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CPA REG > R2 > Flashcards

R2 Flashcards

1
Q

Adjustments

A 
Educator Expenses
IRA
Student Loan Interest Expenses
Tuition and Fee Deduction
Health Savings Account
Moving Expenses
1/2 Self Employment FICA
Self Employed Health Insurance
Self Employed Retirement
Interest Withdrawal Penalty
Alimony Paid
Attorney Fees Paid in Discrimination and Whistle Blower Cases
Domestic Production Activities Deduction
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2
Q

Educator Expenses

A
  • eligible educators can deduct up to 250
  • if both spouses are eligible, max is 500
  • K-12 teacher instructor counselor principal or aide in school for >900 hours/year
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3
Q

Deductible IRAs

A
  • contribution deductible (lesser of 5,500 or compensation)
  • withdrawals taxable
  • contribution NOT TAX FREE IF
    a) Rich: AGI for single/HoH 61,000 - 71,000 and
    b) taxpayer or spouse in another qualified plan
    exception: not considered active just bc spouse is
    phase out: if you aren’t but spouse is and AGI b/w 184,000-194,000

+ additional catch up contribution: 50+ allowed additional $1,000

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4
Q

Roth IRA

A
  • contribution nondeductible
  • withdrawals nontaxable (both principal and earnings)
  • contribution limits (total with other IRAs)
    single: 5,500
    married: 11,000
  • phase out:
    single: 117,000 - 132,000
    joint: 184,000 - 194,000
    MFS: 0 - 10,000
  • no AGI limitations for transfer from regular IRA to roth & it eliminates penalty tax but withdrawal still taxable
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5
Q

Retirement Savings Contributions Credit

A

eligible taxpayers may be entitled to tax credit (max 1000) for contributing to traditional or roth IRA

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6
Q

Nondeductible IRA

A
  • contribution nondeductible
  • withdrawals partially taxable (principal nontaxable, earnings taxable)
  • contribution limits: 5,500
  • no phase out
  • fall back when not eligible for deductible IRA or Roth
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7
Q

Coverdell Education Savings Accounts (education IRA)

A
  • contribution nondeductible (max 2000 annually per beneficiary)
  • withdrawals nontaxable (both principal and earnings) as long as used for education expense through high school
  • any amount when beneficiary reaches 30 must be distributed:
    taxable to beneficiary and assessed 10% penalty
    rolled over to family: nontaxable and no penalty
  • can be used w other education credits
  • contribution requirements:
    beneficiary under 18
  • phase out: single 95,000-110,000 & married: 190,000-220,000
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8
Q

Tuition and Fees Deduction

A
  • higher education expenses applies whether education is work-related
  • expenses above max are only deductible as education expense (itemized deduction)
  • max 4,000
  • max income limit: AGI must be less than or equal to 65,000
    2,000 allowed for AGI b/w 65,000-80,000
    no adjustments for taxpayers w excess of 80,000
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9
Q

Health Savings Account

A
  • pretax contributions up to 3,350 (6,750 for families) to over health care costs
  • increased by 1,000 for those who reach 55
  • no contributions allowed when taxpayer becomes covered by medicare A or B
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10
Q

Moving Expenses (must be work related)

A
  • new workplace 50 miles further from old house than old workplace was
  • 39 week stay (75% of year)
  • only direct moving costs allowed:
    a. travel and lodging of taxpayer and family
    b. transporting household goods and personal effects to new location
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11
Q

Tax on Self Employment

A

50% of self employed SS/Medicare tax is a deductible adjustment

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12
Q

Self Employed Health Insurance

A

100% deductible adjustment

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13
Q

Keogh Plans

A

self employed taxpayer can set up Keogh plan
- max annual deductible amount is limited to lesser of 53,000 or 20% of self employment net income after 1/2 self employment tax deduction

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14
Q

Alimony

A 
Alimony
- taxable income to spouse receiving
- deductible adjustment for spouse paying
Child Support
- nontaxable to spouse receiving
- nondeductible to spouse paying
Property Settlement
- nontaxable to spouse receiving
- nondeductible to spouse paying
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15
Q

Standard Deduction

A

Standard Deduction (1040EZ)
Additional Deduction for Elderly and/or Blind
- single, 65 or blind: 1,550 single, 65 & blind: 3,100
- married, 65 or blind: 1,250 married, 65 & blind: 2,500
- married, both 65 & blind: 5,000

single: 6,300

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16
Q

Itemized Deductions

A 
Medical Expenses
State, Local, and Foreign Taxes
Interest Expense
Charitable Contributions
Casualty and Theft Losses
Misc. Itemized Deductions (2% AGI)
Other Misc. Deductions (no 2%)

phase out when AGI exceeds
311,300 for MFJ &surviving spouses
285,350 for HoH
259,400 for single
155,650 for MFS
itemized deductions reduced by 3% of the excess but may not be reduced below 80% of amount allowed before phase out
4 items not phased out: GIMC: gambling losses, investment interest, medical expenses, casualty & theft

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17
Q

Medical Expenses

A
  • payments for taxpayer, spouse, and SUPORT (w/o U) count
  • paid or charged on CC during the year
  • qualified medical expenses - insurance reimbursements - 10% AGI = deductible medical expenses (7.5% for 65+***)
    prescription medicine and drugs
    doctors
    medical and accident insurance (but not disability insurance)
    required surgery
    transportation to medical facility
    physically disabled costs (building a ramp for wheelchair)
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18
Q

State, Local, and Foreign Taxes

A
  • cash vs accrual method
    Deductible Taxes
  • Real Estate Taxes (on personal residence not rental)
  • Income Taxes
  • Personal Property Taxes
  • Sales Tax
    may deduct EITHER state and local income taxes or state and local general sales taxes
    Nondeductible Taxes FIB
  • Federal Taxes (including SS)
  • Inheritance taxes for states/ federal estate pick up tax
  • Business and rental property taxes
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19
Q

Interest Expense

A

HIPPE
Home Mortgage Interest
Investment Interest Expense
Personal Interest is NOT DEDUCTIBLE
Prepaid interest (deduct when incurred & paid)
Educational Loan Interest (adjustment, not itemized deduction)

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20
Q

Home Mortgage Interest

A

acquisition indebtedness (1,000,000/500,000 MFS max)
- used for home-related, secured by home
home equity indebtedness (100,000/50,000 MFS max)
-used for any purpose even not home, but not tax free securities or certificates
- interest on excess is personal interest
mortgage insurance premiums paid are deductible as home mortgage interest

  • “points” are deductible
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21
Q

Investment Interest Expense

A
  • limited to net taxable investment income
  • included: interest and dividends, royalties, capital gains
  • interest expense used to purchase tax free shit is not deductible
  • excess carryforward indefinitely
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22
Q

Charitable Contributions

A
  • not gifts or political contributions
  • cash or FMV of property
  • max allowed deduction:
    cash: 50% of AGI
    property: 30% of AGI
  • only excess contribution over consideration received (more than 75 makes charity require written statement of estimate)
  • can not deduct value of time or services
  • carryforward excess 5 years
  • use basis for short-term property and FMV for long term property
23
Q

Casualty and Theft Losses

A 
smaller loss (adjusted basis or decreased FMV)
- insurance recovery
- $100
- 10% AGI
= deductible loss
- must be sudden or unexpected
24
Q

Misc. Itemized Deductions (2% AGI)

A 
Unreimbursed Business Expenses
- travel, meals and lodging overnight
- transportation expenses
- 50% meals/entertainment expenses
Educational expenses for work-related
Uniforms
Business gifts (25/recipient/year)
Employee agency fees
Expenses of Investors
Subscription to Professional Journals
Tax Prep Fee
Debit Card Convenience Fees incurred to Pay Income Tax
Activities Not Engaged in for Profit (hobbies)
- for profit if 3/5 years are profitable
25
Q

Other Misc. Deductions (not 2%)

A

Gambling Losses
- deductible to extent of gambling winnings
Federal Estate Tax Paid on Income in Respect of Decedent

26
Q

Tax Credits

A 
Personal Tax Credits
- child and dependent care
- elderly and permanently disabled
- lifetime learning
- retirement savings contributions
- foreign tax
- general business
- adoption
Refundable Credits
- child tax credit (refund limited)
- earned income credit
- withholding taxes (w-2)
- excess social security paid
- american opportunity credit (40% refundable)
27
Q

Child and Dependent Care Credit

A

20-35% of eligible expenditures
- max: 1 dependent: 3,000 2+: 6,000
- eligibility: under 13, disabled any age, disabled spouse
- both parents working
- credit is lower of: max ^, income of spouse making less, actual childcare expenditure
- eligible expenses: babysitter, nursery school, daycare for spouse to be employed
- phase out: max 35 if AGI <15,000
decreases 1% for each 2,000 over 15,000 but not below 20
20% for AGI >43,600

28
Q

Credit for Elderly and/or Permanently Disabled

IRC: tax credit & elderly and disabled

A
  • 65+ or disabled and under
  • 15% of eligible income
  • base amount:
    single, widow(er): 5,000
    MFJ & 1 spouse qualifies: 5,000
    MFJ & both qualified: 7,500
    MFS: 3,750
  • eligible income reduced by
    any social security received and
    1/2 AGI that exceeds: 7,500 for single, 10,000 for MFJ, and 5,000 for MFS
  • after subtracting SS & 1/2 AGI excess from base amount, multiply by 15% = credit
29
Q

American Opportunity Credit

A

for first 4 years of college

  • must be enrolled at least half year
  • max of 2,500 on per student basis (100% of first 2000, 25% of second 2000)
  • not for students convicted of federal state felony
  • phase-out: AGI exceeding 80,000 (160 joint) w full phase out at 90,000 (180 joint)
  • 40% of credit is refundable
30
Q

Lifetime Learning Credit

A

available for unlimited number of years for qualified tuition and related expenses

  • credit is 20% of qualified expenses up to $10,000
  • one payment per year so not for multiple ppl like american
  • phase out: AGI > 55,000 w full phase out at 65,000 (double for joint)
31
Q

Adoption Credit

A
  • Limit 13,460 per child
  • phase out: 201,920 - 241,920
  • medical expenses don’t qualify just expenses for adoption
32
Q

Retirement Savings Contributions Credit

A
  • may offset both regular and alternative minimum tax
  • for contributions to traditional or roth IRA
  • eligibility: 18+, not student, not dependent
  • robin hood*
33
Q

Retirement Savings Contributions Credit

A
  • may offset both regular and alternative minimum tax
  • for contributions to traditional or roth IRA
  • eligibility: 18+, not student, not dependent
  • robin hood*
34
Q

Foreign Tax Credit

A

lesser of foreign taxes paid or foreign tax credit limit

  • foreign tax credit limit = taxable income from foreign operations / (taxable income + exemptions) * US tax
  • carryback 1 year carryforward 10 years
35
Q

General Business Credit

A

includes a bunch of credits

  • may not exceed net income tax less the greater of:
    a) 25% of regular tax liability above 25,000 or
    b) tentative minimum tax
  • carryback 1 year and carryforward 20 years

only first 25,000 can be eliminated completely, remaining income can only be 75% eliminated

36
Q

Work Opportunity Credit

A

part of General Business Credit
for employers who hire employees from targeted group
- 40% of first 6,000 of first year’s wages
- 40% of first 3,000 to certain summer youth
qualified groups
- disabled
- 18 to 24 y/o from poor families
- vietnam veterans
- food stamp recipients

37
Q

Child Tax Credit

A

$1,000 tax credit for each qualifying child
-qualifying child: CARES + under 17 + citizen of US
- phase out: reduce $50 for each $1,000 AGI exceeds
joint: 110,000
single: 75,000
MFS: 55,000
- refundable limit*

38
Q

Earned Income Credit

A

-refundable
- eligibility:
meet certain low income threshholds
be over 25 and less than 65 if no qualifying children
- qualifying child makes earned income credit higher
computation*

39
Q

Excess FICA

A

excess SS is a credit if it resulted from correct withholding by 2+ EMPLOYERS
- if 1 employer, no credit allowed just a refund

40
Q

Small Employer Pension Plan Start Up Cost Credit

A

credit for 50% of first $1,000 of qualified start-up costs for new pension plan for 3 years

41
Q

Small Business Health Care Tax Credit

A
  • up to 50% of employer’s costs of plan premiums
  • allowable as an offset to alternative minimum tax
  • costs for family, sole proprietors, partners, s corp owners w >2% ownership, and shareholdres w >5% of corps are excluded
  • if expenses used to qualify for credit not allowable as tax deductions for employee benefit expense
42
Q

Residential Energy Credit

A

max credit of 15% of qualifying nonbusiness energy stuff up to a max of $500 credit

43
Q

4 tested areas of Alternative Minimum Tax

A
  1. exemption formula
  2. adjustments and preferences
  3. AMT credit carryforward period
  4. credits available to reduce AMT

*AMT tax is 26% for first 186,300 of AMTI and 28% on excess AMTI

44
Q

AMT Exemption Amounts

A

single: exemption 53,900 less 25% of excess over AMTI 119,700
joint: exemption 83,800 less 25% of excess over AMTI 159,700
MFS: exemption 41,900 less 25% of excess over AMTI 79,850

45
Q

AMT Adjustments

A

PANIC TIMME
Passive activity losses
Accelerated depreciation
Net operation loss
Installment income of a dealer
Contracts– long term
Tax “deductions”
Interest on home equity loans
- home mortgage is okay (not added back)
Medical deductions (limit to excess > 10%) 65+ 7.5 so then you need to find diff.
Misc. deductions subject to 2% added back
Exemptions and standard deduction added back

PANIC inc or dec AMTI
TIMME only inc AMTI

46
Q

AMT Preferences

A

PPP
Private activity bond interest income
Percentage depletion the excess over adjusted basis of property
Pre-1987 accelerated depreciation

only inc AMTI

47
Q

Credit for Prior Year Minimum Tax (AMT credit)

A

may only reduce regular tax not future AMT

- carryforward forever

48
Q

AMT Credits

A 
permitted as credit to reduce AMT
FACCE
Foreign tax credit
Adption credit
Child tax credit
Contributions to retirement plans credit
Earned Income Credit
49
Q

Statute of Limitations

A

GR: 3 years from later of due date of return or date the return is filed
25% understatement: 6 years from later of ^
fraud or false returns: no statute of limitation
- IRS can reopen tax year that was erraneously in a closed tax year

50
Q

Refund for Individuals 1040x

A

later of

  • 3 years from later of when filed or original due date of the return or
  • 2 years from time tax was paid

Bad debts, Worthless Securities: 7 years from later of due date or when filed

51
Q

Estimated Tax Payments

A

required to make estimated quarterly tax payments if both conditions are met

1) 1000+ tax liability and
2) if withholding is less than the lesser of:
a) 90% of current year tax or
b) 100% of last year’s tax (110% if AGI > 150,000 MFJ/75,000 single)

52
Q

Student Loan Interest Expense

A
  • adjustment limited to 2,500
  • excess is personal interest and not deductible
  • phase out
    single: 65,000 - 80,000
    married: 130,000 - 160,000
  • dependent cannot claim
53
Q

Hierarchy of Authority in Tax Law

A
  1. Internal Revenue Code (IRC)
  2. IRS Regulations
  3. Tax Court Decisions
  4. IRS Agents’ Reports
54
Q

AICPA Statements on Standards for Tax Services (SSTS)

A

read more haha

CPA REG (11 decks)

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