Becker - Individual Taxes Flashcards
Adjusted Gross Income
Gross Income - Adjustments
How do you calculate Taxable Income?
AGI (Standard Deduction) or (Itemized Deductions) (Exemptions)
What makes up Gross Income?
Wages Interest Dividends State Tax Refunds Alimony received Business Income Capital G/L IRA Income Pension and Annuity Rental I/L K-1 I/L Unemployment Comp SSI Benefits Other Income
What makes up Adjustments from GI to get to AGI?
Educator expenses IRA Student loan interest expenses Tuition & fee deduction Health Savings Account Moving Expenses One-half SE FICA SE health insurance SE retirement Interest withdrawal penalty Alimony paid
What makes up itemized deductions?
Charity up to 50% of AGI Casualty/theft > 10% AGI Interest expenses (Home & Inv) Medical > 10% of AGI Misc > 2% AGI Taxes-state/local Other Misc
When must a taxpayer file? General Rule
IF income = or > sum of: personal exemption PLUS regular standard deduction PLUS additional standard deduction amount for taxpayers age 65 or over or blind
(Except for married filing separately)
What are the EXCEPTIONS to the filing requirements? I.E. must file even if their income is lower than general rule.
- Individuals whose net earnings from SE are $400 or more must file.
- Individuals who can be claimed as dependent on another tax payer’s return, have unearned income, and GI of $1,000 or more must file.
- Individuals who receive advance payments of earned income credit must file.
Which form must be file for AUTO 6 month extension to file?
Form 4868 by 4/15
Define taxpayers outside of the country (auto extension)
Means, outside of the US on the filing date, have their principal place of business outside the US or are stationed outside the US.
Must include documentation if the extension is taken
Define SINGLE
Single at YE or legally separated
Define JOINT RETURNS
- Married at YE
- Living together in common law
- Married and living apart (but not legally separated)
Can joint return be filed if one spouse dies during the year?
Yes
Define married filing separately in a SEPARATE PROPERTY STATE
Hubs and wife must separately report their own income, exemptions, credits, and deductions on their own individual income tax returns
Define married filing separately in a COMMUNITY PROPERTY STATE
Most income, deductions, credits, etc are split 50/50.
Define Qualifying widow(er)
Taxpayer who may use the joint tax return standard deduction and rates (but not the exception for the deceased spouse) for each of two taxable years following the year of death of his or her spouse, unless he or she remarries.
Define principal residence for dependent child for a qualifying widower
Surviving spouse must maintain a household that, for the whole taxable year, was the principal place of adobe of a son, stepson, daughter, or stepdaughter (by blood or adoption).
Surviving spouse must also be entitled to a dependency exemption.
Head of Household conditions that must be meet:
- Is not married, is legally separated, or is married and has lived apart from his/her spouse for the last six months of the year as of the close of the taxable year.
- Is not a “qualifying widow(er).
- Is not a nonresidential alien.
- Maintains as his or her home a household that, for more than half the taxable year, is the principal residence of:
a. a dependent son or daughter
b. father or mother
c. dependent relatives
Divorced Parents
A custodial parent is entitled to the HoH status even if the custodial parent has waived his/her right to the dependency exception by completing FORM 8332
Define HoH for dependent parents and maintaining a home.
Dependent parent is NOT required to live with taxpayer. As long as taxpayer maintains home of the parent for the entire year.
Must contribute OVER half of the cost of upkeep.
Mans rent, mortgage interest, property taxes, insurance, utility charges, repairs, and food consumed in the home.
Define HoH dependent relative
parents, grandparents, bros, sis, aunts, uncles, nephews, and nieces, stepparents, parents-in-laws, etc.
MUST live with taxpayer.
Note: Cousins, foster parents, and unrelated dependents do not qualify.
Will persons eligible to be claimed as dependent on another’s tax return be allowed a personal exemption on their returns?
NO
When can a taxpayer, married filing separately claim his/her spouse’s personal exemption?
- Taxpayer’s spouse has no GI.
2. Taxpayer’s spouse was not claimed as dependent of another taxpayer.
Phase-out of personal and dependency exemptions
This reduces exemptions by 2% for every $2,500 or portion thereof ($1,250 for married filing separately) by which AGI exceeds.
Formula: Phase-out of personal and dependency exemptions
AGI - Phase out = Allowable amt / $2,500 = C
Round “C” up.
C x 2% = D
100% - D = percentage of exemption allowable.
Dependency Exemptions:
Who is a qualifying child?
C lose relative A ge limit R esidency and filing requirements E liminate Gross Income Test S upport Test changes
Dependency Exemptions:
Who is a qualifying relative?
S upport (over 50%) test
U nder a specific amount of taxable GI test
P recludes dependent filing a joint tax return test
O only citizens (US/Can/Mex)
R elative test
OR
T taxpayer lives with individual for whole year test
