CTEC Certification 2025 – Complete California Tax
Preparer Guide
A cash basis taxpayer gets a few hundred dollars for payment on some random labor a few days before
Christmas but doesn't spend it until January. Does the money get reported in the year he received it or
in the year after? - ANSWER ✨✔---It gets reported in the year received under the doctrine of
constructive receipt.
Which taxing system does the United States use for income tax calculation? - ANSWER ✨✔---
progressive tax
Recovery of Capital Doctrine - ANSWER ✨✔---Recovery of Capital Doctrine states that income
cannot be taxed to the extent it is a recovery of basis. This doctrine limits the amount a person can be
taxed on a trANSWERation by subtracting the adjusted basis from the income received to arrive at net
gain.
not ordinary income - ANSWER ✨✔---long term capital gain is considered capital gain income, not
ordinary income.
pension - ANSWER ✨✔---: Anyone who receives a distribution from a pension plan before this 59.5
will be subject to a 10% penalty, unless they meet a stated exception.
,How much can taxpayers who materially participate in rental activity deduct in losses without being
subject to passive activity limits? - ANSWER ✨✔---25,000
Since TY2018, there is no requirement to include the investment income of certain children on their
parent's return. - ANSWER ✨✔---The TCJA heavily altered the "Kiddie Tax" to no longer be taxable
to the parents AND be subject to the trust and estate tax rates.
How many Schedules does the Form 1040 have? - ANSWER ✨✔---3
Which of the following forms would be present for an individual who receives both a pension and social
security? - ANSWER ✨✔---1099-R and SSA-1099
Where would the net income from all Schedule Cs on a return be directly reported? -
ANSWER ✨✔---schedule 1
child tax credit - ANSWER ✨✔---$2,000 per qualifying dependent
itemized deductions - ANSWER ✨✔---Taxpayers may deduct certain allowed expenses in lieu of
taking the standard deduction.
Which of these expenses are allowed to be itemized post-Tax Cuts and Jobs Act - ANSWER ✨✔---
State and Local taxes are still allowed to be itemized, however, they are subject to a $10,000 limitation.
Which of the following types of adjustments can taxpayers no longer take under the Tax Cuts and Jobs
Act? - ANSWER ✨✔---Moving expenses can no longer be taken as an adjustment, unless it is
incurred by a member of the military.
Medical expenses must exceed what percentage of AGI in order to qualify as an itemized deduction? -
ANSWER ✨✔---7.5%
, A client purchased a second home with a mortgage payment in 2015. How much acquisition
indebtedness can be used as the basis of the mortgage interest deduction? pre-act - ANSWER ✨✔-
--up to 1 million
Casualty and theft losses are pretty much only allowed in which circumstance? - ANSWER ✨✔---
Only for casualties and thefts experienced in a Federal disaster zone under the Stafford Act.
Which of the following taxpayers can claim earned income tax credit. - ANSWER ✨✔---A woman
legally married with 2 kids, who has been estranged for her husband for six months. This taxpayer can
claim the EITC can be considered unmarried, and file as head of household instead of MFS.
The IRS requires an additional form to be completed by the tax preparer for all returns with refundable
tax credits - ANSWER ✨✔---The IRS requires all tax preparers fill out the Form 8867 for any returns
where refundable credits are claimed.
Which of the following is true about the hobby vs business analysis? - ANSWER ✨✔---The 3 out of
5 rule for profitability can be avoided by making reasonable changes to one's business model in
response to shortcomings. Even if a business doesn't turn a profit, so long as the owner is making
reasonable changes to adjust to the market, a profit motive will be found.
What of the following expenses can be subtotaled with no additional worksheets or forms with the Sch
C? - ANSWER ✨✔---Contract labor
What is the rate of tax applied on the SE income below the benefit and contribution base for the year? -
ANSWER ✨✔---The full 7.65% rate for both the employee and employer portions, totaling 15.3%,
is used for the SE income below the benefit and contribution base.
what is deductible - ANSWER ✨✔---The entertainment is nondeductible and the meals are
reduced by 50%, leaving the full value of the company picnic to be added with the reduced meal value.
how to split wages and taxes for employer - ANSWER ✨✔---the employer's half of FICA and the
unemployment insurance are taxes, while the rest are wages. The total remitted to the government is a
combination of employer expenses and wages withheld on the employee's behalf.
Preparer Guide
A cash basis taxpayer gets a few hundred dollars for payment on some random labor a few days before
Christmas but doesn't spend it until January. Does the money get reported in the year he received it or
in the year after? - ANSWER ✨✔---It gets reported in the year received under the doctrine of
constructive receipt.
Which taxing system does the United States use for income tax calculation? - ANSWER ✨✔---
progressive tax
Recovery of Capital Doctrine - ANSWER ✨✔---Recovery of Capital Doctrine states that income
cannot be taxed to the extent it is a recovery of basis. This doctrine limits the amount a person can be
taxed on a trANSWERation by subtracting the adjusted basis from the income received to arrive at net
gain.
not ordinary income - ANSWER ✨✔---long term capital gain is considered capital gain income, not
ordinary income.
pension - ANSWER ✨✔---: Anyone who receives a distribution from a pension plan before this 59.5
will be subject to a 10% penalty, unless they meet a stated exception.
,How much can taxpayers who materially participate in rental activity deduct in losses without being
subject to passive activity limits? - ANSWER ✨✔---25,000
Since TY2018, there is no requirement to include the investment income of certain children on their
parent's return. - ANSWER ✨✔---The TCJA heavily altered the "Kiddie Tax" to no longer be taxable
to the parents AND be subject to the trust and estate tax rates.
How many Schedules does the Form 1040 have? - ANSWER ✨✔---3
Which of the following forms would be present for an individual who receives both a pension and social
security? - ANSWER ✨✔---1099-R and SSA-1099
Where would the net income from all Schedule Cs on a return be directly reported? -
ANSWER ✨✔---schedule 1
child tax credit - ANSWER ✨✔---$2,000 per qualifying dependent
itemized deductions - ANSWER ✨✔---Taxpayers may deduct certain allowed expenses in lieu of
taking the standard deduction.
Which of these expenses are allowed to be itemized post-Tax Cuts and Jobs Act - ANSWER ✨✔---
State and Local taxes are still allowed to be itemized, however, they are subject to a $10,000 limitation.
Which of the following types of adjustments can taxpayers no longer take under the Tax Cuts and Jobs
Act? - ANSWER ✨✔---Moving expenses can no longer be taken as an adjustment, unless it is
incurred by a member of the military.
Medical expenses must exceed what percentage of AGI in order to qualify as an itemized deduction? -
ANSWER ✨✔---7.5%
, A client purchased a second home with a mortgage payment in 2015. How much acquisition
indebtedness can be used as the basis of the mortgage interest deduction? pre-act - ANSWER ✨✔-
--up to 1 million
Casualty and theft losses are pretty much only allowed in which circumstance? - ANSWER ✨✔---
Only for casualties and thefts experienced in a Federal disaster zone under the Stafford Act.
Which of the following taxpayers can claim earned income tax credit. - ANSWER ✨✔---A woman
legally married with 2 kids, who has been estranged for her husband for six months. This taxpayer can
claim the EITC can be considered unmarried, and file as head of household instead of MFS.
The IRS requires an additional form to be completed by the tax preparer for all returns with refundable
tax credits - ANSWER ✨✔---The IRS requires all tax preparers fill out the Form 8867 for any returns
where refundable credits are claimed.
Which of the following is true about the hobby vs business analysis? - ANSWER ✨✔---The 3 out of
5 rule for profitability can be avoided by making reasonable changes to one's business model in
response to shortcomings. Even if a business doesn't turn a profit, so long as the owner is making
reasonable changes to adjust to the market, a profit motive will be found.
What of the following expenses can be subtotaled with no additional worksheets or forms with the Sch
C? - ANSWER ✨✔---Contract labor
What is the rate of tax applied on the SE income below the benefit and contribution base for the year? -
ANSWER ✨✔---The full 7.65% rate for both the employee and employer portions, totaling 15.3%,
is used for the SE income below the benefit and contribution base.
what is deductible - ANSWER ✨✔---The entertainment is nondeductible and the meals are
reduced by 50%, leaving the full value of the company picnic to be added with the reduced meal value.
how to split wages and taxes for employer - ANSWER ✨✔---the employer's half of FICA and the
unemployment insurance are taxes, while the rest are wages. The total remitted to the government is a
combination of employer expenses and wages withheld on the employee's behalf.
