ACAT ATP cheat sheet

Gross income under IRC §61 includes all income from whatever source derived unless specifically excluded; exclusions must be found in the Code, not inferred.

Above-the-line deductions (adjustments to income) reduce gross income to arrive at AGI; below-the-line deductions apply after AGI and require itemizing or the standard deduction.

Standard deduction amounts are indexed annually and vary by filing status; additional amounts apply for age 65+ and blindness, and the additional deduction for age/blindness is per qualifying condition per person.

Capital gains: short-term (held one year or less) taxed at ordinary rates; long-term (more than one year) taxed at preferential 0/15/20 percent rates based on taxable income thresholds.

Net capital losses are deductible against ordinary income only up to $3,000 per year ($1,500 if married filing separately); excess carries forward indefinitely.

§121 exclusion: up to $250,000 ($500,000 MFJ) of gain on sale of a principal residence if owned and used as principal residence for 2 of the 5 years preceding sale.

Filing status rules: head of household requires an unmarried or considered-unmarried taxpayer who paid over half the cost of maintaining a home for a qualifying person for over half the year.

Qualified business income deduction under §199A is generally 20 percent of QBI, subject to limitations based on W-2 wages and qualified property for higher-income taxpayers in specified service trades or businesses.

Retirement distributions before age 59½ are generally subject to a 10 percent additional tax unless an exception applies (e.g., disability, substantially equal periodic payments, qualified higher education, first-time homebuyer up to $10,000).

Circular 230 Subpart B duties: practitioners must not give written advice based on unreasonable factual or legal assumptions, or that unreasonably relies on representations of the taxpayer.

§6694 preparer penalty: understatement due to unreasonable position is $1,000 (or 50 percent of preparer income, if greater); willful or reckless conduct raises it to $5,000 (or 75 percent of income).

§6695 imposes separate penalties for failure to furnish copy to taxpayer, failure to sign return, failure to include PTIN, and failure to retain records, generally $60 per failure, indexed.

A preparer may rely in good faith on information furnished by the client but must make reasonable inquiries if information appears incorrect or inconsistent.

Statute of limitations on assessment is generally 3 years from filing date; 6 years if gross income omitted exceeds 25 percent; unlimited for fraud or failure to file.

Return due date for individuals is the 15th day of the fourth month after year-end (April 15); extensions under Form 4868 give 6 additional months to file, not to pay.

Estimated tax safe harbor: no underpayment penalty if payments equal at least 90 percent of current-year tax or 100 percent of prior-year tax (110 percent if prior-year AGI exceeded $150,000).

Confidentiality: §7216 prohibits disclosure or use of tax return information by preparers without taxpayer consent, subject to specific statutory exceptions.

Practitioner disrepute and sanction rules under Circular 230 §10.50–10.51 govern practice before the IRS; sanctions include censure, suspension, and disbarment.