Income Flashcards
Childcare
Schedule C and Schedule 1
Foreign income
must be reported but you may be able to exclude it
Cost of Living Allowances and Reimbursement
generally included except off mainland
Backpay
included along with payments for damages, unpaid (life/health) insurance premiums
Bonuses and Awards
included
Severance Pay
included
Sick Pay
included along with welfare funds, state sickness/disability funds, association of ERs or EEs, and insurance if the ER paid for it
Disability
generally included with 2 exceptions:
1. EE paid the premiums
2. ER included the premiums as compensation
Accident/Health Plans
not included, but the benefits may be taxable
Fringe benefits
included
Group Term Insurance
up to $50,000 cost is not included
Restricted property
If you don’t own it in the current tax year, you do not include it
Tax treatment of NSOs
- nothing at the time of grant
- bargain element at the time of exercise
- Gain at sale
Tax treatment of ISOs
no income until sale/exchange
Tips
included
Clergy special rules
Housing is excluded from income. If it’s an allowance, it can’t be more than reasonable pay for services rendered
Foreign ER special rules
Not considered as wages for SS and Medicare. It is SE income and therefor you pay SE taxes
Military Pay
wages yes, retirement is taxable as a pension
Taxable interest categories
Bank, savings and loan, or credit union accounts.
CDs
Treasuries
Loans
Gifts for opening accounts
Interest received on tax refunds
Savings Bonds
Where do you report income received from a seller-financed mortgage?
Schedule B, Part 1
Original issue discount
taxpayers include a portion of the discount as income as it accrues over the term of the debt instrument even if you do not receive any payments from the issuer
Exceptions for interest income
- Tax-exempt obligations
- US Savings Bonds
- Short-term debt (uner 1 year)
- Obligations issued before Mar 2, 1984
- Loans if the lender is not in that business, all loans total $10k or less, and avoiding tax is not one of the principal purposes of the loan
Ordinary Dividends
Ordinary income
Qualified Dividends
Capital gains rules. Must be:
1. Paid by a US corp or qualified foreign corp
2. Held more than 60 days during the 121 period that begins 60 days before the ex-dividend date
DRIP
dividend reinvestment program. still reported. if offerings are lower than market value, you need to report that as well
Money Market Funds
since it is a type of MF, it is dividend income
Non-Dividend distributions
not a dividend and is not taxable until fully recovering basis. After that it is a capital gain
Situations in which the distributions of stock or rights are taxable
- Have a choice to get cash or other property
- Distribution gives cash or other property to some and an increase in the % interest or earnings/profits to others
- Distribution is in convertible preferred stock
- Distribution is in preferred stock for some and common stock for others
- Distribution is on preferred stock
Qualified Distributions
-after age 59.5 (generally)
-disabled
-Rule 72t (substantially equal periodic payments)
-made to a beneficiary or a taxpayer’s estate
-purchase of a 1st home ($10,000 lifetime limit)
-expenses for birth/adoption of a child ($5,000 limit)
Penalty for failure to take RMD
up to 50% of the RMD amount
Provisional income
the sum of:
-1/2 of SS
-all other income (including tax-exempt interest)
How to report Uncollected SS and Medicare Tax on Wages
Form 8919
Form 8919
Uncollected SS and Medicare Tax on Wages
Special exception for tips of less than $20
Members of the clergy must include in income any salary and fees received for masses, marriages, baptisms, funerals, etc.
