Individual Issues

Question 1

Qualifying Child

Answer 1

TESTS:

1. RELATIONSHIP - step, adopted, sibling, step sibling, descendents, grandchildren, nieces, nephews
2. RESIDENCE - same place as taxpayer for more than 1/2 of the tax year
3. AGE - less than 19, less than 24 full time student at least 5 months of year
4. JOINT RETURN TEST - if individual is married, cannot be claimed if filing a joint return… unless no tax liability on the return
5. CITIZENSHIP - citizen of the US or a resident of Canada or Mexico
6. SUPPORT - must NOT have provided more than 50% of support

Question 2

Qualifying Relative

Answer 2

TESTS:

1. RELATIONSHIP - except cousins - ALSO any person who lives in home for ENTIRE year
2. SUPPORT - Taxpayer has to provide MORE THAN 50% of support
3. JOINT RETURN TEST - if individual is married, cannot be claimed if filing a joint return… unless no tax liability on the return
4. CITIZENSHIP - citizen of the US or a resident of Canada or Mexico
5. GROSS INCOME - dependents gross income (taxable income) must be LESS than the exemption amount for the year (currently 4,050) IF LESS THAN 19 or 24 (STUDENT) DOES NOT NEED TO APPLY THIS RULE

Question 3

Personal Exemption

Answer 3

Every taxpayer can claim ONE exemption in computing taxable income on their own return. NO PERSONAL exemptions can be claimed for a taxpayer (or spouse) who is claimed as a dependent by another taxpyer

Question 4

RJCS - AG/R

Answer 4

Relationship, Joint, Citizen, Support - Age, Residence / GrossIncome

Question 5

Multiple Support Agreements

Answer 5

If no ONE person provides more than 50% of an individuals support, but a group of individuals does – the group can file a multiple support agreement designating who can claim the dependent

ALL other requirements must be met - minus support

Question 6

Phase-out for exemptions

Answer 6

2% of TOTAL exemptions for each 2,500 of excess AGI

10. 02 - will round to 11 (another 2,500 unit)
    * So it would be 11.02 = 22% of exemptions

Question 7

Marital Status

Answer 7

Determined on the last day of the taxable year

Question 8

Surviving Spouse (Qualifying Widower)

Answer 8

May continue to use the rates for joint for two years after the year of death

IF:
Spouse maintains more than 1/2 of cost of maintaining the house FOR a DEPENDENT CHILD who uses the home as a PRINCIPAL residence

Question 9

Head of Household

Answer 9

USED by: (btwn single and joint)

• an unmarried person
• that provides more than 1/2 cost of maintaining the house
• for a qualifying child, relative (non-relative does not count here)
• uses home as principal residence for more than 1/2 year

EXCEPTIONS:

• IF Q child (dependent no, live at home yes) is unmarried then the child does NOT need to be a dependent
• IF PARENT (dependent yes, live at home no) - does not need to live in same home, but taxpayer needs to provide more than 50% of parents home (nursing home)

Question 10

Dependent’s Return

Answer 10

If someone is a dependent on another return, but is required to file own return, then on the dependents return:

• NO personal exemption is allowed
• The standard deductin is limited to 1,050 or earned income plus 350 (greater than amount)

Question 11

Kiddie Tax

Answer 11

• —Includes all children who are UNDER 18
• —Also includes kids who are 18 or between 19 and 23 (students); *IF their earned income does NOT exceed 50% of their total support for the year

Unearned income above $2,100 (2016) (extent it exceeds this, will be taxed at the parents rate)

Question 12

Mini Standard Deduction

Answer 12

Kids Earned Income + 350

OR

1,050

Limited to regualr standard deduction of $6,300

Question 13

Self-Employment Income

Answer 13

Includes:

• Gross income from SE LESS deductions associated with the activity
• Director’s fees
• Allocations of income to general partners (NOT limited partners)
• Guaranteed payments paid to both general/limited partners

(GI less ded, Directors fees, allocations to gen p, guaranteed pymnt)

Question 14

Self-Employment Tax

Answer 14

The last step in calculating the tax is to MULTIPLY the SE income by 92.35%

This MUST exceed $400 for the SE tax to be assessed

**Reported on Schedule SE (short and long)

Question 15

Payroll Taxes - FICA

Answer 15

FICA taxes are levied on the EARNED income of taxpayers

Social Security - 6.2% up to annual limit

Medicare = 1.45% on ALL earned income

Total of 7.65%
These are MATCHED by the employer

ADDITIONAL .9% to wealthy taxpayers
joint = > 250,000
single = > 200,000

Question 16

3.8% Surtax

Answer 16

LOWER OF:

1. Net Investment Income
2. The excess of modified AGI over:

• joint = > 250,000
• single = > 200,000

***Investment Income - ALSO applies to qualified dividends, passive interest, rents, royalties, flow through income that is passive