Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Enrolled Agent: Individual Exam 2020 > Retirement: Pension, Annuities, Social Security and Railroad Retirement Benefits > Flashcards

Retirement: Pension, Annuities, Social Security and Railroad Retirement Benefits Flashcards

1
Q

What determines whether social security benefits are taxable?

A
  1. Filing Status

2. Provisional Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is MFSLT?

A

Married Filing Separate taxpayer that lived together some during the year.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is the formula for Provisional Income (PI)?

A 
Gross Income
\+ Tax Exempt Interest
\+ US Savings Bond Interest 
\+ Foreign EI and housing allowance
\+employer paid adoption benefits 
\+1/2 Social Security Benefit
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Provisional Income (PI)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the Tier 1 Threshold Amounts/Base Amount (BA)?

A

MFJ $32,000
S, HH, QW, MFS $25,000
MFSLT 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the Tier 2 amounts/ Adjusted Base Amounts(ABA)?

A

MFJ 44,000 (32,000 + 12000)
HH, S, QW, MFS 34,000 (25,000 + 9000)
MFSLT 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When are 50% of Social Security Benefits taxed?

A

PI > BA (Tier 1 Threshold) AND

PI < ABA (Tier 2 Threshold)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

When are none of a taxpayers social security benefits taxed?

A

PI < BA And

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When are up to 85% of Social Security Benefits taxed?

A
  1. PI > BA and ABA
  2. MFSLT
  3. Non-Resident Alien
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How much of your social security is taxed if you are MFSLT?

A

85%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How much social security income is included in GI calculation to determine if a taxpayer meets the requirement to file a tax return?

A

1/2 social security income is included even if a taxpayer will not be taxed on any of their social security benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

If a taxpayer receives one check that included a social security benefit for the taxpayer and his child. Whose return is the income reported on?

A

Social Security income is included on in the TI of the person who has a right to the benefits.

The parent would report his benefits on his return.
The child would report her benefits on her return.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How does a repayment of social security benefits by the taxpayer affect the calculation that determines how much social security benefit is taxable?

A

Gross Social Security benefits 2019 (1099 box 3)
- Repayments made in 2019 (1099 box 4)
______________________________________
Net Social Security Benefit used for the calculation (box 5)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How is your tax return affected if your net social security is zero or negative?

A

1, none of your social security benefits are taxable

2. IF > -3000 then you be able to deduct part of it

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How much of a non-resident alien’s social security benefits are taxable? What tax rate is used?

A
  1. 85% taxable benefit

2. 30% tax rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What situations required special worksheets for determining the taxable portion of social security benefits?

A
  1. Deductible contributions to an IRA
  2. Exclusions that are included when calculating how much of a TPs social security benefit is taxable
  3. Lump-Sum payment received from the SSA (not inherited)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How is a Railroad Retirement benefit check divided and how is the income treated?

A

Tier 1: Equivalent to Social Security benefits (SSEB)

Tier 2: Not Equivalent to Social Security benefits (NSSEB) are treated like pension income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What tax forms are sent to the taxpayer for Railroad Retirement benefits?

A
  1. RRB-1099: Tier 1 (SSEB)

2. RRB-1099R : Tier 2 (NSSEB)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How are railroad retirement benefits taxed for:

  1. 60-62 years old
  2. 62+
  3. 65+
A
  1. 60-62: both tiers are taxed like a pension
  2. 62+ : SSEB: like social security benefits NSSEB: like a pension
  3. 65+ : Medicare premiums payments are deductible
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What percentage of a Social Security Lump-Sum distribution to a beneficiary is taxable?

A

None

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

How do you calculate the tax for a social security Lump-Sum payment from SSA? (3 steps)

A
  1. WS1: Calculate 2019 with repayment from an earlier year included in 2019 PI
  2. WS 2: Calculate earlier year with only earlier year GI and repayment.
  3. WS #: Make election based on the numbers to adjust earlier year return
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

If PI > Tier 1 and
PI < Tier 2
How do you calculate the tax?

A

Tax is smallerof:
1. 50% * excess of Tier 1
or
2. 50% * Social Security benefit

Excess of Tier 1= PI - Tier 1 Threshold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How is Excess of Tier 2 calculated?

A 
Excess of T1
- Step up to T2 (12000 MFJ/ 9000 all others)
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Excess T2
*MFSLT = 0 for both Tier 1 and Tier 2
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How do you calculate Excess of Tier 1 amount?

A

Provisional Income (PI)
- T1 Threshold amount (BA)
________________________
Excess of T1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How does a deductible IRA contribution affect Provisional Income?

A

Provisional Income is reduced by the amount of the deductible contribution.

25
Q

What are the requirements for receiving Railroad Retirement benefits?

A
  1. =>60 years old
  2. =>30 years of service
  3. All benefits must be treated like a pension until age 62
26
Q

What worksheet does a taxpayer use to determine if any Tier 1 Railroad Retirement Benefits are taxable?

A

Social Security benefits worksheet

27
Q

What type of jobs qualify as Eligible Public Safety Officers? (5)

A
  1. firefighter
  2. police officer
  3. rescue squad
  4. ambulance crew
  5. chaplain
28
Q

How does being an Eligible Public Safety Officer affect the taxation of pension distributions?

A 
PSO can elect to exclude eligible insurance premiums from the amount of an annuity/pension distribution.
Eligible: 
1. accident insurance premiums
2. health insurance premiums
3. Long term care insurance premiums
29
Q

Which foreign pension sources are taxed the same way as a domestic annuity? (5)

A
  1. foreign employer
  2. trust set up by foreign employer
  3. foreign trust
  4. foreign entity designated to pay an annuity
  5. foreign government/agency
30
Q

What is the most common form of a pension?

A

annuity

31
Q

How much of a pension/annuity distribution is taxable if your actual life span EXCEEDS you estimated life expectancy (IRS table)?

A

100% included in GI after basis is recovered

32
Q

How much of a pension/annuity distribution is taxable if if your actual life span is LESS THAN your estimated life expectancy (IRS table)?

A

Basis has not been completely recovered so none of the distribution is taxable and a loss could be claimed for in year of death

33
Q

What is an annuity?

A

periodic payments at set intervals for more than one year

34
Q

When is a distribution from a pension/annuity fully taxable?

A

TP received all contributions tax-free in prior years and had no investment in the plan

35
Q

What is considered the non-taxable portion of a distribution from a pension/annuity? (2)

A
  1. TP’s investment in the pension/annuity

2. Employer contributions taxed at the time of contribution

36
Q

What items are excluded when determining the TP’s investments in an annuity/pension? (3)

A
  1. amounts contributed on a taxed deferred basis
  2. TP’s contributions for health/accident benefits
  3. Additional premiums for double indemnity or disability benefit
37
Q

What are the two methods used to determine the taxable portion of an annuity/pension distribution?

A
  1. Simplified Method

2. General Rule

38
Q

When is the General Rule used to determine the taxable portion on a pension/annuity distribution?

A
  1. Non-Qualified plans
    - private annuity
    - commercial annuity
    - non-qualified employer plan
  2. Qualified plans were distributions began before 11/19/1996 and after 6/1/1986 AND do not qualify to use the Simplified Method
39
Q

Calculation steps for the General Rule

A
  1. Expected Return= payment * life expectancy (irs table)
  2. Exclusion Percentage=Investment/Expected Return
  3. Excluded Amount from GI = Payment * Exclusion %
  4. Remainder of payment is included in GI
40
Q

When is the Simplified Method used to determine the taxable portion of a pension/annuity distribution?

A

Annuity/pension start date AFTER 11/18/86 and meet both conditions:

  1. From a Qualified Plan AND
  2. On Annuity start date TP is Either:
    - under 75 OR
    - entitled to less than 5 years of guaranteed payments
41
Q

What are Qualified Plans for annuities/pensions? (3)

A

1, Qualified Employee plan

  1. Qualified Employee Annuity
  2. Tax-sheltered annuity contract
42
Q

What is a “Corrective Distribution” from an annuity/pension?

A

The TP has contributed more than too much to the plan (beyond limits). The plan will distribute excess over limit + earnings back to taxpayer.

Included in GI but not subject to early withdrawal penalty

43
Q

When can a TP choose to use either the Simplified or General Rule Method to calculate the non-taxable portion of a pension/annuity distribution?

A
  1. Qualified plans AND
  2. Start date of distribution between 6/1/86-11/19/96
    Once choice is made same method must be used in all future years
44
Q

When are Lump-Sum distributions made from a pension/annuity? (4)

A
  1. TP’s death
  2. TP reaches 59 1/2
  3. TP separates from services
  4. Self -employed participant becomes totally/permanently disabled
45
Q

What are the 3 types of Qualified Lump Sum Distributions?

A
  1. pension
  2. Profit Sharing
  3. Stock Bonus plan
46
Q

What portion of Railroad Tier 2 distributions are included/excluded from GI?

A
  1. NSSEB: treat like an annuity to calculate included/excluded amount
  2. Vested Dual Benefit (VDB) : fully taxable
  3. Supplementary Annuity Benefit (non-contributory benefit): fully taxable
47
Q

Calculate Simplified Method

A

Excluded Amount =

Invested Amount/Anticipated Payments (IRS table)

48
Q

What are the two tax classifications for Annuities?

A
  1. Qualified - Simplified Method

2. Non-Qualified

49
Q

What are 3 types of tax-sheltered annuity plans?

A
  1. tax-exempt organization employee retirement plan
  2. employees of a public school plan
  3. tax sheltered annuity plan
50
Q

Qualified Domestic Relations Order (QDRO) related to pension/annuity

A

Court orders a % of participants annuity/pension benefits paid to spouse/ex-spouse/child as a part of alimony/child support/settlement

51
Q

Disability Pension

A

Taxpayer is retired on disability but has not reached the minimum retirement age

52
Q

Variable Annuity

A
  1. distribution amount varies
  2. payments can be limited or for life
  3. Payment amounts are based on things like:
    - profits earned
    - pension funds
    - cost of living increases
    - earnings from a mutual fund
53
Q

Joint Survivor Annuity (Multi Life Annutity)

A

TP receives a certain amount for life. After TP’s death, the spouse receives a certain amount for life.

54
Q

Fixed period annuity

A

Definite payments for a specific period of time

55
Q

Pension/annuity Qualified Employee Plans from an employer (3)

A
  1. pension
  2. stock bonus
  3. profit sharing for exclusive benefit of the employee
56
Q

Annuities for a Single Life

A

definite payment for the life of taxpayer only

57
Q 
Simplified Method: What are the number of payments for each age group?
55 or under
56-60
61-64
66-70
71 and over
A 
55 or under : 360 payments
56-60: 310 payments
61-65: 260 payments
66-70: 210 payments
71 or over: 160 payments
58
Q

What is the minimum retirement age for a pension?

A

Earliest age a TP can receive a pension (depends on the employer)

Enrolled Agent: Individual Exam 2020 (32 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions