M1-Adjustments

Question 1

In 2017, taxpayers can contribute and deduct up to $5,500 to an IRA. (true or false)

Answer 1

True

Question 2

For couples filing a joint return, where at least one spouse is an active participant in a retirement plan, the deductible portion is phased out. (true or false)

Answer 2

True
For a spouse who is an active participant, the phase-out range in 2017 begins at $99,000. For a spouse who is not an active participant, but is married to someone who is, the phase-out range in 2017 begins at $186,000.

Question 3

Any amount of “alimony” that is dependent on a child reaching the age of 18, will be considered child support (which is not deductible) for tax purposes. (true or false)

Answer 3

true

Ex: Alimony payments of $9,000 to be reduced to $7,000 when their child attains the age of 18.

Accordingly, only the $7,000 is deductible as alimony.

Question 4

IRC Section 221 allow the deduction of student loan interest (above-the-line for AGI) paid on qualified education loans up to a maximum of $2,500 for the tax year. (true or false)

Answer 4

true

There is a phase-out for the deduction in 2017, and there are other minor restrictions, such as a married couple must file joint returns to take the deduction.

There is no limitation of the number of years that the interest may be deducted, other than that the interest may be deducted only when paid.

Question 5

The moving expense deduction is allowable only for direct moving expenses, such as:

Answer 5

1) travel and along the way lodging of the taxpayer and the taxpayer’s family
2) transportation, to the new location, of the taxpayer’s household goods and personal effects.

Deductible expenses must be reduced by the amount of employer reimbursements not properly included on IRS form W-2.

No longer is there a deduction for either:

1) temporary living expenses at the new location; or
2) along-the-way meal expenses; or
3) pre-move house hunting trip

Question 6

One-half of the self-employment tax is deductible to arrive at adjusted gross income. (true or false)

Answer 6

true

Question 7

For Keogh plans, earned income is defined as net self-employment earnings reduced by the amount of the allowable Keogh deduction and 1/2 the self-employment tax. (true or false)

Answer 7

true

Question 8

Alimony payments to a former spouse are adjustments to arrive at AGI. Child support payments are NOT alimony and are NOT deductible. Property settlements are NOT alimony and are NOT deductible. (true or false)

Answer 8

true

Question 9

For IRAs, the adjustment is allowed for a year ONLY if the contribution is made by the due date of the tax return for individuals (April 15). The due date for filing the tax return under a filing extension is NOT allowed (i.e., filing extensions are NOT considered). (true or false)

Answer 9

True

Question 10

The maximum annual deductible amount for self-employed individuals to a Keogh Plan is the lesser of $54,000 or 25% of net earnings. (true or false)

Answer 10

(true or false)
“Net earnings” is defined as:
business income

<50% of self-employment taxes>

Net earnings
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Because the keogh deduction is part of the equation to obtain “net earnings” amount, the mathematical equivalent of 25% of net earnings is to multiply 20% [25%/125%] by the self employment earnings before the Keogh deduction, as follows.

business income

<50% of self-employment taxes> 
--------------------------------------------
Self-Employment earnings before Keogh
Times 20% [25%/125%]
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Calculated Keogh deduction
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