R8 - Surety, Agency, Business Structures, Employer-Employee, Money Laundering, Antitrust, Docs. of
Title, Dodd-Frank Act
Dependency Exemptions - Qualifying Child or Qualifying Relative - ANSWERSQualifying Child: CARES
C - Close
A - Age
R - Residency
E - Eliminate (gross income)
S - Support
Qualifying Relative: SUPORT
S - Support
U - Under (gross income)
P - Precludes (joint)
O - Only (citizens)
R - Relative, or
T - Taxpayer lives with for whole year.
,Qualifying child has residency requirement (more than half).
Close Relative includes: child, stepchild, sibling, stepsibling, or nieces/nephews.
Age Test: UNDER 19 or under 24 if full-time (5 mo.) student, unless totally/permanently disabled.
Gross income test does not include:
1. Social Security
2. Tax-exempt interest
3. Tax-exempt scholarships
Qualifying Widower (aka Surviving Spouse) and Head of Household - ANSWERSQualifying Widower (aka
Surviving Spouse)
1. Two years after year spouse died, did not remarry
2. Dependent entitled to exemption
3. Dependent lived there for ENTIRE year
Head of Household
1. Not married, but maintains household (over half support), where Dependent lives for more than HALF
the tax year.
2. Exception: Dependent parent does not have to live there, as long as household maintained.
Married Filing Separately - ANSWERSYou may only claim an exemption for spouse if:
1. Spouse has no gross income
2. Was not claimed as dependent by anyone else
Nontaxable Fringe Benefits - ANSWERSTax-Free Fringe Benefits, not included on 1040:
1. Life Insurance Proceeds
2. Health Insurance Premiums
,3. De Minimus
4. Meals and Lodging
5. Employer payment of Educational Expenses
6. Qualified Tuition Reductions
7. Qualified Employee Discounts
8. Contributions to Benefit/Retirement Plans (taxed when benefit received)
9. FSA's
Kiddie Tax on unearned interest income - ANSWERS$0 - Standard Deduction amt. - 0% tax rate
Next $1,050 - Taxed at lower child's rate
Amount above is taxed at Parent's higher tax rate
Social Security INCLUDED - ANSWERSLesser of 50% or 85% of Social Security OR provisional income
amount above threshold (% and threshold levels vary with provisional income);
Where MAGI = AGI + Tax-Exempt Interest + Social Security
So basically 50% or 85% of it is included, or it could be less, based on provisional income and threshold.
R1 - Series EE Bonds - ANSWERSTax-Exempt Interest when:
1. Used to pay for higher education
2. Sole or joint (spouse) owner
3. Over age 24
4. After 1989
R1 - Unemployment Compensation - ANSWERSINCLUDED "comes from the government - include"
Note: Worker's Comp. is EXCLUDED
"comes from the employer - exclude"
, R1 - Traditional IRA Distributions are included - ANSWERS59 1/2
70 1/2
10% Penalty Tax
Exceptions: HIM DEAD
H - Home ($10,000)
I - Insurance
M - Medical
D - Disability
E - Education
And
D - Death
R1 - Business Income on Schedule C - ANSWERSNondeductible Expenses:
1. Salaries paid to sole proprietor - Considered a draw.
2. State and local tax expense
3. Health Insurance of sole proprietor
4. Charitable contributions of sole proprietorship
5. Personal interest expense of sole proprietorship
6. Self-Employment Payroll Taxes (can deduct half on 1040)
R1 - Rental Income goes on Schedule E (Passive Activity) - ANSWERSVacation/Rental Homes
15 Day Threshold
R1 - Passive Losses Exceptions - Rental Activities - ANSWERSDeduct losses from certain rental activities:
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