Individual Tax Issues Flashcards
A husband and wife can file a joint return even if:
The spouses have different accounting methods
- Spouses must have the same tax year to file MFJ
What items are considered when determining ‘support’ for a dependent?
Which items are excluded?
Support includes: Food, clothing, FMV lodging, medical, recreational, educational, and certain expenses made on behalf of a dependent
Support EXCLUDES: Life insurance premiums, funeral expenses, nontaxable scholarships, and income and Social Security taxes paid from a dependent own income
What is the income threshold for someone to be a dependent?
For 2022, max gross income is $4,300
What is the formula for the basic standard deduction?
For example, in 2022 George (dependent of his parents) received dividend income of $3,700, and had wages from an after-school job of $1,700. What is the amount that will be reported as George’s TI for 2022?
Basic standard deduction is limited to the GREATER of $1,150, or (EARNED INCOME + $400)
$3,700 dividends
$1,700. wages
=$5,400. AGI
-$2,100 Std. deduct
=$3,300 Taxable income
How is unearned income of a child under age 18 in excess of a threshold amount treated? What is the threshold?
For example, Chris, age 5, has $3k of interest income and no earned income this year. Assume the current applicable mini-standard deduction is $1k; how much of Chris’s income will be taxed at the parents’ rates?
It is generally tax at the parents’ rates.
The threshold is normally 2x the amount of the applicable standard deduction for a dependent who only has unearned income.
In this problem, the Mini-Standard deduction of $1k would be multiplied by 2 to arrive at the threshold of $2k.
$3k interest income - $2k threshold = $1k being taxed at parents rates
