Reg Review Flashcards
Credit can result in refund
Earned Income Tax Credit
Adoption Expenses Not Used for Credit
Medical ( Take on Sch A )
Taxes Paid to A foreign County Can be Treated as
A Credit towards Federal Income Taxes Due
Child & Dependent Care Cr - Refundable or Not?
Not Refundable
Filing Status that Negates the Earned Income Cr
Married Filing Separately
What do you do if two or more employers withhold excess social security?
Claim the excess as a credit on their tax return
“tax preference items” example - Are or Are not added back for AMT
Non-taxable items, ex. municipal bonds
They ARE added back for AMT computation
Home Mtg Interest - Is or Is not added back for AMT?
Is Not Added Back for AMT computation
Charitable Deductions - Are or Are Not Added back for AMT?
Are Not Added Back for AMT computation
Credit for Prior Yr AMT tax liability may be carried —-?
Carried Forward forever. (Note - certain permanent differences cannot be carried forward)
The Alternative Minimum Tax is computed as the
The Excess of the AMT over the Regular Tax
Medical % of AGI threshold for AMT if over 65
7.5 % if over 65 (otherwise threshold is 10%)
If your AGI was above $150,000 last year only way to avoid underpayment of tax penalty.
Pay in 110% of prior yrs tax in 4 equal installments
Statute of limitations for understatement of Gross Income by more than 25%
Statute of limitation is 6 yrs
Required amounts to pay in for tax if your prior years AGI was less than $150,000
90% of the current years tax or 100% of the prior years tax.
Hierarchy of Authority in the Tax Law
IRS Tax Code
IRS Regulations
Tax Court Decisions
IRS Agents’ Reports
What decides whether a CPA gives oral or written advice to a client?
The client’s tax sophistication.
Levels of Support for recommending a tax position
1) Reasonable basis standard (least stringent).
2) Realistic possibility standard
3) Substantial authority standard
4) More-likely-than-not standard (most stringent).
Charitable Cash Deduction - Maximum Allowable
50% of AGI (can carry forward excess)
Charitable Property Deduction - Property held for less than 1 year.
First take the lesser of the property’s basis or its fair market value at the time of contribution. Maximum is 30% of AGI
Charitable Property Deduction - Held for more than 1 yr
Deduct at FMV if held for more than 1 yr. Limited to 30% of AGI If given to a public charity, and 20% of AGI if given to a non-operating private foundation.
Combination Rules for Charitable Donations
The Total Deduction for All gifts (to include LT Cap Gains Property, Cash and other property) cannot exceed 50% of AGI.
Casualty Loss Computation
Lesser of basis in property or decrease in FMV. Minus insurance proceeds received Less $100 per casualty loss Subtotal is Eligible Loss Less 10% of AGI limitation Deductible Loss
Casualty Loss Requirements
Must be “Unexpected” can’t be controllable & avoidable as in example - dog broke a vase.
Investment Interest Expense is limited to
“Net” Investment Income - which includes all investment income less investment expenses (other than inv int). If investment exp is a business itemized deduction, then only those over 2% of AGI are considered.
Child Care Credit Limitations
1) Age - Child must be < 13 yrs old (No teenagers)
2) Qualified Day Care
3) Must have dual income, take the lower of the 2
4) Compare lowest inc. to childcare exp & use lower of 2
5) If AGI < $15K get 35% of #4
6) If AGI > $15K, decrease 1% for ea. $2k increment with a minimum of 20%
