Income

Question 1

Childcare

Answer 1

Schedule C and Schedule 1

Question 2

Foreign income

Answer 2

must be reported but you may be able to exclude it

Question 3

Cost of Living Allowances and Reimbursement

Answer 3

generally included except off mainland

Question 4

Backpay

Answer 4

included along with payments for damages, unpaid (life/health) insurance premiums

Question 5

Bonuses and Awards

Answer 5

included

Question 6

Severance Pay

Answer 6

included

Question 7

Sick Pay

Answer 7

included along with welfare funds, state sickness/disability funds, association of ERs or EEs, and insurance if the ER paid for it

Question 8

Disability

Answer 8

generally included with 2 exceptions:
1. EE paid the premiums
2. ER included the premiums as compensation

Question 9

Accident/Health Plans

Answer 9

not included, but the benefits may be taxable

Question 10

Fringe benefits

Answer 10

included

Question 11

Group Term Insurance

Answer 11

up to $50,000 cost is not included

Question 12

Restricted property

Answer 12

If you don’t own it in the current tax year, you do not include it

Question 13

Tax treatment of NSOs

Answer 13

1. nothing at the time of grant
2. bargain element at the time of exercise
3. Gain at sale

Question 14

Tax treatment of ISOs

Answer 14

no income until sale/exchange

Question 15

Tips

Answer 15

included

Question 16

Clergy special rules

Answer 16

Housing is excluded from income. If it’s an allowance, it can’t be more than reasonable pay for services rendered

Question 17

Foreign ER special rules

Answer 17

Not considered as wages for SS and Medicare. It is SE income and therefor you pay SE taxes

Question 18

Military Pay

Answer 18

wages yes, retirement is taxable as a pension

Question 19

Taxable interest categories

Answer 19

Bank, savings and loan, or credit union accounts.
CDs
Treasuries
Loans
Gifts for opening accounts
Interest received on tax refunds
Savings Bonds

Question 20

Where do you report income received from a seller-financed mortgage?

Answer 20

Schedule B, Part 1

Question 21

Original issue discount

Answer 21

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

Question 22

Exceptions for interest income

Answer 22

1. Tax-exempt obligations
2. US Savings Bonds
3. Short-term debt (uner 1 year)
4. Obligations issued before Mar 2, 1984
5. 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

Question 23

Ordinary Dividends

Answer 23

Ordinary income

Question 24

Qualified Dividends

Answer 24

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

Question 25

DRIP

Answer 25

dividend reinvestment program. still reported. if offerings are lower than market value, you need to report that as well

Question 26

Money Market Funds

Answer 26

since it is a type of MF, it is dividend income

Question 27

Non-Dividend distributions

Answer 27

not a dividend and is not taxable until fully recovering basis. After that it is a capital gain

Question 28

Situations in which the distributions of stock or rights are taxable

Answer 28

1. Have a choice to get cash or other property
2. Distribution gives cash or other property to some and an increase in the % interest or earnings/profits to others
3. Distribution is in convertible preferred stock
4. Distribution is in preferred stock for some and common stock for others
5. Distribution is on preferred stock

Question 29

Qualified Distributions

Answer 29

-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)

Question 30

Penalty for failure to take RMD

Answer 30

up to 50% of the RMD amount

Question 31

Provisional income

Answer 31

the sum of:
-1/2 of SS
-all other income (including tax-exempt interest)

Question 32

How to report Uncollected SS and Medicare Tax on Wages

Answer 32

Form 8919

Question 33

Form 8919

Answer 33

Uncollected SS and Medicare Tax on Wages

Question 34

Special exception for tips of less than $20

Answer 34

Members of the clergy must include in income any salary and fees received for masses, marriages, baptisms, funerals, etc.