Taxes Flashcards
Fed Income Tax Rules apply to all US Citizens
US Citizens:
Natural born, parent is a citizen, naturalized as a citizen, or born in Puerto Rico, Guam and Virgin Islands.
REQUIRED: Report worldwide income.
US National
Person born on a US “Possession,” American Samoa/Northern Marina Islands, but not US Citizen.
Dependent
A person that relies on the majority support of the tax payer.
2018-2025 No exemptions for dependents.
Generally must be relative.
Claim a person as Dependent
Dependent Taxpayer Test: Cannot qualify as a dependent of another
Joint Return Test: Cannot claim a married person who files joint return as a dependent unless they are receiving refund.
Citizenship/Resident Test: US Citizen, US Resident Alien, US National and Canada/Mexico during parts of the year.
Qualifying Child
Relationship Test: Child or descendant of them.
Age Test: Must be younger than taxpayer/taxpayer’s spouse if jointly. (19 or younger, 24 or y if in school, any age if disabled)
Residency Test: Must live with Tax Payer for more than half the year.
Support Test: Child cannot provide more than half of their own support.
Qualifying Child for more than one parent
In a separated marriage the child qualifies for the custodial parent as the dependent. Noncustodial parent may be allowed to use child as dependent for credits if permitted with Form 8332.
A Qualifying Relative May Be….
Any age as long as its not their descendent.
Qualifying Relative Test
Support: Does the relative rely on the taxpayer for more than half of their support.
Make less than $4300 in 2020.
Must live with taxpayer all year & be related.
What form for multiple support?
Form 2120 Multiple Support Declaration.
All support received 10% of qualifying child/dependent total support or more the taxpayer must sign whether they are the individuals claiming the dependent or not.
Does family lineage need to live with claiming taxpayer?
No
Taxpayers that are required to file a tax return must specify a__________.
Filing status
Filing Status is important because…
Many benefits, deductions, credits and applicable tax rates vary by filing status. Depends on marital status on last day of tax year.
Single
A taxpayer is single filing status if at the end of the year they are unmarried and does not qualify for another status.
Unearned Income
Income not considered earned such as unemployment compensation, taxable Social Security benefits, taxable pensions, annuity income, canceled debt, unearned income from a trust, taxable interest, dividends and capital gains.
Earned Income
All wages earned from working or from certain disability payments. For EITC taxpayer may claim nontaxable combat pay as earned income.
Gross Income
Total of Earned or Unearned Income subject to tax. Any means of income, money, goods, property, services nonexempt. Sale of home included.
Gross Income Threshold for Filing Return
Tax payer with income below threshold does not need to file.
