Pm-R2

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Rule: Under a nonaccountable plan (i.e., expenses are not reported to the employer), any amounts received by an employee from the employer must be reported by the employer as part of wages on the employee's W-2 for the year (and subject to income tax withholding requirements). The gross amount received is reported as income.
Rule: Any expenses taken against the gross amount received in a nonaccountable plan (e.g., the car mileage expenses and the reimbursement to the company) are considered miscellaneous itemized deductions and are subject to the 2% AGI limitation.

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A capital expenditure for the improvement of a home qualifies as a medical expense if it is directly related to the prescribed medical care. However, it is deductible to the extent that the expenditure exceeds the increase in value of the home.

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Premiums on disabilities policies are not deductible since payments under the policy are made to replace lost income, not to pay for medical expenses.

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Self employment FICA is the self employment tax

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Rule: IRC Section 111 provides that gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax previously imposed (the tax benefit rule).

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Custodial fees can be deducted as miscellaneous itemized deductions (exceeding 2% of AGI)

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Home equity indebtedness is limited to $100,000 on a joint income tax return (or single return), but only $50,000 if married filing separately.

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Casualty loss must be non controllable, non avoidable & unexpected

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Rule: Interest that is prepaid is deductible in the tax year to which, and to the extent that the interest is allocable - i.e., as it accrues. This allocation is required even by cash basis taxpayers.

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When there is Itemized deductions and standard deductions we must deduct the larger

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Insurance against loss of income is not payment for medical care and therefore is not deductible.

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Medical expenses charged to a credit card is expensed in the year the charge is made. It does not matter when the amount charged is actually paid.

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If the artwork contributions had been held for more than one year, the fair market value could be deducted.

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An individual's losses on transactions entered into for personal purposes are deductible only if the losses qualify as casualty or theft losses.

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There is no itemized deduction for temporary living expenses, and the direct moving expenses (such as the costs to move the goods and the costs to move the taxpayer's family from the old to the new location) are deductible before adjusted gross income, not as an itemized deduction.

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Rule: Contributions of long-term property are generally deductible at fair market value at the date of the gift. Contributions of short-term property are generally deductible at the lower of cost or fair market value.

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There is no limitation of the number of years that the student loan interest may be deducted, other than that the interest may be deducted only when paid.

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Interest paid on a debt secured by a home mortgage is classified as deductible qualified residence interest. The Browns would be able to deduct the interest paid as an itemized deduction. The limit is $100,000 of mortgage interest since the loan was not to buy, build, or improve the home.

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Damage caused in home by dog is controllable, and avoidable, and, thus, is not unexpected and does not qualify as a "casualty."

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No deduction attributable to an activity not engaged in for profit is allowed except for interest & taxes expenses related to such activities

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The amount of the deductions that would be allowed if such activity were engaged in for profit is equal to the difference between the business expenses allowable to be deducted and the gross
income derived from the activity, Consequently, no losses are allowed.

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An activity is engaged in for profit if it shows a profit for three or more taxable years during a period of five consecutive taxable years ending with the year in question.

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In the case of businesses engaged in the breeding, training, showing, or racing of horses, an activity is engaged in for profit if a profit is made in two of seven consecutive taxable years.

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In case of payment of estimated tax for the current year if the previous year AGI for the taxpayer exceeds $150,000 he must use the annualization method which states that he must pay an amount equal to 110% of the previous year's tax liability as estimated tax

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A medical expense deduction is allowed for payments made in the current year for medical services received in earlier years.

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With regard to the individual taxpayer who elected to amortize the premium on a bond that yields taxable interest the bond's basis is reduced by the amortization of the premium.

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Earned income credit can result in a refund even if the individual had no income tax liability

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Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be carried forward five years.

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Rule: Ordinarily, a tax must be assessed within three years after a return is filed. The assessment period begins from the due date of the return if the return is filed prior to the due date or "filing date" if the return is filed later (e.g., with an extension). The assessment period is extended to six years for returns that omit more than 25% of the gross income that should have been reported.

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Rule: A taxpayer may file a claim for refund within three years from the time the return was filed, or two years from the time the tax was paid, whichever is later.

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For Keogh plans, earned income is defined as net self-employment earnings reduced by the amount of the allowable Keogh deduction and the self-employment tax.

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1-Passive activity losses
2-Accelerated depreciation (post-1986 purchase)
3-Net operating loss of the individual taxpayer
4-Installment income of a dealer
5-Contracts-percentage completion vs. completed contract
6-Tax "deductions" (Tax Refunds)
7-Interest deductions on some home "equity loans"
8-Medical deductions (limited to excess over 10% AGI)
9-Miscellaneous deductions subject to 2% AGI are not allowed
10-Exemptions (personal) and standard deduction
PANIC TIMME

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The Following expenses can't be considered as deductible Moving Expenses:
1-Meals
2-Pre-move house hunting
3-Expense of breaking a lease
4-Temporary living expenses

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Prepaid rent is income when received even for an accrual-basis taxpayer.

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Current-year state and city income taxes withheld from a paycheck are allowable itemized deductions.

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For a personal residence that is not used for rental purposes, no deduction is allowed for utilities costs or insurance, only the mortgage interest & property taxes that can be deducted as itemized deductions

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Interest paid on a debt secured by a home mortgage is classified as deductible qualified residence interest.

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Gambling losses remain fully deductible, but only to the extent of gambling winnings.

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The AMT is computed as the excess of tentative AMT over the regular tax.

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What are the requirements for claiming Earned Income Credit?

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1- The taxpayer must meet certain earned low-income thresholds.
2- The taxpayer must not have more than the specified amount of disqualified Income.
3- The taxpayer must be over age 25 and less than 65 if there are no qualifying children.
4- If married, the taxpayer must generally file a joint return with his/her spouse (i.e., the married filing separate status disqualifies a taxpayer from claiming the earned income credit).
5- A qualifying child can be up to and including age 18 at the end of the tax year, provided the child shared a residence with the taxpayer for 6 months or more.
6- The taxpayer must be related to the qualifying child (or children) through blood, marriage, or law.
7- The child must be either in the same generation or a later generation of the taxpayer.
8- A foster child qualifies if officially placed with the taxpayer by an agency.

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Annualization method = Using 110% for the prior year
Seasonal method = Using 100% for the prior year

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Required minimum estimated tax is the LESSER of:
a-90% of current year's tax, or
b-100% of last year's tax.(even if the prior year's tax liability is Zero) ,

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IRC Section 111 provides that gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax previously imposed (the tax benefit rule).