Individual Tax Flashcards
Who must file a tax return?
Income > personal exemption + standard deduction
Net self employment income >= $400
Claimed as dependent on another taxpayer’s return and have any unearned income and gross income >= $1,050
Receiving EIC
Subject to Kiddie Tax
Who does the Kiddie Tax apply to?
Children meeting three conditions:
1) Either parent is alive as of end of taxable year
2) Does not file joint return
3) Either under 18 or student between 18-24 with earned income <50% of support
How is the amount of the Kiddie Tax determined?
Larger of the two amounts:
1) Tax owed based on filing return including child’s earned and unearned income
2) Tax owed based on filing return including only child’s earned income plus allocable parental tax
How is allocable parental tax calculated?
1) Calculate parent’s tax based only on their earned and unearned income
2) Calculate parent’s tax based on their earned and unearned income, plus net unearned income of children who qualify
3) Difference = allocable parental tax
Who can use cash basis of accounting?
Service type businesses whose gross receipts <=$10M Individuals S Corps Individually owned partnerships Personal service corporations
Who cannot use cash basis of accounting?
C Corps with gross receipts >$5M
Partnerships with C Corp partner with gross receipts >$5M
Tax shelters
Certain trusts
Farming corporations
Companies that use inventory to determine income
What is included in gross income?
Wages and tips Jury duty fees Bonuses and commissions Unemployment Bargain purchases of employer merchandise Most fringe benefits Prizes and awards Gambling winnings Illegal drug income Scholarships Interest and dividends Rent and royalties Bargain discount from exercising stock option IRA proceeds if contributions deducted from income Injury awards - punitive, lost business profits, non physical 85% of SS if earn >$60K State tax refunds if deducted payment Interest part of annuity Alimony
When are tips are included in wages?
In the monthly schedule is submitted by employer due on 10th of following month
If do not report tips to employer include in current month
When are scholarships not taxable?
1) Not compensation for services AND
2) Money spent for tuition and books for degree seeking student
When are prizes and awards not taxable?
1) If received for years of service or safety achievement AND
2) <=$400
When is interest on Series EE bonds not taxable?
1) If used for higher education for self, spouse, or dependent
2) Bought by taxpayer or spouse
3) Buyer is at least 24 years old
Only tuition and fees, not room and board
How is the Medicare surtax calculated?
- 8% of the lessor of:
1) Net investment income OR
2) Excess of MAGI over $250K joint / $200K other
How is annuity portion excluded from tax calculated?
Cost of annuity / Expected total annuity payments
% of each payment that is excluded from tax
What amount of state refund is taxable?
If itemized on Schedule A, use smaller of:
1) Amount of itemized deduction > standard deduction OR
2) Amount of taxes deducted
What are the different tax schedules?
A - Itemized deductions B - Interest and dividend income C - Profit/Loss from business D - Capital gains and losses E - Supplementary income or loss (RRF-COP) Rental income Royalties Flow through entities Copyrights Oil/Gas leases Patents F - Profit/Loss from farming
What are the adjustments For AGI?
I-EMBRACED Education, Health, and Farm Interest - student loan up to $2,500 Employment (self) tax - 50% deductible Moving expenses Business expenses Rental, royalty, and flow through entities Alimony paid Contributions to retirement plan Early withdrawal penalty Duty (jury) fee - if remitted to employer Education - qualified higher education up to $4,000 Health Savings Account contributions Farm income
What are rules for deducting moving expenses?
New work must be >=50 miles away from old home
Only includes cost of moving you and your stuff, including lodging during move
Must work >=39 weeks
