Indiv. Tax, Income (III)

Question 1

Where are itemized deductions reported?

Answer 1

Schedule A

Question 2

How are estimated tax payments reported?

Answer 2

Estimated Tax payments are grouped together and shown as line item “Estimated Tax Payments” in payment section of State income tax return

Question 3

What kind of tax treatment for Sec. 1231 Gain?

Answer 3

Capital Gains treatment - Sched. D, Capital Gains (from there to line 13 of 1040)

(so not considered nettable with Self employment/Sched. C income!)

Question 4

How much $ can you exclude from gross income when receiving employer payment of employee’s education expenses?

Answer 4

Up to $5,250 may be exclulded from gross income of payments made by employer on behalf of an employee’s educational expense

Question 5

Calculating Federal Self-Employment (S/E) Tax

Answer 5

1) 92.35% of net earnings (Earnings * 92.35%)

2) S/E Earnings * (Social Sec. Tax + Medicare Tax .. E.g. 12.4%+2.9%… 15.4%)
(except for phase-out clause)

3) Take adjustment deduction on Form 1040 p.1 for S/E tax paid… 50% of whatever S/E taxes you are paying

Question 6

S/E Social Security Tax Phase-out Rule

Answer 6

ALL Self-employment income is subject to the 2.9% Medicare tax, however only the first $118,500 (or whatever the prob. says) is subject to the 12.4% social security tax!!

(so calculate accordingly)

Question 7

Nonqualified Stock option - taxing with Ascertainable Value at purchase

Answer 7

Subtract any previously ascertainable value/ basis in stock, when they exercise in the future!

Question 8

Nonqualified Stock option - taxing with no Ascertainable Value at purchase

Answer 8

Taxed in year of grant as per difference between exercise price (EG $65/sh) and FMV of option at exercise date (EG $85/sh)

Example:
100 shares granted on 1/2/X1, FMV $65 per share. Exercised at 9/5/X1, FMV $85 share.

Y1 Ordinary Income = ($85-$65) x 100 sh. = $2000

Y3 Ordinary Income (date of sale) = ($95-$85) x 100 sh. = $1000