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EA Individuals > Notes > Flashcards

Notes Flashcards

1
Q

Non-resident aliens – don’t qualify for…

A

No standard deduction

Can only take some itemized deductions

No education credits – even if US citizen is married to a non-resident alien filing jointly

No premium tax credit and no investment income tax

No EITC

No CTC or ACTC

No Foreign earned income exclusion

No foreign tax credit

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2
Q

Divorced parents - only custodial parent can claim

A

HOH – only custodial parent can claim

CDCTC – only custodial parent

EITC – only custodial parent

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3
Q

When claimed as a dependent – not eligible for

A

HSA deduction

EITC

Savers credit

Premium tax credit

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4
Q

If eligible to be claimed as a dependent – not qualified for

A

No education credits

EITC childless

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5
Q

Social Security number required for the following credits

A

Earned income tax credit

Child tax credit

Additional child tax credit

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6
Q

MFS does not qualify for

A

Premium tax credit

Education credits

Adoption credit

Education savings program – bond

Student loan interest deduction

Don’t qualify for special $25,000 loss allowance – if living with spouse

Capital loss reduced to $1500 of $3000

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7
Q

Is the tax home based on the workers mailing address or place of work

A

A taxpayers tax home is usually determined by the location of the principal place of work, regardless of mailing address or where they actually live

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8
Q

$25,000 loss allowance

A

Max AGI of $100,000

Reduces the allowance one dollar for every two dollars over the limit

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9
Q

Recourse when 60 day rollover window is missed for a traditional IRA

A

Maybe be eligible for an automatic waiver of the 60 day IRA rollover rule

Or request a private letter ruling from the IRS

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10
Q

Schedule see deduction for meals and entertainment

A

Some business meals and entertainment expenses are 100% deductible if the expense is primarily for the benefit of employees who are not highly compensated or key employees

Meals are deducted at 50%

Business related entertainment expenses have been eliminated and are not deductible

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11
Q

Optional method of calculating the home office deduction

A

Taxpayer can deduct five dollars per square foot for the space in the home that is used for business

With a maximum allowable square footage of 300 ft.²

Equals a maximum deduction of $1500

There is no depreciation expense and no recapture of depreciation upon the sale of the home

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12
Q

How are losses on a second or vacation home deductible?

A

They are not deductible

Section 121 exclusion applies to primary residence

Loss on a vacation home or secondary home does not qualify and losses are not deductible

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13
Q

What fees cannot be included in the basis of a property when it is purchased

A

Casualty insurance premiums

Rent for occupancy of the property before closing

Charges for utilities or other services related to occupancy of the property before closing

Charges connected with getting alone – points,
mortgage, insurance, premiums,
loan assumption, fees
Cost of a credit report
Fees for an appraisal that are required by a lender
Fees for refinancing a mortgage

Or amount placed in escrow for the future payments of taxes or insurance

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14
Q

Wash sales – married filing separately

A

If spouses are married filing separately, wash sales still apply

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15
Q

Gross estate versus taxable estate

A

The value of the gross estate is figured without regard to liabilities. It is only the assets.

Taxable estate takes into consideration, several deductions to determine the amount of the taxable estate

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16
Q

Sales taxes on schedule C are…

A

A liability, not income, and are therefore excluded from gross receipts and deductible expenses

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17
Q

When a person with share an a partnership dies, how is the distributive shares allocated on each form?

A

Share of partnership income through the end of the month the person was alive is reported on 1040

Earnings in the months after the person died or reported on form 1041

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18
Q

Statutory non-employees

Three categories

A

Direct sellers
Licensed real estate agents
Certain companion sitters

These taxpayers are treated as self-employed for FICA purposes, and are usually required to pay estimated taxes

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19
Q

Can you deduct childcare expenses to receive medical treatment as a medical expense deduction on schedule a

A

No

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20
Q

When do you have to report a state income tax refund as income?

A

If itemizing deductions in the prior year and received a tax benefit from the state tax deduction

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21
Q

What type of insurance is not deductible on a schedule C?

A

The owners health insurance

Claimed as an adjustment to income on schedule one

But other types of insurance, including any health insurance cost for employees, would be deductible as ordinary business expenses on schedule C

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22
Q

Related party transaction rules do not apply to

A

Uncles, nieces, nephews, cousins, stepchildren, step siblings, step, parents, or in-laws

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23
Q

Mutual funds are always taxed as

A

Long-term capital gains or losses

24
Q

Can a taxpayer deduct taxes if they were imposed in a prior year

A

Yes – as long as the taxes were paid during the current tax year

25
Q

If you don’t reconcile the advanced premium tax credit…

A

Could be prevented from applying for PTC in the following year

26
Q

For IRA purposes, is rental income considered qualified compensation

A

No

27
Q

Qualifying charitable contributions must be made in…

A

Cash or property

The value of the free use of a taxpayers property is not allowed as a charitable deduction

28
Q

For the purposes of determining the residency for a qualifying child, who is deemed the custodial parent

A

The parent with whom the child lived for the greater number of nights during the year

Regardless of who has legal custody

29
Q

When calculating NIIT - does rental income count as investment income?

A

Yes

30
Q

Itemizing salt taxes – what is the limit when filing married filing separately?

A

$5000, not $10,000

31
Q

What is never considered a taxable recovery?

A

A federal income tax refund

32
Q

If a K-1 includes business income, and other non-passive income – where does the beneficiary report it?

A

On part three of the beneficiaries schedule E

33
Q

What happens if you itemized medical expenses claiming $200?…

And the following year received reimbursement for reported expenses of $500

How is it reported?

A

Only need to report the amount that was claimed as an itemized deduction in the prior year has taxable income

Only need to report $200 taxable income

34
Q

Involuntary conversion – federally declared disaster area

How long does the taxpayer have to replace the home?

A

Four years after the end of the tax year

Real property that is held for investment or used in a trade or business is allowed a three year replacement.

35
Q

When are scholarships taxable?

A

If a student is not a degree candidate, all scholarships are subject to federal income tax

Even if they spend it on educational expenses

36
Q

Royalties from copyrights, patents, oil, gas, and mineral properties are taxable as

A

Ordinary income

37
Q

Taxpayers cannot claim the refundable additional child tax credit if…

A

If they file form 2555 and elect to exclude for an earned income from tax

38
Q

How is IRD reported to beneficiaries – on what form?

A

1099 – MISC

Not on a form W – 2

39
Q

Nonbusiness bad debts

A

Always short term capital loss

A loan to a friend they can’t repay… write off as SHORT TERM capital loss on schedule D

40
Q

Penalty for unreported tips

A

50% of SS and MW tax due on those tips

41
Q

Statutory employee

A

Issued a form W – 2 by their employers

But they report their wages, income, and allowable expenses on schedule C just like self-employed taxpayers

The difference is that statutory employees are not required to pay self-employment tax

The employer pays that Sherrif, Social Security, and Medicare

Examples of statutory employees

Full-time life insurance sales people
Traveling sales people
Certain commissioned truck drivers
Certain workers who perform work on materials or goods furnished by the employer

42
Q

In a lawsuit – our lost wages taxable

A

No, but any interest earned is

43
Q

What are the two types of passive activity income?

A

Passive rental activity

A business activity in which the taxpayer does not materially participate

44
Q

When determining Social Security tax ability – you need to include

A

All other income – including tax exempt interest like municipal bonds

Plus, half the Social Security benefits

45
Q

Nonresident aliens with married filing jointly – electing to be taxed on worldwide income

What would end the election?

A

Revocation of the choice

Death

Divorce

Legal separation

In adequate records

46
Q

What is not a preference item when calculating the AMT

A

Charitable contributions

47
Q

Charitable contributions – things to remember

A

Appreciated property is subject to a 30% of AGI limit

Unused parts of a gift or charitable donation can be carried over to future tax years for five years

48
Q

Lifetime learning credit – non-resident alien married filing jointly elects to be treated as a resident alien

A

Eligible for the lifetime learning credit

49
Q

Municipal bond filing requirements

A

Even though they are tax exempt – they still need to be reported on the tax return

50
Q

For the purposes of the premium tax credit – household income is the taxpayers adjusted gross income on the federal income tax return

plus…

A

Any excluded foreign income

Non-taxable Social Security benefits

And tax exempt interest

51
Q

How is military severance pay taxed?

A

Generally taxable as wages

When members are separated from the military for medical reasons and given severance pay

Later awarded VA disability benefits – 100% of the disability severance benefit may be excluded from income

52
Q

Can a full-time student still qualify for the EITC

A

Yes

53
Q

Coverdell and 529 plans can be used for

A

Room and board

Not transportation expenses

54
Q

Reporting requirements for an FSA and tax tax requirements

A

No reporting requirements for FSA on a taxpayers individual return

Not subject to employment, taxes, or federal income taxes

55
Q

How are Worker’s Compensation payments reported on a tax return

A

They are not taxable and do not have to be reported on the return

EA Individuals (21 decks)

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