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50 Cards in this Set
- Front
- Back
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What are the standard deduction amounts for 2010?
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The standard deduction for 2010:
Single or MFS $5,700 MFJ or QW $11,400 HOH $8,400 Additional amount if 65 or older or blind per person: MFJ, QW, or MFS: $1,100 Single or HOH: $1,400; Taxpayer claimed as a dependent of someone else's return: Greater of $950 or earned income plus $300 not to exceed regular standard deduction |
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What are the add-ons to the standard deduction in 2010 if the taxpayer does not itemize deductions?
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For 2010, you can no longer increase your standard deduction by:
State or local real estate taxes, New motor vehicles taxes (for vehicles purchased in 2010), or & Disaster losses (for disasters occurring in 2010). But, you can increase your standard deduction in 2010 if you: Had a net disaster loss in 2010 occurring in 2008 or 2009 (from Form 4684, line 17), or Purchased a new motor vehicle after February 16, 2009, and before January 1, 2010, and paid the sales or excise taxes in 2010. If you increase your standard deduction by either of these items, use Schedule L (Form 1040A or 1040) to figure your standard deduction. |
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What is the individual exemption amount for 2010?
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Individual exemption for 2010:
Exemption amount is $3,650 x number of exemptions on line 6d 1040. The exemption phase-out is no longer in effect in 2010. If the taxpayer can be claimed as a dependent on someone else's return the exemption is zero |
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How much is the Midwestern displaced individual personal exemption in 2010?
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The Midwestern displaced individual personal exemption is no longer available
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What are the self-employed filing requirements?
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If self-employed, the taxpayer must file a return if gross income is at least as much as the filing requirement amount for the taxpayers filing status and age. The taxpayer must file Form 1040 and Schedule SE if:
The taxpayer had net earnings from self-employment (excluding church employee income) of $400 or more. The taxpayer had church employee income of $108.28 or more. |
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What are the gross income thresholds for filing a tax return?
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The standard deduction + additional standard deduction (if applicable) + exemption. For example:
Single under 65 is $5,700 + $3,650 = $9,350 Single over 65 is $5,700 + $1,400 + $3,650 = $10,750 Head of Household under 65 is $8,400 + $3,650 = $12,050 |
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What is the standard deduction for a dependent who is claimed on another person's tax return?
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The standard deduction for an individual who is claimed on another person's tax return is generally limited to the greater of:
$950, or The individual's earned income for the year PLUS $300 (but not more than the regular standard deduction amount, generally, $5,700) |
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When must a single dependent, under age 65 and not blind, file a return?
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File a return if any of the following apply:
Unearned income was over $950. Earned income was over $5,700. Gross income was more than the larger of $950 or earned income (up to $5,400) plus $300. |
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When must a single dependent, over age 65 or blind, file a return?
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File a return if any of the following apply:
Unearned income was over $2,350 ($3,750 if age 65 or older and blind). Earned income was over $7,100 ($8,500 if age 65 or older and blind). Gross income was more than the larger of $2,350 ($3,750 if 65 or older and blind), or earned income (up to $5,400) plus $1,700 ($3,100 if age 65 or older and blind). |
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When must a married dependent, under age 65 and not blind, file a return?
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File a return if any of the following apply;
Unearned income was over $950. Earned income was over $5,700. Gross income was at least $5 and spouse files a separate return and itemizes deductions. Gross income was more than the larger of $950, or earned income (up to $5,400) plus $300. |
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When is Form 1040 due? (With & without extensions.)
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Form 1040 is due:
April 18; Outside U.S. June 15 Automatic extension - October 17; Outside U.S. October 17 Form 4868 filed, or credit card payment made Combat zone - Extended for at least 180 days after later of: Last day in a combat zone or last day the area qualifies as a combat zone, or Last day of any continuous qualified hospitalization for injury from service in combat zone |
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For income tax purposes, what is a combat zone?
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A combat zone is any area:
The President of the United States designates by Executive Order as an area in which the U.S. Armed Forces are engaging in or have engaged in combat, The Department of Defense has certified for combat zone tax benefits due to its direct support of military operations, or A Qualified Hazardous Duty Area established by statute where the service member receives imminent danger pay. Members of the U.S. Armed Forces who serve in a combat zone may exclude such combat zone military pay from their taxable income. |
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How does a taxpayer's marital status determine the filing status?
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Single - last day of year unmarried or legally separated under a divorce or separate maintenance decree, & do not qualify for another filing status
MFJ - married at end of year MFS - can choose if married at end of year HOH - Unmarried or considered unmarried; paid more than half the cost of keeping up a home; &, a qualifying person lived in the home for more than half the year. (Dependent parent does not have to live with taxpayer.) QW with dependent child (Available for 2 years following the year spouse died.) |
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What are the requirements for a taxpayer to be eligible to file as qualifying widow(er)?
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Taxpayer must have been eligible to file joint return with deceased spouse in year spouse died. Must have a child, or step child for which an exemption can be claimed (not a foster child); must have paid more than half the cost of keeping up a home for the qualifying child for entire year.
Entitles taxpayer to use joint return tax rates and highest standard deduction amount. Does not entitle taxpayer to file a joint return (except in year of death). |
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If a taxpayer files married filing separately which credits are disallowed?
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The following credits are disallowed:
Adoption credit is not allowed in most cases Earned income credit Child and dependent care credit Elderly or disabled credit unless spouses lived apart all year |
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If a taxpayer files married filing separately what education credits/deductions are not allowable?
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The following educational benefits are disallowed:
The deduction for student loan interest The tuition and fees deduction Taxpayer cannot exclude any interest income from qualified U.S. savings bonds that are used for higher education expenses. Educational credits |
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If a taxpayer chooses MFS what deductions and credits are reduced at income levels that are half those for a joint return?
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The following deductions and credits are reduced at income levels that are half those for a joint return:
Child tax credit Retirement savings contributions credit Itemized deductions (Does NOT apply in 2010) Deduction for personal exemptions (Does NOT apply in 2010) |
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What is the capital loss deduction limit for a taxpayer who chooses married filing separately?
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The capital loss deduction limit is $1,500 (instead of $3,000 if taxpayer had filed a joint return).
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If spouses file MFS, must both spouses itemize if one spouse elects to itemize?
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If one spouse itemizes deductions, the other spouse cannot claim the standard deduction if they choose MFS filing status. They must both itemize. If they claim the standard deduction, the basic standard deduction for each taxpayer is half the amount allowed on a joint return.
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What is the filing status of a taxpayer when his spouse died during the year?
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If taxpayer's spouse died during the year, the taxpayer is considered married for the whole year for filing status purposes.
If the taxpayer did not remarry before the end of the year, the taxpayer can file a joint return for self and deceased spouse. If taxpayer remarries before end of tax year, taxpayer can file a joint return with new spouse. Taxpayer's deceased spouse's filing status is MFS for that year. |
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When is a taxpayer considered unmarried on the last day of the tax year for head of household purposes?
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If all of the following tests are met:
Taxpayer filed a separate return. Taxpayer paid more than half the cost of keeping up the home for the tax year. Taxpayer's spouse did not live in the home during the last 6 months of the tax year. Taxpayer's home was, for more than half the year, the main home of his child, stepchild, or eligible foster child for whom an exemption can be claimed. This test can still be met if taxpayer cannot claim an exemption for the child if certain tests are met. |
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Can a taxpayer use head of household filing status if his spouse was a nonresident alien?
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Taxpayer is considered unmarried for head of household purposes if spouse was a nonresident alien at any time during the year & taxpayer does not choose to treat nonresident spouse as a resident alien. A spouse is not considered a relative. Taxpayer must have another qualifying relative and meet the other tests to be eligible to file as head of household. However, taxpayer is considered married if election is made to treat spouse as a resident alien.
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What are the head of household filing requirements?
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Taxpayer must be unmarried or "considered unmarried" on the last day of the year.
Taxpayer must have paid more than half the cost to keep up the home for the entire year. A "qualifying person" must have lived with the taxpayer in the home for more than half the year (except for temporary absences, such as school). However, if the "qualifying person" is the taxpayer's dependent parent, he does not have to live with the taxpayer. |
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What does the term "dependent" mean?
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The term "dependent" means:
Qualifying child, or Qualifying relative |
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What are the 5 tests that must be met to be a "qualifying child"?
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Relationship. The child must be taxpayer's son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
Age. The child must be under age 19 at end of the year and younger than the taxpayer, or a full-time student under age 24 at end of the year and younger than the taxpayer (or taxpayer's spouse, if filing jointly), or any age if permanently and totally disabled. Residency. Child must have lived with taxpayer for more than half the year. Support. Child must not have provided more than half of his own support for the year. Joint return. A child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund.) |
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There are special rules pertaining to claiming dependent children of divorced, separated, or never married parents. What are these rules?
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There are special rules pertaining to claiming dependent children of divorced, separated, or never married parents. What are these rules?
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What is a dual status alien
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A dual status alien is an alien who is both a nonresident and resident alien during the same tax year. The most common dual-status tax years are the years of arrival and departure
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What are the 4 tests that must be met to be a "qualifying relative"?
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Not a Qualified child test. The person cannot be the taxpayer's qualifying child or the qualifying child of any other taxpayer.
Member of household or relationship test. The person must either: Be related to the taxpayer in one of the ways listed under relatives who do not have to live with taxpayer, or Must live with taxpayer all year as a member of taxpayer's household Gross income. The person's gross income for the year must be less than $3,650. Support. Taxpayer must provide more than half of the person's total support for the year. Explanation for Card 28 listed The following relatives do not have to live with the taxpayer all year to meet the member of household test: A child, stepchild, foster child, or a descendant of any of them (for example, grandchild) A brother, sister, half brother, half sister, stepbrother, or stepsister A father, mother, grandparent, or direct ancestor, but not foster parent A stepfather or stepmother A son or daughter of the taxpayer's brother or sister A brother or sister of taxpayer father or mother A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law |
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What are the rules for claiming an exemption for a dependent?
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The taxpayer can claim an exemption for a Qualifying Child or Qualifying Relative if the following three tests are met:
Dependent taxpayer test If taxpayer "A" can be claimed as a dependent of taxpayer "B" then taxpayer "A" cannot claim another dependent. Joint return test Generally a married person who files a joint return cannot be claimed as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. Citizen or resident test A person cannot be claimed as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or resident of Canada or Mexico. |
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Can a child be the taxpayer's qualifying child if the child meets the rules to be a qualifying child of more than one person?
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Yes. To be a qualifying child the child must meet the special test for qualifying child of more than one person.
If the child meets the rules to be a qualifying child of more than one person, taxpayer must be the person entitled to claim the child as a qualifying child. Taxpayer and the other person can decide which person will claim the child. That person can take all of the following tax benefits based on that qualifying child: The exemption for the child The child tax credit Head of Household filing status The credit for child and dependent care expenses The earned income credit |
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List the persons who meet the relationship test for relatives who do not live with the taxpayer all year.
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The following relatives do not have to live with the taxpayer all year to meet the member of household test:
A child, stepchild, foster child, or a descendant of any of them (for example, grandchild) A brother, sister, half brother, half sister, stepbrother, or stepsister A father, mother, grandparent, or direct ancestor, but not foster parent A stepfather or stepmother A son or daughter of the taxpayers brother or sister A brother or sister of taxpayer father or mother A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law |
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List the relationships necessary to meet the relationship test of a "qualifying child".
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The child must be the taxpayer's son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these such as the taxpayer's grandchild, niece or nephew.
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Is there an age test to claim a "qualifying relative" as a dependent?
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No. Unlike a qualifying child, a qualifying relative can be any age.
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Regarding a qualifying child as a dependent, what is an "Age Test"?
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One of the tests for identifying a qualifying child:
Was the potential dependent under age 19 and younger than the taxpayer at the end of the year? Or, was the person under age 24 at the end of the year and a full-time student for some part of each of five months during the year? Or, Was the person any age and permanently and totally disabled? |
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Is there a gross income test to claim a "qualifying relative" as a dependent?
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Yes. The relative must have gross income of less then $3,650.
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Can a taxpayer claim an exemption for a cousin?
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A taxpayer can claim an exemption for a cousin only if cousin lived as a member of the household for the ENTIRE year.
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To meet the member of household or relationship test a person must satisfy what two requirements?
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To meet this test, a person must:
Live with the taxpayer for the entire year as a member of taxpayer's household, OR Be related to taxpayer EXCEPTIONS are: Temporary absences Death or birth Explanation for Card 37 related A child, stepchild, foster child, or a descendant of any of them (for example, grandchild) A brother, sister, half brother, half sister, stepbrother, or stepsister A father, mother, grandparent, or direct ancestor, but not foster parent. A stepfather or stepmother A son or daughter of the taxpayers brother or sister A brother or sister of taxpayer father or mother A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law |
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How is the support test for dependency figured?
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Taxpayer must provide more than half of a person's total support during the calendar year to meet the support test. This is figured by comparing the amount taxpayer contributed to the person's support with the entire amount of support the person received from all sources. This amount includes the person's own funds used for support.
In figuring a person's total support, include tax-exempt income, savings, and borrowed amounts used to support that person. Tax-exempt income includes certain Social Security benefits, welfare benefits, nontaxable life insurance proceeds, Armed Forces family allotments, nontaxable pensions, and tax-exempt interest. |
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How does the taxpayer determine if he provided more than half of the support of a person?
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To figure if taxpayer provided more than half of the support of a person, first determine the total support provided for that person. Total support includes amounts spent to provide food, lodging, clothing, clothing, and dental care, recreation, transportation, and similar necessities. Capital items, such as furniture, appliances, and cars, that are bought for a person during the year can be included in total support under certain circumstances.
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Which items are not included in total support?
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Federal, state, and local income taxes paid by persons from their own income
Social Security and Medicare taxes paid by persons from their own income Life insurance premiums Funeral expenses Scholarships received by taxpayer's child if child is a full time student Survivors' and Dependents' Educational Assistance payments used for support of the child who receives them |
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What is the calendar year accounting period?
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Calendar year - 12 months from January 1 through December 31 Fiscal year - 12-month period ending on the last day of any month except December 52-53-week fiscal year varies from 52 to 53 weeks and always ends on the same day of the week. Choose the accounting period when the first income tax return is filed
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What are the safe harbor rules to avoid an estimated tax penalty?
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General Rule. An estimated tax penalty will not apply if both of the following apply:
Taxpayer expects to owe less than $1,000 in tax for the current year after subtracting withholding and credits. Taxpayer expects withholding and refundable credits to be less than the smaller of: At least 90% of the tax on the current year's tax return, or 100% of the tax shown on the prior year's tax return. The current return must cover all 12 months. (110% if the current year AGI was greater than $150,000). |
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When are estimated tax payments due?
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Estimated tax payments divided into four payment periods due:
1st payment - April 18 2nd payment - June 15 3rd payment - September 15 4th payment - January 17 next year If taxpayer files tax return by January 31, and pays the rest of the tax due, taxpayer does not need to make the estimated tax payment due on January 17. |
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List the requirements to include a child's investment income on the parents tax return (Form 8814).
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Taxpayer may be able to elect to include child's interest & dividend income (including CG distributions) on taxpayer's tax return if ALL the following conditions are met.
Child was under age 19 (or under age 24 if a full-time student) at the end of the year. Child had income only from interest and dividends. The child's gross income was less than $9,500. No estimated tax payment was made for the child, and no overpayment from the previous year was applied to this year. No federal income tax was taken out of the child's income. The child does not file a joint return for the year. The child is required to file a return unless the taxpayer makes this election. The taxpayer is the parent whose return must be used when applying the special tax rules for children. |
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When must a child file Form 8615?
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Part of a child's investment income may be subject to tax at the parent's tax rate if ALL of the following are true:
The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year AND did not have earned income that was more than half of his support, or Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his support. The child's investment income was MORE than $1,900. The child is required to file a tax return for the year. The child does not file a joint return for the year. At least one of the child's parents was alive at year end. |
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How can a taxpayer establish that she is an innocent spouse?
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The innocent spouse must establish that she did not know, and had no reason to know that there was a substantial understatement of tax that resulted because her spouse:
Omitted a gross income item, or Claimed a deduction, credit, or property basis in an amount for which there is no basis in fact or law. The facts and circumstances must also indicate that it is unfair to the innocent spouse to pay the tax due. One consideration is to whether she significantly benefited from the substantial understatement of tax. |
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What is a Multiple Support agreement?
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Sometimes no one provides more than half of the support of a person. Instead, two or more persons, each of whom would be able to take the exemption but for the support test, together provide more than half of the person's support.
When this happens, taxpayer can agree that any one of the qualified persons who individually provides more than 10% of the person's support, but only one, can claim an exemption for that person. Each of the others must sign a written statement agreeing not to claim the exemption for that year. The statements must be filed with the income tax return of the person who claims the exemption. |
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As a member of the Armed Forces, certain tax deadlines may be extended. What are some of those deadline extensions?
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The time for taking care of certain tax matters may be postponed for members of the Armed Forces. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.
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Joint returns generally must be signed by both spouses. How would members of the Armed Forces on active duty address this requirement?
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When one spouse is not available to sign a joint return due to military duty, a power of attorney may be used to file a joint return.
If a taxpayer's spouse is unable to sign the return because he is serving in a combat zone or is performing qualifying service outside of a combat zone, and the taxpayer does not have a power of attorney or other statement, the taxpayer can sign for his spouse. Attach a signed statement to the return that explains that the spouse is serving in a combat zone. |
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How is the personal exemption phase-out calculated in 2010?
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There is no personal exemption phase-out after 2009
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