REG2

Question 1

List the deductions FOR AGI

Answer 1

Educator expenses, IRA, Student loan interest expenses, Tuition and Fee deduction, Heath savings account, Moving expenses, 50% Self employment FICA, Self employed health insurance, Self employed retirement, Interest withdrawal penalty, Alimony Paid, Attorney fees paid in whistleblower case, Domestic production activities deduction

Question 2

Which is a deduction FOR AGI: Child support or alimony?

Answer 2

Alimony!

Question 3

What are the limits on IRA deductions?

Answer 3

The lessor of $5,000 or individual’s compensation; with nonworking spouse, limit is $10,000 provided combined earnings of both spouses total at least that much.

Where a spouse is an active participant in an employer retirement plan, allowable deduction to arrive at AGI is phased out proportionally for modified AGI between $58,000 and $68,000 single or $92,000 and $112,000 MFJ.

Question 4

What are the limits on nondeductible IRAs?

Answer 4

The lessor of:

• $5,000
• Individuals compensation
• limit not contributed to other regular and Roth IRAs

Earnings on such contributions will accumulate tax-free until withdrawn.

Question 5

What is the time limit on Coverdell Education Savings Accounts?

Answer 5

Any amounts remaining when the beneficiary reaches the age of 30 must be distributed. Left over funds must be distributed to a beneficiary, taxed, and 10% penalty OR rollover to family member with no penalty.

Question 6

What are the limits on deductions and contributions to Keogh plans?

Answer 6

They are for self employed taxpayers and their employees. Deductible amount is lessor of:
- 25% of net earnings after Keogh deduction or
- 50% self employment tax or
- $50,000
Max annual contribution may exceed the deductible amount for the year. It is limited to lessor of:
- $50,000 or
- 100% net earnings if compensation < $50,000

Question 7

Describe the self employed deductions (“adjustments”) FOR AGI

Answer 7

Tax = 50% of self-employment tax

Health Insurance = 100% deductible

Question 8

What are the requirements for moving expenses to be deductible?

Answer 8

-Must change job sites
-50 mile move from former residence to new job site
-Must work in new location for 39 weeks during next year or 78 weeks if self employed
Note: there is per mile car allowance or actual out-of-pocket amounts

Question 9

What is the additional deduction for elderly and/or blind?

Answer 9

If 65+ add $1,450 (single or head of household) or $1,150 (MFJ or MFS or qualify widow).

If blind, add same amounts as above.

If both, amounts are $2,900 and $2,300

Question 10

What taxpayers are not eligible to use the standard deduction?

Answer 10

-One spouse itemizes deductions on a separate return
-Taxpayer is dual-status or non resident
-Taxpayer has short tax year.
It is limited if taxpayer can be claimed on another return, greater of $950 or earned income + $300 up to basic standard amount.

Question 11

Identify the major classes of itemized deductions

Answer 11

Medical and dental expenses, taxes paid, interest paid, gifts to charity, casualty and theft losses, miscellaneous deductions subject to 2% floor (job expenses, investment expenses, tax prep) and other miscellaneous deductions not subject to 2% floor (gambling losses to extent of winnings)

Question 12

What are the limitations on medical expenses?

Answer 12

-Medical expenses are deductible to the extent they exceed 7.5% of AGI. Cost of surgery for elective cosmetic reasons is not deductible. Self employed may deduct 100% of medical premiums from gross income. A dependent must meet tests.

Question 13

Identify the taxes that are deductible as itemized deductions

Answer 13

• Either local sales tax or state and local income tax
• Real estate taxes
• Personal property tax
• Foreign taxes

Question 14

Identify the types of interest that are deductible and nondeductible

Answer 14

• Qualified residence on principle/second residence subdivided into: Acquisition indebtedness ($1,000,000 limit), Home equity indebtedness ($100,000 limit), points paid on principle residence mortgage loan fully deductible, points paid to refinance capitalized, certain mortgage insurance premiums.
• Interest on loans for investment purposes, limit to net investment income, can carry forward
• Prepaid interest
• Educational loan interest is an adjustment FOR
• Consumer interest NOT deductible

Question 15

What are the limitations on charitable deductions?

Answer 15

• Overall limit = 50% AGI, cash all 50%
• Long-term capital gain property deduct FMV up to lessor: 30% AGI or remaining amount to reach 50% after cash distribution
• Excess carry forward 5 years

Question 16

What is the limit on nonbusiness casualty and theft losses?

Answer 16

If partial loss, deduction is based on decrease in FMV not to exceed adj. basis. If total loss, deduction is adj. basis. Aggregate losses are reduced by insurance recovery, $100 per event, and 10% of AGI

Question 17

Identify some miscellaneous deductions subject to the 2% AGI floor

Answer 17

Unreimbursed business expenses, educational expenses not deducted above AGI, uniforms, business gifts of $25 per person, business use of home, employment agency fees, expenses of investors, subscriptions to professional journals, tax prep fee

Question 18

Identify some miscellaneous expenses NOT subject to the 2% of AGI floor

Answer 18

Gambling losses and federal estate tax paid on income in respect of decedent

Question 19

Identify some tax credits

Answer 19

Nonrefundable: foreign, child and dependent care, elderly or disabled, education, adoption, retirement plan contribution, general business

Refundable: child care, earned income, withholding taxes, excess SS paid, long-term unused minimum

Question 20

What are the child/dependent credit limitations?

Answer 20

Up to 35% of eligible expenditures or $3,000 max ($6,000 for 2+ dependents). Max of $15,000 AGI, reduce by 1% for each $2,000 increment over $15,000 to a min of 20%.

A qualifying child is <13 years old, disabled dependent, or spouse who is disabled.

Question 21

Describe the tax credit for the elderly or disabled

Answer 21

• Either at least 65 or totally/permanently disabled and has disability income.
• If single or married and only one is over 65, 15% of $5,000 reduced by nontaxable SS benefits received and 50% AGI over $7,500 (single) or $10,000 (married).
• If married and both over 65, 15% of $7,500 reduced by nontaxable SS benefits received and 50% of AGI over $10,000.

Question 22

State the limitations of the American Opportunity Tax Credit

Answer 22

For the first 4 years of post secondary education is limited to $2,500 as follows: 100% of the first $2,000 in tuition costs and 25% of the second $2,000

Question 23

What are the eligibility requirements for the retirement plan contribution credit

Answer 23

• At least 18 by close of tax year
• Not full-time student
• Not a dependent
• Income limits apply

Question 24

State the formula to determine the amount of foreign tax credit

Answer 24

(net foreign income/worldwide taxable income)*US tax liability before credit on worldwide taxable income

Credit is lessor: foreign taxes paid or overall limit

Carry back 1 year and forward 10.

Question 25

State the limitation of the work opportunity credit

Answer 25

• 40% of the first $6,000 of wages per employee paid during the first year of employment
• 40% of the first $3,000 of certain summer youth

Question 26

Describe the child tax credit

Answer 26

$1,000 for each qualifying child (CARES but under 17 years old)

Higher-income taxpayers must reduce credit by $50 for each $1,000 that exceeds modified AGI: $110,000 joint, $75,000 single, $55,000 MFS

Question 27

What are the eligibility requirements for the EIC?

Answer 27

• Live in US for more than half year
• Meet certain low income thresholds
• Not have more disqualified income
• Be between 25 - 65 if no children
• File joint return if married

Question 28

Name some adjustments for AMTI calculations (PANIC TIMME)

Answer 28

Passive activity losses
Acceleration depreciation 
Net operating loss
Installment income of dealer
Contracts, %completion vs. completed contract
Tax deductions
Interest deductions on some home equity loans
Medical deductions (limit to >10% AGI)
Miscellaneous deductions not allowed 
Exemptions personal and standard

Question 29

Name some tax preference items for AMTI calculations

Answer 29

• Private activity bond interest income
• % depletions
• Pre-1987 accelerated depreciation

Question 30

What credits are allowed against the AMT?

Answer 30

Foreign, adoption, child, contributions to retirement plans, earned income, and small business health care tax credit

Question 31

What is the statue of limitations for an assessment?

Answer 31

3 yrs from the later of: due date of return or date return is filed

Question 32

What is the statute of limitations for a refund?

Answer 32

The later of:

• 3 years from the time return filed
• 3 years from due date
• 2 years from the time tax paid

Question 33

Who must make estimated tax payments?

Answer 33

Those with:

1. $1,000 or more tax liability and the withholding is less than lessor of 90% of current year tax OR
2. 100% of last years tax (110% if AGI is >$150,000/$75,000 MFS)