Class 06 Flashcards
exclusions
what are exclusions?
income not subject to tax
what are employee fringe benefits?
side dish benefits added to wages
what’s the catch with employee fringe benefits?
must be offered to all employees
what are child + dependent care fringe benefits?
up to $5K in benefits
what are athletic facilities fringe benefits?
non cash allowance open to employees + families
what are educational assistance fringe benefits?
as a scholarship up to $5,250
what are adoption fringe benefits?
up to $15,950 (but reduced when in the phase out zone)
what are cafeteria plan benefits?
choose cash (taxed) vs non tax benefits
what are flexible plan benefits?
pre tax dollars put in the plan and can apply to medical services
what are no additional cost benefits?
ie airline standby benefits tax free (except if a potential client prevented)
what is the employee benefit catch?
discount can’t exceed the employer’s unit cost
what are retirement planning services catch?
must be employee of the insurance
what are working condition fringe benefits?
tax free annual dues + subscriptions in professional organizations
what are de minimus fringe benefits?
benefits so small it’s impractical (i.e. company dinners)
what are transportation fringe benefits?
subsidized transportation ($300/month limit)
what are moving expenses fringe benefits?
limited to armed forced on active duty (everyone else is taxed)
what is substantiation?
taxpayer is burdened to prove deductions
what do you assume about deductions?
assume nothing is a deduction unless congress says so
what is “for AGI”?
you automatically qualify and do not itemize
what are categories of “for AGI”?
all are non deductible:
1. trade or business activities—sole proprietor, partnership, and farm
2. investment activities
3. personal activities
“for AGI” vs. “from AGI”?
“for AGI” is before you get to AGI + “from AGI” are itemized deductions
what is a schedule 1 1040?
a summary of taxpayer’s financial activities
when do trade + business deductions apply?
expenses are ordinary AND helpful
when do excessive executive compensation deductions apply?
reasonable + $1M deduction max
when do qualified business income (QBI) apply?
- up to 20% deduction for sole proprietorship, partnership, S corp
- certain industries restricted (health, business, law, arts, athletics)
what is cash method deduction timing?
- expenses deducted when paid
- prepaid expenses non deductible
what is accrual method deduction timing?
- all events test (amount determined)
- economic performance event (event occured)
