Becker - Individual Taxes

Question 1

Adjusted Gross Income

Answer 1

Gross Income - Adjustments

Question 2

How do you calculate Taxable Income?

Answer 2

AGI
(Standard Deduction)
or 
(Itemized Deductions)
(Exemptions)

Question 3

What makes up Gross Income?

Answer 3

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

Question 4

What makes up Adjustments from GI to get to AGI?

Answer 4

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

Question 5

What makes up itemized deductions?

Answer 5

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

Question 6

When must a taxpayer file? General Rule

Answer 6

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)

Question 7

What are the EXCEPTIONS to the filing requirements? I.E. must file even if their income is lower than general rule.

Answer 7

1. Individuals whose net earnings from SE are $400 or more must file.
2. 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.
3. Individuals who receive advance payments of earned income credit must file.

Question 8

Which form must be file for AUTO 6 month extension to file?

Answer 8

Form 4868 by 4/15

Question 9

Define taxpayers outside of the country (auto extension)

Answer 9

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

Question 10

Define SINGLE

Answer 10

Single at YE or legally separated

Question 11

Define JOINT RETURNS

Answer 11

1. Married at YE
2. Living together in common law
3. Married and living apart (but not legally separated)

Question 12

Can joint return be filed if one spouse dies during the year?

Answer 12

Yes

Question 13

Define married filing separately in a SEPARATE PROPERTY STATE

Answer 13

Hubs and wife must separately report their own income, exemptions, credits, and deductions on their own individual income tax returns

Question 14

Define married filing separately in a COMMUNITY PROPERTY STATE

Answer 14

Most income, deductions, credits, etc are split 50/50.

Question 15

Define Qualifying widow(er)

Answer 15

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.

Question 16

Define principal residence for dependent child for a qualifying widower

Answer 16

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.

Question 17

Head of Household conditions that must be meet:

Answer 17

1. 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.
2. Is not a “qualifying widow(er).
3. Is not a nonresidential alien.
4. 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

Question 18

Divorced Parents

Answer 18

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

Question 19

Define HoH for dependent parents and maintaining a home.

Answer 19

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.

Question 20

Define HoH dependent relative

Answer 20

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.

Question 21

Will persons eligible to be claimed as dependent on another’s tax return be allowed a personal exemption on their returns?

Answer 21

NO

Question 22

When can a taxpayer, married filing separately claim his/her spouse’s personal exemption?

Answer 22

1. Taxpayer’s spouse has no GI.

2. Taxpayer’s spouse was not claimed as dependent of another taxpayer.

Question 23

Phase-out of personal and dependency exemptions

Answer 23

This reduces exemptions by 2% for every $2,500 or portion thereof ($1,250 for married filing separately) by which AGI exceeds.

Question 24

Formula: Phase-out of personal and dependency exemptions

Answer 24

AGI - Phase out = Allowable amt / $2,500 = C

Round “C” up.

C x 2% = D

100% - D = percentage of exemption allowable.

Question 25

Dependency Exemptions:

Who is a qualifying child?

Answer 25

C lose relative
A ge limit
R esidency and filing requirements
E liminate Gross Income Test
S upport Test changes

Question 26

Dependency Exemptions:

Who is a qualifying relative?

Answer 26

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