LIFO, FIFO and now TYPO: IRS Approves new accounting method

The Internal Revenue Service announced April 1 that it was approving a third accounting method called TYPO. Continue reading

The Internal Revenue Service announced April 1 that it was approving a third accounting method called TYPO. This new method will join LIFO and FIFO as a government-approved way to manage and calculate the cost of inventory.

LIFO stands for “last in first out,” with the most recent (last) unit considered sold first. FIFO stands for “first in first out,” with the oldest (first) unit considered sold first.

The IRS announcement did not state what TYPO stands for or how it works.

Observers were surprised and confused. “Are you sure that’s not a mistake?” was the reaction from Deb It, spokesperson for the American Society of Accountants.

Study Question of the Week: December 18, 2013 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 6, Series 7, Series 65, and Series 66. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 6Series 7, Series 65, and Series 66)

The IRS uses the FIFO method for taxing:

Answers:

A. Withdrawals from a life insurance contract

B. Withdrawals in excess of the basis in a variable annuity contract

C. Loans from a life insurance contract

D. None of the choices listed

Correct Answer: A. Withdrawals from a life insurance contract

Rationale: Life insurance enjoys “first in, first out“ treatment from the IRS. Annuities are taxed on a LIFO basis, and money borrowed from a life insurance contract is not taxed at all.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Exam Alert: IRS publishes outline for Registered Tax Return Preparer exam

If you prepare tax returns, no doubt you have heard about the upcoming IRS Registered Tax Return Preparer exam requirements. This new exam will focus on Continue reading

If you prepare tax returns, no doubt you have heard about the upcoming IRS Registered Tax Return Preparer exam requirements. This new exam will focus on the completion of Form 1040 series and ethical responsibilities of tax preparers. The IRS recently published an outline that shows what applicants will need to study to pass the exam.  It is divided up into seven domains:

  1. Preliminary work and collection of taxpayer data (15% of the exam)
  2. Treatment of income and assets (22% of the exam)
  3. Deductions and credits (22% of the exam)
  4. Other taxes (11% of the exam))
  5. Completion of the filing process (10% of the exam)
  6. Practices and procedures (5% of the exam)
  7. Ethics (15% of the exam)

The IRS will begin requiring this exam in October 2011, although if you have a PTIN before then, you have until December 31, 2013 to take the test. Additionally, certain tax preparers are exempt from this exam requirement. This includes attorneys, CPAs, enrolled agents and those supervised by any of the former categories. Details for this exam are still being ironed out. However, the IRS has indicated that the exam will be approximately 120 questions and will last between 2-3 hours.

Solomon Exam Prep is working on materials to help you prepare for this important new test. If you would like to be updated on our progress with materials for this exam, please join our mailing list by clicking here.

Exam Alert: IRS requires broker-dealers and mutual funds to report cost basis of stocks

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to Continue reading

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to the IRS and to investors.  In 2011, this reporting requirement only applies to most stocks, while in 2012 and beyond, the requirement will apply to all stocks.  In 2011, the rule will not apply to mutual fund shares and shares purchased via dividend reinvestment plans. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66 exams.

IRS news release: http://www.irs.gov/newsroom/article/0,,id=228907,00.html

Analysis by the Securities Technology Monitor: http://www.securitiestechnologymonitor.com/photo_gallery/1_36/27400-1.html