CTEC 60 Hour Qualifying Education

QE Credits: 45 Federal Tax Law, 15 California Tax Law

This course meets the 2024 60-hour qualifying education requirement imposed by the state of California to become a tax preparer. This course has been approved by the California Tax Education Council Vendor #2080.

In this beginner CA tax preparer course, you will learn…

  • How to prepare a federal individual tax return
  • Filing status
  • Which form to use
  • Credits the taxpayer qualifies for

This course contains 13 Chapters; after each chapter, the student will complete online review questions and a Practice Tax Return (PTR). PTR’s are based on the course content that has been covered so far and will have its own set of review questions. Returns that use the Schedule A are prepared with state income tax withholding on line 5 and the additional state-specific taxes such as CASDI. 

How to access your course?

First-time users: You will receive an email from edsupport@latinotaxpro.com with the subject line "Welcome to Prendo365". This email will contain your username and password. Please check your spam/junk folder if you do not see the email. Prendo365.com is our powerful, user-friendly E-learning system where you can access the eBook, quizzes, practice tax returns, finals, and more!

Returning users: You can access your course on Prendo365.com with the same login credentials as previously used. If you forgot your password, simply click "Forgot your password?" right below the sign-in box on Prendo365. 

Click on a chapter title to view the content description  

Chapter 1: Ethics and Preparer Penalties

This chapter will cover tax preparer due diligence and penalties. When the taxpayer files a return with refundable credits the tax preparer needs to complete an accurate tax return and complete Form 8867, which is attached to the taxpayer’s return. The following refundable credits will be discussed in this course:

• Earned Income Credit (EIC).

• Child Tax Credit (CTC).

• Additional Child Tax Credit (ACTC).

• Other Dependent Credit (ODC).

• American Opportunity Tax Credit (AOTC).

Chapter 2: Compiling Taxpayer Information

The tax preparer will learn how to collect taxpayer’s information needed to prepare an accurate tax return. This course will give detailed interviewing example questions to understand how to collect the necessary information. Completing an interview to gather taxpayer’s information to understand the taxpayer’s situation to prepare an accurate tax return is an essential step.

Sample questions are provided for each section of the tax return to help the student understand the importance of knowing the “how” to and “why” ask questions to gain the necessary information from the taxpayer.

CA Compiling Taxpayers Information

The California tax return does not follow the federal return line-by-line, as established by the following:

• California subtracts the exemption amount from the tax owed.

• California did not conform to the TCJA with respect to not being able to claim an exemption for dependents.

• California begins by gathering the taxpayer’s and spouse’s personal information.

• If the couple’s status is a registered domestic partner (RDP) or same-sex married couple (SSMC), you will enter the spouse’s information on Form 540.

The information needed to complete the state return is: 

• First and last name as found on SSN or ITIN.

• Address (including city, state, and zip).

• Date of birth.

• Prior name (if the taxpayer or spouse filed a prior California return with a different last name). 

California does not conform to most of the federal Tax Cuts and Jobs Act changes. A tax practitioner needs to understand state tax law to make sure that the taxpayer is receiving all the credits and paying the correct amount of tax.

Chapter 3: Filing Status, Dependents and Deductions

This chapter offers a review on who qualifies for the standard deduction, and what circumstances allow taxpayers to claim a higher standard deduction. You will also learn what an exemption is, (even though it has been suspended due to TCJA). Filing status is used to determine filing requirements, standard deduction, correct tax, and taxpayer’s eligibility for certain credits and deductions. If more than one filing status applies to the taxpayer, the tax professional should choose the one that lowers the amount of tax for the taxpayer.

CA Standard Deductions, Dependents, and Filing Status

California did not conform to most of the federal Tax Cuts and Jobs Act changes. Subsequently, as a California tax preparer, you will need to make sure your software allows for the personal exemptions as required to complete the California state return.

As you have already seen, filing statuses can get very complicated at the Federal level. Unfortunately, it gets even more complicated when you include filing statuses at the state level as well. As previously stated, state law governs many aspects of the filing, like whether a taxpayer is married or legally separated under a divorce or separate maintenance decree. It is important for California tax preparers to know their state’s laws to prepare their clients’ returns as accurately and professionally as possible.  

Chapter 4: Income

The IRS has the authority to tax all income from whatever source derived. This includes compensation for services, gains from dispositions of property, interest and dividends, rent and royalties, pensions and annuities, gambling winnings, and even illegal activities. All such income a person receives is collectively referred to as “worldwide income.” However, not all money or property is taxable or subject to tax. This course discusses the different types of taxable and nontaxable income and show you where and how to report such wages on a professionally prepared tax return. A tax professional must recognize the different kinds of taxable income, tax-exempt income, and other income included in Schedule 1, line 8, and must know how to figure out the taxable percentage on social security benefits.

CA Income 

Although California does not conform to certain provisions of the Internal Revenue Code, it does conform in the following ways: 

• The “general rule.”

• The “simplified general rule,” or the “safe harbor method.”

• IRA rollovers.

• Roth IRAs.

• Archer MSAs.

• Coverdell ESAs.

• Current-year IRA deductions.

• Lump-sum credits received by federal employees.

Chapter 5: Adjustments to Income

In this chapter, students will learn how various expenses are used to “adjust” or lower the taxpayer’s income to arrive at his or her adjusted gross income (AGI). They will also learn how the Tax Cuts and Jobs Act (TCJA) has impacted adjustments at the federal level and how to handle any previous-year returns that preceded those TCJA-mandated changes.

CA Adjustments to Income

In this chapter, you will learn what adjustments need to be made to California income and where to enter it on 540 Schedule CA. You will first review a few items from Part I, Section A, Income. Then, you will review Part I, section B, Adjustments to Income. The chapter will conclude by presenting a few items from Part II, Adjustments to Federal Itemized Deductions.

Chapter 6: Other Taxes and Taxpayer Penalties

This chapter provides an overview of miscellaneous taxes from the Form 1040 and reported on Schedule 2 that a taxpayer might be assessed. This includes excess Social Security tax, additional taxes on IRAs, the Alternative Minimum Tax, and household employment taxes. 

CA Other Taxes and Taxpayer Penalties

The Franchise Tax Board (FTB) is the agency responsible for collecting state personal income taxes in California. The revenues FTB collects are placed in the state’s general fund to help pay for items, such as roads, parks, law enforcement, and schools. California’s state income tax system is based on the principle of voluntary compliance. Voluntary compliance is a system of taxation that relies on individual citizens to properly report their income, calculate their tax liability, and file their tax returns timely.

This lesson is a brief overview of other California taxes that a taxpayer might pay as well as the types of penalties a taxpayer may pay and why. 

Chapter 7: Payments and Tax Credits

A nonrefundable tax credit reduces the amount of tax liability that may have to be paid. Unlike a deduction, which reduces the amount of income that is subject to taxation, a credit directly reduces the tax itself. There are two types of credits: nonrefundable, which cannot reduce tax liability below zero, and refundable, which can reduce tax liability below zero, resulting in the need for a refund.

CA Tax Credits and Payments

Although a variety of California tax credits are available to help the taxpayer reduce their tax liability, California does not conform to all the credits that can be claimed on the federal return. This chapter will cover FTB Form 540, lines 40-48. California refers to this section as “Special Credits”. A tax preparer is responsible for ensuring (to the best of his or her knowledge) that the taxpayer is filing a true and accurate return by asking the client detailed questions and doing as much research as necessary.

Chapter 8: Itemized Deductions

When computing taxable income, personal expenses cannot be claimed as itemized deductions; however, tax rules do allow for some deductions that are essential for daily living. These specific expenses are deductible as itemized deductions. A standard deduction is a set amount that the taxpayer can claim based on his or her filing status. Itemized deductions are shown on the tax return using Schedule A, Itemized Deductions. The taxpayer must decide whether to itemize deductions or use the standard deduction and should choose whichever option is best for their tax situation.

CA Itemized Deductions

The Tax Cuts and Jobs Act made some changes to the Internal Revenue Code (IRC) that California did not adopt. California does conform with IRC regulations established on and before January 1, 2015. Because of these changes, California residents will need to make adjustments on their 540 Schedule CA to account for the differences between state and federal tax law.

Chapter 9: Schedule C

This chapter encompasses how the sole proprietor reports income. Sole proprietorship is the most popular business structure. A sole proprietorship is indistinguishable from its owner, and all income earned is reported by the owner. Schedule C is the reporting tool for most sole proprietors. Covered in the course is line by line instruction to complete the Schedule C.

Chapter 10: Schedule E and Capital Gains and Losses

Rental income is any payment received for the use or occupation of real estate or personal property. The payment that is received is taxable to the taxpayer and is generally reported on Schedule E. Each Schedule E can report three properties. If the taxpayer has more than three properties, additional Schedule E’s would be used. Schedule E is not used to report personal income and expenses. The taxpayer should not use Schedule E to report renting personal property, that is not a business. To report other income, use Schedule 1, lines 8 – 24b.

Chapter 11: Schedule F and Depreciation

Income received from the operation of a farm or from rental income from a farm is taxable. Farmers determine their taxable income from farming and related activities by using Schedule F. Profit or loss from farm income is first reported on Schedule F and then “flows” to Form 1040, Schedule 1, line 6. This course covers basic farm income and expenses.

Chapter 12: Extensions and Amendments

If taxpayers are unable to file their federal individual tax returns by the due date, he or she may be able to qualify for an automatic six-month extension of time to file. The taxpayer can either electronically file or mail Form 4868 to the IRS to file for the extension. If the taxpayer has filed a return and realizes that a mistake was made, he or she would file an amended return by using Form 1040-X.

CA Extensions and Amendments

If taxpayers are unable to file their California individual tax return by the due date, they may be able to qualify for an automatic six-month extension of time to file by electronically filing or mailing Form 3519 to the FTB. If the taxpayer has filed a return and realizes that a mistake was made, he or she would have to file an amended return using Schedule X.

Chapter 13: Electronic Filing

Electronic filing (also referred to as E-File and E-filing) is the process of submitting tax returns over the internet via properly-certified tax software. The E-File system has made tax preparation significantly easier, and the IRS notifies software users within 24-48 hours if they accepted or rejected the tax return. E-filing is not available year-round but rather begins sometime in January and ends sometime in October; the IRS determines when exactly e-filing begins and ends each year, and states follow whatever dates the IRS sets. An electronic return originator (ERO) is the individual who originates the electronic submission of the tax return. To file a return electronically, the individual needs to be an Authorized IRS e-File Provider.

CA Electronic Filing

California conforms to the federal guidelines regarding electronic filing and the importance of safeguarding the taxpayer’s personal identification information. However, California has systems in place to perform these duties at the state level, and it is important for California tax professionals to know them and how they are different. For more information, see California Revenue & Taxation Code Sections 18621.9 and 19170.

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This course has been approved by the California Tax Education Council (2080-QE-001), which fulfills the 60-hour qualifying education requirement imposed by the state of California to become a tax preparer. A listing of additional requirements to register as a tax preparer may be obtained by contacting CTEC at P.O. Box 2890, Sacramento, CA, 95812-2890 or 1-877-850-2832 or www.CTEC.org.