REG04

Question 1

When is transportation deductible?

Answer 1

Only if the trip is primarily related to the taxpayer’s trade or business, if more days are spent for personal purposes than for business purposes, none of the transportation is deductible.

Question 2

How do you figure the deduction for income attributable to domestic activities?

Answer 2

= to the lesser of:
9% of the qualified production activities income (QPAI), 9% of the taxable income of the taxpayer, or
50% of the W-2 wages allocable only to qualified production activities income for the year

Question 3

Where is most farm-related income is reported on Form 1040?

Answer 3

Most farm-related income is reported in Part 1 of Form 1040 Schedule F

Question 4

Are capital gains and losses and contributions to retirement plans considered income or expenses for self-employment purposes?

Answer 4

No

Question 5

According to Section 274(j) what are the limits of the deduction for employment achievement awards?

Answer 5

Tangible personal property awarded to an employee by reason of length of service or safety achievement is limited to $400 per employee per year or $1,600 per employee per year if it is a qualified plan award. Qualified plan award = permanent, written plan or program that does not discriminate in favor of highly compensated employees. Not qualified award if the average cost of all items awarded > $400. Worked over 5 years.

Question 6

Is a bonus of publicly-traded stock included in compensation?

Answer 6

Yes, the FMV should be included in compensation.

Question 7

is nonqualified stock option included in compensation?

Answer 7

Yes, = to the difference between the FMV of the stock and the exercise price.

Question 8

What value may be excluded for the value of employer-provided transit passes and employer-provided parking?

Answer 8

Up to $260 per month FOR EACH. Employees may use both of these exclusions. (260 x 2)

Question 9

Where would a 1231 gain be reported?

Answer 9

On Schedule D.

Question 10

If asked to complete the 2018 Form 1040 Schedule SE Section A item, what are the calculations?

Answer 10

Net profit. Then calculate the net earnings from self-employment = Net Profit - (Net Profit x .0765)
Then net earnings × .153. then 50% of that is the deduction for the employee portion of self-employment tax

Question 11

If no SUTA Tax is paid what FUTA tax is imposed on and what is the applicable rate?

Answer 11

FUTA tax is imposed on the first $7,000 the applicable rate was 6.0%.

Question 12

What are the 2018 self-employment tax rates for Social Security and Medicare?

Answer 12

For 2018, the self-employment tax is separated into two components: Social Security and Medicare. The Social Security tax is 12.4% of the first $128,400 (2018) of self-employment income.

Question 13

What is the limit on investment interest expense?

Answer 13

Investment interest expense is only deductible to the extent of taxable investment income. Taxable investment income does not include tax-exempt municipal bond interest or rental income.

Question 14

How much can be deducted for Medical expenses?

Answer 14

Medical expenses are deductible if they exceed 7.5% of AGI. Take AGI x 7.5% - Medical Expenses.

Question 15

What are charitable deductions limited to?

Answer 15

At FMV of capital assets are limited to 30% of AGI.

= FMV of the asset OR 30% of AGI, whichever is

Question 16

What are the thresholds for QBI?

Answer 16

Lower = 157,500 S or 315,000 MFJ
Upper = 207,500 S or 415,000 MFJ

Question 17

Is a law firm allowed to take the QBI deduction?

Answer 17

Depends.

Not allowed to claim the deduction when taxable income > the upper threshold (207,500 S or 415,000 MFJ)

Question 18

What are the IRA Limits?

Answer 18

= $5,500 ($6,500 if qualified for a catch-up contribution) or the taxpayer’s compensation gross income for the year. The limit is applied separately to each spouse If one spouse is covered by an employer’s retirement plan, the deduction is proportionately reduced once earned income < $101,000 in 2018.

Question 19

For purposes of an IRA does compensation include distributions from pension plans or interest income?

Answer 19

No, compensation represents earned income and does not include distributions from pension plans or interest income.

Question 20

Are both state income taxes and self-employment taxes deductible as an itemized deduction and are reported on Schedule A?

Answer 20

No, State income taxes are deductible as an itemized deduction and are reported on Schedule A.
Self-employed individuals may deduct half of the self-employment taxes paid as an above-the-line business deduction, which is not on Schedule A.

Question 21

What are the 2018 rates in the Tax Brackets?

Answer 21

Rates 10%, 12%, 22%, 24%, 32%, 35%, 37%
10% is for MFJ =< $19,050 and S =< $9,525 or H =< $13,600
37% is for MFJ over $600K and S or H over $500K

Question 22

What are the 2018 HSA Limits?

Answer 22

For self-only = $3,450 ($4,450 for age 55).

For family = $6,900 ($8,900 for age 55).

Question 23

What is the maximum annual contribution a self-employed individual can deduct for a qualified retirement or profit-sharing plan, such as a SEP plan?

Answer 23

The most common self-employed retirement plan used is a SEP (Keogh) plan. The max annual contribution is limited to the lesser of 25% of the self-employed earnings or $55,000 (indexed for inflation).
Contributions to the plan are subtracted from NE to calculate self-employed earnings, creating a circular computation. For convenience, a standard rate of 20% is used to calculate the allowed deduction.

Question 24

What are the 2018 contributions for an IRA?

Answer 24

Up to the lesser of $5,500 ($6,500 for taxpayers age 50 and over) or 100% of includible compensation. Because contributions are deducted from gross income, all distributions are included as ordinary gross income.

Question 25

What are the 2018 wage limitations for an IRA?

Answer 25

If active participant in an employer-sponsored retirement plan and has earned income in 2018 of > $101,000 MFJ and > $63,000 for HOH or S taxpayers, and $0 for MFS, the IRA deduction is proportionately reduced over a phaseout range. Deductible contribution will be phased out when AGI is between $189,000 and $199,000.

Question 26

What are the standard deduction rates for 2018?

Answer 26

MFJ OR Qualifying Widow(er) $24,000 Addl if blind/age 65 $1,300
HOH $18,000 Addl if blind/age 65 $1,600
S $12,000 Addl if blind/age 65 $1,600
MFS $12,000 Addl if blind/age 65 $1,300

Question 27

What is the basic standard deduction amount limited to for a child under age 19 or a student under age 24 who can be claimed as a dependent?

Answer 27

Limited to the greater of either $1,050 or earned income for the year + $350 up to $12,000

Question 28

What form is used to report itemized deductions?

Answer 28

Schedule A