CTEC 60 Hour Qualifying Education

Protecting yourself and your clients is one of the biggest challenges that tax return preparers face today. Criminals have learned that tax return preparers have a lot of information about their customers, including their Social Security numbers, information about their families, and employment history. Criminals want to steal this information and weaponize it to steal money from banks, the IRS, or conduct other crimes.

This chapter explains the importance of interviewing the taxpayer. Each segment of the chapter will cover a section of Form 1040 with sample interview questions that are needed for the section discussed. The tax professional needs to understand the importance of knowledgeable questions to determine if the taxpayer is eligible to claim certain credits. Interview questions asked should be documented as well as the answers the taxpayer provided. Knowing basic tax law is essential.

Preparing tax returns is an art; knowing which questions to ask will help determine the best tax situation for the individual. Just imputing information into software does not prepare an accurate tax return. The saying is true: “garbage in, garbage out”. Entering incorrect information so that the taxpayer receives a higher refund is not the best situation for you or the client. This chapter provides you with a brief overview of current year forms and sample questions to determine the best tax position for the taxpayer. Asking the taxpayer, the right questions from the beginning provides the tax preparer accurate answers needed to complete the tax return.

CA Compiling Taxpayers Information

The California tax return does not follow the federal return line-by-line, as established by the following:

• California subtracts the exemption amount from the tax owed.

• California did not conform to the TCJA with respect to not being able to claim an exemption for dependents.

• California begins by gathering the taxpayer’s and spouse’s personal information.

• If the couple’s status is a registered domestic partner (RDP) or same-sex married couple (SSMC), you will enter the spouse’s information on Form 540.

The information needed to complete the state return is: 

• First and last name as found on SSN or ITIN.

• Address (including city, state, and zip).

• Date of birth.

• Prior name (if the taxpayer or spouse filed a prior California return with a different last name). 

California does not conform to most of the federal Tax Cuts and Jobs Act changes. A tax practitioner needs to understand state tax law to make sure that the taxpayer is receiving all the credits and paying the correct amount of tax.

This chapter will present an overview of the Tax Cuts and Jobs Act standard deduction and what circumstances permit taxpayers to claim a higher standard deduction. You will also learn what an exemption is, what exemptions each of the filing statuses can claim, and how to identify a qualifying dependent.

CA Standard Deductions, Dependents, and Filing Status

California did not conform to most of the federal Tax Cuts and Jobs Act changes. Subsequently, as a California tax preparer, you will need to make sure your software allows for the personal exemptions as required to complete the California state return.

As you have already seen, filing statuses can get very complicated at the Federal level. Unfortunately, it gets even more complicated when you include filing statuses at the state level as well. As previously stated, state law governs many aspects of the filing, like whether a taxpayer is married or legally separated under a divorce or separate maintenance decree. It is important for California tax preparers to know their state’s laws to prepare their clients’ returns as accurately and professionally as possible.  

The IRS has the authority to tax all income from whatever source it is derived. This includes compensation for services, gains from dispositions of property, interest and dividends, rent and royalties, pensions and annuities, gambling winnings, and even illegal activities. All such income a person receives is collectively referred to as “worldwide income.” However, not all money or property is taxable or subject to tax. This chapter will cover the different types of taxable and nontaxable income and show you where and how to report such wages on a professionally prepared tax return. A tax professional must recognize the different kinds of taxable income, tax-exempt income, and other income included in Schedule 1, line 21, and must know how to figure out the taxable percentage on Social Security benefits.

CA Income

Although California does not conform to certain provisions of the Internal Revenue Code, it does conform in the following ways:

• The “general rule.”

• The “simplified general rule,” or the “safe harbor method.”

• IRA rollovers.

• Roth IRAs.

• Archer MSAs.

• Coverdell ESAs.

• Current-year IRA deductions.

• Lump-sum credits received by federal employees.

Any interest or dividends can be taxable income if they are credited to the taxpayer’s account and can be withdrawn. This chapter will cover the exceptions to this rule and show which interest and dividends are not taxable income and which expenses can be deducted on the taxpayer’s Schedule A if the taxpayer itemizes.

CA Interest and Dividends

Most interest income taxable by federal standards is also taxable by the state of California. There are a few exceptions, however, including the fact that California exempts interest income for U.S. obligations. In California, adjustments are not made for exempt-interest dividends. Certain mutual funds are qualified to pay an exempt-interest dividend if at least 50% of their assets consist of tax-exempt government obligations. The portion of the exempt-interest dividend should be shown on the annual statement from the mutual fund. If the California exempt-interest dividend amount is different from the federal amount, an adjustment will be required.

Self-Study Internet-Based Courses

Students have the right to request a full refund of their purchase excluding taxes and shipping (if applicable) within seven (7) days of the purchase date if unsatisfied with the online course material. A request made after seven (7) days but no more than 30 days with 0% coursework completed will result in a store credit. If a textbook was purchased with the internet-based course, a refund will only be issued after the original textbook(s) have been received in a re-sellable condition. If the textbook is not shipped back only partial credit will be refunded. Any other requests outside of this policy will be denied. The request must be made in writing and sent to info@latinotaxpro.org.

How to Request a Refund
To request a refund, simply fill out the "Refund Request Form" and fax it to 831-424-3218. You can also email it to our Accounting Department:

LTPA Accounting Department
Janvictor Zamora, Sr. Accountant
Phone 866-936-2587
Fax 831-424-3218
Email: info@latinotaxpro.org

Latino Tax Professionals Association
1588 Moffett St., Suite A
Salinas, CA 93905 U.S.