See 2 Flashcards
(178 cards)
1
Q
What method of accounting are tax shelters required to use?
A
Accrual method of accounting.
2
Q
What is the maximum number of shareholders that an S corporation can have?
A
100 shareholders, although related family members count as a single shareholder for purposes of the 100 shareholder limit.
3
Q
How can a tax-exempt entity be organized?
A
A tax-exempt entity can be organized as a corporation, unincorporated association or a trust. An exempt entity cannot be classified as a partnership or a sole proprietorship.
4
Q
A general partner in a partnership is considered to be:
A
Self-employed. Partners are not considered employees and should not be issued a Form W-2. Instead, they are issued a Schedule K-1, and each partner includes his share of the partnership’s income on his/her individual tax return.
5
Q
If a sole proprietor removes items from inventory for his/her own personal use, what is the correct way to account for this transaction?
A
Goods that are withdrawn from the business and taken by the owner for personal use should be subtracted from the inventory of the business. It is not treated as a business expense.
6
Q
How long should a business retain employment tax records?
A
At least four years (examples: form I-9, forms 940, 941, forms w-2).
7
Q
What annual information return must qualified retirement plans file?
A
Qualified retirement plans (such as 401k plans, must file a form 5500, annual return/report of employee benefit plan, every single year.
8
Q
Define Section 197 assets, and give some examples of what they are.
A
Section 197 assets are intangible assets held by a businesss. They include: trademarks, trade names, copyrights, goodwill, franchisee and covenants not to compete. These assets are amortized over 15 years.
9
Q
If an employee-shareholder of a c corporation uses the business’s bank account to pay personal expenses, how is this treated for tax purposes?
A
The payments for personal expenses of an employee-shareholder would be treated as a constructive distribution, which is taxable to the employee as a dividend, and not deductible by the C corporation.
10
Q
Which business entities are subject to the NIiT (Net investment Income Tax)?
A
Estates, trusts, and individuals can be subject to the nIiT on net investment income over certain thresholds.
11
Q
When is a s/e taxpayer’s first estimated tax payment due?
A
April 15th.
12
Q
When an S Corporation makes charitable contributions, how is this treated on the business return?
A
Charitable contributions made by an S corporation are a flow-through item. The contributions are reported to the shareholders on Schedule k-1. The contributions are not a business expense or an s corporation and do not affect the business’s income and loss.
13
Q
If an employee of a business is reimbursed for mileage and other out-of-pocket expenses, do the reimbursements have to be reported on the employee’s form w-2?
A
No, reimbursements made to an employee under an accountable plan do not have to be reported and are not included in an employee’s form w-2.
14
Q
How many years May a C corporation carryover unused charitable contributions?
A
C corporations are permitted a tax deduction for charitable gifts, subject to certain income limits. The corporation can carry over unused charitable contributions for five years.
15
Q
What is the deadline for a business to set up a Simple retirement plan?
A
To make a simple plan effective for a year, it must be set up by October 1 of that year. A later effective date is allowed only when the business is started after October 1.
16
Q
What is the accumulated earnings tax?
A
The accumulated earnings tax is a 20% tax assessed on the excess accumulated earrings and profits of a C corporation. This tax is usually assessed under audit and is not automatic.
17
Q
What types of entities are permitted to own stock in an s corporation?
A
Estates, certain trusts, individuals and 501c3 entities are permitted to own stock in an S corporation. Partnerships and c corporations cannot own stock in an S corporation.
18
Q
When does the BIG Tax (Built-in Gains tax) apply to an s corporation?
A
The built-in gains tax (also called the “BIG tax”) applied to the sale of an asset by an S corporation that was previously a C corporation or if the S corporation acquires assets from a C corporation a tax free transition.
19
Q
What type of trust can accumulate income from one year to the next?
A
A complex trust may accumulate income. A simple trust may not.
20
Q
A corporation whose S election is revoked or terminated must generally wait how many months before making an S election again?
A
A corporation whose S election is revoked or terminated must generally wait 60 months (5 years) before making an S election again.
21
Q
What type of property can be exchanged in a like-kind exchange (a Section 1031 exchange)?
A
In order for a section 1031 like-kind exchange to be valid, both properties must be real property (real estate) and used in a business or held for investment.
22
Q
What is the IRS safe harbor, with regard to whether or not a business activity is engaged in with the intent to make a profit?
A
Safe harbor: an activity is presumed to be “for profit” if it makes a profit at least 3 out of the last 5 years, including the current year.
23
Q
How do distributions affect a C corporation’s E&p (earnings and profits).
A
Corporate dividends and distributions will decrease corporate e&p (earnings and profits).
24
Q
If a business receives an assessment for local improvements (such as sidewalks or streets) how is this expenditure treated by the business?
A
Assessments for local improvements increase the value of property, and are generally added to the basis of the property.
25
What form must a business use in order to request a change in accounting method?
A business must file form 3115, application for Change in Accounting method, to request a change in accounting method.
26
If a farmer rents farmland for a percentage of the crop, (rather than cash) how should this activity be reported?
Farmers who rent their farmland for a percentage of the crop should use form 4835, Farm Rental Income and Expenses, to report this activity (this is called a sharecropping activity).
27
What are the two methods of depletion?
(1) cost depletion and (2) percentage depletion. A business may choose the method which results in the greater tax deduction.
28
Define section 1259 property.
Section 1259 property is real property. It includes buildings (including thru structural components, like elevators) and permanent land improvements (ex. Concrete fencing, walkways, irrigation).
29
If a non-profit organization has unrelated business income, which form is the entity required to file?
An exempt organization that has $1,000 or more of gross income from an unrelated business activity must file
Form 990-t.
30
If an individual partner in a partnership receives guaranteed payments, how are these payments reported by the partner?
An individual partner reports guaranteed payments on schedule e (form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income.
31
A liquidating distribution of cash for a partner's entire interest in a partnership usually results in:
A capital gain (or loss) for the partner.
32
If a business purchases a building, and then pays to demolish it, how are the costs of demolition treated?
Costs incurred to demolish a building are added to the basis of the land on which the demolished building was located. The demolition costs cannot be expensed or claimed as a current deduction.
33
An LLC with at least two members will be automatically taxed as a _______ by default.
An llc with at least two members will be automatically taxes as a partnership. An MMLLC can also elect to be taxed as a corporation.
34
What are the 4 shareholder loss limitations for an S corporation?
There are four shareholder loss limitations: 1) stock and debt basis limitation 2) at-risk
Limitation 3) passive activity loss limitation 4) excessive business loss limitation
35
When a corporation initially forms, how are the costs of incorporation classified?
State corporation costs are classified as organizational costs. A business may be able to claim an immediate deduction of up to $5k of qualifying organizational costs in the first year it commenced business.
36
An exempt entity that is classified as a private foundation is required to file which annual information return?
Private foundations file form 990-PF. A private foundation is required to file an annual information return every year, regardless of incomes
37
When does a business adopt its accounting method?
Any business (including a corporation) adopts irs accounting method when it files its first income tax return.
38
What is the flat tax rate that applies to C corporations?
A flat tax of 21% applies to C corporations.
39
What is a 52/53 week tax year?
A 52/53 -week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end in the last day of a month.
40
What is a short tax year?
A short tax year is a tax year if less than 12 months. A short period tax return often occurs in the first year of a business's formation, as well as the year of dissolution.
41
What is a foreign partnership?
A partnership not created or organized in the US or under the law of the US or of any state. Foreign partnerships have additional filing requirements.
42
What is the adjusted gross estate of a decedent?
The adjusted gross estate refers to total value of a decedent's property after deducting allowable expenses such as: administration expenses, funeral expenses and charitable gifts.
43
Which type of corporation is subject to double taxation?
A C corporation is subject to double taxation; taxed on the corporation's net income, and then on the shareholders when dividends are distributed.
44
Which type of corporation is a pass-through entity?
An s corporation is a 'pass-through' entity. It only has one level of taxation; all income is allocated to the shareholders according to ownership stake.
45
Define leasehold improvements.
An improvement made to a leased building by a tenant that has the right to use this leasehold improvement over the term of the lease. Examples may include exterior fencing or interior partitions.
46
Define royalties.
Royalties represent payments to another party for the use of their property. Royalties are typically reported on schedule e.
47
What is the self-employment (se tax) tax rate that applies to taxpayers who are self-employed?
The self-employment tax rate is 15.3%. The rate consists of two parts: 13.4% for social security and 2.9% for Medicare.
48
Can a self-employed taxpayer deduct their social security and
Medicare taxes?
A self-employed taxpayer can deduct 1/2 of their self-employment tax. The deduction is an adjustment to income on form 1040 and is not reported on schedule c. Wage earners cannot deduct social security taxes.
49
What is a 'parent-subsidiary' controlled group?
When a single corporation (the 'parent') owns 80% or more of another corporation.
50
What is an FSA or a flexible spending arrangement?
A fsa is a tax-advantaged health care savings plan that an employer sponsors for their employees. An fsa is not the same thing as an hsa.
51
What information form is a corporation required to file when it issued more than $10 in dividends to a shareholder?
Form 1099-div, dividends and distributions.
52
On a corporate tax return, what is the purpose of the schedule m-1?
The purpose of the schedule m-1 is to reconcile the entity's accounting income ('book income') with its taxable income. Differences exist because of the difference in accounting principles and tax law.
53
Can a corporation change its accounting period after it has filed its first tax return?
A change in accounting period or method requires an IrS consent. Form 1128, application to adopt, change or retain a tax year, is used to request consent.
54
How are payroll taxes used by the government?
Payroll taxes (also called fica taxes) taxes are used to provide for retired workers, disabled workers and their dependents.
55
With regards to retirement plan contributions, what is an elective deferral?
An amount elected by a participant to be contributed to a plan, thereby deferring the receipt of the cash as income. Elective deferrals can be either pre-tax elective deferrals or designated Roth contributions.
56
What are allocated tips?
Allocated tips are tips an employer assigns to an employee. They are in addition to the tips the employee reports to the employer. Employers report allocated tips on the employee's w-2.
57
How much does a taxpayer need to receive in net earnings from s/e before having to pay s/e tax?
$400 or more.
58
What is inventory, and how does it differ from cost of goods sold?
Inventory is products that a business buys or provided for resale to customers. The cost of goods sold is the cost of the products (or services) that have already been sold to customers.
59
When is an employer required to provide minimum essential coverage (MEC) to its employees?
Under the AcA's employer-shared responsibility provisions, an applicable large employer (ale) must either offer affordable minimum essential coverage or owe a shared responsibility payment to the IrS. Ale's
Are defined as having 50 employees or more.
60
What is a 401k plan?
A 401k is a defined contribution plan. The employee and employer can make contributions to the account, 401k plans have an annual filing requirement form 5500.
61
What is a 'brother-sister' controlled group?
A 'brother-sister' controlled group is a group of corporations owned by the same five or fewer individuals.
62
What is a direct rollover?
A rollover made from one retirement plan to another plan without being distributed to the participant. This is also called a trustee to trustee transfer.
63
What is the difference between wages and salary?
Usually, wages are computed by multiplying an hourly pay rate by the number of hours worked. A salary is a fixed sum paid for a specific period of time worked, such as weekly or monthly.
64
What are the advantages of a sole proprietorship?
A sole proprietorship is the easiest business type to form and requires no paperwork. The proprietor receives all of the profits and controls the business.
65
What is a limited partner?
A limited partner is an investor. They invest capital and share profits, but do not participate in management and are not personally liable for partnership debts beyond their investment in the business.
66
With regard to retirement plans, what is a hardship distribution?
A distribution from a retirement plan which is made because the participant has suffered severe financial difficulty or an extraordinary event as defined by the plan document. Hardship distributions are generally taxable and can be subject to penalties, as well.
67
What are retained earnings of a corporation?
Retained earnings are corporate profits that are not distributed to shareholders.
68
With regards to retirement accounts, what does the term vesting mean?
Vesting refers to the degree to which a participant is entitled to a portion of his or her retirement account balance. Some retirement plans allow gradual vesting schedules, and thus helps reduce employee turnover.
69
With regards to trusts, what is the Income distribution deduction?
The Income Distribution Deduction (IDD) is a deduction allowed to a trust for distributions to beneficiaries. It is limited to distributable net income and is designed to avoid double taxation on income flowing from the trust to its beneficiaries.
70
What is probate?
Probate is generally used to refer to the entire process of administration and distribution of a decedent's estate. Legal processes for probating an estate vary from state to state.
71
With regards to the formation of a trust, what is a grantor?
A grantor is the person who creates and initially funds a trust, by contributing money or property. Also called a settlor.
72
When a business has employees, what is the deadline for an employer to provide form w-2 to its employees?
January 31.
73
What two types of exempt organizations do not have to apply for formal exemption from the IRS?
Churches and governmental entities are automatically treated as tax exempt and are not required to apply for and obtain recognition of tax-exempt status form the IRS.
74
What form is used to apply for formal recognition as a tax exempt organization under IRC section 501c3?
Form 1023, application for recognition of exemption under section 501c3.
75
With regards to exempt entities, what is the definition of a cash contribution?
A contribution received in the form of cash, checks, money orders, credit card charges, wire transfers, and other transfers and deposits to a cash account of the organization.
76
How can a partnership be formed?
A partnership can be formed simply by two people who want to do business together. A partnership agreement can be oral or written. General partnerships require no legal filings.
77
What is a limited liability partnership (LLP)?
An LLP is a state-level entity designed mostly for licensed professionals, such as attorneys, doctors and accountants. LLP statues vary from state to state.
78
What is a limited partnership (LP)?
A LP is a legal entity with at least one general partner and one (or more) limited partners. Limited partners do not participate in the business and are liable only up to the extent of their investment in the business.
79
What entity type is the best choice if the owners wish to offer a public sale of stock?
A C corporation can expand and seek investors through the public sale of stock. Stockholders Can be foreign or domestic, and different classes of stock can be offered (common or preferred).
80
What are the two ways of computing depletion?
Cost depletion and percentage depletion.
81
With regards to rental real estate activities, what is a real estate professional?
Individuals who perform more than 50% of their personal services and spend more than 750 hours during the year in real property businesses in which they materially participate.
82
What are the IRS' hobby loss rules, and how do these rules limit the deductibility of expenses?
The hobby loss rules limit the deductibility of expenses related to activities not engaged in for a profit. Taxpayers are prohibited from deducting net losses generated by a hobby against other income.
83
Define the home office deduction.
If a business owner uses part of their home regularly and exclusively as the principal place of their business or to meet with clients, patients or customers, the taxpayer can qualify to deduct certain home office expenses.
84
What is imputed interest? Is it taxable?
Imputed interest is used by the irs as a means of collecting tax revenues in loans that pay little or no interest. Imputed interest is often assessed under audit, and it is taxable.
85
What is a misclassified worker according to the irs?
A worker that has been improperly classified as an independent contractor. If the irs determines that an individual has been classified, it may levy penalties against the employer.
86
If a business receives $10,000 or more in cash (or cash equivalent) what form is the business required to file?
Form 8300 is required when a business receives large cash payments ($10,000 or more). Form 8300 must be filed for each separate transaction that exceeds the $10,000 in cash limit.
87
What is listed property?
Listed property is an irs term used for specific depreciable assets that are subject to special tax rules if the assets are used for business less than 50% of the time )this list includes photographic, phonographic, communication and video-recording equipment.
88
What is the marital deduction, as it pertains to estates?
The marital deduction generally allows any amount of property to go from One US citizens spouse to the other free of federal gift taxes or estate taxes.
89
How do C corporations report capital gains and losses?
With a C corporation, capital gains and losses offset each other. Capital losses can only offset capital gains, and cannot offset other corporate income. Capital losses of a corporation can be carried back 3 years and forward 5 years.
90
What is depreciation recapture?
When an asset is sold above its adjusted basis, the gain is (generally) taxed as ordinary income up to the amount of previously claimed depreciation.
91
What is a SEP-IRA?
A simplified employee pension (sep-irs) is a tax-favored retirement plan that is used most often by self-employed taxpayers.
92
What is a simple plan?
A savings incentive match plan for employees (simple) is a retirement plan that can be offered by companies with 100 or fewer employees. There are two types (1) simple irs and (2) simple 401k.
93
What is a stepped up basis?
The basis of inherited property is stepped up to its value on the date of death of the owner or the alternate valuation date, if chosen by the executor of a taxable estate.
94
How does the IRS define fair market value?
FMV: for purposes of property valuation is the price that property would sell for on the open market. FMV is also defined as the price that would be agreed on between a willing buyer and a willing seller.
95
What are some examples of intangible personal property?
Intangible personal property includes certificates of stock, bonds, promissory notes, licenses, copyrights, patents, trademarks, contracts, software and franchises.
96
What form does a partnership use to report a partner's distributive share of income to each partner?
Schedule k-1 (Form 1065) is used by partnerships to report a partner's share of the partnership's income, deductions, credits, etc.
97
What form does a S corporation use to report a shareholder's distributive share of income?
Schedule k-1 (form 1120-s) is used by S corporations to report the taxpayers' share of the corporation's income, as well as any deductions, credits, etc.
98
What form does an estate use to report distributions to a beneficiary?
Schedule k-1 (form 1041) is used by the fiduciary of a domestic decedent's estate, trust or bankruptcy estate to report distributions to a beneficiary.
99
What is Last-in, first out (LIFO)?
LIFO is an inventory method that applies to the sale of part of a group of similar items in an inventory that assumes the last ones acquired were the first ones sold.
100
What is fifo (first in, first out)?
FIFO stands for first-in, first out. It is an inventory costing method that assumes that the first items placed in inventory are the fist sold.
101
What is a LLC?
A state level legal structure that allows a business to be taxed like a sole proprietorship or a partnership but can elect to be treated as a corporation.
102
What assets are included in a decedent's gross estate?
The estate of the decedent consists of everything the decedent owned or had a right to, on the date of death. The property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.
103
What is excluded from a decedent's gross estate?
Does not include property owned solely by the decedent's spouse or other individuals. Lifetime gifts that are complete are not included in a decedent's gross estate.
104
An LLC can elect to be treated treated as a C Corp by filing which form?
8832, entity classification election.
105
What is a section 351 tax-free exchange?
Section 351 allows for the non recognition of gain or loss on the transfer of property to a corporation solely in exchange for stock if, immediately after the exchange, the transferor is in control of the corporation and owns at least 80% of outstanding stock.
106
What form does a C corporation file in order to request an extension?
Form 7004, application for automatic extension of time to file certain business income tax, information and other returns.
107
Corporations are required to pay their tax liabilities through which online service?
EFtps to make deposits for all tax liabilities including social security, Medicare, withheld income, excise and corporate income taxes.
108
When are a corporation's estimated taxes due?
4th, 6th, 9th and 12th months of the corporation's tax year. For a calendar year corporation, payments are due on April 15, June 15, September 15 and December 15.
109
What is the safe harbor for corporations, with regard to estimated taxes?
A corporation must make quarterly installment payments through eftps if it expects its estimated tax for the year to be $500 or more. A corporation that owes less than $509 May là the amount at the time of filing, using direct debit.
110
What form does a corporation use to figure its estimated tax due?
Form 1120-w, estimated tax for corporations, is a worksheet that allows a corporation to figure its estimated tax.
111
What is portfolio income, as defined by the irs?
Portfolio income is income derived from interest, dividends, royalties or capital gains by the sale of an investment property, shares of stock, and mutual funds. Portfolio income is not the same as "passive activity income."
112
How employers figure out how much income tax to withhold from an employee's pay?
Employers use the information on form w-4 to compute income tax withholding in an employee's wages.
113
Wages, salaries and tip income are reported to an employee on which irs form?
W-2.
114
With regards to proving a deduction taken in the tax return, who has the burden of proof?
In most dealings with the irs, the burden of proof lies with the taxpayer. However, in tax fraud cases, the burden of proof switched to the government.
115
What is a tax year?
A tax year is an annual accounting period for paying or withholding taxes, keeping records and reporting income and expenses.
116
Self-employment tax is calculated on which form?
Self-employment tax is calculated on schedule SE, self-employment tax.
117
The 1099-nec is required when a payment to any one independent contractor exceeds what dollar threshold?
$600 or more for a calendar year.
118
A self-employed taxpayer must file schedule c and pay s/e tax if he or she has net earnings from a/e of ____?
A s/e taxpayer must file schedule C and pay s/e tax if he or she had net earnings from s/e of $400 or more.
119
For travel-related meals, a business can figure their travel-related meal expenses using either of the two following methods:
1) actual meal costs and 2) the standard meal allowance, also called the federal per diem rate.
120
What is the rule for the deductibility of passive activity losses?
Losses from passive activities are generally deductible only to offset income from passive activities for the taxable year. A special rule exists for losses from residential rental activities.
121
How does a business calculate gain or loss on the disposition of an asset?
Gain or loss in the disposition of an asset is calculated by the difference between the amount realized and the asset's adjusted basis.
122
A taxpayer may make an election to group multiple business activities or multiple rentals as a single activity for purposes of the passive loss restrictions. What is this grouping election called?
Section 469 election is this type of grouping election. This election is irrevocable.
123
When a taxpayer actively participates in a rental real estate activity, the taxpayer may be able to deduct up to _____ of losses against nonpassive income.
When a taxpayer actively participates in a rental real estate activity, the taxpayer may be able to deduct up to $25k of losses against nonpassive income. This $25k loss allowance is available for taxpayers whose MAGI is $100k or less.
124
Define bonus depreciation.
A special 100% depreciation deduction created by the tax cuts and jobs act and generally applies to depreciable business assets with a recovery period of 20 years or less.
125
In a like-kind exchange, what is a boot?
Boot is unlike property (usually cash but can include other property) transferred in a like-kind exchange. Boot will not invalidate an otherwise valid exchange, but can make it partially taxable.
126
What is a bequest?
After the death of a taxpayer, a bequest is a transfer of property from an estate to a beneficiary, either through probate or by terms of a will.
127
With regards to partnerships, what is a current distribution?
A current distribution is a distribution of cash or property that is not a liquidating distribution.
128
What is the dsue?
The decreased spousal unused exclusion (dsue) is the amount of federal estate tax exemption amount that the first spouse's (the deceased) estate did not use up and can be transferred to the living spouse.
129
What is direct seller?
A direct seller is an individual who sells products or services through one-to-one selling? Direct sellers are generally self-employed and file Schedule C. Examples include: Avon sellers, Mary Kay and Amway salespeople.
130
What is a qualified disability trust (qdt)?
A qdt is an irrevocable trust set up specifically for the benefit of a disabled beneficiary. A qdt is allowed an annual deduction equal to the personal
Exemption.
131
With regard to trusts, what is distributable net income (Dni)?
Dni is the trust income that is available for distribution.
132
What are the filing responsibilities of an estate's executor/administrator?
An executor or administrator is appointed in a will or by the courts. The executor may need to file income tax returns for the decedent, as well as manage the estate and file estate tax returns.
133
What is a fiscal tax year?
A fiscal year is a tax year ending in the last day of any month except December.
134
What is a calendar tax year?
A calendar tax year is 12 consecutive months beginning nhau 1 and ending December 31.
135
What is worker's compensation?
Worker's compensation is an insurance program that hat employers purchase. It provides no taxable income for workers who are injured on the job. Many states require businesses to carry worker's compensation insurance if the business has employees.
136
If an individual taxpayer is in the business of renting personal property, how should this activity be reported?
The rental of personal property (such as rental cars, equipment or formal wear) is not reported on schedule e. Instead it's reported on a schedule c, if the activity is a trade or business.
137
What is the fica tax?
Us federal payroll tax. It stands for the federal insurance contributions act and is deducted from each paycheck.
138
Fica taxes are divided into two parts. What are the two components of the fica tax?
Social security tax and Medicare tax.
139
What is the irs' definition of a business activity, as opposed to a hobby activity?
According to the irs, a business is a continuous and regular activity that has profit at its primary purpose.
140
The QBI deduction or 199a deduction, allows a deduction of up to _______ of qualified business income.
The QBI deduction (199A deduction) allows a deduction of up to 20# of qualified business income.
141
What is an excise tax?
An excise tax is a tax levied on the retail sale of particular products or services. Excise taxes exist on motor fuel, indoor tanning, tobacco, etc. These businesses must file excise tax returns with the irs.
142
The basis of property is used to determine depreciation, amortization, depletion and casualty losses. If a business cannot determine the basis of an asset, the irs will deem it to be __________.
If a business cannot determine the basis of an asset, the irs will deem it to be zero.
143
Many retail businesses are required to collect sales tax at the point of sale. How should a business account for these sales taxes?
Sales taxes collected by a retail busibess are usually listed in the balance sheet as a liability.
144
What is the futa tax rate that applies to employers?
The futa refers to a payroll tax that employers pay. Only employers pay futa tax. The futa tax rate is 6% of the first $7k of an employee's wages.
145
What is Macrs?
The modified accelerated cost recovery system (macrs) is e current tax depreciation system in the United sates. Under macrs, assets are divided into asset classes that dictate the number of years over which their cost can be recovered.
146
What is a cafeteria plan?
A cafeteria plan is a plan maintained by an employer that allows employees to select from a menu of taxable and non-taxable benefits.
147
What is the section 179 deduction?
The section 179 deduction is a special allowance that allows a business to elect to take a full deduction property in the first year it is placed in service, rather than depreciating it over its useful life.
148
What form does a c corporation use to report income and loss?
Form 1120z
149
What is an installment sale?
An installment sale is a sale of property in which the seller receives at least a portion of the sales proceeds in a subsequent year. The resulting gain is typically reported using the installment method. The installment sale rules only apply when an asset is sold at a gain.
150
Are meals or lodging provided by employer taxable to the employee?
Meals or lodging provided by employer are generally a non-taxable fringe benefit to the employee if provided for the convenience of the employer or on the employer's premises.
151
What is a grantor trust?
A grantor trust is controlled by the grantor. Generally, the trust is disregarded as a separate tax entity, and all income is taxed to the grantor.
152
What is a statutory employee?
The irs treats certain workers who meet the independent contractor rules as employees for employment tax purposes by statute. These workers are called statutory employees.
153
What is a qualified joint venture ( QJV)?
A qjv is a trade or business where: the only members of the joint venture are spouses who file a joint return, and choose not to file a partnership return.
154
What is an annuity?
An annuity is a series of payments under a contract that are made at regular intervals and over a period of more than one year. If a taxpayer purchases an annuity with pre-tax dollars, payments from the annuity are fully taxable as income.
155
Describe a defined benefit plan.
A defined benefit plan is also known as a traditional pension plans this type of retirement plan promises the participant a specified monthly benefit at retirement.
156
What is ERISA?
ERISA is a federal law hat sets standards of protection for individuals in most voluntarily established, private-sector retirement plans. ERISA covered retirement plans have annual filing requirements.
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What is an esop?
An employee stock ownership plan is a type of defined contribution plan that is invested primarily in employer stock.
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What is the definition of a trust's corpus?
Corpus is the principal or property in a trust. The income earned on the principal is distinguished from the principal.
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Estates and trusts generally terminate when:
When all of the entity's assets and income have been distributed, and all liabilities have been paid.
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An estate tax return is filed using which form?
Form 706, US estate (and generation-skipping transfer) tax return
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What type of intangible property qualifies for section 179 expensing?
In general, intangible property does not qualify for section 179 expensing, however, off-the-shelf computer software that a) is not custom designed and b) is available to the general public is qualified section 179 property.
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What is an education ira (coverdell education savings account)?
A coverdell is a type of education savings account. Contribution
I s are nondeductible, but withdrawals of earnings will be tax free if used to pay the qualified education expenses if the designated beneficiary.
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Define the accrual method of accounting.
The accrual method of accounting method that reports income when earned (not necessarily received) and expenses when incurred (not necessarily paid). Most large businesses use the accrual method of accounting.
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What is a revocable trust?
A revocable trust allows the person who created the trust to retain control of the assets in the trust, and revoke or change the terms of the trust at any time.
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What are some examples of actual costs when calculating business automobile expenses?
Gas and oil, repairs, tire replacement, vehicle insurance, registration fees, licenses and depreciation.
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What are two methods for calculating business related car expenses?
The actual expense method and the standard mileage rate method.
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Define the cash method of accounting?
Under the cash method, a business reports income when received (not earned) and expenses when paid (not incurred). Most small businesses use the cash method.
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What is the irs definition of a common law employee?
Per the irs, a common law employee is a person who performs services for an employer, when the employer can control what will be done and how it will be done.
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Define depreciation.
Depreciation is an annual deduction that allows businesses to recover the cost of property used in a trade or business or held for the production of income.
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What are corporate dividends?
A c corporation's distributions to its shareholders from its earnings and profits.
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What is amortization?
Amortization is the straight line recovery of the cost of certain intangible assets. For example, amortization of goodwill is allowed over 15 years.
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When are estimated taxes due, for most self-employed taxpayers?
4/15, 6/15, 9/15 and 1/15.
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When a business has two or more owners, the default entity is _______?
A partnership.
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What is accelerated depreciation?
Accelerated depreciation is a form of depreciation used for accounting or tax purposes to reduce the book value of an asset faster than more conservative straight-line depreciation.
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What types of meals are 100% deductible in 2021?
The temporary exception allows a 100% deduction for food and beverages provided by restaurants. The 100% deduction also applies to per diem in 2021.
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What is the standard mileage rate for business miles in 2021?
56 cents per mile for business miles driven.
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In 2021, employers may provide a student loan repayment benefit to employees in a tax-free basis. What is the maximum amount that can be provided as a tax-free benefit?
An employer may contribute up to $5250 annually toward an employees' student loans as tax free fringe benefit.
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What is form 1099-k used to report? I
Form 1099-k is used by a third party network (such as visa, PayPal, stripe, etc.) to report transactions processed for taxpayers. This can include a/e taxpayers, like rideshare drivers for Uber and Lyft.
