R2 Individual Tax - Adj, Ded, Cred Pt 3

Question 1

State the limitations of the American Opportunity tax credits.

Answer 1

For 2014, the credit for the first 4 years of postsecondary education is limited to $2,500 as follows: 100% of the first $2K in tuition costs and 25% of the second $2,000

Question 2

What are the eligibility requirements for the retirement plan contribution credit?

Answer 2

1. At least 18 by close of the tax year
2. Not a full-time student
3. Not a dependent
4. Income limits apply

Question 3

State the formula to determine the amount of the foreign tax credit?

Answer 3

1. Can claim either deduction or credit
2. there is no limitation to the amount of foreign taxes paid that are claimed as deductions
3. Overall limitation for the credit

(Net foreign income / worldwide taxable income) x U.S tax liability before credit on worldwide taxable income

Question 4

State the limitation of the work opportunity credit (12/31/13)

Answer 4

1. 40% of the first 6K wages per employee paid during the first year of employment
2. 40% of the first $3K to certain summer youth

Question 5

Describe the child tax credit?

Answer 5

$1,000 tax credit for each qualify child

Qualify child “CARES” rules apply, except that a child must be under the age of 17

Higher-income taxpayers must reduce credit by $50 for each $1K by which modified AGI exceeds:

1. $110K for a joint return
2. $75K for an unmarried individual
3. $55K for married filing separelty

Question 6

What are the eligibility requirements for the EIC?

Answer 6

1. Live in the US (main home) for more than half the taxable year
2. meet certain low earned income thresholds
3. Not have more than specified amount of disqualified income
4. Be over 25 and under 65 if there are no qualifying children and
5. File a joint return with a spouse (if married)

Question 7

State the AMT formula and the tax rate.

Answer 7

Taxable Income 
\+/- Certain adjustments
\+ Tax preferences - Exemption allowance 
AMTI
x Tax rate
= AMT (the greater of AMT or regular tax is the total tax liability)

The exemption amount is phased out by 25 cents per dollar of AMT $156,500

For AMTI in excess of $182,500 tax rate on excess is 28%

Question 8

Name some adjustments for AMTI calculation

PANIC TIMME

Answer 8

Passive activity losses
Accelerated depreciation 
Net operating loss
Installment income of a dealer
Contracts, percentage completion vs. completed contract

Tax deduction
Interest deduction on some home equity loans
Medical deduction (limit to excess over 10% AGI)
Miscellaneous deductions not allowed
Exemption (personal) and standard deductions

Question 9

Name some tax preferences items for AMTI calculations

Answer 9

1. Private activity bond interest income (exception apply
2. Percentage depletion
3. Pre-1987 accelerated depreciation

Question 10

What credits are allowed against the AMT?

Answer 10

1. Foreign tax credits
2. Adoption credit
3. Child tax credit
4. Contributions to retirement plans credit
5. EIC
6. Small business health care tax credit

Question 11

What is the SOL for an assessment?

Answer 11

three years from the later of:

1. Due date of return
2. Date return is filed

Question 12

What is the SOL for a refund?

Answer 12

The later of:

1. 3 yrs from the time the return was filed.
2. 3 yrs from the due date of the original return
3. 2 years from the time the tax was paid (if not when the return was filed))