Taxes

Question 1

It should be noted that anytime self-employment tax is mentioned, it only refers to ___ and ___ taxes and does not include any other taxes that self-employed individuals may be required to file.

Answer 1

It should be noted that anytime self-employment tax is mentioned, it only refers to Social Security and Medicare taxes and does not include any other taxes that self-employed individuals may be required to file.

Question 2

You figure self-employment tax (SE tax) yourself using ___ (Form ___ or ___).

Answer 2

You figure self-employment tax (SE tax) yourself using Schedule SE (Form 1040 or 1040-SR).

Question 3

Also you can deduct the employer-equivalent portion of your SE tax in figuring your ___

Answer 3

Also you can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income

Question 4

___ cannot deduct Social Security and Medicare taxes.

Answer 4

Wage earners cannot deduct Social Security and Medicare taxes.

Question 5

The self-employment tax rate is ___. The rate consists of two parts: 12.4% for ___ (old-age, survivors, and disability insurance) and 2.9% for ___ (hospital insurance).

Answer 5

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Question 6

For 2019, the first $132,900 of your combined wages, tips, and net earnings is subject to any combination of the Social Security part of self-employment tax, Social Security tax, or railroad retirement (tier 1) tax. The amount increased to ___ for 2020. (For SE tax rates for a prior year, refer to the Schedule SE for that year).

Answer 6

For 2019, the first $132,900 of your combined wages, tips, and net earnings is subject to any combination of the Social Security part of self-employment tax, Social Security tax, or railroad retirement (tier 1) tax. The amount increased to $137,700 for 2020. (For SE tax rates for a prior year, refer to the Schedule SE for that year).

Question 7

The ___, ___, or ___ is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund.

Answer 7

The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund

Question 8

If you file a Form ___, you may be eligible to claim the Earned Income Tax Credit (EITC). Learn more about EITC, or use the EITC Assistant to find out if you are eligible.

Answer 8

If you file a Form 1040 or 1040-SR Schedule C, you may be eligible to claim the Earned Income Tax Credit (EITC). Learn more about EITC, or use the EITC Assistant to find out if you are eligible.

Question 9

Under Section 2042 of the Small Business Jobs Act, a deduction, for income tax purposes, is allowed to self-employed individuals for the cost of ___. This deduction is taken into account in calculating net earnings from self-employment. See the Form ___ or ___ and ___ instructions for calculating and claiming the deduction.

Answer 9

Under Section 2042 of the Small Business Jobs Act, a deduction, for income tax purposes, is allowed to self-employed individuals for the cost of health insurance. This deduction is taken into account in calculating net earnings from self-employment. See the Form 1040 or 1040-SR and Schedule SE instructions for calculating and claiming the deduction.

Question 10

Generally, your net earnings from self-employment are ___ tax.

Answer 10

Generally, your net earnings from self-employment are subject to self-employment tax.

Question 11

If you are self-employed as a sole proprietor or independent contractor, you generally use ___ to figure net earnings from self-employment.

Answer 11

If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C to figure net earnings from self-employment.

Question 12

If you have earnings subject to self-employment tax, use ___ to figure your ___ from self-employment. Before you figure your net earnings, you generally need to figure your total earnings subject to self-employment tax.

Answer 12

If you have earnings subject to self-employment tax, use Schedule SE to figure your net earnings from self-employment. Before you figure your net earnings, you generally need to figure your total earnings subject to self-employment tax.

Question 13

Note: The self-employment tax rules apply no matter ___ you are and even if you are already receiving Social Security or Medicare.

Answer 13

Note: The self-employment tax rules apply no matter how old you are and even if you are already receiving Social Security or Medicare.

Question 14

The first ___ of gifts of present interest to each donee during the calendar year is subtracted from total gifts in figuring the amount of taxable gifts.

Answer 14

The first $15,000 of gifts of present interest to each donee during the calendar year is subtracted from total gifts in figuring the amount of taxable gifts.

Question 15

All gift and GST taxes must be figured and filed on a calendar year basis. List all reportable gifts made during the calendar year on one Form ___. This means you must file a separate return for each calendar year a reportable gift is given (for example, a gift given in 2019 must be reported on a 2019 Form 709). Do not file more than ___ Form 709 for any 1 calendar year.

Answer 15

All gift and GST taxes must be figured and filed on a calendar year basis. List all reportable gifts made during the calendar year on one Form 709. This means you must file a separate return for each calendar year a reportable gift is given (for example, a gift given in 2019 must be reported on a 2019 Form 709). Do not file more than one Form 709 for any 1 calendar year.

Question 16

Use ___ (Form 1040 or 1040-SR) to figure your itemized deductions. In most cases, your federal income tax will be less if you take the larger of your ___deductions or your ___ deduction.

Answer 16

Use Schedule A (Form 1040 or 1040-SR) to figure your itemized deductions. In most cases, your federal income tax will be less if you take the larger of your itemized deductions or your standard deduction.

Question 17

You can receive income in the form of ___, ___, or ___.

Answer 17

You can receive income in the form of money, property, or services.

Question 18

___ is the amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year. It is generally described as ___ (which is your total income, known as “gross income,” minus any deductions or exemptions allowed in that tax year). Taxable income includes ___, ___, ___, and ___, as well as investment income and unearned income.

Answer 18

Taxable income is the amount of income used to calculate how much tax an individual or a company owes to the government in a given tax year. It is generally described as adjusted gross income (which is your total income, known as “gross income,” minus any deductions or exemptions allowed in that tax year). Taxable income includes wages, salaries, bonuses, and tips, as well as investment income and unearned income.

Question 19

Who must file 709 for Gift Tax

Answer 19

In general. If you are a citizen or resident of the United States, you must file a gift tax return (whether or not any tax is ultimately due) in the following situations.

Question 20

Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individual beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes.

Answer 20

Only individuals are required to file gift tax returns. If a trust, estate, partnership, or corporation makes a gift, the individual beneficiaries, partners, or stockholders are considered donors and may be liable for the gift and GST taxes.

Question 21

The donor is responsible for paying the gift tax. However, if the donor does not pay the tax, the person receiving the gift may have to pay the tax.

Answer 21

The donor is responsible for paying the gift tax. However, if the donor does not pay the tax, the person receiving the gift may have to pay the tax.

Question 22

Who does not need to file. If you meet all of the following requirements, you are not required to file Form 709. • You made no gifts during the year to your spouse. • You did not give more than $15,000 to any one donee. All the gifts you made were of present interests.

Answer 22

Who does not need to file. If you meet all of the following requirements, you are not required to file Form 709. • You made no gifts during the year to your spouse. • You did not give more than $15,000 to any one donee. All the gifts you made were of present interests.

Question 23

Generally, the federal gift tax applies to any transfer by gift of real or personal property, whether tangible or intangible, that you made directly or indirectly, in trust, or by any other means.

Answer 23

Generally, the federal gift tax applies to any transfer by gift of real or personal property, whether tangible or intangible, that you made directly or indirectly, in trust, or by any other means.

Question 24

Four types of transfers are not subject to the gift tax. These are: • Transfers to political organizations, • Transfers to certain exempt organizations, • Payments that qualify for the educational exclusion, and • Payments that qualify for the medical exclusion.

Answer 24

Four types of transfers are not subject to the gift tax. These are: • Transfers to political organizations, • Transfers to certain exempt organizations, • Payments that qualify for the educational exclusion, and • Payments that qualify for the medical exclusion. These transfers are not “gifts” as that term is used on Form 709 and its instructions. You need not file a Form 709 to report these transfers and should not list them on Schedule A of Form 709 if you do file Form 709.

Question 25

Educational exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual.

Answer 25

Educational exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual.

Question 26

Educational exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual.

Answer 26

Educational exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual.

Question 27

Taxpayers may file tax returns as heads of household (HOH) if they pay more than half the cost of supporting and housing a qualifying person. Taxpayers eligible to classify themselves as an HOH get higher standard deductions and lower tax rates than taxpayers who file as single or married filing separately.

Answer 27

Taxpayers may file tax returns as heads of household (HOH) if they pay more than half the cost of supporting and housing a qualifying person. Taxpayers eligible to classify themselves as an HOH get higher standard deductions and lower tax rates than taxpayers who file as single or married filing separately.

Question 28

Wages paid to a parent employed by his or her child are not subject to FUTA tax, regardless of the type of services provided.

Question 29

What is FUTA tax?

Answer 29

Federal Unemployment Tax - 6%

Question 30

FUTA conditions

Answer 30

You paid wages of $1,500 or more to employees in any calendar quarter during 2018 or 2019, or

You had one or more employees for at least some part of a day in any 20 or more different weeks in 2018 or 20 or more different weeks in 2019. Count all full-time, part-time, and temporary employees.

Question 31

FUTA tax rate: The FUTA tax rate is 6.0%. The tax applies to the first $7,000 you paid to each employee as wages during the year. The $7,000 is often referred to as the federal or FUTA wage base.

Question 32

The wages for the services of a parent employed by his or her child in a trade or business are subject to income tax withholding and social security and Medicare taxes.

Question 33

You do not generally have to withhold or pay any taxes on payments to independent contractors.

Question 35

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

Answer 35

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

Question 36

Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

Answer 36

Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

Question 37

Although S corporation owners do not pay the Self-Employed Contributions Act (SECA) tax on their profits, they are required to pay themselves “reasonable compensation,” which is subject to the regular Social Security tax.

Question 38

Many LLC’s choose the S corporation for its tax status because: It avoids the double taxation situation of corporations. S corporation owners can take the QBI deduction on business income (not employment income) Owners pay Social Security/Medicare tax only on employment income.

Question 39

The income of an S corporation generally is taxed to the
shareholders of the corporation rather than to the corporation
itself.

Question 41

What is the self-employment tax?

Answer 41

Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.

Question 42

You figure self-employment tax (SE tax) yourself using Schedule ___ (Form 1040 or 1040-SR).

Answer 42

You figure self-employment tax (SE tax) yourself using Schedule SE (Form 1040 or 1040-SR).

Question 43

Also you can deduct the ___ portion of your SE tax in figuring your adjusted gross income.

Answer 43

Also you can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income.

Question 44

___ cannot deduct Social Security and Medicare taxes.

Answer 44

Wage earners cannot deduct Social Security and Medicare taxes

Question 45

The self-employment tax rate is ___%. The rate consists of two parts: ___% for social security (old-age, survivors, and disability insurance) and ___% for Medicare (hospital insurance).

Answer 45

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Question 46

For 2020, the first ___ of your combined wages, tips, and net earnings is subject to the Social Security part of the self-employment tax.

Answer 46

For 2020, the first $137,700 of your combined wages, tips, and net earnings is subject to the Social Security part of the self-employment tax.

Question 47

___ your combined wages, tips, and net earnings in the current year are subject to any combination of the 2.9% Medicare part of Self-Employment tax, Social Security tax, or railroad retirement (tier 1) tax.

Answer 47

All your combined wages, tips, and net earnings in the current year are subject to any combination of the 2.9% Medicare part of Self-Employment tax, Social Security tax, or railroad retirement (tier 1) tax.

Question 48

Taxes under the ___ are composed of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare taxes. Different rates apply for these taxes.

Answer 48

Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare taxes. Different rates apply for these taxes.

Question 49

The current tax rate for social security is ___% for the employer and ___% for the employee, or 12.4% total. The current rate for Medicare is ___% for the employer and ___% for the employee, or 2.9% total.

Answer 49

The current tax rate for social security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.

Question 50

Only the social security tax has a wage base limit. The wage base limit is the maximum wage that’s subject to the tax for that year. For earnings in 2020, this base is $137,700.

Answer 50

Only the social security tax has a wage base limit. The wage base limit is the maximum wage that’s subject to the tax for that year. For earnings in 2020, this base is $137,700.

Question 51

There’s no ___ limit for Medicare tax. All covered wages are subject to Medicare tax.

Answer 51

There’s no wage base limit for Medicare tax. All covered wages are subject to Medicare tax.

Question 52

The Social Security Act was signed into law by President Roosevelt on August 14, ___ In addition to several provisions for general welfare, the new Act created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement.

Answer 52

The Social Security Act was signed into law by President Roosevelt on August 14, 1935. In addition to several provisions for general welfare, the new Act created a social insurance program designed to pay retired workers age 65 or older a continuing income after retirement.

Question 53

In July 1965, under the leadership of President Lyndon Johnson, Congress enacted Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history.

Answer 53

In July 1965, under the leadership of President Lyndon Johnson, Congress enacted Medicare under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history.

Question 54

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

Answer 54

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.

Question 55

Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

Answer 55

Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

Question 56

This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

Answer 56

This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

Question 57

Employers must deposit and report employment taxes.

Answer 57

Employers must deposit and report employment taxes.

Question 58

At the end of the year, you must prepare and file Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee. Use Form W-3, Transmittal of Wage and Tax Statements to transmit Forms W-2 to the Social Security Administration.

Answer 58

At the end of the year, you must prepare and file Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee. Use Form W-3, Transmittal of Wage and Tax Statements to transmit Forms W-2 to the Social Security Administration.

Question 59

Employers generally must withhold federal income tax from employees’ wageEmployers generally must withhold federal income tax from employees’ wage

Answer 59

Employers generally must withhold federal income tax from employees’ wage

Question 61

What taxes do employers pay?

Answer 61

Withhold Federal Income Tax

Pay half of Social Security

Pay half of Medicare

Pay all of Federal Unemployment Tax (FUTA)

Question 62

S-Corp distributions

If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution. You’ll still be liable for self-employment taxes on the salary portion of your income, but you’ll just pay ordinary income tax on the distribution portion. Depending on how you divide your income, you could save a substantial amount of self-employment taxes just by converting to an S-corporation.

Question 64

Adjusted Gross Income (AGI) is defined as gross income minus ___

to income.

Answer 64

Adjusted Gross Income

Adjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account. Your AGI will never be more than your Gross Total Income on you return and in some cases may be lower. Refer to the 1040 instructions (Schedule 1) for more information.

If you are filing using the Married Filing Jointly filing status, the $69,000 AGI limitation applies to the AGI for both of you combined.

To e-file your federal tax return, you must verify your identity with your AGI or your self-select PIN from your 2018 tax return.

Question 66

What IRS form 1040-SR?

Answer 66

US Tax Return for Seniors, alternative filing option for seniors

uses larger print

has a standard deduction chart

Question 67

What is GST?

Answer 67

Generation-Skipping Tax

Question 69

If you itemize, you can deduct a part of your medical and dental expenses, and
amounts you paid for certain taxes, interest, contributions, and other expenses. You
can also deduct certain casualty and theft losses.

Answer 69

If you itemize, you can deduct a part of your medical and dental expenses, and
amounts you paid for certain taxes, interest, contributions, and other expenses. You
can also deduct certain casualty and theft losses.

Question 70

Pub. 504 to figure the portion of joint expenses that you can claim as itemized
deductions.

Question 71

Don’t include on Schedule A items deducted elsewhere, such as on Form
1040, Form 1040-SR, or Schedule C, E, or F.