Individual Taxes

Individual Taxes

1. Miscellaneous

   • Accounting Basis
     • Cash
   • Portfolio Income
     • Interest & Dividend income
   • Qualifying Child vs. Relative
     • Child
       • < age 19, or < age 24 if student. Must be N. America resident
     • Relative
       • You must provide > 50% of support. Must live w/ you, unless parent. Must be N. American citizen
   • Petitions After Audits
     • How long does the taxpayer have to petition for appeal after an audit? = 90 Days
     • If No Petition...
       • How long does a taxpayer have to pay tax due after an audit? = 10 days
   • Statute of Limitations for Tax Audit
     • 3 years 6 years if 25% or more of gross income is omitted Clock starts on the LATER of the due date or the filing date of return
   • File Claim for Tax Refund?
     • Refund must be claimed within "LATER OF": 3 yrs of return due date OR within 2 years of being paid

2. Deductions - AGI (Schedule A)

   • *MSA/HSA contributions *Investment penalties for early withdrawal *Self-employed medical insurance premiums *Self-Employment Tax (approx. 50%) *IRA Contributions *Student loan interest (can't be another taxpayer's dependent) *Moving expenses *Alimony *Attorney fees in discrimination lawsuit *Qualified Tuition & Fees *Teacher Expenses
   • Section 179
     • $500k deduction w/ dollar-for-dollar reduction after $2M
     • Excess 179 expense is CF'd to next yr
   • Mortgage Interest
     • $1M deductible amt
     • Home Equity
       • $100k deductible amt
   • Business Gifts
     • $25 deductible
   • Business Start-Up Costs
     • Up to $5k deducted, reduced $-for-$ over $50k
       • Amortized over 180 months
   • Medical Expenses
     • Amts > 10% of AGI may be deducted
     • "If paid on behalf of another", deductible when:
       • 1) N. America citizen 2) Reside w/ you OR parent 3) Provide > 50% support
   • Foreign Taxes
     • Income & Real Estate taxes ARE deductible
     • Personal Property taxes NOT deductible
   • Excess Investment Int Exp
     • Gross inv income - (inv exp > 2% of AGI) = Net Inv Income
   • Mortgage Points
     • IF prepaid interest on new home purchase
       • Points are amortized over mortgage life
   • Charitable Contributions of L/T CG (related to charity's function)
     • Deducted at FMV, up to 30% AGI
     • Charitable Contributions of L/T CG (NOT related to charity function)
       • Deduction taken for adj. property basis, up to 50% AGI
   • Casualty Loss
     • "Lower of X" - Insurance Proceeds Rec'd - $100 - 10% AGI
       • Decrease in FMV
       • Basis in Property
   • Miscellaneous Deductions (in Excess of 2% of AGI)
     • Continuing Education
     • Business Travel
     • 50% Meals & Entertainment
     • Union Dues
     • Tax Prep. Fees
     • Legal Fees to Collect Alimony
     • Appraisal Fees to Value Casualty Loss of Charity
   • NOT Subject to "Phaseout" based on income, etc.
     • Medical
     • Casualty
     • Gambling
     • Investment Interest Exp
   • Traditional IRA Contributions

3. Carryovers to Future Years

   • Investment interest expense in excess of investment income Charitable contributions Excess Section 179 Capital losses AMT Paid Passive Activity Losses
   • Passive Activity Loss (PAL)
     • No Carryback
     • CF indef.
   • Charitable Contributions
     • 5 yr CF
   • AMT (Paid)
     • CF indef.
     • Applied to future "regular" income tax
   • Capital Losses
     • $3k max loss per yr,
     • Loss retains character (ST or LT)
   • Net Oper. Losses (NOL's)
     • Carried back 2 years
       • CF'd 20 years

4. Depreciation Conventions

   • Personal Property
     • Mid-year / Mid-quarter
       • Mid-quarter when 40% > purchases in Q4
     • Personal Tangible Property - Farming
       • MACRS 150 Depr. Table
   • Real Property
     • Mid-month
   • Leasehold improvements
     • 15-Yr S/L Depr

5. Personal Tax Forms

   • 1040 - Personal Tax Return
   • Schedules
     • Schedule B - Interest & Ordinary Dividends
     • Schedule A - Itemized Deductions
     • Schedule C - Profit or Loss from Business
     • Schedule D - Capital Gains & Losses
     • Schedule E - Supplemental Income & Loss
     • Schedule G - Capital Gains & Losses
     • Schedule H - Household Employment Taxes
     • Schedule I - Alternative Minimum Tax
     • Schedule K-1 - Partner's Share of Income, Deductions, Credits
     • Schedule SE - Self Employment Tax
       • 15.3% tax rate assessed

6. NOT Deductible

   • Accident or Disability insurance premiums
   • Investment Int Exp on Tax-Free Securities
   • Roth IRA Contributions

7. Tax Credits

   • Refundable Credits
     • A tax credit which takes the taxpayer's tax owed on the return below zero. Results in a refund
     • Earned Income Credit (EIC)
     • American Opportunity Credit
     • Add'l Child Tax Credit

8. NOT Taxable

   • Scholarships
     • When they are NOT in return for services rendered AND the money is used "only" for tuition & books
     • Includable in income
       • Scholarships for room & board
   • Workman's Comp Ins. Benefits
   • Child Support
   • Divorce Property Settlements

9. Tax Free

   • State & Municipal Bond Interest
     • US EE Savings Bond
   • Dividend Income
     • S-Corporation

10. Taxable

    • Unemployment Compensation Taxable
    • Any lawsuit payments for punitive damages
    • Alimony

11. Filing Status

    • Head of Household
      • -Must have dependent child-Must provide > 50% of child's support -Must live w/ them > 50% of year
    • Qualifying Widower
      • -Must have a dependent child -Gets "Married Filing Jointly" status for the year of death + 2 tax years
    • Married Filing Jointly
      • -Must be married at end of year -If one spouse dies, they must be married at the end of the year