Wrong Answer Tax Flashcards
Self Employment Tax Shortcut
Take the total self employment tax and multiply it by .1413 and round up.
Hybrid Method of Accounting
Combines the accrual method for purchases and sales of inventory with the cash method. Best for companies with over 25 million in revenue
NOL Prior to 2019
Not allowed for S Corps or C Corps prior to 2019. Starting in 2019 they are not allowed at all
Tax Result of A Home Sale At A Loss
No loss can be taken on taxes
Passive Income Loss Phaseout
Losses for passive income activities like real estate can only be taken if your agi is below 150
Separate Maintenance Agreements Prior to 2019
Deductible with alimony
Public Charities (50% Organizations)
-All churches, schools, and hospitals
-All organizations organized and operated for charitable, religious, educational, or literary purposes, or for the prevention of cruelty to children or animals (united way, Red Cross, humane society)
30% Organizations (Private Charities)
Private Non Operating Foundations, fraternal orders, and war veterans organizations
Steps for Calculating Charitable Deduction
- Calculate the maximum amount deductible (60% of AGI)
- Amount to public charities
-Up to 60% of AGI for cash donations
-Up to 30% of AGU for long term capital gains property
-Up to 50% of AGI but using: basis for inventory, basis for works of art created by taxpayer, basis for short term capital gains property, basis for use unrelated property. - amount to private charities
-up to 30% of AGI for cash donations
Ordinary income property donated to charities
Deduction limited to basis. Types include:
-inventory
-a work of art created by taxpayer
-use unrelated property (watch out for art work and collectibles)
-short term capital gains property
-a copyright
Loss Property Donated to Charity
Limited to FMV, but FMV is treated as basis.
Required Minimum Annual Tax with an AGI over 150k
90% of current year tax liability or 110% of the previous year. If clients AGI is below 150 they only need to pay 100% of previous year
Expenses for Self Employed
Above the line deduction against schedule C income.
Self Employment Income Includes
-Net schedule C income
-General Partnership Income (k1 income)
-Board of Directors fees
-Part time earnings (1099)
Schedule H
Used for Household Employees
Basis For 1031 Exchange
Carries over from previous property. If boot is received, then add to basis.
Overpayment of Allimony
When alimony is front loaded for the first two years, subtract 37,500 from total alimony paid in both years 1&2 to get recapture amount.
Forgiven Loans to a LP
If a loan to a limited partnership is forgiven, the amount of the unpaid portion of the loan becomes taxable phantom income to the LP.
STCG and LTCG above the line
Must be netted above the line, disregard the 3k carry over. For example if the question has:
10K LTCG
and
5K STCG.
5K is income for the current year.
FICA Taxes
The employee and the employer each pay (6.2% + 1.45%) .
7.65% individually and 15.3% in total.
Up to W2 earnings of 168,600. After 168,600 each pays Medicare taxes or 1.45% or a total of 2.9% unlimited.
Employer Provided Dependent Care Assistance
-Amounts that are paid by employer are not included in the employees gross income
-the amount excludable from gross income cannot exceed $5,000. This applies whether the filing status is single or joint
-to qualify for employer provided child care payments, the dependent must be 13 years old
LIFO
Inventory cost method
Schedule A of the 1040
Itemized deductions
Amended Tax Form
1040 Z
