Individual Taxes: Tax Computations and Credits Flashcards
For EIC eligibility purposes Individuals
are allowed to have only up to $3,400 in 2015 of “disqualified income” in order to be eligible for the earned income credit
Disqualified income in post-1995 tax years includes an individual’s capital gain net income and net passive income in addition to interest, dividends, tax-exempt interest, and nonbusiness rents or royalties
Form 1040, Schedule H may be used
to report federal employment taxes on cash wages paid to household employees
Federal employment taxes that may be paid with Schedule H
include Social Security, Medicare, withheld federal income, and federal unemployment (FUTA) taxes
Child Tax Credit phaseout rules
A married couple filing a joint return loses some or all of the child credit if the couple has modified adjusted gross income (AGI) in excess of $110,000. The credit is reduced by $50 for each $1,000 of modified AGI (or fraction thereof) in excess of the $110,000 threshold
Single filers and heads of household lose $50 of the credit for each $1,000 of modified AGI (or fraction thereof) in excess of $75,000
Married taxpayers filing separate returns lose $50 of the credit for each $1,000 of modified AGI (or fraction thereof) in excess of $55,000
IRA penalties
are taxed at the Marginal rate in addition to the 10% penalty
The following items reduce taxable income for a corporation:
Dividends-received deduction
State income taxes
Accelerated depreciation
Domestic Employees rules
Wages paid for domestic services are subject to Social Security and Medicare taxes if they exceed $1,800 in a calendar year to one employee
Wages paid for domestic services are subject to federal unemployment tax if they exceed $1,000 per quarter, aggregating wages paid to all employees
The General business credit
is a combination of several tax credits to provide uniform rules for the current and carryback/carryover years
