Tax

Question 1

Step Transactions

Answer 1

Sell to friend hand he sells it back to wife to incur and loss

Question 2

Substance over form

Answer 2

I take a loan but never intended to take it back. This would be income.

Question 3

Business vs Hobby

Answer 3

To qualify for as a Business
profit 3/5 years
For horses … 2/7 years

Question 4

Filing dates for estimated taxes

Answer 4

April 15, June 15, sept. 15, January 15th
2,3,4 months after the previous

Question 5

Form used if resubmitting an incorrect return

Answer 5

1040X

Question 6

Fraud Penalty

Answer 6

75% of underpayment (not interest)

Question 7

Failure to pay

Answer 7

.5% per month until tax is paid with 25% max

Question 8

Failure to file

Answer 8

5% tax due each month with max of 25%
(Always file!)

Question 9

Estimated tax

Answer 9

90% or current years tax liability
Or 100% or 110% (if over 150k) of prior years adjusted gross income

Question 10

Frivolous return penalty

Answer 10

5k

Question 12

What items are subject to self-employment tax?

What is the tax amount?

How much can you deduct above the line?

Answer 12

• Net Schedule C income
• general partnership income (k-1)
• board of directors fees
• part-time earnings

Added up amounts from above * .1413

1/2 of the amount calculated above

Question 13

Child tax Credit Vs Child dependent care credit

Answer 13

Child Tax credit : kids under 17 and MAGI under 200k 400k MFJ

Child dependent care credit: used for daycare expenses - 3k x 20%
Or 6k x 20% for 2 or more children

Question 14

Credits are worth more to whom?
Deductions are worth more to whom?

Answer 14

Lower tax bracket
Higher tax brackets

Question 15

Is child support payment received included in gross income?

Answer 15

No

Question 16

Is alimony received included on gross income?

Answer 16

Yes if before

Question 17

Qualified residence interest rules

Answer 17

Interested on up to 750k