholding Certificate) to adjust withholding; submitted to employer, not IRS.
    • Safe Harbor Rule: Avoid estimated taxes by ensuring sufficient withholding; if expected tax liability exceeds $1,000.
      • Taxpayer must generally make estimated payments if total withholding and credits are less than the smaller of:
        • 100% of the prior year's tax liability.
        • 90% of the current year's tax liability.
    • Higher-Income Safe Harbor: If adjusted gross income (AGI) exceeds 150,000(150,000 (150,000(75,000 for married filing separately), pay the smaller of:
      • 90% of current year's expected tax liability.
      • 110% of prior year's tax shown on return.
    • No penalty if total tax (minus tax credits/withholding) is under $1,000.
    • Penalties may apply if tax is not paid by the deadline (April 15th for individuals).
    • Specific rules and deadlines for different income sources (e.g., farming, self-employment).

    Taxpayer Identification Numbers (TINs)

    • IRS requires valid TIN for all individuals on a tax return (taxpayer, spouse, dependents).
    • Types of TINs:
      • Social Security number (SSN)
      • Individual taxpayer identification number (ITIN)
      • Adoption taxpayer identification number (ATIN)
    • Eligibility for SSN: Generally U.S. citizens or lawful non-citizens authorized to work in the U.S.
    • ITIN: For U.S. tax reporting, non-U.S. citizens. This does not affect immigration status or permit work in the U.S.
    • ATIN: For adopted children; requested with Form W-7A; expires after two years, unless extended.
    • Form W-7 for ITIN applications typically requires original documents (passport, birth certificate).
    • Certified Acceptance Agents (CAAs) assist foreign individuals with ITIN application.

    Special Rules for Deceased Taxpayers

    • If a child is born and dies in the same tax year, and does not have an SSN, the child can still be claimed as a dependent.
    • Interest abatement is granted in unusual circumstances (e.g., mathematical errors).

    Identity Protection Personal Identification Number (IP PIN)

    • Taxpayers can request an IP PIN for secure e-filing.
    • IP PIN service availability does not depend on past identity theft victimization.

    Important Considerations

    • Taxpayer information is confidential; wrongful disclosure has significant consequences.
    • Taxpayers should be aware of special rules by income source.

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    Related Documents

    EA Review Part 1: Individuals PDF

    Description

    This quiz covers the basics of estimated taxes for individuals in the United States, including the pay-as-you-go system and the Safe Harbor Rule. It highlights the importance of Form W-4 in adjusting withholding and outlines requirements for making estimated payments based on prior and current year's tax liabilities.

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