Chapter 7 part 2 Flashcards
EIC must be calculated using
EIC Tables
EIC Rules Change ____
Yearly
Worksheet A is used to calculate EIC for taxpayers with
Wage income Only
Worksheet B is used to calculate EIC for taxpayers with
Self employment Income
Schedule EIC is required
For taxpayers claiming a Qualifying Child
Child and Dependent Care Credit
Allows taxpayers to have a credit for Child and dependent Care expenses
Child and Dependent Care Credit Eligibility
is granted to whichever parent has primary physical placement for most of the year
Qualified Care Expenses
Must be required for taxpayers to be able to work, Day care and Day camp programs, Babysitter/Nanny, Cannot be another dependendant under 10
to claim credit for qualified care expenses
tax payer must include the name, addressm and EIN/SSN of the care party
for taxpayers with an AGI less thanb ___ the allowable care credit is equal to __% of qualifued expenses
15,000;35
for taxpayers with an AGI greater thanb ___ the allowable care credit is
15,000; rediced
Form ____ line _ shows the applicable car credit percentages
2441; 8
Care credit maximums
3000 for one dependent, 6000 for 2+
_______ _______ musdt file a joint return to claim the child care tax credit
Married taxpayers
for MFJ, the care credit is limited to the ____ of either spouse’s income
lesser
full time sudents with little/no income are limited to ___ in care credits
250 for 1 dependent, 500 2+/month
Affordable Care Act
Obamacare
Health insurance premium tax credits
intended to lower the cost of healthcare
Health insurance premium tax credits requirements
exchange plan, ineligible for employer spons. Plan, income under limits, not MFS, not a dependent
ACA income eligibility
Modified AGI for household+ tax exempt interest & income
Maximum family income for ACA
400% FPL
FPL
Federal Poverty Line
Taxpayers below the federal poverty line are eligible for Medicaid and thus ___ eligible for the credit
are not
The credit is intended to take the form of the ______ of (1) actual health care premiums paid or (2) silver plan premiums less the amount the taxpayer is expected to contribute to health care.
Lesser
Under the ACA, the FPL is set in the ____ year during open enrollment
previous
calculate the ACA credit
household modified AGI, compare to FPL and calculate as a percentage, look up applicable percentage of income for premiums paid,
Ed and Milly are married with two children under the age of 21. Household income is $50,200. Ed and Milly’s household income is at 200 percent of the FPL. For household income of 200 percent of the FPL, the applicable figure is 0.0654; thus the intended or deemed to be paid for health care premiums is or $___.
$3,283.08
The amount of the ACA credit is based on comparing the cost of premiums for a designated silver plan in the taxpayer’s state with the deemed premium cost calculated above. For example, if the deemed premium to be paid is $3,283 and the cost of a silver plan for that household is $10,000 then the premium tax credit is ______
$6717
For households that did not have coverage for the entire year, the credit is _____ based on the number of months coverage was maintained.
prorated
ACA credits cannot exceed
premiums actually paid
ACA Credit can be obtained either ____ as a direct reduction in premiums or ____ the plan year when taxes are filed
in advance, after
Since the actual premium tax credit is not known until household income can be computed after the end of the tax year, Form ____, provides a reconciliation of the ____ credit and the _____ credit
8962; estimated; actual
If the actual credit is _____ than the estimated credit, the difference between the two amounts is a ____ credit on the taxpayer’s tax return.
greater ;refundable
If the estimated credit taken throughout the year is ____ than the actual credit, the difference is treated as additional ___ ___ on the taxpayer’s tax return.
greater ; tax due
as long as the household income remains below ___percent of the FPL, the repayment amount of the credit is _____
400 ;limited
ACA Repayment limits
<200% FPL 300/600
200-300% 800/1600
300-400% 1325-2650
Form ____ reports the taxpayer’s actual premiums paid,
1095-A
education tax credits
to reduce the cost of education
AOTC
American Opportunity Tax Credit
American Opportunity Tax Credit
Previously referred to as the Hope credit, a tax credit available for the first 4 years of postsecondary education expenses for students who meet specific requirements.
AOTC is for students in their ____ ____ years of postsecondary Education
first 4
AOTC can be claimed for expenses related to
associates/bachelor degreed
Students must be enrolled at least
half time for one period during the tax year
Students need form ____ provided by the school to qualify for AOTC
1098T
Students cannot have any ____ convictions to qualify for AOTC
drug
Students claiming aotc cannot file
as someone elses dependent or married filing separate
Qualifying expenses for the AOTC ___ be paid on behalf of the taxpayer, his or her spouse, or dependents.
can
AOTC requires due diligence form ____ and carries the same penalties as EIC for falsification and erros
8867; EIC
Lifetime learning credit is meant
to encourage taxpayers to take courses at eligible institutions to acquire or improve job skills
The lifetime learning credit may be used in ___ tax year the American Opportunity tax credit is not used for expenses paid for education.
any
Unlike the American Opportunity tax credit, the lifetime learning credit may be claimed for an ___ tax years.
unlimited number of
for Lifetime learning credit, taxpayers can elect a nonrefundable tax credit of __ percent of qualified expenses of up to $_____
20%,10000
The lifetime learning credit is available for qualified expenses paid for the education of whom?
the taxpayer, his or her spouse, and dependents.
Lifetime learning credit is less restrictive than AOTC because
you do not need to be degree seeking, you can take as little as one course, it is not subject to drug convictions, and it can be used every year.
Lifetime Learning Credit Phaseouts
MFJ 116-136000, S/HOH/QW 58-68000
Taxpayers cannot take both the ____ and ____ education credits in the same tax year.
AOTC; LLC
Foreign Exclusion Tax credit
Certain taxpayers working and living outside the U.S. are eligible to exclude a certain portion of their foreign income from taxable income under the foreign income exclusion.
to Qualify for FETC taxpayers must live and work outside the __, and must have a real ___ _____ outside the US
US; tax home (not a house)
Foreign Income Exclusion is claimed on form ____
2555
you can’t claim ____ with FIC
EITC
Employees and self-employed taxpayers that qualify for the foreign income exclusion are also eligible for a ____ ____ _ ____
housing exclusion or deduction
The foreign housing exclusion is an additional exclusion designed to represent the
incremental cost of housing in a foreign country above a base amount
Foreign tax credit
The purpose of this credit is to eliminate double taxation on income earned in a foreign country.
U.S. ______ taxpayers and U.S. ____ may claim a foreign tax credit on income earned and subject to tax in a foreign country or U.S. possession.
individual ;corporations
As an alternative to the credit, a ____ may be taken for the foreign taxes paid.
deduction
An individual will typically incur foreign taxes if they have worked outside the US as either an ___ or as ___-____ OR as a result of ____ _____ through an investment portfolio such as___ ___
employee; self employed; foreign investments; mutual funds
foreign tax credit is typically claimed on Form
1116
A simplified foreign tax credit that does not require the completion of Form 1116 is available if you meet all of the following requiremen
forign income iss passive(dividends/interest), all foreign income taxes reporter on payee statement (1099/K1), creditable taxes < 300(600 MFJ)
If the Form 1116 is not used, the foreign tax credit is entered directly on Schedule _of Form 1040, Line 1
3
IRS Publication 54
all about Foreign income exclusions/credits
adoption credit
a nonrefundable income tax credit for qualified adoption expenses
Form ___ is used to calculate and report the adoption credit
8839
