Indiv. Tax, Adj/Deductions/Credits (III) Flashcards Preview

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Flashcards in Indiv. Tax, Adj/Deductions/Credits (III) Deck (16):

Penalty for the underpayment of indiv. estimated taxes?

Taxes still due after withholdings need to be $1000+ to fall into the penalty range.

"Failure to pay" penalty for amounts under 1K.


What form to submit a claim of erroneously paid income taxes?



Annualized vs. seasonal method --

1) annualization method - ANNUALIZED=Current year .. 90% of current year

2) preceding year method (seasonal) - 100% or 110% of prior year


Statute of limitations for IRS assessing additional tax? (3 situations - normal misstatement under 25%, filing false returns)

Normal situations - 3 yrs. from date of filing

MIsstatement of under 25% or more of gross income OG reported (EG u reported 100K and there was 26K more)- up to 6 yrs. from date of filing

Fraud - Unlimited


Claiming refunds? (Never filed return vs. filed return)

Filed return - claim 3 yrs. from time return was filed (EG you file on 2/5/11, you have til 4/15/14 (3 full tax yrs)

Unfiled return - 2 yrs. from time tax was paid (EG your employer paid ur wages by 12/31/14 -- you have til 12/31/16 to claim those if you never filed)


According to AICPA, as a tax preparer, when should you use estimates to prepare taxes?

When you cannot obtain exact data.


"More likely than not standard"

Under AICPA Statements for Standards for Tax Service (SSTS), CPA should inform taxpayer of penalty risks UNLESS the transaction (at minimum) meets the standard known as the "More Likely than Not Standard"


"realistic possibility standard"

Preparer should recommend this if the tax preparer has good faith belief that the position has a "realistic possibility of being sustained administratively"


order of standards: more-likely than not, reasonable basis, realistic possibility, substantial authority

1) reasonable basis (least strict)
2) Realistic possibility
3) Substantial Authority
4) More-likely-than-not (Most stringent)


Annualization - describe method
Seasonal method

90% of current years tax liability
100 or 110% prior year tax liability



Qualified dividends - 2 major requirements

1) must be issued by a US corporation, or by a foreign corporation that trades on a US exchange / Corp. in US POssesion

2) owned by you for more than 60 days of "holding period" -- defined as 121-day period that begins 60 days after ex-dividend date (aka the day which the stock was trading without the div price)

Qual. Dividends qualify for preferential tax treatment !!


Ordinary (non-qualified dividends?) example?

1) capital gains distribution
2) divs. On bank deposits
3) divs. Held by a Corp. on an EMPL. Stock ownership plan(ESOP)
4)divs paid by tax-exempt corps


How to deduct depreciation of schedule C for self-employeds

You can depreciate home office portion, up to the point that it will not create a LOSS on schedule C.


How to deduct depreciation of schedule C for self-employeds

You can depreciate home office portion, up to the point that it will not create a LOSS on schedule C.


Can you pay medical expenses of a non-dependent? Circumstances?

Yes, when the lack of dependency is the gross income limitation (or joint return requirement) .


Can you extend payment past extension deadline for taxes?

No. Still expected to pay full amount by deadline.