M4 Tax Computation and Credits

Question 1

Estimated Payments. An underpayment penalty will be due if the amount owed on the return is how much?

Answer 1

$500 or more

Question 2

Estimated Payments - amount due for small corporations

Answer 2

1) 100% of current year tax OR
2) 100% of PY tax

*NOTE if PY tax was $0, must take 100% current year

Question 3

Estimated Payments - amount due for large corporations (taxable income of $1 million or more)

Answer 3

100% of current year tax

Question 4

When calculating the tax amount, remember to what?? (in regards to the different tax brackets)

Answer 4

Add cumulatively

Question 5

Which tax credits includes a combination of a bunch of credits (Invsetment, WOTC, R&D, etc.)?

Answer 5

General Business Credit

Question 6

General Business Credit. Formula

Answer 6

*May not exceed net income tax (regular + AMT - nonrefundable credits) LESS the Greater of:

25% of regular tax liability above $25,000
OR
Tentative Minimum Tax for the year

Tax
<25,000>
--------
$xx
*25%
-------
XX,XXX

Credits

Question 7

Unused general business credit carryover rules

Answer 7

1 back, forward 20

Question 8

Research and Development Credit Calculation.

Answer 8

Total qualified research expenses (Wages + Supplies)

Gross Receipts Limitation
Fixed based percentage * Annual gross average receipts

Minimum Base Amount
GREATER OR gross receipts limit or 50% of qualified

Research & Development Credit
20% * Minimum Base Amount

Question 9

R&D Credits. Definition of eligible small business who are able to use the R&D credit to offset AMT

Answer 9

less than $50 million in gross receipts for three preceding years

Question 10

Foreign Tax Credit. Can choose annually …

Answer 10

take either a CREDIT or DEDUCTION

Question 11

Foreign Tax Credit Calculation - LESSER OF (2)

Answer 11

LESSER OF:
1) Qualified Foreign income taxes paid or accrued 
GIVEN
OR
2) Foreign Tax Credit Limitation
     a. US Tax Liability * Tax Rate
     b. Foreign Income/Total Income
a * b

Question 12

Foreign Tax Credit carryover rules

Answer 12

1 back, forward 10

Question 13

What is the tax for when the corporation doesn’t make enough distributions?

Answer 13

Accumulated Earnings Tax

Question 14

Accumulated Earnings Tax calculation

Answer 14

1st	Business Need:
		Beg E&P
		 (i.e. expansion)
		--------------
		Beg. Excess
	2nd 	Lifetime Credit
		250,000 (Regular Corp) or 150,000 (Service Corp)
		 (from above)
		---------------------
		Remaining Credit
	3rd	
		Taxable Income - BEFORE: Dividends Received deduction
				NOL
				Charity Deduction
				Capital Loss carryover

		 (FEDERAL TOO)
		 (During tax year within 3 and half months consent dividends)
		-------------------
		Accumulated Taxable Income
		 (from 2nd above)
		---------------------
		Current Accum. taxable income
*20%
--------------------
Accumulated Earnings Tax

Question 15

Regular corporations are entitled to how much lifetime accumulated earnings?

Answer 15

$250,000

Question 16

Personal Service Corporations (PSCs) are entitled to how much lifetime accumulated earnings?

Answer 16

$150,000

Question 17

How many taxes for a corporation?

A Corporation will have either a ___ tax or a ___tax

Answer 17

Accumulated Earnings Tax
Personal Holding Company Tax

*All have Regular and AMT plus ONE of the above (3 taxes total)

Question 18

Personal Holding Company Definition (NIRD MNEMONIC)

Answer 18

N = Net rent (if less than 50% of ordinary gross income)
I = Interest (that is taxable - nontaxable is excluded)
R = Royalties OR
D = Dividends from unrelated domestic corporation
*More than 50% owned by 5 or fewer individuals (directly or indirectly) AND having 60% adjusted ordinary gross income consisting of the above items

Question 19

Personal Holding Company Tax amount

Answer 19

20% on net income (reduced by federal income taxes and net long-term capital gain) NOT distributed (in addition to the regular and AMT taxes)