Gross Income Part: I - M2

Question 1

What is a nontaxable Fridge Benefits?

2 Specific Items of Income and Exclusions

GI Exclusions

Answer 1

13 Employer paid and excluded from employee income:

1. Life Insurance Coverage. (under $50,000).
2. Accident, Medical, and Health Insurance.
3. De Minimis Fringe Benefits.
4. Meals and Lodging.
5. Employer Payment of Employee’s Educational Expenses. (up to $5,250)
6. Employee Adoption Assistance Program. (exclude up to $15,950 employer paid adoption expenses) Phased out for TP with MAGI $239,230-$279,230.
7. Dependent Care Assistance up to $5,000 expenses paid or reimbursed for dependent children under age 13 spouse or depenent is disable.
8. Qualified Tuition Reduction.

9 Qualified Employee Discounts.

• Merchandise Discounts excludes up to employers gross profit percentage any excess is taxable.
• Service Discounts 20% of FMV of services is excluded but any excess is taxable.

10 Employer-Provided Parking. ( up to $300/mo. $3,600/yr.)
11 Transit Passes excludes up to $300/mo. $3,600/yr.

12. Qualified Retirement Plans.
* Payments made by employer (non-taxable)
* Benefits received (Taxable).

13 Flexible Spending Arrangements (FSAs)
* Pretax Deposits Into Employee’s Account
* Foreit Funds Not Used Within 2 1/2 Months after yr. end.

Question 2

What type of income given to employee by employer is included or excluded from GI?

Answer 2

INCLUDED

• Employer given awards

EXCLUDED

• Employee parking $300/mo.
• Life Insurance Premiums up to $50,000
• Educational expenses up to $5,250
• Qualified Employer paid IRA contributions

Question 3

What types of payments received from on the job injury is included or excluded from GI as taxable?

Answer 3

• Disability pay received where premiums were paid by the employer as non-taxable fringe it is included in gross income and is taxable, if employee paid the premiums it would have been excluded.
• Punitive damages is included in GI as taxable.

EXCLUDED

• Medical expense reimbursement to employee is excluded from GI.
• Employer paid health insurance premiums are excluded from GI.
• Damages for personal physical injury is also excluded from GI as not taxable.

Question 4

What is included/excludable in GI?

Answer 4

Excluded

• Workers compensation
• Injury Illness damages

Included

• Punitive damges

Question 5

When are contributions and earnings to and from a IRA are taxable from distributions?

IRA Distributions Withdrawals

Answer 5

Contributions/Principal Taxable

• Deductible traditional IRA distributions

Contributions/Principal Not Taxable

• Nondeductible Traditional IRA distributions
• Qualified Roth IRA distributions
• Nonqualified Roth IRA distributions

Earnings Taxable

• Nondeductible Traditional IRA distributions
• Deductible traditional IRA distributions
• Nonqualified Roth IRA distributions

Earnings Not Taxable

• Qualified Roth IRA distributions

Question 6

What type of government interest income is taxable?

Answer 6

Interest on
* state refunds
* federal refunds
* federal obligations

NOT
* State and municiple bonds are not taxable.
* Interest on obligations of a possesssion of the U.S. such as puerto rico, canada, or new mexico is tax-empt.

Question 7

When can you exclude interest earned on Series EE Bonds?

Answer 7

• TP income subject to phase-outs (Single HOH/ $91,250 - $106,850) MFJ ($137,800 - $167,800)
• TP must be mfj or single (hoh)
• Excludeable amount reduced by the amount of the tax free scholarships received.
• Bonds issued after 1989
• Used to pay for higher education tuition, books, and fee’s only
• Taxpayer must be over the age of 24 when the bond was received.
• The purchaser of the bonds must be the sole owner of the bonds (or joint owner with his or her spouse).
• The bonds must be bought and put in the name of the owner or
  co-owner, not in the name of the dependent child.

Question 8

When do taxpayer recognize the gain/loss on sale of securities on the stock market?

Constructively received.

Answer 8

Recognize it on the trade date regardless if TP is cash or accrual basis TP.

Question 9

When is TP state refund taxable GI?

Answer 9

IF ITEMIZED MUST DO THIS TEST!

• It is taxable if it created a tax benefit.
• It created a tax benefit if, the itemized deduction amount exceeds the standard deduction amount by the amount of the state tax refund or more, than it is included in GI and is taxable.

STANDARD DEDUCTION IN PRIOR YEAR EXCLDED STATE REFUND NOT TAXABLE!

• If claimed the standard in the prior year non of the state refund is a benefit, therefore none of the state refund is taxable.

Question 10

What does a stock-split do the owned shares and its basis?

Answer 10

Increases the shares owned and reduce the basis to the total amount of shares now owned/oringinal basis price paid.

Question 11

What is a non-accountable employee plan?

Answer 11

A non-accountable employee plan is a plan where employee does not have to show proof of reimbursed expenses.

• All monies received from employer is taxable and added to GI.
• It is added directly on the W2 as wages.
• if employee reimburse employer can deduct it as a itemized deduction.

Question 12

What are seperately stated income items to owners of s-corps and partnerships that flows to schedule E?

Answer 12

S-Corp or Partnership
Net Income
-Interest income take this out because it goes to sch d at owner%
-LTCG take this out it goes to sch d at owner%
+sect. 179 Depr. add back to issue ownership % to bus. income(loss)
+Charitale contributions add back to issue ownership % to bus. income(loss)
———————————————————
Ordinary Business Income/(loss) to owners
x ownership%
——————————————
Equals Seperately stated income to owner sch E.
+ Sect 179 Depr owner % of the deduction
=====================
Full amount going to schE