REG - M1 - Federal Taxation of Individuals

Question 1

Basic Tax Formula

Answer 1

Gross Income
<Adjustments>
Adjusted Gross Income</Adjustments>

<Standard>
OR
<Itemized>
Taxable inc bef QBI deduction
<QBI>
Taxable Income
Federal Income Tax
<Tax>
Other taxes
<Payments>
Tax Due OR Refund
</Payments></Tax></QBI></Itemized></Standard>

Question 2

Qualified Surviving Spouse

Answer 2

SPOUSE DIED Yr 1, Yr 2 and 3 can claim this status if:
1) Unmarried at end of yr AND
2) Maintain household for entire year that is principal home of child or stepchild AND
3)Child or stepchild qualifies as a dependent

Question 3

Head of Household

Answer 3

1) Unmarried, legally separated, married but living apart for last 6 months of the year
2) NOT a surviving spouse
3) NOT a resident alien
4) Maintain home for >50% of yr AND it is principal residence of a
a) son or daughter qualifying child or a qualifying relative
b) dependent relative residing with taxpayer
c) dependent parent, regardless of whether living with taxpayer or not

Question 4

Multiple Support Agreement (requirements)

Answer 4

a) 2 or more people provide >50% of support but no one supports >50%
b) to claim as a dependent must support >10% AND
c) other dependency test are met
d) Form 2120 Multiple Support Declaration must be filed

Question 5

Tax Exempt Interest

Answer 5

1) State and Local govt bond
2) Bond of US possession
3) Series EE savings bond if used for higher ed and
4) certain ownership/income requirements met

Question 6

Excl Interest Higher Ed expense on EE Bonds

Answer 6

Series EE bonds issued after 1989
Registered to taxpayer (or w spouse)
Taxpayer 24 years old when issued
AGI limit

Question 7

Taxability of some items

Answer 7

Scholarship - tuition/books not taxable; room and board taxable
Workers comp payment for injury or illness - not taxable
Alimony pre 2019 - taxable (excl child support)
Child support - not taxable

Question 8

Charitable contribution limit

Answer 8

30% AGI for property
60% AGI for

Question 9

Net Investment Income Tax

Answer 9

3.8% Surtax on Investment Income above the following levels
Married Filing Jointly = $250,000
Married Filing Separately = $125,000
Head of Household = $200,000
Single = $200,000

Question 10

Different Investment Rates on Tax Return

Answer 10

Ordinary Income - Wages, STCG
Follow tax tables
Preferential Income - LTCG, Ordinary Dividends
0%/15%/20%
Net Investment Income - Investment income over threshold
3.8%

Question 11

Major Classes of Itemized Deductions

Answer 11

Medical and dental Expenses
Taxes paid
Interest paid
Gifts to charity
Casualty and theft losses
Gambling losses to the extent of winnings

Question 12

Schedule SE Items

Answer 12

Self Employment Income line = Net Profits (excl Int income)
Net Earnings from Self Employment = Self Emp Inc x 92.35%
Self Employment tax = 15.3% up to $168,600 (12.9% FICA, 2.9% Medi)
Adjustment for self employment tax paid = 50% of Self Emp Tax Paid

Question 13

Child and Dependent Care Credit

Answer 13

limited to children under 13
limited to spouse with lowest earned income of couple
% of lowest earned income is based on combined income
20% for lower, 35% for higher income

Question 14

Charitable Contributions

Answer 14

Cash to qualifying organization
Can include value over FMV paid at charity event/auction
Can include in kind donation with receipt to qualifying org

Question 15

Deductible Investment Interest Expense

Answer 15

only can deduct against taxable interest
NOT tax free bonds
NOT rental income