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CPA Exam- Reg > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Educator Expenses:

A

Can deduct up to $250 of qualified expenses paid. If spouses are filing jointly and both are eligible educators, the maximum deduction is $500
Must be k-12 (not homeschool teacher)

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2
Q

4 IRA accounts are:

A
  • Deductible IRA
  • Nondeductible IRA
  • Roth IRA
  • Coverdell education savings accounts
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3
Q

Taxpayer not permitted to deduct a contribution to an IRA when the following two conditions are both present

A
  1. Excessive AGI (rich)

2. Active participation in another qualified plan

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4
Q

Individuals who are 50 years of age or older by the end of the year are allowed an additional contribution to IRA of what amount?

A

$1,000

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5
Q

Roth IRA

A

Not deductible & Tax-free earnings; phases out for super rich

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6
Q

Withdrawals from IRAs

A

Deductible & Taxed when withdrawn

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7
Q

Nondeductible IRA

A

Fall back when not eligible for deductible or Roth IRA.
Not taxed until withdrawn
no phase out

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8
Q

Coverdell Education Savings Accounts

A
  • contributions are nondeductible; maximum contribution of $2,000 per beneficiary annually.
  • Tax free distribution
  • any amount remaining when beneficiary reaches 30yrs old must be distributed
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9
Q

Coverdell Education Savings Accounts Time limit penalty

A
  1. distributed to beneficiary - taxable and 10% penalty

2. Rollover to another family member- tax free and no penalty

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10
Q

Coverdell Education Savings Accounts Contribution requirements

A
  1. beneficiary must be under 18

2. phases out when contributor is super rich

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11
Q

Student Loan Interest Expense

A

adjustment for eduction loan interest is limited to $2,500

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12
Q

Tuition and Fees Deduction

A

applies regardless of whether eduction is work-related
Maximum contribution: $4,000
Phases out for rich

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13
Q

Health Savings Accounts

A

Pretax contribution increased by 1,000 for 55+

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14
Q

Moving expenses

A
  1. new workplace 50+ miles from old home
  2. Must be working full time for at least 39 weeks during 12month period following relocation
  3. Travel and lodging for family
  4. Transporting household goods
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15
Q

Nondeductible moving expenses

A

meals, pre-move house hunting, expense of breaking a lease, temporary living expenses

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16
Q

Tax on self-employment

A

50% deduction

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17
Q

Self-employed health insurance premiums

A

100% deductible

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18
Q

Additional deduction for:

A

65+ or blind

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19
Q

Schedule A

A

personal

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20
Q

Schedule C

A

Business

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21
Q

Schedule E

A

rental

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22
Q

Nondeductible medical expenses

A
  1. cosmetic surgery
  2. life insurance
  3. health club memberships
  4. personal hygiene
23
Q

Itemized deductible taxes

A
  1. real estate taxes
  2. income taxes
  3. personal property taxes
  4. sales tax (can be state and local income taxes of sales; cannot be both)
24
Q

Itemized nondeductible taxes

A
  1. federal taxes (social sec)
  2. Inheritance taxes for states
  3. Business and rental property taxes
25
Q

Deduction for charity

A

lesser of properties starting price or FMV
cash-max 50% of AGI
property-max 30% of AGI

26
Q

Appreciated property given to charity

A

deductible at FMV
max 30% AGI to public charity
max 20% AGO to private foundation
Only 30% can be deducted in appreciated property

27
Q

Charity deduction may not exceed

A

50% of AGI

28
Q

Casualty and theft losses

A

must exceed 10% of AGI to deduct; loss must be sudden or unexpected

29
Q

Miscellaneous itemized deductions

A

cannot exceed 2% of AGI

30
Q

unreimbursed business expenses for itemized deduction

A

meals/entertainment - 50%

31
Q

Educational Expenses

A
  1. qualified-job related (uniforms, business gifts, etc)
32
Q

Personal tax credits

A

may reduce tax lability to zero but cannot result in a cash refund

33
Q

Refundable credits

A

may reduce tax liability and can result in a refund

34
Q

Child and Depended Care Credit

A 
Both parents need to work and someone needs to claim income for watching children. Maxes out at 2 kids
eligible people:
1. a qualifying child under age 13
2. any disabled depended of any age
3. a spouse who is disabled
4. is babysitting not school
**amount of credit is 20% of AGI
35
Q

Credit for elderly or permanently disabled

A
  1. 65 or old
  2. under 65 and retired due to permanent disability
    * AGI reduced by 50% then multiplied by 15%
36
Q

American Opportunity Credit

A

pays for students first 4 years of post secondary school
eligible:
taxpayer
taxpayer’s spouse or dependent (multiple kids okay)
Cannot have drug offense during year
phases out for superrich

37
Q

Lifetime learning credit

A

available for an unlimited number of years. Only 1 credit per household

38
Q

American Opportunity Credit and Lifetime learning credit is okay for____ but not for _____.

A

okay for same year, not okay fore same kid. (pick either or for a child not both credits)

39
Q

Adoption Credit

A

Nonrefundable credit. Not available for adopting child of spouse

40
Q

Retirement savings contribution credits

A 
May often tax to IRA or Roth IRA. 
Eligible:
over 18
not a full-time student
not a dependent
very low income
41
Q

Foreign tax credit

A 
limited to the lesser of:
1. foreign taxes paid
2. Taxable income from all foreign operations
/taxable income+ exemptions
xUS tax
(US tax is based upon worldwide income)
42
Q

Any disallowed foreign tax credit may be carried over as follows:

A
  1. carry back 1 year

2. carry forward 10 years

43
Q

Work Opportunity Credit

A

Is available to employers who hire from a targeted group
qualified groups:
1. Disabled
2. 18-24 from poor families
3. Vietnam veterans from economically disadvantaged areas
4. Certain food stamp receipts
**credit is a low amount

44
Q

Child tax credit

A

claim $1,000 for each qualifying child. Must be under 17 (not the 19 and student rule). Phases out for rich

45
Q

Earned Income Credit

A
  • Refundable to help poor families make ends meat. Living at low poverty line
  • – frequently tested that it is a refundable credit
46
Q

Alternative minimum tax

A

Designed to hurt the super rich (only hits 3% of population). Pays the greater of regular tax or tentative minimum tax

47
Q

AMT formula

A

$83,800 - 25% of AMTI 0ver $159,700

48
Q

Statute of limitations

A

3 yrs from due date of return or date of extension

6 yrs for 25% understatement of gross income

49
Q

Statute of limitations- fraud and false returns

A

no statute

50
Q

Refund claim

A

3 yrs from due date of return or date of extension

51
Q

Bad debts claim

A

7 yrs from due date of return or date of extension

52
Q

Estimated taxes requirement

A

Taxpayer is required to make estimated quarterly tax payments is BOTH of the following are met:

  1. over $1,000 of tax liability
  2. withholdings were less than 90% of this years earnings OR 100% of last year’s taxes
53
Q

Hierarchy of authority in tax law

A
  1. Internal Revenue Code

2. IRS regulations (the interpretation of the IRC)

CPA Exam- Reg (2 decks)

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