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29 Cards in this Set
- Front
- Back
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Components of 1040 |
Filing status Wage income Taxable interest income Standard/itemized deductions Taxable income Tax liability Tax Payments Earned Income Credit Am't owed/refund |
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Qualifying Child dependent |
Relationship - child, descendent, step/foster, bro/sis half bro/sis, desc. Age - <19 or <14 if full time student Residency - Must live with for > 1/2 year Support - must not provide > 1/2 support Special - not claimed by anyone else |
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Qualifying relative |
Not a qualifying child Relationship - Mbr of household, lives with for entire year OR child/desc foster, bro/sis, 1/2 bro/sis, mother/father, aunt/uncle desc, in law Gross income < $4150 Support -claimant must provide > 50% support |
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Qualified dependent |
Tests: 1 Qualifying child/relative 2 Dependent taxpayer - cannot be claimed by someone else 3 Joint return - cannot file joint with spouse 4 Citizen/resident - U.S, Mexico or Canada, adopted + mbr of household full year |
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Soc Sec Wage Withholding limit |
$128,400 |
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Interest/Dividends must use Schedule B if: |
1 Interest + dividend income > $1500 2 Red'c seller-financed mortgage interest 3 Rec'd any tax exempt interest 4 Claimed EE or I bond exclusion 5 Nominee 6 Adj for accrued int/ bond premium/ OID 7 Foreign income |
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Excluded from Gross income |
Non taxable employee fringe benefits No add cost services, discounts, transportation,deminimis, etc. Other Scholarships/Fellowships Tuition program withdrawals Life insurance Compensation for sickness |
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Tax Formula |
Gross Income (GI) - Permitted deductions ("For AGI") = Adjusted Gross Income (AGI) - Standard/itemized deductions ("After AGI") = Taxable Income (TI) x Tax rate = Tax liability - Tax credits + other taxes - payments + refundable credits = refund/amount due |
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Provisional Income |
AGI + 50% of Soc Sec benefits Interest on gov't bonds for education tax exempt interest excluded foreign income deducted interest on edu loans deducted tuition and fees |
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Other Income |
Jury duty pay Prizes and awards Forgiveness of debt Certain Insurance proceeds |
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History of fed income tax |
First enacted 1861 to finance civil war repealed after war passed again 1894, found unconstitutional passed again 1913 under sixteenth amendment |
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Shared responsibility penalty |
Greater of 2.5% of household income > filing threshhold OR $695 per adult + $347.50 per child < 18 up to max of $2085. calculated monthly |
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Deductible Student loan interest |
Only interest on qualified loans Only person on loan can take deduction Cannot take if claimed on someone else's return Cannot take if MFJ Limited to $2500 Limited by modified AGI Qualified expenses reduced by scholarships, edu assistance, QTP, Coverdell, etc. |
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Types of taxes |
Progressive - tax increases as base. increases e.g. income tax Proportional - tax remains same as base increases e.g. sales tax Regressive - tax decreases as base increases e.g. Soc Sec tax |
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Average tax |
Total tax ÷ Taxable income |
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Marginal tax |
Rate on next dollar earned |
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Qualifying health care deductions |
Health coverage provided by employer Health coverage provided by exchange Most government health care |
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Tax Authority |
Statutory - 16th amendment congress Administrative - IRC Judicial - Courts |
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Gross Income |
All sources of income wherever derived |
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Adjusted Gross Income |
Gross Income minus permitted deductions |
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Filing Status |
Single Married filing jointly Married filing separate Head of household Qualifying widow(er) |
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Penalties |
Failure to File - 5%/month or fraction thereof up to max of 25% Failure to Pay - .5%/month or fraction thereof up to max of 25% Failure to pay estimated - avoid by paying |
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Forms of income realized |
Inventory sold Professional services Asset Sales Patent license Wages |
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Method of accounting for personal taxes |
Cash receipts and disbursements Income reported when received/constructively received |
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Gross income inclusions |
Wages, Interest income, Dividend income, State tax refund, Unemployment compensation Soc Sec benefits, Prizes and awards, Forgiveness of debt, Jury duty, Alimony, |
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Gross income exclusions |
Employee discounts, Life ins prem paid by employer, Edu Assistance, Dependent care assistance, Scholarships, Life Ins proceeds, Gifts, Inheritances, Compensation for injury, including punitive, child support, Moving expense (Military), |
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HSA deduction |
Under 65 Self employed or employer has no coverage or HDHP only. Has own HDHP and no other insurance Cannot be on medicare Cannot be somebody else's dependent |
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Dependent standard deduction |
When a taxpayer can be claimed as a dependent on another's return, their basic standard deduction is the lesser of $1050 or taxpayers earned income +$350 |
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State local refund |
Lesser of amt rec, amt deducted prior year, amt by which itemized exceed standard. |
