R2: Individual Tax - Adjustments, Deductions & Credit Flashcards
When may an individual file an amended return (& what is is this form?)
1040X - filed within 3 years of the date of the original return or within 2 years of the date in which tax was paid, whichever is later
Frivolous position?
CPA cannot prepare or file the return if it is frivolous.
How is investment interest expense deducted?
As an itemized deduction limited to net investment income.
Alternative Minimum Tax - PANIC TIMME stuff
P - passive activity losses are added back
A - accelerated depreciation adjustments (no adj. for 179 needed)
N - net operating loss must be recomputed
I - installment method may not be used by a dealer for property sales
C - contracts; percentage of completion versus completed contract
ITEMIZED DEDUCTIONS - ALWAYS ADD-BACKS
T - taxes reduced by taxable refunds
I - interest (mortgage not used to buy/build/improve & investment int. recalc)
M - medical expenses (7.5% - 10% if applicable)
M - miscellaneous deductions subject to 2% limit
E - exemptions (personal & standard) not allowed.
AMT Credits (to reduce AMT) - FACCE
F - foreign tax credit A - adoption credit C - child tax credit C - contributions to retirement E - earned income credit
Avoid underpayment of tax thresholds:
90% of current year tax - 4 installments
110% of PY tax - 4 installments, $150K+
Revenue and expenses from a hobby
Revenue included in gross income, expenses deducted as itemized subject to 2% AGI.
Child and dependent care credit requirements
1- child must be under the age of 13
2- credit is limited to $3000
3- above reduced by % threshold of lowest spouse earnings (usually 20%)
Donated artwork
Deductible up to taxpayers basis
Self employment insurance & healthcare
Deductible FOR AGI
Unused charitable contributions are…
carried forward 5 years.
How is appreciated property that is donated that would have otherwise been subject to capital gains deducted?
Limited to 30% of AGI to avoid built-in capital gains tax.
