Individual Taxation

Question 1

What and how is, the kiddie tax applied?

Answer 1

Kiddie tax is to stop taxpayers from transferring wealth, considered unearned income for the kids, to the kids.

To calculate the tax, it is the child’s unearned income minus the greater of double the standard deduction or $1.1k plus itemized deductions related to the unearned net income.

Question 2

Emotional distress compensation is normally included in gross income. Under what circumstances is it allowed to be excluded from gross income?

Answer 2

Damages for physical injury or sickness are excluded from income. If the emotional distress is attributable to a physical injury or physical sickness, then emotional distress is excludable from gross income.

Question 3

What is the latest date that an IRA contribution can be made in order to qualify as a deduction on the prior year’s return if an extension was filed?

Answer 3

Must be submitted by the original tax return due date.