CPA1040 Help!!!

Personal Information
Please complete all personal information related to your tax return. This includes your name, address, social security number(s), contact information, birthdate, etc.

At the bottom of this information you need to designate the state return (if any) that will be included with your federal personal income tax return.

Dependent Information
Complete all dependent information, one dependent per box. Social security
numbers are required for any dependent that is older than 2 months of age as of January 1, 1998.

Please complete the entire questionnaire. Do not leave any questions unanswered. This will help us to determine the proper treatment of your tax information and will alert us as to any missing information.

Wages, Salaries, Tips
Enter all wage information that is on your W-2. The W-2 is provided to you by your employer.

Please complete all boxes if you have a W-2. The W-2's need to be attached to your tax return. If these are not mailed to us, then you must attach the W-2's to your completed tax returns before you mail the returns to the taxing authorities.

If you did not receive a W-2, please complete the information based upon your final pay stub for the year. Let us know that you did not receive a W-2 and what efforts you made to obtain the W-2. We will attach the appropriate documentation to your return.

Pensions, IRA Distributions, W-2G, and 1099-R All pension information can be found on your W-2G or 1099-R. You must attach a copy of the W-2G or 1099-R to your income tax return if either federal or state income tax was withheld from your distribution.

If you received a distribution from a retirement/pension plan and you are under 59 1/2 years old, you may be subject to penalties for premature distribution. If you are aware of any reason that would make you exempt from the penalty, contact our office. You may be exempt from the penalty based on a number of exceptions. Please e-mail us to discuss your particular situation.

Interest Income
Interest information can be found on the form 1099's issued to you. If a 1099 was not issued or the 1099 was misplaced you can usually find the required information on your December bank or brokerage statement.

If you sold property and are carrying back a note, enter the interest income in seller financed mortgage. Be sure to include the name and social security number of the payee.

For tax-exempt interest income, be sure to properly classify the interest as either In-State Bonds (for your state of residence) or Out-of-State bonds.

Any interest earned from U.S. Bonds of Treasury Bills should be entered separately in the appropriate box.

Dividend Income
Dividend income can be found on the form 1099's issued to you. If a 1099 was not issued or the 1099 was misplaced you can usually find the required information on your December bank or brokerage statement.

Under the column marked Gross Dividends please enter the entire dividend. If any portion of the entire dividend was classified as Capital Gain Dividend indicate that amount under the column Capital Gain Dividend. Do not reduce the Gross Dividend by the amount of the Capital Gain Dividend. If you have any doubts about the correct amount to report under Gross Dividends you should fax us a copy of your 1099 reporting the dividend.

Enter "Bond Interest" in its appropriate box. Do not reduce the amount shown as a "Gross Dividend" for any amounts listed under the other categories.

Other Income & Adjustments
State Refund - Enter the amount of your 1997 state income tax refund. Only enter this amount if you itemized in 1997.

Social Security Benefits - Enter the net social security benefits received during the calendar year. This information can be found on your annual statement of benefits, form SS-5 .

Alimony Received - Enter total alimony received. Do not enter non-taxable child support.

Unemployment Compensation Received - Enter total unemployment compensation received.

Unemployment Compensation Repaid - Enter total unemployment compensation repaid. This will offset the income tax will be taxed as unemployment compensation.

Taxable Scholarships and Fellowships - Enter the taxable portion of scholarships and fellowships received during the year.

Income Subject to Self Employment Tax - Enter all other sources of income which would be subject to self employment tax that are not reported on your Schedule C.

Other Income - Enter all other income received which would not be subject to self employment tax. This income is routinely gambling winnings, prizes and awards, or other miscellaneous income reported on a 1099-MISC.

Gambling losses are deductible to the extent of gambling winnings. You enter the gross amount of gambling winnings here and the gambling losses in the itemized deductions portion of the data entry.

Self-Employed Health Insurance Premium - This field is only applicable to individuals who are self-employed. Please enter the total amount of health insurance that you paid for yourself during the year. Premiums paid for employees are reported on the Schedule C separately from this amount

Alimony Paid - Enter total alimony paid. You must enter the name and the social security number of the recipient in order to get credit for the payment. Remember that child support payments are not typically a deduction. Payments to your spouse that are designated as family support may or may not be deductible, depending on your divorce agreement.

Other Adjustment to Income - IRA, SEP-IRA, and Keogh contributions for the current year are entered here.

Estimated Tax Payments
Please list all federal and state estimated tax payments and any overpayments from the prior year which were applied to the current years taxes. It is very important that you list all payments and dates. If you do not enter a payment, we will not be aware of it. However, the taxing authorities will usually give you credit for all payments made.

Application of Overpayment
In the event you have an overpayment, indicate if you want it refunded or applied to the next year.

1999 Estimated Tax Information
This section will help us to determine if is is necessary for you to make quarterly estimated tax payments in 1999. If this section is left blank then we will assume that you expect 1999's income and expenses to be similar to 1998's.

Itemized Deductions
Medical - Please complete all medical expenses. Should you have medical expenses that you cannot classify into the printed categories, please put the description and amount under the classification"Other Medical".

Taxes - Enter all taxes paid during the tax year into their appropriate field . Do not duplicate any amounts that are input elsewhere, such as those amounts that are reported as withheld on your W-2 wages that are reported on your W-2 or taxes withheld on a pension distribution that is reported on the 1099-R..

Home Mortgage Interest Expense - You should receive a form 1098 for the mortgage interest paid on your home loan. If you purchased a home this year and paid "points" to get the loan, enter the amount paid for points below mortgage interest in the same input area.

If you pay mortgage interest to an individual, you must include the name, address, and social security number of that individual.

Points paid on a mortgage loan refinance are not currently deductible to the extent that those points were for refinancing a current loan balance. If you borrowed additional money on your mortgage to complete home improvements, then that portion of points that funded the additional mortgage balance for home improvements is currently deductible.

Investment Interest Expense - This type of interest expense is paid on money you borrowed that is allocable to property held for investment. This interest is subject to limitations based upon investment income. The "Carryover" of investment interest expense relates to prior years investment interest expense which was not deductible in that prior year. The carryover information can be found on Part 3, line 7 of the 1997 form 4952.

Passive Interest Expense - Passive interest is interest expense from passive investments. An example of this type of investment is a non-real estate limited partnership interest where you do not participate in the running of the partnership. Your involvement is limited to merely owning the limited partnership interest.

Personal Interest Expense - There is no longer any deduction for personal interest.

Cash Contributions - Please list all your cash (and check) contributions for the year. For any contribution in excess of $250, you are required to maintain a receipt from the charity as part of your records.

Non-Cash Contributions - Non-Cash contributions are typically comprised of clothing, books, household appliances, toys, old computers, etc. that you donate to charities. Checks are included as cash contributions.

Most of us give these types of items to Goodwill, the Salvation Army, our church or temple, etc. For all non-cash contributions, indicate the name and address of the charity, the description of the property donated, your cost of the property donated and the value of the property when donated.

For non-cash charitable contributions in excess of $500, the IRS requires additional disclosure on a form 8283 of your income tax return. Just fill in all the blanks on our form 8283 input section.

Contribution Carryovers - Please list any contribution deductions that were limited in prior years in the appropriate fields. You may have these if you gave an amount to a charity that exceeded 50% of your adjusted gross income in a prior year.

Unreimbursed Employee Expenses - List all employee business expenses. These are expenses paid by you directly, were not reimbursed by your employer, and relate to your job as an employee. They can include automobile expenses, business telephone expense, business publications, business computers, software, and peripherals, and any other necessary business related expenditures.

Be sure you retain cancelled checks and receipts for all expenses that you claim were for business purposes.

Investment Expenses - Investment expenses are expenses incurred for the production of investment (interest, dividends, and capital gains) income. For example, a fee paid to an investment advisor would be input here. Legal fees paid to protect your investments would be entered here. Money that you pay on a margin account for stock investments in Investment Interest Expense.

Other Miscellaneous Deductions - Input all miscellaneous itemized deductions in this section. Common miscellaneous deductions are tax preparation fees, safe deposit box rentals, union dues, or other professional dues related to your employment.

Child and Dependent Care Expenses - Please complete in full so we can compute the amount of the credit, if any is available.

Schedule C - Self-employed Business
Please complete the entire schedule C input. All unanswered boxes will be assumed to be zero or not applicable. Most of the general information can be found in your prior years Schedule C.

Schedule D - Stock Transactions
This section is used to report sales of stocks, bonds, and other capital assets. For 1998, any stocks held for longer than one year are subject to long-term capital gains tax rates which are significantly lower than you regular tax rates.

Sale of Property
The gain from a sale of property such as real estate, collectibles, or business assets will generate income. This income is included on your tax return. The character of the income depends on the character (business, investment, personal) of the asset sold.

For instance, a gain on the sale of real estate can yield a short term gain taxed at ordinary income rates, depreciation recapture taxed at a capital gain rate of 25%, or capital gain in excess of depreciation recapture taxed at a 20% rate.

If the real estate is used in a trade or business, including a rental property trade or business, a loss on the sale is usually an ordinary loss which can offset your other earned/salary/investment income.

A gain on the sale of a personal asset that is not used for investment or business is a long term capital gain if you held the asset for more than one year. However, losses on the sale of personal assets are usually not deductible.

Gain or loss on the sale of investments is either short term or long term capital gain or loss.

Yes, it can be complicated. By completing this section you will be telling us whether or not the asset, other than stock, was business, investment, or personal. You will also tell us about any depreciation you might have claimed on the asset, the asset's sale price, its cost, and all of the relevant dates. We will calculate the appropriate amounts of gain and there tax-character per your input. You may here from us on this issue if you data entry appears unclear or incorrect. Don't worry, we're happy to help.

Schedule E - Rental Properties
Most of the general information can be found on your prior year's Schedule E. All unanswered boxes will be assumed to be zero or not applicable.

Losses arising from rental properties may be limited based upon the passive loss rules.

Form 2106 - Vehicle/Employee Business Expenses
Complete all areas applicable. When completing the detailed fields do not duplicate expenses entered on either the Schedule C or in Itemized Deductions.

Vehicle expenses can be deducted only if you maintain a contemporaneous (detailed) record of your business related automobile usage; usually a written automobile log. Deductible business mileage generally does not include commuting to your first place of work and returning home from your last place of work.

If your primary place of work is your home then you would not have any commuting mileage. Your mileage would be split between business and personal. Business mileage percentages can be higher if there is no personal, non-deductible commuting in the mix.

Your automobile expenses are prorated based upon business usage to total usage. An alternative system would be to use the standard mileage rate. This method multiplies the business mileage by the standard rate allowed by the Internal Revenue Service. Should you complete the input entirely we will determine which method is the most advantages to you.

Parents Election to Report Child's Income
This form allows the parents to report their children's income on the parents income tax return if:
  • The child was under age 14 on January 1, 1999;
  • If the child is required to file a tax return for 1998;
  • If the child's income was more than $700 and less than $7,000;
  • If interest and dividends (including capital gain dividends) were the child's only income;
  • If the child did not make any estimated tax payments; and
  • If federal income tax was not withheld from backup withholding.

Page 15 Depreciation is designed for highly complicated depreciation of assets. Some individuals have assets in their business where federal depreciation is calculated with a different method than state depreciation or "book" depreciation.

In addition, some very sophisticated taxpayers might understand the fine points of IRC Section 179 depreciation. They can use this input to specify exactly how much IRC Section 179 depreciation they have chosen for us to take on a particular business asset.

In any event, this input screen is designed for "the Pro's" who want to make some very specialized choices, rather than have us do it for them.

If you don't understand this section, don't worry. Most people should use the simplified asset depreciation input at page 16. Let us do the work and the calculations. We will make the selections designed to minimize you tax liability automatically.

Depreciation and Asset Acquisition
This section is used to enter all of the assets that you use for business, investment, or rental activities. In column one (Description of Property) enter the description of the asset, such as: Pentium 350 computer, Ford Explorer, Ricoh Fax Machine, etc.

In column 2, Related Business Activity, tell us which business uses the asset. For instance, you may have a computer consulting business which uses the Pentium computer. Your wife may be an architect who uses the Ford Explorer for a different business. You might also have a rental property that uses the fax machine. Entries in the Related Business Activity column would then be: Computer Consulting, Architect, and Rental Property 1. Call your business whatever you like as long as we can tell which business(es) you are referring to.

Column 3 and 4 should be self-explanatory. If you need help e-mail or call us.

If you are using CPA1040 for the first time, but have had some assets that you have been depreciating on an earlier tax return, then you have some accumulated depreciation from earlier years. Give us the totals of the prior depreciation taken for these earlier assets. Complete the state depreciation column if the state amounts were different than the federal amounts.

For all 1998 asset purchases, we will compute the depreciation which minimizes your tax liability.

Engagement Agreement
This Agreement constitutes the final agreement for tax-preparation. Please read it carefully and thoroughly. The high points of the agreement are that you acknowledge that we are preparing your 1998 personal income tax return from the information that you provide us, that we are not preparing any other type of business statement, that you have the records necessary to substantiate your income and deductions, and that you agree to pay us for our work. Even after accepting this agreement you have not yet committed to paying us for anything.

After accepting this agreement you will move to the next screen, which will tell you how much the return will cost. If after reviewing the cost you decide that you do not want us to prepare your return, then do not fill in the payment information and do not submit the return. You are under no obligation until you fill in the payment information and submit the return.

Once you have submitted the return to us, we will begin preparing your return and apply for credit card approval. If your credit card is accepted, you will hear from us within one business day if we have any questions. Usually tax returns are completed and shipped within 2 business days.

In the event that we must contact you to clarify any tax issues, we will call you within 2 business days. Of course, the tax issues must be resolved before we can complete the return. In the rare event that an additional charge for the return is necessary, you approval will be requested before we undertake that work.

Fee Schedule and Payment Information
The Fee Schedule outlines the charges and includes where the charges have originated from.

Please fill out all information completely. Incomplete information will return an error and prohibit you from completing the preparation process. See the discussion above under Engagement Letter for a more complete description of the payment process.

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