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25 Cards in this Set
- Front
- Back
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Tax Return Formula
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All sources of income
-Exclusions -Deferrals =Gross Income -for AGI deductions =AGI -from AGI deductions -Either std. ded. or itemized -personal exemptions =Taxable income x Tax rate =Tax liability -Credits -Other Taxes --ATM, self employment -Total Tax liability -Tax Payments -withholding, estimated tax pmnts =Tax Due/Refunded |
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For AGIs are aka
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Above the Line
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From AGIs are aka
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Below the Line
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AGI is aka
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The Line
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For AGI deductions are mainly
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Trade or business expenses
Rent and royalty expenses Alimony Capital losses IRA contributions Moving expenses |
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Itemized Deductions are mainly...
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Medical Expenses
Taxes (state, local, foreign income) Real Estate Personal Property |
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Other general itemized deductions...
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Mortgage interest
Investment interest Charitable contributions Casualty/theft losses |
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Miscellaneous Itemized Deductions include...
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Unreimbursed employee business expenses
Investment Expenses |
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Investment Interest is...
And Investment Expense is... |
Interest that you pay on a loan that you take out.
Amount that you would pay a broker who helps you invest. |
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Qualifying Child:
4 tests |
1) Relationship Test
2) Age Test 3) Principle Residence Test 4) Support Test |
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Relationship Test for Qualifying Child
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Son, daughter, step, half, foster, brother, sister, step-sibling, nieces, nephews.
NO COUSINS |
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Age Test for Qualifying Child
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-Must be younger than the taxpayer.
-Under 19 @ year end. -If student, under 24 @ year end. -Disabled people meet the age test. |
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Principle Residence Test for Qualifying Child
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-Must live with taxpayer for more than half of the year
-Illness, vacation, education, military is considered living with |
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Support Test
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-Dependent must not have provided more than 50% of their own support: food, shelter, clothing, medical care, etc.
--Doesn't include scholarships. Anybody can pay more than 50% as long as the child didn't. |
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Qualifying Relative
3 Tests |
1) Relationship Test
2) Support Test 3) Gross Income Test |
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Relationship Test for Qualifying Relative
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2 levels
--1) Relative: everybody but your cousins --2) Member of household: for the entire year regardless of your relationship |
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Support Test for Qualifying Relative
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Taxpayer must pay more than 50% of expenses.
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Gross Income Test for Qualifying Relative
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Dependent's income must be less than the personal exemption amount.
Muni Bond income is not included |
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Tie Breaking Rules
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1) Parent always claims/has priority.
2)Parent with custody if divorced. 3) Parent with greater AGI if you live with 2 people for the same amount of time. |
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Multiple Support Agreements
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Two or more people combined provide more than 50% of the support... Then any person who provides at least 10% of the support has the right to claim the person but the parties have to agree.
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Child of Divorced Parents
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Parent who has custody gets exemption and if it's non-custodial parent, it's stated in the divorce contract.
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If you are widowed during the year, then your filing status at year end will be...
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Married Filing Jointly.
If no dependents, you can be married filing jointly for that year. If dependents, married filing jointly for two years after. |
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What are the requirements for head of household?
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-Have to be single
-Must provide more than half of the support for more than half of the year for dependent or child and yourself. -Abandoned spouse can file HOH. The abandoner files Married Filing Separately. |
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Realized Income
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Generated in a transaction with a second party in which there is a measurable change in property rights between parties.
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To qualify as a dependent of another, an individual...
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1) Must be a resident of the United States, Canada, or Mexico
2) Must not file a joint return with their spouse unless they have no tax liability and there would not have been any tax liability on either spouse's return if they had filed separately. 3) Must be considered either a qualifying child or a qualifying relative of the taxpayer. |
