Gross Income Flashcards
Compensation for Services
Taxable Wages Tips Bonuses and Commissions Jury Duty Unemployment Bargain Purchases on employer merchandise Employer expense reimbursements Foreign Earned Income if pass test Unearned Income
Foreign earned income
May elect to exclude up to $99,200 if pass either test:
Bona Fide Residence Test
- US Citizen or Resident Alien
- Uninterrupted period
- Entire TAX year
Physical Presence Test
- US Citizen or Resident Alien
- 330 Full days (can be interrupted)
- in ANY 12 month period
Material Fringe Benefits
Taxable
-using company car
Immaterial Fringe benefits
Not taxable • Qualified Employee discounts • Working condition fringe benefit • Deminimus fringe benefits • Meals • Use copier or Xerox machine
Premium on GTL Insurance in excess of $50,000
Taxable
- Group not Individual
- Term not Whole
Health and Medical Insurance coverage is generally
Not Taxable
Death benefits on GTL Insurance
Not Taxable
Medicare and Welfare
Not Taxable
Prizes and Awards
Taxable if:
- over $400
- Services are required
- Selection of Prize or award was because of actions of recipient
Gambling Winnings
Taxable
-not netted with Gambling losses
Gambling Losses only deducted if
Itemized on Sch. A
-not subject to 2%
Scholarships and Fellowships
Taxable if:
1. Compensation for Services
2. Not a degree candidate
3. Spent on non-qualified expenses
(room board living expense)Taxable interest
Zero coupon bond accrued interest Bond purchased at a discount accrued interest US obligations interest Series HH savings bonds Bank deposit income corporate bond interest condemnation award interest dividend from life insurance interest interest received as beneficiary of estate or trust interest on an annuity contract installment sale payment of interest Foreign source interest income Federal refund interest state refund interest
Non Taxable interest
Non zero coupon bond interest Bonds purchased at a discount accrued interest State or Muni bond interest Series EE savings bond interest Interest from Pship interest from Scorp Interest on VA dividends Frozen Deposit interest income
Interest income generally reported on
1099-INT
Interest income greater than $600
Must be itemized on Sch. B
*might be able to deduct expenses in earning interest income on
SCHEDULE A if choose to itemize
*When to report interest income depends on whether you are:
- Cash basis TP
Report upon actual or constructive receipt
- Accrual basis TP
Report when earned, regardless of receipt
State and Local Refund
Taxable if itemized in prior year
Not Taxable if did not itemize in prior year
Federal tax refund
Not Taxable
Taxable Dividend Income
From Earnings and Profits
Dividends that arise in below market loans from corporation to shareholder
Dividends used to buy more stock in lieu of receiving cash
If Dividend reinvestment plan allows you to buy more stock below FMV, you are still taxed on FMV
Service charges that were subtracted before dividend distribution are added back for dividend income
Foreign source dividends unless exempted by U.S. Law
o True whether reside inside or outside of US
o True whether receive a 1099 from payer
Patronage Dividends from a Corp.
Non Taxable Dividend Income
[Stock Dividends and Stock Rights (stock options)
o Taxable at FMV if:
1. Opt to receive cash or property
2. Cash/prop. is given to other shldrs
3. Distributions is conv. P/S
4. Distribution is on P/S
5. Distribution gives P/S to C/S shldrs
- Stock Splits
- S-Corps Dividends
- Life Insurance Policy dividends (return of premium)
- Dividends received from Mutual Fund that invested in tax exempt bonds
- VA dividends
- Liquidating Dividends (not from E&P)
- Investments from tax exempt bonds/exempt interest div
Dividend income greater than $600
Must be itemized on Sch. B
In order for a Dividend to be taxable it must be
out of Earnings and Profits
Assume any dividend from C/S or P/S are ordinary unless
told otherwise
Qualified dividends Special Rates (similar to LTCG rates)
o 0% 10-15% tax bracket
o 15% 15% - 38% tax bracket
o 20% 39.6% - up tax bracket
Non-Qualified Dividends:
o Capital Gain distributions o Dividends paid on deposits o Dividends paid from tax exempt organizations o Dividends paid by Corporation for ESOP o Dividends from Foreign corporation
Rent
Taxable including: nonrefundable deposits improvements made in lieu of rent prepaid rent lease cancellation payments
ISO’s
Not Taxable
Deductible Traditional IRA withdrawals “deferred interest”
1) Original contributions that were initially excluded or deducted from income:
o Taxable to extent of contributions made
o Accumulated earnings taxable
Non-deductible Traditional IRA withdrawals “deferred interest”
1) Original contributions were non-excludible or non-deductible:
o Nontaxable to extent of contributions made
o Accumulated earnings taxable
Pension Plan withdrawals whose original contributions were excluded or deducted from income
Taxable
Pension Plan withdrawals whose original contributions were not excluded or deducted from income
Non Taxable
LUMP SUM distributions (Stock Bonus, Pension, Keogh, Profit sharing) are subject to special tax treatment.
Not Taxable
DOES NOT INCLUDE IRA’s!!!
Non-Physical Injury Awards for:
1) Non-Physical Injuries (SRRN)
2) Lost Business Profits
3) Punitive Damages
4) Mental or emotional injury
Taxable
Physical Injury Awards for:
1) Physical Injury -bodily injury, pain and suffering, blood
2) Lost Wages
3) Workers Compensation
4) Disability payments
5) Medical expense reimbursements
Not Taxable
Social Security benefits if TP earns $60,000 or more
85% of Social Security is taxable
15% is Not Taxable
Alimony
Taxable (CANNOT)
Child Support and Property Settlements
Not Taxable
Alimony Recapture Rule
Prevents property settlements from being treated as alimony
Partial combination of child support and alimony
Child support is paid first
If payments are to be reduced due to child based contingency, even though labeled alimony, it is considered child support
Gifts
Generally Not Taxable to Donee
Income from Gift taxable however
Inheritances
Generally Not Taxable
Income from Inheritance taxable however
Death Benefits
Generally Not Taxable
Gain on Sale of Personal Residence
Not Taxable if once every 5 years
