Part 1 - Individuals - Taxation And Advice

This section of the exam covers material regarding taxation, how individuals can minimize their tax burden through adjustments, deduction and credits, and how Enrolled Agents can advise individual taxpayers.

Taxation
This section includes information regarding some of the various types of taxes for which a taxpayer may be liable and that may affect his or her tax return. Enrolled Agents should understand the role of taxation and how to calculate tax liabilities for a federal income tax return. Different topics include:

  • Alternative Minimum Tax
  • Credit for prior year minimum tax
  • Penalties and exceptions on premature distributions from qualified retirement plans and IRAs
  • Household employment taxes
  • Self-employment tax – rates and exemptions
  • Excess social security withholding
  • Conditions for filing a claim for a refund
  • Underpayment penalties and interest
  • Tax provisions for members of the clergy

Advising the Individual Taxpayer
An Enrolled Agent, by definition, is a federally licensed tax practitioner with technical expertise in the field of taxation. Enrolled Agents advise, represent and prepare tax returns for individuals (and other entities). In addition to tax preparation and taxpayer representation, Enrolled Agents may also offer services such as accounting and bookkeeping, financial planning and budgeting, payroll services and financial statement preparation. All Enrolled Agents specialize in taxes (unlike attorneys and certified public accountants) and receive their right to practice from the United States government. As an Enrolled Agent, you may be responsible for advising taxpayer clients on a wide variety of tax-related topics, including:

  • Education planning – lifetime learning credit,529 plans
  • Estate planning – gift versus inheritance, trusts, family partnerships, charitable giving, long-term care, life insurance
  • Marriage and divorce – divorce settlements, common law, community property
  • Property sales –  home, stock, businesses
  • Reporting obligations individuals
  • Retirement planning – annuities, beneficiary ownership, employer plans, IRAs, etc.
  • Items that will affect future returns - carryovers, net operating loss, Schedule D, Form 8801
  • Injured spouse
  • Innocent spouse
  • Estimated tax
  • Adjustments, deductions, and credits for tax planning
  • Use of capital gain rates versus ordinary income rates - character of transaction
Specialized Returns For Individuals
Related Articles
  1. Professionals

    Holding Out for Capital Gains Could Be a Mistake

    Holding stocks for the sole purpose of avoiding short-term capital gains taxes may be a mistake, especially if all the signs say get out.
  2. Professionals

    Advisors: Warn Clients About These Audit Triggers

    There are several factors that may increase the risk of an audit, especially with high-net-worth clients.
  3. Professionals

    3 States Where Taxes Can Hammer Retirees

    Knowing which states ding retirees with the highest tax implications should be part of your retirement research.
  4. Professionals

    Best Ways to Avoid RMD Tax Hits on IRAs

    If you want to avoid hefty tax penalties, read this cheat sheet on IRA required minimum distributions.
  5. Retirement

    Top Tips for Minimizing Taxes on Social Security

    Social Security benefits are taxable under certain circumstances. Here are some ways retirees can lessen the tax burden.
  6. Professionals

    How to Help Retirees Manage Taxes on Distributions

    There are many variables when it comes to helping retirees manage taxes on distributions. Here's what advisors need to consider.
  7. Taxes

    Employers: Don't Forget IRS Form 941

    Your obligations as an employer include various employment taxes. Use this form to report them.
  8. Entrepreneurship

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  9. Taxes

    What's IRS Form 2848 Used For?

    It's a power of attorney tax form and here's what it can, and cannot, do.
  10. Taxes

    20 Medical Expenses You Didn't Know You Could Deduct

    To lower your tax bill, be sure not to miss out on these commonly overlooked medical tax deductions.
RELATED TERMS
  1. Structured Transaction

    A series of transactions that could have been treated as a single ...
  2. Tax Deductible Interest

    A borrowing expense that a taxpayer can claim on a federal or ...
  3. Working Tax Credit (WTC)

    A tax credit offered to low-income individuals working in the ...
  4. Proof of Charitable Contributions

    Substantiation required by the Internal Revenue Service for a ...
  5. Quid Pro Quo Contribution

    A charitable donation for which the donor receives something ...
  6. Readvanceable Mortgage

    A mortgage feature that allows the borrower to re-borrow the ...
RELATED FAQS
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  2. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  3. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>
  4. How are write-offs recorded on my tax return?

    The way your write-offs are recorded on your tax return varies depending on whether you are filing a personal or business ... Read Full Answer >>
  5. How is the deductible I paid for my insurance claim treated for tax purposes?

    The deductible you pay on your health insurance policy may be tax-deductible if you meet certain conditions. However, whether ... Read Full Answer >>
  6. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!