Tax Prep Foundations

📄 Module 1: Tax Prep Foundations

Welcome to Module 1: This module lays the groundwork for everything you’re going to learn about taxes. By the end of this section, you’ll understand why taxes exist, who must file, how to pick filing statuses, and the basics of Form 1040

What the IRS Actually Does:

-The IRS collects taxes and enforces federal tax laws -The IRS does not prepare taxes, find you deductions, or file for you -The IRS communicates mainly through mail — not calls, texts, or emails

*Important:*As a tax preparer, it’s your job to properly file your client’s taxes, claim their credits, and stay compliant

Why We Pay Taxes:

-Taxes fund public services like roads, schools, government programs, and military defense -The U.S. uses a "pay-as-you-go" system, meaning taxes are taken out of paychecks during the year -Many people overpay, which is why they receive a refund -A refund isn’t free money — it’s money the taxpayer overpaid during the year

Who Must File a Tax Return: You must file if your income is over a certain amount, depending on

Filing Status
Age
Dependency Status
Income Type (W2, 1099, Self-Employment, etc.)

General Examples for 2024 Tax Year:

-Single under 65: Must file if gross income is $13,850 or more -Head of Household under 65: Must file if income is $20,800 or more -Self-employed: Must file if net earnings are $400 or more

Note: Income limits update each tax year. Always check IRS guidelines.

Filing Statuses Overview: Filing status determines

-Standard Deductio -Eligibility for credit -Tax rat

Types of Filing Status:

Single —Unmarried, no dependents
Head of Household —Unmarried with a qualifying dependent
Married Filing Jointly —Married and filing together
Married Filing Separately —Married but filing separately
Qualifying Widow(er) —Surviving spouse with a dependent child (for up to 2 years after death of spouse)

Choosing the correct status is critical for maximum refund or lowest liability.

Introduction to Form 1040:

-Form 1040 is the main form used to file personal federal income taxes -It summarizes all your client’s income, deductions, credits, and final refund or balance due

Form 1040 Major Sections:

Personal Information(name, SSN, address, filing status
Income(W2, 1099, business income, etc.
Adjustments to Income(above-the-line deductions
Tax and Credits(child tax credit, education credits
Other Taxes(self-employment tax, ACA penalties
Payments(withholding, estimated tax payments
**Refund or Amount Owed*

Think of the 1040 as your final report card for the year.

Quick Check-in:

Ask yourself — or your client:

-Did you earn income this year -Were you required to pay taxes on that income -Did you qualify for any credits or deductions -What filing status applies to you If yes to any of these, a tax return is needed

Module 1 Wrap-Up:

You’ve learned:

-Why the IRS exist -Why people pay taxe -Who must fil -Filing statuse -The layout of Form 104

Next up: Mastering the 1040 — we’ll go line-by-line so you can understand every section.

Included Downloads:

-Filing Thresholds Chart (Single, HOH, MFS, MFJ -Blank 1040 Form for practic -Glossary of Tax Term

📝 Module 1 Quiz:

What is the primary role of the IRS?

A Prepare tax returns for individuas
B Collect taxes and enforce federal tax las
C Provide financial advice to taxpayes
D Offer loans to small businesss

Which of the following individuals is required to file a tax return for the 2024 tax year?

A A single individual under 65 earning $12,00
B A self-employed person with net earnings of $30
C A head of household under 65 earning $21,00
D A married couple filing jointly with combined income of $25,00

What does the Form 1040 summarize?

A Only the taxpayer's incoe
B Only the taxpayer's deductios
C The taxpayer's income, deductions, credits, and final tax liability or refud
D The taxpayer's employment histoy