Reg 2 Flashcards
What is the amended form and when must you file by
You can amend your previous 3 years of tax returns on a 1040X
When are tax payers not consider married - MFJ
must be married on last day of year
- if divorce
- if legally separated - doesn’t matter if you still live together or not
What is the phase out for itemized deductions for high income tax payers
Lesser of:
3% excess AGI over the applicable amount or
80% of certain itemized deductions (does not include casualty losses, gambling losses, investment interest and medical expenses)
Can you deduct Roth IRA contributions
No - because Roth IRA’s are not deductible
If you have a sole proprietorship - how many years must you be profitable out of the last 5 to NOT BE CONSIDERED A HOBBY
You must be profitable in 3 of the last 5 years. If so then you can deduct expenses. If not then you CANT deduct the expenses
How do you calculate how much income from a purchased annuity you have to include in income
Income in only taxable to the extent that the amount received exceed the cost of the annuity
Example: Buy an annuity for 64K
that will pay 700 per month for an estimated 23 years.
What is taxable?
fist calculate how much the policy is worth. $700 * 12 * 23 years = 193,200
Since you paid 64K this is 1/3 of the value of the annuity. So 2/3 of your payments will be taxable
so of the $700 that you get 467 is taxable
How do you switch from accrual to cash basis for tax - how do you make the switch
- net A/R with A/P and accrued expenses
This will get you the net amount that is the adjustment -
It is usually taken in the year if change, but if the number is positive (meaning you owe more tax) then you can spread it over 4 years if the amount is over 3K
What is the rule for how you report gross income on a cash basis
Ou should report gross income for the year in which income is either actually or constructively received whether in cash or in property
What makes medical bills quality for deductibility
- must be paid for by the taxpayer and not reimbursed
- Yes if its health insurance
- Yes prescription drugs
- yes mileage to a doctor
- yes f cosmetic for birth defect or specific injury
- yes contact lenses and glasses
- yes dentist
Can you deduct disability insurance as part of schedule A itemized deductions
No
How does the taxation of HSA funds work?
You can contribute to an HSA if you have a high deductible
The funds contributed to HSA are NOT taxable
These funds can then be used to pay for medical expenses without being taxed
HSA expense can NOT be claimed on Schedule A
what is ad valorem tax
It is a tax based on the value of an item such as property or automobiles
Can you deduct these on your schedule A if your qualify for itemized deductions:
personal property tax
real estate tax
state and local tax
Yes - personal property tax
Yes - real estate tax
yes - state and city income
Yes to all unless you reach the limit an then take the smaller of:
- 3% of the amount that AGI exceeds annual limit
- 80% of amount affected by the limit (all except - Gambling, Investment Interest, Medical expenses, Casualty Loss - GIMC
What are the conditions for alimony to be deductible for an individual that pays alimony
If you pay alimony - you can deduct alimony. If you receive alimony - then it is YES income.
To be deductible it must:
- be in cash only
- payer CANT live with recipient
- NOT child support
- payments must terminate at the recipients death
What are the MAGI limits for single and MFJ
200k - Single
250K - MFJ
