Individual Income Tax CreditsCode: 26-INDCR

98 pages
Course description and objectives:

Governments have historically used a “carrot and stick” approach to encouraging individuals and businesses to behave in ways it deems desirable: tax credits for acting as requested and tax penalties for failing to behave as required. The U.S. government similarly promotes multiple forms of socially-beneficial actions—adopting children, becoming employed, providing funds for dependents’ education, and other socially-desirable activities—by offering incentives in the form of tax credits for engaging in them. This course examines the various tax credits that may be claimed by individual taxpayers and explains how each tax credit works, its eligibility requirements, limitations, phase-outs, etc. and, for refundable tax credits, their due diligence requirements.

Of the 161,336,659 federal income tax returns received in 2023 (2022 income) by the IRS, 61,831,870 taxpayers—about 38%—claimed one or more federal income tax credits amounting to a total of $154.8 billion.[1] For a tax preparer that prepares 150 to 200 tax returns in a season, the numbers indicate that he or she is likely to encounter between 55 and 75 returns claiming income tax credits that average approximately $2,500.

Learning Objectives

Upon completion of this course, you should be able to:

• ·        Describe and identify the requirements for claiming the various income tax credits available to individual taxpayers;
• ·        List the due diligence requirements a tax preparer must meet when preparing a tax return claiming the Earned Income Tax Credit (EIC), American Opportunity Tax Credit (AOTC), Child Tax Credit, Additional Child Tax Credit, and Other Dependent Credit (CTC, ACTC, ODC);
• ·        Recognize the records a tax return preparer is required to keep to support a client’s claim for the EIC, AOTC, CTC, ACTC and ODC;
• ·        Identify the penalties that may be imposed on a tax preparer and his or her employer for failing to comply with due diligence requirements when preparing a client’s tax return claiming the EIC, AOTC, CTC, ACTC or ODC;
• ·        Calculate the tax credits available for taxpayers’ energy-efficient home improvements; and
• ·        Describe the tax credits available for the purchase of electric vehicles.

Category: Taxation

CPE credit: 5 Hours

Program Level: Update

Prerequisites: None

Advance Preparation: None

Exam expiration date: Participants must submit exams for grading within one year from the date of purchase