R1, May Your Soul Rest Easy

Question 1

What is the basic Tax Formula?

Answer 1

Gross Income
LESS: adjustments
=AGI
LESS: Std Deduction OR Itemized Deduction
=Taxable Income before QBI
LESS: QBI Deduction
=Taxable Income
x Federal Rate
=Federal Income Tax 
LESS Tax credits 
ADD: Other Taxes
LESS: Payments
=Tax due/refund

Question 2

What is the riteria for claiming head of household

Answer 2

Not married, legally seperated, or is married and has lived apart from spouse for the last six months of the year..

Not a qualifying widower

Maintain a home, that for over half the tax year is the principle residence of a: Dependent child, Dependent relative, dependent mother/father (this one is regrdless of if they live with the person, think nursing home)

Question 3

What are the qualifications to file as a widower

Answer 3

Unmarried at the end of the tax year.
AND
Surviving spouse must maintain a household which for the whole year, was the main house for a dependent son/daughter/step S/D
ANDDDD
This qualification is good for two years after the spouses death.

Question 4

What are the requirements for a qualifying child

CARES

Answer 4

Close Realtive
Age Limit (19 or 24 and under in college)
Residency and filing requirement
Eliminate gross income test
Support Test (over half)

Question 5

What are the requirements for a qualifying relative

SUPORT

Answer 5

Support (>50%) Test
Under specific amount of gross income (<4200)
Precludes dependent filing a joint tax return test
Only Citizens
Relatives Test OR
Taxpayer lives with individual for whole year test (if non-relative)

Question 6

Name requirements for a multiple support agreement

Answer 6

Two+ people together provide more than 50% of support, but individually, nobody provides more than 50%

To claim as a dependent, a person must provide more than 10% support as well as other dependency tests

File a 2120 form

Question 7

When does a cash basis tax payer report income

Answer 7

in the year it is either actually or constructively received…can be either in cash or property (Cash and cash equivalents)

Question 8

What are the 4 types of income for a person

COPP

Answer 8

Capital
Ordinary (Wages)
Passive (real estate, limited partnership, S Corp)
Portfolio (Dividends or interest)

Question 9

Gimme examples of non tax fringe benefits

Answer 9

De minimis
Tuition reduction
Employee Discount
Employer paid accident, medical, or health insurance

Question 10

lemme ask you…are life insurance premiums taxable to employees

Answer 10

WELP yes and no…the first 50,000 of group term is not includable in gross income…BUT anything over 50k should be included

Question 11

So uhhhh gimme examples of exempt interest

Answer 11

State/local bonds
Bonds of a US possession (puerto rico)
Series EE if used for higher ed
Interest on Veterans shiz

Question 12

What is the deal with taxes on property settlements from a divorce

Answer 12

transferring spouse gets no deduction for payments made or property transferred, and the payments aint includable in gross income for spouse receiving shit…this is the case no matter what time period

Question 13

The fuck you gotta do to deduct alimony and so the other person can make it includable

Answer 13

PRE 12/31/2018 CAN RECOG AS INCOME/DEDUCT AND TO BE ALIMONY IT:
written decree of payments
Must be in cash or cash equiv.
Payment cant extend beyond death of recipient
Cant pay member of same household
No joint returns

AYOOOO
Before any alimony is paid/recognized…child support gets priority…think of it as the primary bucket that must be fillled up)

Question 14

When are the funds in a nondeductible traditional IRA taxable

Answer 14

withdrawls are partially taxable

When withdrawn, the principal payments arent taxed, but the earned interest (the gain)…is

Allocated on pro rata basis to determine amount

Question 15

How the F you find the excludable part of a annuity

Answer 15

Investment in contract / Age Factor ( in months)

If that MF lives longer tahn the factor in months, further payments are fully taxed…if they die before full payments collected, the uncollected shit is a misc. itemized deduction on that dead persons last return.

Question 16

In a premature distribution of an IRA, what are the exceptions to the penalty tax

HIM DEAD

Answer 16

Home buyer (first time, 10,000 max within 120 days)
Insurance (medical) unemployed with 12 consecutive weeks of unemployment comp. or self employment
Medical expenses in excess of 10% AGI
Disability
Education
And
Death

Question 17

How the hell do you determine social security benefits

Answer 17

its broken out by AGI plus tax exempt interest plus 50% SS benefits…

Low income (<25,000 S , 32,000 MFJ) means no SS benefits are taxed

Lower Middle Income means less than 50% of SS is taxed

Middle Income (OVER 25000 S, 32000 MFJ) 50% of SS is taxed

Upper Middle Income means between 50% and 85% of SS is taxed

Upper income (Over 34,000 S, $44,000 MFJ) means 85% of SS benefits are taxed

Question 18

Are scholarships and fellowships gross income

Answer 18

if degree seeking, they are excludable up to the amount spent on tuition, fees, books and supplies. All reamining amounts are includable in grosss income.

If non degree seeking all amounts are includbale in income.

Question 19

Qual es the tests for foreign earned income exclusion

Answer 19

Bona Fide resident (whole tax year)

Physcial presence (330 full days out of 12 consecutive months)

Question 20

Gimme some them nontaxable misc. income items (exclusions)

Answer 20

life insurance proceeds
Gifts/inheritence
Medicare benefits
workers comp
personal injury/illness award
Accident insurance 
foreign earned income exclusion

Question 21

The heck is the self employment tax

Answer 21

all net SE income is subject to 2.9% medicare, but only SE income up to 132,900 is subject to 12.4% SS tax

Question 22

What does the uniform capitalization rules apply to

Answer 22

real or tanigble personal prop produced by the taxpayer in the trade or business

Real or tangible personal prop produced by tax payer for consumer (inventory of manufacturer)

Real or tangible personal property purchased by the tax payer for resale (retail inventory) but only if gross receipts are over 25 million annually oer the past 3 years

Question 23

How is rental income from a vacation jaunt handled

Answer 23

if rented less than 15 days, its a personal jaunt

If rented more than 15 days and personal use is the greater of 14 days or 10% of days rented, allocste rental expenses to the extent of rental income

If rented 15 or more days, and personal use is not more than 14 days or 10% of days rented: its a rental prop.

Question 24

So for rentals, if its considered personal prop, what is going on compared to if its a rental talkin bout deductions and income

Answer 24

if its a personal, income is excluded and deuctions for mortgage interest and taxes are put on Schedule. A and other expenses aint deductible…

If its a vacation property/rental the taxpayer reports income and deductions on Sched. E

Question 25

wtf ar ethe 4 categories of business entities

Answer 25

partnership
S corp
Sole Proprioetorship
C Corp

Question 26

Talk me through the tax treatment of guaranteed payments

Answer 26

they are distributive deductions to the partners via the partnership K01 and also taxable income to the partner receiving the payments

Question 27

The frick is fiduciary accounting

Answer 27

used in estates and trusts…it is focused on the classification of all receipts and disbursements as either principal or income

Question 28

What is a passive activity and gimme some examples

Answer 28

any activity where the tax payer does not materially participate

Rental activities, interest in limited partnerships, and S corps are examples.

Question 29

Tax treatment of nondeductible passive activity losses

Answer 29

nondeductible passive activity losses are unusef passive activity losses which are held in suspension

USed to offset passive income in future years (FOREVER)

Fully tax deductible in year the property is disposed of or sold

Question 30

Lemme hear the employer employee taxation of nonqualified employee sock option

Answer 30

employee taxation: if there is a readily ascertainable value, the employee recognizes ordinary income in the year it was granted.
If there is no readily ascertainable value, employee recognizes ordinary income based on FV of the stock purchased less any amount paid for the option on the excersise date.

Employer Taxation: employer may deduct the value of the stick otion as a business expense in the same year the employee recognizes ordinary income

Question 31

walk me through the employee and mployer taxation of incentive stock options (ISOs)

Answer 31

Employee: ISOs are not taxed as compensation. basis of stock is the exercise price plus any amount paid for the option.

Employer: no deductions received.

Question 32

walk me through the employee and mployer taxation of employee stock purchase plans ( ESPPs)

Answer 32

Employee: not taxed as compensation. Basis of stock is the exercise price plus any amount paid for the option.

Employer: nNo tax deductions

Question 33

Out of alimony child support and property transfer…what is able to be taxed as income/deducted

Answer 33

Alimony if its pre 2018

BUT NEVER child suppport or property shit

Question 34

what does the unifrom capitalization rules impact wiht regard to inventory

Answer 34

DM DL MOH

PERIOD COSTS NOT INCLUDED

Question 35

So there are three buckets to QBI deductions: The first bucket states:

Taxable Income at or below 160,700 S or 321,400 MFJ has what ype of QBI deduction for QTB and SSTB

Answer 35

If QBI –> Full 20%
If SSTB –> Full 20%

THEY SAME

Question 36

So there are three buckets to QBI deductions: The second bucket states:

Taxable Income at or above 210,700 S or 421,400 MFJ has what ype of QBI deduction for QTB and SSTB

Answer 36

QTB –> Full W-2 Wage and property limitation applies which is greater of: 50% of W-2 OR 25% W2 plus 2.5% of unadjusted basis of all qualified property

If SSTB NO QBI deduction

Question 37

So there are three buckets to QBI deductions: The third bucket states:

Taxable Income BETWEEN 160,700-210,700 S or 321,400-421,400 MFJ has what ype of QBI deduction for QTB and SSTB

Answer 37

QTB –> Phase in of W-2 wage and property limitation (if limitation is less than 20% of QBI)
DO: REduction amount = excess amount x phase-in %
THEN: Reduced QBI Deduction = Tentative QBI deduction (20% WBI)- Reduction amount

SSTB –> QBI, W2 wages, and ualified propery amounts are reduced, then phase in W2 wages and proerty limitation using reduced amounts

Question 38

WHat is the general limitation to the QBI deduction rule

Answer 38

once qbi has been calculated, the deduction can be the lesser of combined QBI OR 20% of the taxable income in excess of capital gain

Question 39

So you are a part of a partnership (get paid a guaranteed amount) as well as an S corp…what income gets hit by the SE tax?

Answer 39

just the partnership amount

Question 40

What determines if you a state refund is taxable

Answer 40

if you did itemized in taht year, its taxable…if you did standard, its not

IF it was itemized, you report income up to the extent to which the Itemized was over the standard

Question 41

Walk me through this QBI problem:
Person is a QTB, single
183,200 inc.
no gains
QBI is 80,000
W-2 wages were 20,000

whats the deduction

Answer 41

1/50,000 = Phaseout %

Taxable Income - Threshold of 160,700 = #1

Next: QBI x 20% = #2
Next: W-2 Limit x 50% = #3
Next: #2-#3 = Phawe out amount
THEN: Phase-out x Phaseout % = Applied Phase Out

SO: 
#2 would be full QBI deduction bc its always 20%, but we lessen it by the applied phaseout.