R-2 2013 Flashcards Preview

Becker CPA REG 2013 > R-2 2013 > Flashcards

Flashcards in R-2 2013 Deck (34)
Loading flashcards...
1
Q

List the deductions for AGI.

A

Educator expenses; IRA; Student Loan Interest Expenses; Tuition and Fee Deduction (expired 12/31/11, not yet extended); Health Savings Account; Moving Expenses; One-Half Self-Employment FICA; Self-Employed Health Insurance; Self-Employed Retirement; Interst Withdrawal Penalty; Alimony Paid; Attorney fees paid in certain discrimination and whistleblower cases; Domestic Production Activities Deduction.

2
Q

Which is a deduction for AGI: Child support or alimony?

A

Deduction for (to arrive at) AGI = Alimony Paid. Child support is not alimony and is not deductible bythe payor or taxable to the recipient.

3
Q

What are the limits on IRA deductions?

A

For IRAs, the lesser of $5,000 or indivdual’s compensation; with a nonworking spouse, limit is $10,000 provided the combined earnings of both spouses total at least that much. Where a spouse is an active participant in an employer retirement plan, the allowable deduction to arrive at AGI is phased out proportionally for modified AGI between $58,000 (base) and $68,000 ($92,000 and $112,000 for married filing jointly) [2012]. Phase-out percentage is 20% of the maximum IRA deduction (AGI less base).

4
Q

What are the limits on nondeductible IRAs?

A

The lesser of: a. $5,000 for 2012; b. Individual’s compensation; c. Limit not contributed to other regular and Roth IRAs. Earnings on such contributions will accumulate tax-free (deferred) until withdrawn.

5
Q

What is the time limit on Cpverdell Education Savings Accounts (Education IRAs)?

A

Any amounts remaining when the beneficiary reaches the age of 30 must be distributede. “Left over funds”: Must be distributed to a beneficiary, are taxable, and a 10% penalty is assessed, or Rollover to another family member is permitted with no 10% penalty.

6
Q

What are the limits on deductions to Keogh plans?

A

Keogh plans are for self-employed taxpayers and their employees. Deductible amount is lesser of 25% of net earnings from self-employment (after Keogh deduction) and one-half of self-employment tax or $50,000 (2012). The maximum annual addition (contribution may exceed the deductible amount for hte year. It is limited to the lesser of $50,000 (2012) or 100% net earnings if compesation is less than $50,000.

7
Q

Describe the self-employed deductions (“adjustments”) for AGI.

A

Self-employment tax: 50% of self-employment tax. Self-employed health insurance: 100% may be deducted.

8
Q

What are the requirements for moving expenses to be deductible?

A

Must change job sites; 50-mile move (distance from former residence to new job site must be 50 miles or more of the distance from former residence to former job site); Must work in new location for 39 weeks during the 12 months following arrival (if self-employed, 78 weeks during the 24-month period after arrival). Note: There is a per-mile car allowance or actual out-of-pocket amounts. Meal costs are not deductible.

9
Q

What is the additional deduction for elderly and/or blind?

A

For 2012, if 65 or older, add $1,450 (single or head of household), or $1,150 (married filing jointly or separately or qualifying widow[er]). If blind, add same amounts as above. If both are over 65 and blind, amounts are $2,900 and $2,300, respectively.

10
Q

What taxpayers are not eligible to use the standard deduction?

A

One spouse itemizes deductions on a separate return; Taxpayer is a dual-status or nonresident alien; Taxpayer has a short tax year. The standard deduction is limited if taxpayer can be claimed on another person’s return (greater of $950 or earned income of dependent pluss $300 up to basic standard deduction amount).

11
Q

Identify the major classes of itemized deductions.

A

Medical and dental expenses; Taxes paid; Interest paid; Gifts to charity; Casualty and theft losses; Miscellaneous deductions subject to the 2% floor (job expenses, investment expenses, tax preparation); Other micellaneous deductions not subject to the 2% floor (gambling losses to extent of winnings).

12
Q

What are the limitations on medical expenses?

A

Medical expenses are deductible to the extent they exceed 7.5% of AGI. Cost of surgery for elective cosmetic reasons is not deductible. Self-employed individuals may deduct (100% of medical insurance premiums from gross income. A dependent for medical expenses must meet only the support, relationship, and citizenship or residency tests.

13
Q

Identify the taxes that are deductible as itemized deductions.

A

Taxpayers have a choice of deducting either the local sales tax (expired on 12/31/11, not yet extended) or state and local income tax. Other deductible taxes include: Real estate taxes; Personal property taxes; Foreign taxes (either deductible or may be taken as a credit).

14
Q

Identify the types of interest that are deductible and nondeductible.

A

Qualified residence interest on principal and second residence is subdivided into: Acquisition indebtedness ($1,000,000 limitation); Home equity indebtedness ($100,00 limitation); Points paid on a principal residence mortgage loan are fully deductible; Points paid to refinance a home (or for a home equity loan) must be capitalized and deduction spread out over life of loan; Certain mortgage insurance premiums. Interest on loans for investment purposes, limited to net investment income, can be carried forwar. Prepaid interest (use accrual basis for determining deductible amount). Educational loan interest is an adjustment and not an itemized deduction. Consumer interest is NOT deductible.

15
Q

What are the limitations on charitable contribution deductions?

A

Overall limit = 50% of AGI: Cash, may be all 50%; Long-term capital gain property (deduct FMV) is limited to the lesser of: 30% of AGI, The remaining amount to reach 50% after cash contributions. Excess contributions can be carried forward five years. Cash contributions must be substantiated by a bank record or a written communication by the charitable organization.

16
Q

What is the limit on nonbusiness casualty and theft losses?

A

If partial loss: Deduction is based on decrase in FMV not to exceed adjusted basis. If total loss: Deduction is adjusted basis. Aggregate losses are reduced by: Insurance recovery, $100 per casualty/theft event, 10% of AGI.

17
Q

Identify some miscellaneous deductions subject to the 2% of AGI floor.

A

Unreimbursed business expenses; Educational expenses not deducted above AGI; Uniforms; Business gifts ($25 limit per recipient per year); Business use of home; Employment agency fees; Expenses of investors; Subscriptions to professional journals; Tax preparation fee.

18
Q

Identify some miscellaneous expenses NOT subject to the 2% of AGI floor.

A

Gambling losses, Federal estate tax paid on income in respect of a decedent.

19
Q

Identify some tax credits.

A

Nonrefundable tax credits: Foreign tax credit, Child and dependent care credit, Elderly or disabled credit, Education credits, Adoption credit, Retirement plan contribution credit, General business credit. Refundable credits: Child tax credit, Earned income credit, Withholding taxes, Excess Social Security paid, Long-term unused minimum tax credits.

20
Q

What are the child/dependent care credit limitations?

A

Up to 36% of eligible expenditures or $3,000 maximum ($6,000 for two or more dependents). Maximum of $15,000 AGI, reduced by 1% for each $2,000 increment over $15,000, to a minimum of 20%. A qualifying child is one under age 13 for whom an exemption may be claimed, any disabled dependent who is unable to care for self, or a spouse who is disabled and unable to care for self.

21
Q

Describe the tax credit for the elderly or disabled.

A

Either at least 65 or totally and permanently disabled and have diability income. If single or married and only one is over 65, 15% of $5,000 reduced by nontaxable Social Security benefits received and half of AGI over $7,500 (single) or $10,0000 (married). If married and both are over 65, 15% of $7,500 reduced by nontaxable Social Security benfits received and half of AGI over $10,000. Claim the credit to the extent of tax liability.

22
Q

State the limitations of the American Opportunity Tax Credit.

A

For 2011-2012, the credit for the first four years of post-secondary education is limited to $2,500 as follows: 100% of the first $2,000 in tuition costs and 25% of the second $2,000.

23
Q

What are the eligibility requirements for the retirement plan contribution credit?

A

At least 18 by close of the tax year, Not a full-time student, Not a dependent, Income limits apply.

24
Q

State the formula to determine the amount of the foreign tax credit.

A

Can claim either deduction or credit; Thre is no limitation to the amount of foreign taxes paid that are claimed as deductions; Overall limitations for the credit. (Net foreign income / Worldwide taxable income) x US tax liability befroe credit on worldwide taxable income. Credit is lesser of foreign taxes paid or overall limit. Any unused credit can be carried back 1 year and forward 10 years.

25
Q

State the limitation of the work opportunity credit.

A

40% of the first $6,000 of wages per employee paid during the first year of employment. 40 % of the first $3,000 to certain summer youth.

26
Q

Describe the child tax credit.

A

$1,000 tax credit for each qualifying child. Qualifying child: “CARES” rules apply, except that a child must be under the age of 17. Higher-income taxpayers must reduce credit by $50 for each $1,000 by which modified AGI exceeds: $110,000 for a joint return, $75,000 for an unmarried individual, $55,000 for married filing separately.

27
Q

What are the eligibility requirements for the EIC?

A

Eligibility: To be eligible for the earned income credit, a taxpayer must: Live in the US (main home) for more than half the taxable year; Meet certain low earned income thresholds; Not have more than a specified amount of diqualified income; Be over 25 and under 65 if there are no qualifying children; and, File a joint return with spouse (if married).

28
Q

State the alternative minimum tax formula and the tax rate.

A

Taxable income +/- Certain adjustments + Tax preferences - Exemption alloance (2012)–1) $45,000 married filing joint, $33,750 single, $22,500 married filing separate = AMTI x Tax rate–2) 26% and 28% for individuals = AMT, the great of AMT or regular tax is total tax liability. 1) The exemption amount is phased out by 25 cents per dollar of AMTI above $150,000 ($112,500 for single, $75,000 married filing separate). 2) For AMTI in excess of $175,000, tax rate on excesss is 28%.

29
Q

Name some adjustments for AMTI calculations. (PANIC TIMME)

A

Passive activity losses; Accelerated deprecition; Net operating loss; Installment income of a dealer; Contracts, percentage completion vs. completed contract; Tax deductions; Internet deductions on some home equity loans; Medical deductions (limited to excess over 10% AGI); Miscellaneous deductions not allowed; Exemptions (personal) and standard deduction.

30
Q

Name some tax preference items for AMTI calculations.

A

Private activity bond interest income (exceptions apply); Percentage depletion; Pre-1987 accelerated depreciation.

31
Q

What credits are allows against the AMT?

A

Foreign tax credit; Adoption credit; Child tax credit; Contributions to retirement plans credit; Earned income credit; Small Business Health Care Tax Credit.

32
Q

What is the statute of limitations for an assessment?

A

Three years from the later of: Due date of return, Date return is filed.

33
Q

What is the statute of limitations for a refund?

A

The later of: Three years from the time this return was filed; Three years from the due date of the original return; Two years from the time the tax was paid (if not when the return was filed).

34
Q

Who must make estimated tax payments?

A

Taxpayers with: 1. $1,000 or more tax liability and the taxpayer’s withholding is less than the lesser of 90% of current year’s tax, or 2. 100% of last year’s tax [110% if AGI is > $150,000 ($75,000 for married filing separately)]