REG 2 - Adjustments Flashcards

1
Q

Define health savings account adjustment?

A

Enables workers with high deductible health insurance costs to make pretax contributions of up to $3,400 ($6,750 for families)

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2
Q

What are the the four requirements to claim work-related moving expense adjustment?

A

1) New workplace commute must beincreased by 50 miles.
E.g. if you travel 10 miles daily, then your new workplace commute must be 60 miles.

2) 39-week stay during the 12-month period following arrival (75%) of next year
3) Travel and lodging are deductible - transportation expense, tolls and parking fees.

Nondeductible expenses:

  • Meals
  • Pre-move house hunting
  • Expense of breaking lease
  • Temporary living expenses

4) Employer reimbursements are excludable from income and subtracted from the moving expense adjustment

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3
Q

Explain deductible part of self-employment tax adjustment?

A

Self-employed individuals can deduct 50% of self-employment tax as adjustment

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4
Q

Explain self-employed health insurance adjustment?

A

Self-employed individuals can deduct 100% of self-employed health insurance (taxpayer, spouse, dependents)

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5
Q

Explain Keogh (Profit-Sharing) Plans: self-employed retirement plan adjustment?

A

Self-employed taxpayers may deduct the lesser of:

$54,000

or

25% net (Keogh/self-employed) earnings

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6
Q

Explain the “25% net (Keogh/self-employed) earnings calculation”

A
Business income
Less: Business expenses
= Net business income
Less: 1/2 self-employment tax
Less: Keogh deduction
= Keogh net earnings

25% x Keogh net earnings = the calculation for self-employed retirement plan adjustment

OR

20% of self-employment income after self-employment tax (if you don’t know Keogh deduction)

E.g. Peter has self-employment net income of $100,000 (after-one half of the self-employment tax).

$100,000 x 20% = $20,000 maximum allowable deduction

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7
Q

Explain penalty on early withdrawal of savings adjustment?

A

Forfeited interest (the interest penalty on early withdrawal of savings) is an adjustment

  • do NOT net against interest income
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8
Q

How is alimony paid to spouse treated? How is alimony received treated?

A

Alimony paid is an adjustment.

Alimony received is income.

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