Individual Tax Quiz 2

Front 1

Foreign Earned income

Back 1

Income earned in a country other than US or Puerto Rico

Front 2

What is the deal with excluding foreign earned income

Back 2

Essentially we can exclude from gross income 92,900 of foreign income. If you make less than that you don't pay any taxes. Anything over that you have to include in income. If you make 93,000 you must include 100 in income.

Front 3

What are the rules to qualify for foreign earned income?

Back 3

1. To qualify must reside in the country the entire year or be physically present in a foreign country 330 days. Taxpayer resides in italy last 300 days of 2012 he didn't meet rules and yet can still take a deduction because if you can allocate if you know you will be over there.

Front 4

If you go home to US for 7 days what does that do to your foreign earned income?

Back 4

It means that you can't include these in your330 day count because you aren't physically present in the foreign country.

Front 5

Examples of fringe benefits

Back 5

accident and health insurance
athletic facilities
education assistance
group term life insurance
moving expenses and reimbursement
tuition reduction
meals and lodging provided by employer

Front 6

Discrimination/discriminatory

Back 6

This means fringe benefits can't be allocated to highly paid employees vs. low paid employees. The CEO and janitor must get the same thing. If you do discriminate and give more then they must include it in their gross income

Front 7

If higher ppl pd higher amounts and lower ppl pd lower amounts how does this work out?

Back 7

Pay exec 50000 edu benefits. pay lower ppl 5000. Exec must include 45000 income if used. Lower ppl include nothing if used.

Front 8

When the company gives fringe benefits what happens?

Back 8

It is an expense to the company. When there is an expense there should also be revenue recorded but there isn't in the case of fringe benefits. Co gets to deduct an expense but you don't have to report income.

Front 9

Group life insurance policy

Back 9

most employers have this if I'm a co I can have this on my employees up to 50,000. I as a company can expense this and they don't have to report income. First 50000 anyways. Anything the employee uses over 50,000 must be reported as income on their return.

Front 10

Meals and lodging

Back 10

Meals and lodging provided on employers premise. If employer provides meals for employee this is to the benefit of the employer. Hopsitals provide food for ICU nurses so they don't have to leave the hospital. If I provide lodging for employee this is a benefit to the employer. RA's don't have to report room and board as income bcasue it's to emloyers benefit.When companies have all day meetings don't have to report income because you are required to be there.

Front 11

Transportation exclusion benefits

Back 11

1. Parking 230 can be excluded
2. Public transport 230
3. Bicycle 20

Front 12

If you find a cheaper parking lot than what employer gives you to use must

Back 12

report excess amount unused as income.

Front 13

dependent care assistance

Back 13

Can giev you dependant child assitance. Max they pay is 3000 per child x 2 per year. Total max you can deduct is 6000.

Front 14

Dependent care is a credit

Back 14

Which goes to employee not employer. Line 29 when you do this you go to general form 2441.

Front 15

What is the credit?

Back 15

The credit is a 10% so you get 300. Rather have employer pay it because you get the full 3000.

Front 16

Workman's compensation

Back 16

Not income to taxpayer. It is an exclusion from gross income.

Front 17

Award for physical injury

Back 17

excluded from gross income

Front 18

Award for depression/emotional distress

Back 18

Must be included in income.

Front 19

IRA

Back 19

Individual Retirement Account

Front 20

Roth IRA

Back 20

Contributions to a roth IRA are not tax deductible but income you earn on a roth IRA are excluded from income.

Front 21

What happens to ROTH IRA's

Back 21

Contributions are not tax deductible but income you earn is. Put 5000 in per year after tax contribution. CAn't deduct 5000 but hopefully you invest it and the returns grow tax free.

Front 22

Why does government allow roth IRA's to grow tax free?

Back 22

1. They want people to invest and not rely on the government
2. All IRA's are considered long term investment can't take any $ out until I reach 59.5 If I take $ out penalized.

Front 23

Long term savings

Back 23

Lower interest rates. This $ can be loaned out as a long term investment. Interest rates used to be around 18% which is why Regean came up with long term IRA's. Immediately interst rates dropped to 9% within 2 years 6%

Front 24

Rules to withdraw from IRA

Back 24

If I withdraw before 59.5 the earned income is subject to tax and a 10% penalty on income. IF you have 25,000 and put it in you make 10,000 for 35,000. Want to withdraw 5000 they say that amount is earned income so you have to pay income tax as well as the 10% penalty.

Front 25

Exceptions to withdrawing

Back 25

1. if you die the $ goes to your beneficiary. If I have 50,000 in my roth I die at 55 and leave it to my wife who is 50 she can't have it because she's not 59.5. If I die at 65 and she's 55 she can use it. Death lets you take the basis of the person who set up the ROTH
2. Disabled can take it with no penalty. Must stil pay income portion but not 10% penalty.
3. Buying afirst house can withdraw 10,0 for a house. They allow you to take out contributions first.

Front 26

Coverdell and 529 education plan

Back 26

These are educations savings accounts. Both are out of IRS. Coverdell has max contribution of 2000. 529 max is 5,000.

Front 27

How are Coverdell and 529 education plans set up?

Back 27

These are set up individually and can be set up for anybody. Allows you to invest tax free. No deduction for initial contribution but the income is tax free as long as it's used for tuition, books, fees, room and board as long as your at a degre bestowing university.

Front 28

MO and KS plans

Back 28

Set up through state so you have limited investment opportunities. Much more conservative so you can deduct your contribution from state taxes. Only deductible in state you put into them in.

Front 29

Distributions

Back 29

Make a contribution and income grows tax free. Distributions are tax free. If distribution is greater than cost of the eduction difference is taxable. If school costs 6000 and you get 8000 out the 2000 is a taxable event. If you have multiple children you can shift the plan from one to another.

Front 30

Discharge of indebtednes

Back 30

You don't owe anymore. Someone forgave your debt. This is a taxable event. You have to report this as income because someone wrote it off as an expense.

Front 31

Exceptions to discharge of indebtednes

Back 31

1. Bankruptcy-we forgive in this situation because they don't have $. Other income line 22 is where all this is reported
2. If harmed when buying a house in 2008-2010 don't have to do it. Get debt forgiveness. DOn't have to report it all as income.

Front 32

education expenses deduction

Back 32

If you teach primary or secondary education may deduct up to 250 from AGI for expenses. If you spend 600 you can still deduct as itemized deductions on schedule A which is subject to 2% limitation.

Front 33

Reservist

Back 33

IF you have deductionsif reservist travels over 10 miles to get to the reserve they can deduct anything over the 10 miles. This reduces their AGI which is a good thing.

Front 34

Performing artists

Back 34

Can deduct certain expenses from AGI not subject to 2% refers to ballet dancers, symhony persons.

Front 35

Health saving account

Back 35

Helps pay off bills directly related to medical expenses. CAn be individual or family. Amount you put in is a tax deduction which reduces AGI. To qualify must be in hig deductible plan. This means must pay 5000 before insurance plan kicks in.

Front 36

Rules to qualify for health savings plans

Back 36

1. Must have at least 1200 deductible for single and 2400 for family.

Front 37

What happens in these health savings plans

Back 37

1. Investments grow tax free. $ you put in is invested and grows tax free.
2. Deductions as long as used for healthcare are all tax free
3. If I never use it no problem it keeps growing, if I die, it goes to my heirs tax free but they must use it for healthcare.

Front 38

Benefit for me

Back 38

grows tax free and distributions are tax free.

Front 39

Moving expenses

Back 39

Subject to mileage must be more than 50 miles from preiovs home to work. IF I travel 20 miles to work must be 50 miles in excess for a total of 70 miles and 50 miles away from work.

Front 40

What if you move to chicago and don't have a job lined up?

Back 40

If you movein November 2011 and deduct expenses as long as you find a job within the year you are in great shape. If you moved, deducted expenses, and didn't find a job within the year, you either have to file an amended return for 2011 or file additional income in 2012 under other income.

Front 41

What things can count as qualified moving expenses

Back 41

1. hire a mover
2. travel to new home if you stay overnight hotel deductible

Front 42

Not deductible moving expenses

Back 42

1. can't deduct meals
2. can't deduct part employer pays.