Tax-Reg_Review Deck_1 Flashcards
(44 cards)
What are the conditions to qualify for Qualified surviving spouse filing status?
- Taxpayer’s spouse died in one of the two previous years and taxpayer did not remarry in the current tax year.
- The taxpayer has a child who can be claimed as a dependent.
- This child lived in the taxpayer’s home for all of the current tax year.
- The taxpayer paid over half of the cost of keeping up a home for the child.
- The taxpayer could have filed a joint return in the year the spouse died.
True or False:
Qualified business income deduction is an adjustment to standard or itemized deduction on the individual tax return
FALSE!
The QBI deduction is taken from adjusted gross income (“below the line”). It is not part of the itemized deductions
What date Marital Status is determined for filing taxes?
Marital status for the tax year is determined as of the last day of the year.
Taxpayers who are divorced or legally separated are considered unmarried.
Conditions to qualify Head of the Household filing status -
To qualify for head of household filing status,
1. A taxpayer must be unmarried as of the last day of the tax year.
2. Maintains a home that is the principal residence of a qualifying person for more than half of the tax year.
A qualifying person includes a dependent child, parent, or relative.
True or False:
To claim head of the household filing status for dependent parents, parents must live with the tax payer.
FALSE!
Head of household filing status is available to a single taxpayer who maintains a separate home for a dependent parent.
A dependent parent is not required to live with the taxpayer, provided the taxpayer maintains a home that was the principal residence of the parent for the entire year.
True or False:
A tax payer’s spouse who died in the previous year can claim Married Filing Jointly tax filing status for the current tax year.
TRUE!
A QUALIFIED SURVIVING SPOUSE is a taxpayer who may use the married filing jointly tax return, standard deduction and rate for each of two taxable years following the year of death his or her spouse, unless he or she remarries.
The surviving spouse must maintain a household that, for the entire taxable year, was the principal place of abode of a son, stepson, daughter, or stepdaughter (whether by blood or adoption).
True or False:
Child Support Payments made under the divorce agreement are taxable income for the recipient.
FALSE!
Child support payments are not taxable income for the recipient.
Child Support payment qualifications:
1 A specific amount is fixed or is contingent on the child’s status (like reaching certain age)
2 It is paid solely for the support of minor children
3 It is payable by decree, instrument or agreement.
When the Alimony under a divorce agreement is not Taxable or Deductible to the parties of the divorce agreement?
Divorce or Separation agreements executed AFTER December 31, 2018 - The ALIMONY is NEITHER TAXABLE TO THE RECIPIENT NOR DEDUCTIBLE BY THE PAYOR.
True or False:
Scholarships are nontaxable for degree-seeking students to the extent that the proceeds are spent on tuition, fees, books, and supplies
TRUE!
True or False:
Interest income received on US Treasury Bonds / Certificate is EXEMPT from tax.
FALSE!
Interest received on US Treasury Certificates is taxable. Interest income from U.S. (Federal Govt) obligations is generally taxable
True or False:
Interest income received from State or Local government obligation is tax free.
TRUE!
Interest income on Municipal Bonds or State Govt obligations is TAX FREE. This income should not be added to GROSS TAXABLE INCOME for tax purposes.
What is taxability of Alimony under Tax Law?
Alimony received based on a divorce agreement executed ON or BEFORE December 31, 2018, is TAXABLE as gross income to the recipient.
When total payments (of ALIMONY) received do not equal the total due, the amounts are first allocated to child support.
Alimony = ONLY CASH and CASH Equivalent payments
Taxability of IRA distributions and penalty of early withdrawal -
Distributions of both principal (contributions) and earnings from deductible traditional IRAs are taxable as ordinary income and may be subject to applicable early withdrawal penalties.
Withdrawals prior to age 59½ are also subject to a 10 percent penalty tax (unless an exception applies)
True or False:
Punitive damages received in a personal injury case are fully taxable.
TRUE!
Punitive damages received in a personal injury case are fully taxable, except in a wrongful death case where state law has limited wrongful death awards to punitive damages.
Damages that are awarded as a result of physical personal injury are not taxable and should be excluded from gross income.
How guaranteed payments are treated under tax law?
Guaranteed payments to partners is an allowable deduction to the Partnership and reported as ordinary income to Individual Partners on Schedule K-1
Items generally allowed as deduction from Gross Income to calculate Adjusted Gross Income in 2024 -
Items reported as an adjustment to Gross Income (Adjusted Gross Income calculation) are -
1. Self employment health insurance
2. Alimony paid per divorce agreement settled on or before Dec 31, 2018.
3. Self employment tax - 50% adjusted.
4. Trade or Business Expenses reported on Schedule C
5. Capital losses in excess of capital gains are deducted (up to $3,000) on Form 1040
5. Contribution to IRA
6. Interest paid on Student Loan max of $2,500
True or False:
One half of the self-employment tax is deductible to arrive at adjusted gross income.
TRUE!
50% of Self Employment tax paid in 2024 is deductible as an adjustment to Gross Income.
True or False:
Interest paid on qualified mortgage is deductible as an adjustment to Gross Income.
FALSE:
Qualified mortgage interest paid is deductible as an itemized deduction on Schedule A
True or False:
Moving expenses are deductible from Gross Income as an adjustment.
FALSE!
Moving expenses are only deductible by members of the U.S. armed forces on active duty when moving pursuant to military orders.
What is the maximum annual deduction Self Employed can claim to SEP IRA in 2024?
The maximum annual deductible amount for self-employed individuals to a SEP IRA is
the lesser of $69,000 or 20 percent of net earnings.
“Net earnings” is defined as net self-employment income minus 50 percent of self-employment (S/E) taxes
2024 IRA max contribution limits
LESSOR OF -
UNMARRIED:
Under Age 50 - $7,000 or Earned Income.
Age 50 & Above - $8,000 or Earned Income
MARRIED:
Under Age 50 - $14000 ($7000 each) or Earned Income.
Age 50 & Above - $16000 ($8000 each) or Earned Income.
Earned Income includes:
- Salary & Wages
- Commissions
- Bonuses
- Alimony for Divorce or Separation agreement executed before Dec 31, 2018
- Net Earnings from Self Employment
- Non-tuition fellowship and stipend payments treated as taxable compensation.
AGI Phased Out Limitation When Tax-payer is Actively participating in Employer sponsored retirement plan -
For Unmarried: AGI is the range of - $77,000 - $87,000.
For MFJ: AGI is in the range of - $123,000 - $143,000.
EXCEPTION RULE FOR MFJ -
When filing MFJ and any of the spouse NOT ACTIVELY PARTICIPATING IN EMPLOYER SPONSORED RETIREMENT PLAN -
AGI PHASED OUT RANGE: $230,000 - $240,000
A cash basis tax-payor should report Gross Income _______________________
for the year in which income is either actually or constructively received, whether in cash or in property
True or False:
Self Employment Income is subject to federal income tax and self employment tax.
TRUE!
Self-employment income is subject to federal income tax and self-employment tax.
The self-employment tax is made up of Social Security (12.4%) and Medicare (2.9%), for a total of 15.3%
Calculation os Net Earnings from Self Employment and Self Employment Tax -
Net Earnings from Self Employment = Gross Income from Self Employment X 92.35% (rate given per Schedule SE)
Self Employment Tax = Net Earnings from Self Employment (as calculated in above) X 15.3% (12.9% of SS + 2.9% Medicare).
50% of Self Employment Tax is adjusted against Gross Income.
