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Circular 230 - ANSRegulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS. Disclosure - ANSThe release of tax information by an IRS employee. Due Diligence - ANSRequirements that tax professionals must follow when preparing income tax returns. Noncompliance - ANSFailure or refusal to comply with the tax code. Privilege - ANSProtection from being required to disclose confidential communications between two parties, such as attorney and client. Estimated Tax - ANSThe amount of tax a taxpayer expects to owe for the year after subtracting expected amounts withheld and certain refundable credits. Estimated Tax Voucher - ANSA statement by an individual of (1) the amount of income tax he estimates he will incur during the current taxable year on income that is not subject to withholding, (2) the excess amount over that withheld on income which is subject to withholding, and (3) his estimated self-employment tax. Exemption from Withholding - ANSStatus claimed on Form W-4 directing the employer not to withhold federal income taxes from the employee. Underpayment Penalty - ANSIf a taxpayer did not pay enough tax on a timely basis during the year, he may be required to pay an underpayment penalty. Withholding Allowances - ANSAn increase by which income tax withholding on certain income is reduced. Two Ways to Pay as You Go - ANSWithholding and Estimated Tax Payments Form W- 4 - ANSEmployee's Withholding Allowance Certificate Form 8815 - ANSExclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 Form 2210 - ANSUnderpayment of Estimated Tax by Individuals, Estates, and Trusts Form 4868 - ANSApplication for Automatic Extension of Time To File U.S. Individual Income Tax Return Form 8888 - ANSAllocation of Refund Form 9465 - ANSInstallment Agreement Request Amended Return - ANSA tax return filed on Form 1040X after the original return has been filed. Closed Year - ANSA tax year for which the statute of limitations has expired. Open Year - ANSA taxable year for which the statute of limitations has not yet expired. Failure-to-File Penalty - ANSGenerally 5% for each month or part of a month the return is late, but not more than 25% of the tax not paid. Failure to File - ANSTaxpayer fails to file the return by the due date, and there is a balance due. Failure to Pay - ANSTaxpayer fails to pay the tax owed by the due date. Failure-to-Pay Penalty - ANS0.5% of the unpaid taxes for each month or part of a month after the due date, but not more than 25%.
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Negligence or Intentional Disregard - ANSTaxpayer shows negligence or disregard of the rules or regulations causing an underpayment. Negligence-or-Intentional-Disregard Penalty - ANS20% of the underpayment. Substantial Understatment - ANSTaxpayer understates their tax by the larger of $5,000 or 10% of the correct tax. Substantial-Understatement Penalty - ANS20% of the underpayment. Form 1040X - ANSAmended U.S. Individual Income Tax Return When can an amended return be filed? - ANSWithin three years of the date the original return was filed, or within two years of the date the tax was paid, whichever is later. Can the 1040X be e-filed? - ANSNo. Household Employee - ANSAn individual who performs nonbusiness services in a taxpayer's home. Active Income and Losses - ANSThose for which a taxpayer performs services. Partnership - ANSA form of business in which two or more persons join their money and skills in conducting the business as co-owners. Passive Income and Losses - ANSThose from business activities in which the taxpayer does not materially participate, and all rental activities. Portfolio Income and Losses - ANSThose from such sources as dividends, interest, capital gains and losses, and royalties. Rental Income - ANSIncome received by the taxpayer for allowing another person's use of the taxpayer's property. Royalty - ANS(1) A payment received for the right to exploit a taxpayer's ownership of natural resources or a taxpayer's literary, musical, or artistic creation. (2) An interest in the oil and gas in place that entitles the holder to a specified fraction, in kind or in value, of the total production from the property, free of any expenses of development and operation. S Corporation - ANSA qualified small business corporation that has elected special tax treatment under subchapter S of the Internal Revenue Code. S corporations pass income, losses, and deductions through to shareholders to report on their individual returns. Trust - ANSA tax entity that distributes all or part of its income to beneficiaries as instructed by the trust agreement. Requirements for a Real Estate Professional - ANS1. More than half of the personal services performed by the taxpayer in all trades or businesses during the tax year were performed in real property trades or businesses in which the taxpayer materially participated.
- The taxpayer performed more than 750 hours of services during the year in real property trades or businesses in which the taxpayer materially participated. Trade or Business Activities - ANSAny activity that: Involves the conduct of a trade or business; is conducted in anticipation of starting a trade or business; Involves research or experimental expenditures that are deductible under IRS Code 174. Nonpassive Income - ANSIncome derived from activities that are not passive. Types of Nonpassive Income - ANSPortfolio income; personal service income; other income.
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Contribution - ANSWhen a person puts money into a retirement plan. Defined Benefit Plan - ANSAn employee benefit plan that provides determinable benefits not based on employer profits. Defined Contribution Plan - ANSAn employee benefit plan that provides a separate account for each person covered and pays benefits based on account earnings. Disability Pension - ANSA taxable pension from an employer-funded disability plan or a disability provision of a retirement plan. Distribution - ANSWhen a person takes or receives money from a retirement plan. Pension - ANSGenerally a series of definitely determinable payments made to a taxpayer after retirement from work. Rollover - ANSA qualified transfer of funds from one tax-favored account to another, usually of the same type. Roth IRA - ANSA type of individual retirement arrangement in which contributions are not tax deductible, earnings grow tax deferred, and qualified withdrawals are tax free. Traditional IRA - ANSAn individual retirement arrangement, contributions to which may or may not be deductible depending on the taxpayer's AGI and whether or not he is covered under an employer-sponsored retirement plan. What is the full retirement age? - ANSFor workers born before 1938, it is 65. For those born after it is gradually being increased to 67. How much of a client's social security and equivalent tier 1 RR benefits may be taxable? - ANSUp to 85%. Form SSA- 1099 - ANSSocial Security Benefits Form RRB- 1099 - ANSRailroad Retirement Benefits None of Social Security Benefits Taxable - ANSSingle, Head of Household, Qualified Widow - $0-$25,000; Married Filing Jointly - $0-$32, Up to 50% of Social Security Benefits Taxable - ANSSingle, Head of Household, Qualified Widow - $25,001-$34,000; Married Filing Jointly - $32,001-$44, Up to 85% of Social Security Benefits Taxable - ANSSingle, Head of Household, Qualified Widow - $34,001+; Married Filing Jointly - $44,001+; Married Filing Single - $1+ Fully Taxable Pension - ANSPensions to which the taxpayer did not make after-tax contributions or from which all pre-tax amounts have been recovered in previous years. Partly Taxable Pensions - ANSThose pensions funded through employer plans to which the employee contributed some after-tax money. Form 1099-R - ANSDistributions from Pensions, Annuities, Retirement, or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc. Distribution Code 1 - ANSEarly distribution, no known exception to penalty applies. Distribution Code 2 - ANSEarly distribution, exception to penalty applies. Distribution Code 3 - ANSDisability. Distribution Code 4 - ANSDeath. Distribution Code 7 - ANSNormal distribution.
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Distribution Code A - ANSMay qualify for ten-year averaging and/or capital gain election. Distribution Code G - ANSDirect rollover to a qualified retirement plan, tax-sheltered annuity, 457(b) plan, or IRA, or from a conduit IRA to a qualified plan. Distribution Code J - ANSEarly distribution from a Roth IRA, no known exception to penalty applies. Distribution Code Q - ANSQualified distribution from a Roth IRA. Distribution Code T - ANSRoth IRA distribution due to death or disability or taxpayer has reached age 59 1/2, but the payer does not know if the five-year holding period was met. Exceptions to the Early Withdrawal Penalty - ANS01 - The distribution was made to an employee who separated from service during or after the year in which they reached age 55. 02 - The distribution is part of a series of substantially equal periodic payments, made at least annually for the life of the participant or the life expenctancy of the participant. 03 - The distribution was made due to permanent and total disability. 04 - The distribution was made due to the death of the employee. 05 - The distribution was made in a year that the taxpayer's medical expenses exceeds 7.5% of AGI. 06 - The distribution was made to an alternate payee under a qualified domestic relations order. 07 - The distribution was made in a year an unemployed taxpayer paid health insurance premiums. 08 - The distribution was made to pay qualified higher education expenses for the taxpayer, spouse, their child, or their grandchild. 09 - The distribution was made to pay qualified first-time, home-buying expenses. 10 - The distribution was made due to an IRS levy of the qualified plan. 11 - The distribution was made to a reservist while serving on active duty for at least 180 days. 12 - Other. Form 5329 - ANSAdditional Taxes on Qualified Plans and Other Tax-Favored Accounts 401(k) Plan - ANSDeferred compensation plan available through a wide range of employers. Contributions to a 401(k) plan are tax deferred to the employee. Distributions from the plan are taxed as ordinary income to the recipient when received. 403(b) Plan - ANSDeferred compensation plan available to employees of many public educational institutions and non-profit organizations. 457 Plan - ANSDeferred compensation plan available to employees of many government entities. Roth IRA - ANSA type of individual arrangement in which contributions are not tax deductible, earnings grow tax deferred, and qualified withdrawals are tax free. Traditional IRA - ANSAn individual retirement arrangement, contributions to which may or may not be deductible depending on the taxpayer's AGI and whether or not he is covered under an employer-sponsored retirement plan. Earnings within a traditional IRA grow tax-
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Reduction of Qualified Educational Expenses - ANSQualified expenses must be reduced by any nontaxable: scholarships; grants; veteran's or military educational benefits; any other nontaxable benefits. Eligible Student - ANSThe student has not claimed an AOC in any four earlier tax years; the student had not completed the first four years of postsecondary education before 2011; the student was enrolled at least half-time in a program leading to a degree for at least one academic period beginning in 2011; the student had not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2011. Calculating the AOC - ANSThe amount of the AOC is the sum of: 100% of the first $2, of qualified education expenses paid for the eligible student; 25% of the next $2,000 of qualified education expenses. Form 1098-T - ANSTuition Statement Amount of the Lifetime Learning Credit - ANS20% of the total qualified expenses for all eligible students on the tax return. Form 8863 - ANSEducation Credits Form 8917 - ANSTuition and Fees Deduction Adoption Credit - ANSA nonrefundable credit for qualified adoption expenses incurred for each eligible child. The credit cannot exceed $13,360 per child. The limit is a per-child limit, not an annual limit, and can be carried forward for up to five years or until used. Cafeteria Plan - ANSA plan wherein an employer offers a choice of nontaxable fringe benefits from which participating employers may select. The plan may be funded with employer contributions, employee contributions, or a combination of both. Child and Dependent Care Credit - ANSA nonrefundable tax credit of 20-35% of employment-related child and dependent care expenses for amounts of up to $6,000, available to individuals who are employed and have a qualifying child or disabled spouse or dependent. Credits - ANSReductions of tax liability allowed for various purposes to taxpayers who meet the qualifications. Nonrefundable Credit - ANSA credit which cannot exceed the taxpayer's tax liability. Refundable Credit - ANSA credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer's tax liability. Special-Needs Child - ANSFor the adoption credit, a child determined by the state to be difficult to adopt due to factors such as racial or ethnic background, age, a condition that requires special care, or whether the child has siblings. Deductions - ANSThese lower the tax by reducing the amount of income that would otherwise be taxable. Requirements to Claim the Child and Dependent Care Credit - ANSMarried taxpayers must file a joint return; the care must have been provided so the taxpayer could work or look for work; the taxpayer must have some earned income; the taxpayer and the person for whom the
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care was provided must have lived in the same home; the person who provided the care must not be someone the taxpayer can claim as a dependent. Qualified Child or Dependent Care Expenses - ANSThose incurred for the primary purpose of assuring the well-being and protection of a qualifying person while the taxpayer works or looks for work. Computing the Child Care Credit - ANSA percentage of the smallest of the following: the amount of qualified expenses incurred and paid during the year; $3,000 for one qualifying individual or $6,000 for two or more; the taxpayer's earned income for the year. Section 125 Plans - ANSSalary reduction arrangements offered by some employers. These plans allow employees to reduce their salaries by a certain amount in return for one or more nontaxable benefits. Form 2441 - ANSChild and Dependent Care Expenses Form 8839 - ANSQualified Adoption Expenses Amount of Adoption Credit - ANSUp to $13,360 per eligible child. Eligible Child - ANSFor purposes of the adoption credit or exclusion must be under age 18 or physically or mentally incapable of self-care. Special-Needs Child - ANSA child who the state has determined should not be returned to his parents' home and who probably will not be adopted unless special assistance is provided to the adopting family. Form 5405 - ANSFirst-Time Homebuyer Credit and Repayment of the Credit Requirements for Homebuyer Credit - ANSTaxpayer was or is a member of the uniformed services; taxpayer purchased their main home in the US; taxpayer did not own any other main home. Amount of the Homebuyer Credit - ANSThe smaller of $8,000 or 10% of the purchase price of the home. Nonbusiness Energy Property Credit - ANSApplies to improvements such as adding insulation, energy-efficient exterior windows and doors, and energy-efficient heating and air conditioning systems. Form 5695 - ANSResidential Energy Credits Form 1116 - ANSForeign Tax Credit Form 3800 - ANSGeneral Business Credit Form 8396 - ANSMortgage Interest Credit Form 8801 - ANSCredit for Prior-Year Minimum Tax Accelerated Cost Recovery System (ACRS) - ANSThe system of depreciation in effect from 1981 through 1986. Adjusted Basis - ANSThe cost or other original basis of property reduced by adjustments such as depreciation allowed or allowable and increased by capital improvements and other adjustments. Alternative Straight-Line Depreciation System - ANSA MACRS system of depreciation using the straight-line method over an alternative recovery period.
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Modified Accelerated Cost Recovery System Percentage Tables Eight Classes of MACRS Property - ANS3-year 5 - year 7 - year 10 - year 15 - year 20 - year 25 - year 50 - year The Additional Depreciation Allowance (Bonus Depreciation) - ANSA special first-year depreciation bonus for qualified assets. The bonus is an additional deduction for 30% or 50% of the unadjusted basis of the asset for property acquired between Sep. 10, 2001, and Jan. 1,
How is residential real property depreciated? - ANSSuch property placed in service after 1986 is depreciated using a straight-line method over 27.5 years. Straight-Line Method - ANSAn equal amount of depreciation is claimed each full year the asset is depreciated. How is nonresidential real property depreciated? - ANSSuch property placed in service after May 13, 1993, is depreciated using the straight-line method over 39 years. Such property placed in service between 1986 and May 13, 1993 is depreciated over 31.5 years. Form 4562 - ANSDepreciation and Amortization Listed Property - ANSAssets that are subject to depreciation restrictions under certain circumstances. Types of Listed Property - ANSMost passenger autos weighing 6,000 pounds or less; property generally used for entertainment, recreation, or amusement; computers and related peripheral equipment. If listed property is used 50% or less for business purposes.... - ANS...no 179 deduction or special depreciation allowance may be claimed. 179 Expense Deduction - ANSAn election to expense up to $500,000 of the cost of certain property in the year it is placed in service instead of recovering that amount under MACRS. Property Eligible for the 179 Expense Deduction - ANSGenerally new or used tangible personal property purchased for use in a trade or business. 179 Restrictions - ANS$2,000,000 Limitation; Business Income Limitation $2,000,000 Limitation - ANSIf the cost of all property eligible for the 179 deduction during the year exceeds $2,000,000, the deduction is reduced dollar for dollar by the amount in excess of $2,000,000. Business Income Limitation - ANSThe total amount expensed cannot exceed the taxpayer's business income from all trades or businesses.
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At-Risk Rules - ANSSpecial rules limiting the taxpayer's deductible business, partnership, S corporation, or real estate loss to cash invested plus debt he is legally obligated to pay and the adjusted basis of any property contributed. Cost Method of Inventory Valuation - ANSValuing inventory purchased during the year at cost; that is, the invoice price less any discounts plus transportation or other costs incurred in acquiring the merchandise. Cost of Goods Sold - ANSBeginning inventory plus direct purchases, direct labor costs, and overhead costs less withdrawals for personal use and ending inventory. FICA - ANSThe law that provides for social security and medicare benefits. This program is financed by payroll taxes imposed equally on the employer and employee. Hybrid Method of Accounting - ANSA combination of accounting methods, usually of the cash and accrual methods. Inventory - ANSA list of articles of property. For income tax purposes, inventory refers only to a list of articles comprising stock in trade - articles held for sale to customers in the regular course of a trade or business. Lower of Cost or Market Method of Inventory Valuation - ANSInventory valuation considering the actual cost or the replacement cost of merchandise on the inventory date. Partnership - ANSA form of business in which two or more persons join their money and skills in conducting the business as co-owners. Proprietorship - ANSA business controlled and operated by one person. Self-Employed Individuals - ANSTaxpayers who work for themselves. They decide when, how, and where to work, obtain their own jobs or sales, pay their own expenses, and receive social security and medicare coverage through payment of self-employment tax. Sole Proprietorship - ANSA business owned by one individual. Schedule C - ANSProfit or Loss From Business Form 1065 - ANSUS Return of Partnership Income How many businesses may be reported on each Schedule C? - ANSEach business must have its own Schedule C. Principal Business or Profession - ANSThe business or professional activity that provided the principal source of income. Employer Identification Number (EIN) - ANSRequired if the business has any employees. Obtained by filing Form SS-4. Gross Receipts - ANSThe gross amount of cash receipts and the fair market value of any property and services the proprietor receives in exchange for the goods or services he sells. Returns and Allowances - ANSAmounts included in gross receipts that were refunded to customers who returned merchandise for refund or who were given a partial refund because they received damaged merchandise or for other similar reasons. Two Most Common Methods of Valuing Inventory - ANSCost Lower of Cost or Market Gross Profit - ANSGross receipts minus returns and allowances and cost of goods sold.
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Adjusted Basis - ANSUsually the original cost plus the cost of capital improvements and the cost of restoring the property, minus any reimbursement or deduction of previous casualty losses and depreciation taken. How is the amount of casualty loss determined for real property? - ANSLoss is determined for the entire property as a single item. How is the amount of casualty loss determined for personal property? - ANSLoss is determined separately for each item. When do you deduct a loss? - ANSLoss is deducted only for the year in which the casualty occurred or the theft was discovered. AGI Limitation of Most Miscellaneous Itemized Deductions - ANS2% Form 2106-EZ - ANSUnreimbursed Employee Business Expenses Two Methods for Computing Allowable Transportation Expenses - ANSThe Regular Method The Optional Method What must a taxpayer do to qualify to use the optional method with the standard mileage rate? - ANSOwn or lease the vehicle; not use the vehicle for hire; not have more than four vehicles in simultaneous business use at any time during the year; use the optional method the first year the car or truck is placed in service. When are education expenses not deductible? - ANSIf the education is required to meet the minimum educational requirements in effect when the taxpayer first obtained the job or if it qualifies him for a new trade or business. Are tax preparation fees deductible? - ANSYes What line of Schedule A are investment expenses included on? - ANSLine 23 Hobby - ANSAn activity not entered into for profit. What portion of hobby expenses are deductible? - ANSThe portion up to the amount of income from the hobby that is reported on the tax return. Are funeral expenses deductible? - ANSNo Is homeowner's or renter's insurance deductible? - ANSNo Are gambling losses deductible? - ANSOnly to the extent of winnings reported as income. Form 6251 - ANSAlternative Minimum Tax - Individuals Form 8801 - ANSCredit for Prior Year Minimum Tax - Individuals, Estates, and Trusts Acquisition Debt - ANSDebt incurred to acquire, construct, or improve the taxpayer's principal or secondary residence. General Sales Tax - ANSA general sales tax is a sales tax imposed on retail sales of a broad range of items at a single rate. Itemized Deductions - ANSCertain personal expenditures allowed as deductions from adjusted gross income. Personal Property Tax - ANSAn annual tax imposed on certain personal property, such as cars or boats, and based on the value of the property. Points - ANSA loan-origination fee that a buyer generally may deduct as interest.
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Prepaid Interest - ANSInterest paid in advance is deductible as an interest expense only as it accrues. Schedule A - ANSItemized Deductions Sections on Schedule A - ANSMedical and dental expenses; taxes you paid; interest you paid; gifts to charity; casualty and theft losses; job expenses and certain miscellaneous deductions; other miscellaneous deductions. Long-Term Care Contract - ANSAn insurance contract that provides only coverage for long- term care services. Insurance Policies for which Premiums are not Deductible - ANSLoss of earnings while injured; loss of life, limb, or sight; paying guaranteed amount for a given time period while hospitalized or injured; paying for medical care from a portion of auto insurance premiums. Maximum Deductions for Long-Term Care Insurance Premiums - ANS$340 (age 40 and younger) $640 (41-50) $1,270 (51-60) $3,390 (61-70) $4,240 (71 and older) Can stop-smoking programs be included as a medical expense? - ANSYes Can weight loss programs and surgery be included as a medical expense? - ANSYes Capital Expenditures - ANSThe cost of special equipment and structural improvements installed in a residence for medical purposes. What part of capital expenditures is deductible? - ANSIf the taxpayer rents, the full cost is deductible. If the taxpayer owns the home, the part of the cost that exceeds any increase in the value of the property is deductible. What portion of medical and dental expenses is deductible? - ANSTo the extent they exceed 7.5% of the taxpayer's adjusted gross income. What taxes are deductible? - ANSState and local taxes (income or general sales); real property taxes (state, local, and foreign); personal property taxes (state and local); foreign income taxes. General Sales Tax - ANSImposed on retail sales of a broad range of items at a single rate. Total Available Income - ANSAdjusted gross income plus any nontaxable income. Real Estate Taxes - ANSState, local, or foreign taxes levied on real property for the general public welfare. Personal Property Tax - ANSSimilar to a real estate tax, except that it is imposed on personal property. Is the amount of home mortgage interest paid deductible? - ANSYes Form 1098 - ANSMortgage Interest Statement Form 8283 - ANSNoncash Charitable Contributions
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HSA Eligibility - ANS(1) Be in a high deductible health plan. (2) Not be covered by other health insurance. (3) Not be eligible to be claimed as a dependent on someone else's return. Form 8889 - ANSHealth Savings Accounts (HSAs) Rollover - ANSA tax-free distribution of assets from one tax-advantaged plan that is reinvested in another HSA. Alimony Payments - ANSPayments made by one spouse to the other spouse or former spouse under a written separation or divorce instrument. Child Support Payments - ANSPayments pursuant to a court order, divorce decree, or other legal obligation. Scholarships and Fellowships - ANSFinancial aid grants awarded to students for the purpose of attending a college or performing research. Form 1099-G - ANSUnemployment Compensation Fully Taxable Scholarships and Fellowships - ANSIf a taxpayer receives a Form W-2 for scholarship and fellowship income, the income is fully taxable. Are gambling winnings taxable? - ANSYes Form W-2G - ANSCertain Gambling Winnings Form 1099-R - ANSDistributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. How Long-Term Disability Income is Reported - ANS(1) Until the taxpayer reaches minimum retirement age, the disability pension payments are reported as wage income. (2) Beginning on the day after the client reaches minimum retirement age, the disability pension payments are reported as pension income. When is social security disability income reported as wage income? - ANSNever Is social security disability income considered earned income? - ANSNo Other Income (Form 1040 Line 21) - ANSPrizes and awards; jury duty; cancelled debts; reimbursements; rental of personal property; taxable distributions from HSA or MSA; credit card insurance; hobby income; medical trial income. Nontaxable Income - ANSMost bequests and inheritances; certain foster care payments; child support payments; disaster relief payments; federal income tax refunds; insurance proceeds or court judgments; life insurance proceeds; medical insurance proceeds; rebates; most veterans' benefits; welfare benefits; workers' compensation. Custodial Parent - ANSThe parent with whom a child lived for the greater number of nights during the year. Dependent - ANSAn individual whose personal exemption may be claimed on another person's income tax return. Eligible Foster Child - ANSA child, other than the taxpayer's biological child, stepchild, or adopted child, who was placed with the taxpayer by an authorized placement agency or by a court order. Full-Time Student - ANSAn individual who is enrolled in a school for the number of hours or courses considered by the school to be full time.
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Investment Income - ANSIncludes interest, dividends, capital gains, and other types of distributions. Noncustodial Parent - ANSThe parent who is not the custodial parent of the child. Nonrefundable Credit - ANSA credit which cannot exceed the taxpayer's tax liability. Permanent and Total Disability - ANSA disability that prevents an individual from engaging in any substantial gainful activity because of a medically determined physical or mental impairment that is expected to result in death, or that has lasted or is expected to last for a continuous period of not less than 12 months. Principal Place of Abode - ANSThe place that an individual considers to be his permanent home. Qualifying Child - ANSA child who meets the relationship, age, residency, support, joint return, and the special test tests with regard to a taxpayer to determine the taxpayer's eligibility to claim the dependency exemption, child tax credit, earned income credit, or child and dependent care credit with regard to the child, or to use the head of household filing status. Qualifying Relative - ANSA person who bears a certain relationship to the taxpayer for whom the taxpayer provides more than one-half support for the year, whose gross income for the year is less than the exemption amount, and who is not claimed as a qualifying child of any taxpayer. Refundable Credit - ANSA credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer's tax liability. Support - ANSThe total amount provided on behalf of an individual. Qualifications for the Child Tax Credit - ANS(1) The taxpayer must have a qualifying child. (2) The qualifying child must be under the age of 17 at the end of the year. (3) The qualifying child must be a dependent on the taxpayer's return. (4) The qualifying child must be a US citizen. Is the child tax credit refundable? - ANSNo Is the additional child tax credit refundable? - ANSYes Qualifications for the Additional Child Tax Credit - ANS(1) Earned income exceeding $3000. (2) Three or more qualifying children. Maximum Earned Income Credit - ANS$ Qualifications for Earned Income Credit - ANS(1) Have a valid SSN. (2) Not filing married filing separately. (3) Be a US citizen. (4) Not file Form 2555. (5) Investment income of $3150 or less. (6) Have earned income. Qualifications for EIC without QC - ANS(1) Between 25 and 65 years old. (2) Cannot be claimed as a dependent by another taxpayer. (3) Not a QC of another person. (4) Live in US over half the year. (5) AGI of less than $13660 ($18740 if MFJ). Qualifications for EIC with QC - ANS(1) Have a QC. (2) QC not claimed by more than one person. (3) Not a QC of another person. (4) AGI less than: $36052 ($41132 MFJ) w/ 1 QC; $40964 ($46044 MFJ) w/ 2 QC; $43998 ($49078 MFJ) w/ 3+ QC.
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Stock-in-Trade - ANSProperty held for sale to customers. Capital Assets - ANSEverything you own or use for either personal purposes or investment purposes is a capital asset. Basis - ANSA measure of the taxpayer's investment in property for tax purposes. Cost - ANSIncludes the cash paid, the fair market value of services rendered, and the fair market value of property traded in exchange for the property. Adjusted Basis - ANSThe original basis PLUS the cost of improvements; the cost of restoration after a casualty; assessments for local improvements MINUS any discount, rebate, or reimbursement of any portion of the purchase price; insurance reimbursements for property damages; the amount of casualty or other losses deducted on the return for any year; depletion or depreciation allowed or allowable; any gain that is not reported in the year realized. Holding Period - ANSThe length of time an asset has been owned. Amount Realized - ANSThe amount of cash received by the seller from the buyer PLUS the fair market value of any obligations, property, or services received; the face value of any of the seller's liabilities the purchaser assumes as part of the transaction. Expenses of Sale - ANSIncludes the costs of transferring the property. Form 8949 - ANSSales and Other Dispositions of Capital Assets Schedule D Tax Worksheet - ANSTaxpayers must use if they have: Gains from the sale of collectibles; Unrecaptured 1250 gain; Gain from the sale of certain 1202 stock. Tax Rate of Long-Term Capital Gains - ANS15% Maximum Rate - ANS28%. Applies to long-term gain from the sale of collectibles; certain gain from the sale of 1202 stock, also called qualified small business stock. Collectible - ANSAny work of art, rug, antique, metal, gem, stamp, coin, alcoholic beverage, or other tangible property. Form 1099-B - ANSStocks or bonds sold through a broker. Form 1099-S - ANSClosure of certain real estate transactions. Capital Gain Distributions - ANSAmounts paid by mutual funds, regulated investment companies, and real estate investment trusts. Mutual Fund - ANS(1) An open-ended investment company that invests money of its shareholders in a usually diversified group of securities of other corporations. (2) A company that is in the business of buying and selling stocks and sharing its income with those invested in it. Nontaxable Distributions - ANSStock dividend distributions that are not taxable. Ordinary Dividends - ANSPaid out of the earnings and profits of the corporation. Ordinary Income (Loss) - ANSIncome that is fully includable in gross income and that does not have the characteristics of capital gain or loss. Qualified Dividends - ANSDividends received on shares of common stock held by the taxpayer for more than 60 days of the 120-day period beginning 60 days before the ex- dividend date.
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Returns of Capital - ANSA return of a shareholder's investment generally made because an excess amount of capital has been accumulated. Stock Dividend - ANSAdditional shares of stock distributed to shareholders at no cost. The number of shares received are a percentage of the shares owned. Interest - ANSMoney paid or received for the use of money. Schedule B - ANSMust be used if the taxpayer received any interest on foreign investments. Must be filed if the taxpayer received any of the following: Interest not properly attributable to the taxpayer; Interest on a seller-financed mortgage; Interest from US Savings Bonds which is being excluded from income. Form TD F 90-22.1 - ANSReport of Foreign Bank and Financial Accounts. May have to file if you have any financial interest in or signature authority over a financial account located in a foreign country. Form 8938 - ANSStatement of Specified Foreign Financial Assets. May have to file if you have any financial interest in or signature authority over a financial account located in a foreign country. Form 3520 - ANSAnnual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. May have to file if you received a distribution from or were the grantor of or transferor to a foreign trust. Form 1099-INT - ANSInterest Income Foreign Tax Credit - ANSA credit for foreign tax paid without making any calculations and without filing any supporting forms. Most Common Types of Distributions - ANS(1) Ordinary dividends (including qualified dividends) (2) Capital gain distributions (3) Nontaxable distributions Form 1099-DIV - ANSDividends and Distributions Kiddie Tax - ANSThe tax on the investment income of children. Rules of Kiddie Tax - ANS(1) If the child's interest and dividend income total less than $9,500, the child's parent may be able to include that income on their return instead of filing a return for the child. (2) If the child's interest, dividends, and other investment income total more than $1,900, part of that income may be taxed at the parent's rate instead of the child's rate. Form 8814 - ANSParents' Election to Report Child's Interest and Dividends Form 8615 - ANSTax for Certain Children Who Have Investment Income of More Than $1, Interest-bearing checking account, credited to account this year. Taxable? - ANSYes Credit union savings account, credited to account this year. Taxable? - ANSYes City municipal bond, pro rata earnings for this year. Taxable? - ANSNo A 1988 US Series EE Bond, cashed in this year. Election to report interest annually has not been made. Taxable? - ANSYes
