Chapter 8 - Credits, Losses, and Additional Taxes

Question 1

What is General Business Credits?

Answer 1

is a set of more than 30 credits commonly available to businesses. The credits are reported on 3800.

Question 2

For individuals, what is GBC limits?

Answer 2

GBC is limited to net income tax minus the greater of a) the tentative alternative minimum tax or 25% of net regular tax liability over 25000.

Question 3

Small Employer Insurance Credit

Answer 3

1) Tax credit provides a 50% credit for the cost of premiums paid toward health insurance coverage.

it reduces the deduction for health insurance premiums. Limited to 2 consecutive years.

Question 4

What is the eligibility Small Employer Insurance credit for small employers

Answer 4

1) The credit is available to small employers with 25 or fewer employers and average annual wages of less than 57,400

Question 5

Disabled Access Credit Eligibility

Answer 5

Eligibility is for small businesses, partnerships, and S corporations that don’t have more than 30 FT employees or more than 1 million gross receipts.

reported on 8826

Question 6

Disability Access limit

Answer 6

credit is equal to 50 % of qualifying expenditures that fall between a 250 threshold and a 10250 cap.

5000 [(10250 - 250) x 50%]

Question 7

Work opportunity Tax credit

Answer 7

credit for wages paid to individuals from certain target groups during their first year.

5884 is used to report

• Any business deduction for the wages must be reduced by the amount of the credit

Question 8

How many hours must be worked for WOTC? What’s the threshold for full or partial credit?

Answer 8

at least 120

400 hours = 40%

120 to 400 = 25%

Question 9

What are the WOTC’s qualifying classes that have maximum credit?

Answer 9

Question 10

What are the other target groups for WOTC?

Answer 10

1) IV A recipients of temporary assistance to needy families

2) veterans

3) ex felons

4) designated community residents vocational rehabilitation referrals

5) Vocational rehabilitation referrals

6) supplemental nutrition assistance program ( SNAP) benefits recipients

7) SSI recipients

8) LT family assistance recipients

9) Summer youth employees

10) LT unemployment recipients

Question 11

What are WOTC’s qualifying wages ?

Answer 11

1) remuneration for employment

2) Amount received under accident and health plans

3) Contributions by employers to accident and health plans

4) Educational assistance

5) Dependent care expenses

Question 12

Investment Tax Credit

Answer 12

is depreciable or amortizable property as list below (must be certified by the secretary of Treasury):

1) ( Business ) energy Credit
2) Rehabilitation Credit
3) Qualifying Advanced Coal Project Credit
4) Qualifying Gasification Project Credit
5) Qualifying Advanced Energy Project Credit

Question 13

( Business) Energy Credit

Answer 13

for businesses that invest in energy conserving property

The credit is equal to the basis of the property placed in service during the year times the credit percentage.

Question 14

( Business ) Energy Credit Percentages Limits

Answer 14

Qualified property and their corresponding energy percentages range from 10 to 30 percent.

50% of the credit taken reduces depreciation of the property’s basis.

Question 15

Rehabilitation Credit

Answer 15

equal to 20% ratably over 5 years ( i.e., 4% per year ) for certified historical structures expenditures paid or incurred after 2017.

Expenditures must exceed the larger of 5000 or the structure’s AB.

Question 16

Qualifying Advance Coal Project

Answer 16

The investment in qualified property that is used in a qualified advanced coal project.

Credit is equal to the basis of the property placed in service during the year times the credit percentage.

Question 17

Qualifying Advance Coal Project percentage limits

Answer 17

Qualified property and their corresponding credit %:

1) integrated gasification combined cycle 20%
2) Other Advanced coal based projects, 15%
3) Advanced coal based generation technologies, 30%

Question 18

Qualifying Gasification Project

Answer 18

investments in a qualified property that have gasification project(s).

Credit basis is 20% with an increase to 30% if 75% pf carbon dioxide emissions are captured.

Disallowed if Advanced Coal Credit is allowed .

Question 19

Qualifying Advanced Energy Project

Answer 19

Credit = 30%

Disallowed if property available has selected Energy Credit, Advanced Coal Project Credit, or the Gasification Project Credit .

Question 20

Research Credit

Answer 20

Eligible for small businesses with 50 million or less in gross receipts. The tax credit is for expenses relating to increasing research ( i.e., technological in nature) activities in a trade or business.

Question 21

Research Credit formula

Answer 21

Question 22

Pension Plan Start up Costs eligibility

Answer 22

for small employers ( 100 or fewer employees) for the first 3 tax years

Question 23

Pension Plan start up costs credit

Answer 23

50% of the start up cost incurred to create or maintain a new employee retirement plan

limited to the greater of 500 or the lesser of 250 for each eligible employee who is not a highly compensated employee or 5000.

Question 24

Employer Provided Childcare credit

Answer 24

to create an incentive for small and medium sized businesses to provide childcare for their employees

Question 25

Employer Provided Childcare credit percentages

Answer 25

25% of qualified expenses paid for the employee childcare and 10% of qualified expense paid for childcare resource and referral services.

Limited to 150,000 and file 8882

Sec 179 do not qualify

Question 26

FICA Tip Credit

Answer 26

NRF for employer’s portion of FICA Taxes paid ( incurred ) on employee cash tips exceeding the tips satisfying minimum wage adjustments

Question 27

Paid Family and Medical Leave Credit

Answer 27

through 2025

employers pay family and medical leave to their employees may credit 12.5% to 25%

12.5 applies to payments of at least 50% of wages normally paid to the employee. It increases by .25% above 50%.

File 8994

Question 28

Paid Family and Medical Leave Credit - 6 types of qualified leave

Answer 28

1) Birth of a child and care for that child

2) Adoption and foster care placement of a child with the employee

3) Care for spouse, child, or parent with a serious health condition

4) Employee being unable to perform work function due to health condition.

5) Urgent need due to spouse, child , or parent being on active military duty ).

6) Care for a service member ( spouse, child, parent , or next of kin ).

Question 29

Paid family and medical leave credit: State and local law

Answer 29

pay that is required by state or local law doesn’t count toward the 50%.

Question 30

Paid family and medical leave credit: Salary and other requirements

Answer 30

must have at least 81,000 to qualify.

employer must have a written policy

at least have 2 weeks of leave to FT and prorated for PT