Intuit Academy Flashcards
In 2021 Gustav bought a residential real estate property and rented it full time on November 1, 2021. What schedule should he include with Form 1040?
Select all that apply, then select Submit.
Schedule 1
Schedule E
Schedule 1 includes additional income and adjustments to income.
Additional income consists of:
Taxable Refunds, Credits, or Offsets of State and Local Income Taxes
Alimony Received
Business Income or (Loss)
Other Gains or (Losses)
Rental real estate, royalties, partnerships, S Corporations, Trusts, etc.
Farm income or (loss)
Unemployment Compensation
Other Income
Schedule E includes supplemental income and loss.
Supplemental Income and Loss consists of:
Income or Loss from Rental Real Estate and Royalties
Income or Loss from Partnerships and S Corporations
Income or Loss from Estates and Trusts
Income or Loss from Real Estate Mortgage Investment Conduits (REMICs)
Kahn received a Capital Gain Distribution reported on Form 1099-DIV, Box2a and also received a 1099B reporting long term capital gains. What should he do when preparing the Form 1040?
Select the best answer, then select Submit.
Attach a Schedule D
This schedule consists of short-term and long-term gains or losses on assets.
individuals don’t have to pay estimated tax for the current year if they meet all three of the following conditions.
1- They had no tax liability for the prior year.
2- They were a U.S. citizen or resident alien for the whole year.
3- Their prior tax year covered 12 months.
If they didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, they may have to pay a penalty for underpayment of estimated tax.
Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.
Use Form 2210 to verify if there is a penalty for underpayment of estimated taxes.
Taxes must be paid through withholding or estimated tax payments as income is earned.
A penalty may occur if taxpayers haven’t paid enough tax, but most will avoid penalties if they owe less than $1,000 or paid at least 90% of the tax due for the current year or 100% of the prior year’s tax.
There are three ways to extend the tax-filing deadline until October 15th: paying online while checking the box, using Free File electronically, or mailing Form 4868.
What are estimated payments and extensions?
Estimated tax payments for individuals and business owners
Taxes must be paid as earned or received income during the year through withholding or estimated tax payments. Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. However, individuals don’t have to pay estimated tax for the current year if they meet all three of the following conditions.
Avoiding penalties for underpayment of estimated taxes
If they didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, they may have to pay a penalty for underpayment of estimated tax.
Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits or if they paid at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller.
Use Form 2210(opens in a new tab) to verify if there is a penalty for underpayment of estimated taxes.
The penalty may be waived if:
The underpayment was due to a casualty, disaster, or other unusual circumstance, and it would be inequitable to impose the penalty OR
The person retired (after reaching age 62) OR
The person became disabled during the tax year for which estimated payments were required or in the preceding tax year, and their underpayment was due to reasonable cause and not willful neglect
Payments due dates for estimated taxes
Taxes must be paid through withholding or estimated tax payments as income is earned.
April 15
June 15
September 15
January 15, next year
If an individual doesn’t pay enough tax by the due date of each payment period, they may be charged a penalty even if they are due a refund when they file their income tax return.
How to request a tax-filing extension until October 15th
If an individual needs more time to file taxes, they can request an extension through October 15th. They must file their request by the April tax filing due date to get the extension. It’s important to pay any tax owed by the April filing date. The extension is only for filing your return.
Tom is a sole proprietor who expects his tax liability for the current year to be $1,500. He had no tax liability the previous year, but he was a U.S. citizen who lived in the country for the entire year. However, his prior tax year covered only 12 months. Which of the following statements is true regarding Tom and his estimated tax payments?
Select the best answer, then select Submit.
Tom is not required to make estimated tax payments because he meets the three conditions for exemption, including being a U.S. citizen for the entire year.
Linda, a resident of the United States and a sole proprietor, expects that she will owe $2,500 in taxes for the current year. According to the IRS guidelines, which of the following statements is true about Linda’s estimated tax payments?
Select the best answer, then select Submit
Linda must make estimated tax payments for the current year since her expected tax liability is $2,500 or more.
According to IRS guidelines, individuals, including sole proprietors and partners, must pay estimated tax payments if they expect to owe $1,000 or more in taxes when their return is filed. Since her expected tax liability is more than $1,000, Linda must make estimated tax payments to avoid underpayment penalty.
Cheng lives in Georgia, and receives the following types of income: W-2 income from her Georgia employer, rental income from her Florida rental property, and interest income of $2,000 reported on a 1099-INT from a bank located in Massachusetts. Where is Cheng required to file a state income tax return?
Select the best answer, then select Submit.
Cheng is only required to file a resident Georgia return.
1 of 4 — Introduction
Lesson content
LESSON 2 OF 4
Filing taxes in multiple states
Multi state filing
Residency rules vary from state to state. For example, if you spend more than a certain number of days in some states, you’re considered a resident even if you have not lived there for very long.
It’s best to check with the state Department of Revenue for specific residency rules(opens in a new tab), especially as they apply to a particular situation. In the meantime, use the following examples as a general guideline.
In general, a person is considered a resident of a state where they live and intend to reside indefinitely, including the home where they come back to after being temporarily away on vacation, a business trip, or at school.
If a person temporarily works in a state or receives income from sources in that state (such as rental property), they are considered a nonresident of that state for tax purposes. In such cases, a Nonresident tax return is required to report income earned in that state.
When a person’s permanent home is located in a state for a portion of the tax year, such as when they move from one state to another, they are considered a part-year resident of the state, in this situation, a part-year resident return should be filed to report income earned during the residency period.
some of the common situations that will require multi state filing.
Situation 1
–
Taxpayer moved to a different state during the year except temporary moves for short-term work or school.
Two part year state returns will be required in this situation.
Situation 2
–
Taxpayer worked and lived in two different states.
Generally, out of state workers have to file a return for their work state in addition to their resident state(excluding reciprocal agreements and non income tax states). Typically, taxpayers file a non resident state return for the state they worked in and pay that state’s tax. They’ll then get a credit for taxes paid on their resident state return.
Situation 3
–
Taxpayer owns a property or has business interests in another state.
Here are some common situations where the taxpayer does not have to file a second state return:
Interest from an out-of-state bank or account
Out-of-state employer
If taxpayer earned money in one of nine states that don’t collect income tax but live in a state that does, taxpayer needs to report the income on their resident state return.
Taxpayer resident and work states have a reciprocal agreement.
Each state may differ from the other in the way they tax out-of-state employees. It is best to refer to that state’s department of revenue website to confirm.
When a second state return is unnecessary
Here are some common situations where you don’t have to file a second state return:
Interest from an out-of-state bank or account
Out-of-state employer
If a person earns money in one of nine states that does not collect income tax (Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, or Wyoming), but lives in a state that does, they need to report the income on their resident state income tax return.
Your resident and work states have a reciprocal agreement to learn which states have reciprocal agreements.
When to file a nonresident state tax return
Generally, a nonresident state return is necessary if an individual earns money from sources in a state where they do not reside. Some examples are:
Wages or income earned while working in the state
Out-of-state rental income, gambling winnings, profits from property sales
S corporation or partnership income
Beneficiary income from a trust or estate
For active duty military members, non-military income earned outside their SLR
If an employer withholds taxes for the wrong state
However, individuals do not need to file a nonresident return if:
They only have interest income from an out-of-state bank account
If the other state doesn’t have an income tax (such as Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington, or Wyoming)
It’s important to note that if a resident state collects income tax, income earned in a “no-income tax” state must be reported to the resident state.
Filing state taxes for out-of-state employers
Most people do not need to file a nonresident tax return in the state where their employer is located. The location of income earned is the determining factor here, not the employer’s location. To illustrate, let’s consider the example of Ruth in the following scenarios.
Scenario 1
Ruth resides in California but works in-person in Oklahoma
Ruth is a California resident who spent several months working in-person in Oklahoma for their employer. Ruth would need to file a nonresident Oklahoma tax return to report income earned in Oklahoma and a resident California tax return.
Scenario 2
Ruth resided and worked in California for an Oklahoma employer
However, if Ruth resided and worked in California for an Oklahoma employer, she would only file a resident return for California, where she earned the money.
Summary
Sometimes, payroll departments may not know how withholding works, and employers may withhold taxes for the wrong state. In such cases, the taxpayer must file a nonresident return to recoup these erroneous withholdings.
It’s important to declare earnings of $0 on the nonresident return to get a full refund for taxes withheld and inform the payroll department to correct this error in the future.
New Jersey residents who work in New York click here(opens in a new tab).
Knowledge check
Cheng lives in Georgia, and receives the following types of income: W-2 income from her Georgia employer, rental income from her Florida rental property, and interest income of $2,000 reported on a 1099-INT from a bank located in Massachusetts. Where is Cheng required to file a state income tax return?
Select the best answer, then select Submit.
Cheng is required to file all of the following returns: a resident Georgia return, a non-resident Florida return, and a non-resident Massachusetts tax return.
Correctly unselected
Cheng is only required to file a resident Georgia return, and a non-resident Massachusetts return.
Correctly unselected
Cheng is only required to file a resident Georgia return.
Correctly selected
Cheng is only required to file a Massachusetts non-resident return.
Correctly unselected
SUBMIT
Correct
That’s right! Cheng is required to file a Georgia resident return reporting all income from all sources because Cheng is a resident of Georgia. A Massachusetts nonresident return is not required for interest income reported on a 1099-INT by a Massachusetts bank. Florida does not have state income tax, so a Florida state return is not required to report the Florida rental income. However, Cheng will report all rental and interest income on her Georgia return.
Zara is an active duty military servicemember who married Chris in September of 2023. Zara’s Home of Record is Montana. Chris was a resident of Maryland prior to marrying Zara. Zara and Chris both currently reside in Virginia, which is Zara’s official Permanent Duty station. Which state(s) may Zara choose as her SLR for reporting her military income?
Select the best answer, then select Submit.
Zara is able to choose Maryland, Montana, or Virginia as the state to report her active duty military income.
a Roth IRA must be open for at least five years for any of the above distributions to count as qualified. The clock starts ticking on the first day of the first year you made a contribution to your Roth IRA.
There are two basic types of distributions you might take from your Roth IRA: qualified and non-qualified. The basic difference is this: qualified distributions are generally made after a person reaches age 59½ or when the owner of the Roth IRA has become permanently disabled or has passed away.
A Roth IRA and its 100% tax-free.
A Roth IRA qualified distribution includes a withdrawal of up to $10,000 if the withdrawal is used for the purchase of a first home.
Distributions can hold huge advantages for retirees. Additionally, Roth IRAs aren’t subject to required minimum distributions the way traditional IRAs are. That allows you to grow your money without triggering a tax penalty.
Claiming the standard deduction often reduces an individual’s taxable income more than itemizing because the Tax Cuts and Jobs Act (TCJA) virtually doubled these deductions from what they were prior to 2018.
Single or Married Filing Separately—$14,600.
Married Filing Jointly or Qualifying Surviving Spouse—$29,200.
Head of Household—$21,900
Generally, the lower an AGI is, the fewer restrictions the taxpayer will face on other tax benefits.
What Are Above-the-Line Deductions?
Above-the-line deductions are expenses deducted to calculate an individual’s adjusted gross income (AGI). These differ from itemized deductions, which are the dollar amounts deducted from the determined AGI. The following examples represent above-the-line expenses:
1- Retirement Plan
2- Contributions: Contributions made to traditional IRAs and qualified plans such as 401(k), 403(b), and 457 plans are deductible. Taxpayers with incomes above a certain level who contribute to both a traditional IRA and a qualified plan are subject to a graduated phaseout reduction on the deductibility of their IRA contributions.
HSA, MSA Contributions: Contributions to Health
S
Above-the-Line Deductions
Each above-the-line deduction that’s offered in a particular tax year is listed on Schedule 1 Part II, with total amount carrying to Form 1040 Line 8. Above-the-line deductions typically include contributions to health savings and individual retirement accounts. For self-employed taxpayers who report business earnings on a personal return, deductions are available for:
one-half of self-employment taxes owed
health insurance premiums paid
contributions to specific retirement plans, like a savings incentive match program for employees or SIMPLE
simplified employee pension plans, or SEPs
domestic production activities
Other write-offs used to calculate AGI include alimony payments, student loan interest, the moving expenses incurred when relocating for business purposes, and many others.
