Deductions
Jack contributed 20,000 to a Roth IRA opened 12 years ago. The Roth IRA has a current value of 37,500. Jack is 53 1/2 years old and takes a distribution of 26,000. How much of the distribution will be taxable to Jack?
What is 6,000 (26,000-20,000?
Which of the following tax credits are not available for this tax filing year?
a. Adoption Credit
b. Foreign Tax Credit
c. Child and Dependent Care Credit
d. All of these choices are available credits
What is D?
What is the maximum number of qualifying children that a taxpayer can claim for the EIC?
What is 3?
If an employer contributes to a qualified retirement plan for his or her employees, the amount is deductible by the employer and the employee?
True
False
What is False?
Name an example of a withdrawal from an IRA that can be made without a penalty?
Examples: First time home expenses, adoption expenses, disabled tax payer
Jill is a nurse's assistant - not covered by a retirement plan and earns $47,000. She supports her husband Andy who sells pottery but has no earned income. They are both less than 40 years of age. What is the maximum total amount that the couple can contribute to the traditional IRA and deduct for this tax year?
a. 11,000
b. 7,000
c. 47,000
d. 14,000
What is d 14,000 (7,000 x 2)?
Which type of credit is generally more advantageous to the taxpayer- refundable tax credit or non refundable credit.
What is a refundable credit?
Do you need earned income to qualify for the Earned Income Credit?
What is Yes?
As a owner of a tax business you allow tax preparers to prepare taxes that do not reflect the data supplied by the client and results in huge refunds. What type of Act would IRS consider that you committed?
What is Tax Fraud?
Ben and Jerry paid 5,000 for adoption in 2025 for a qualified child.Their AGI was $269,190. How much is the allowable credit. Note AGI over $259,190 phase out at $299,190
What is3,750? 5,000 x (269,190-259,190 /40,000 =1,250. Subtract from 5,000
Is Personal property tax an itemized deduction?
True
False
What is True?
What is an example of a non-refundable tax credit?
Child and dependency credit -2441, Adoption Credit, Retirement Saver's Credit, Energy Credit
The EIC formula for calculating the credit is based on the AGI of the tax payer and number of qualifying children of the taxpayer if they have children.
True
False
What is True?
Andrew had net earnings from Real estate of 85,000. His liability for self-employment tax on his earnings is?
What is 12,010?
85,000 X. 9235 = 78,498 which is less than 168,600 max so use 78,498 X .124 = 9734 SS
78,498 X.029 = 2,276 Medicare care
12,010 Total
What are the two ways of Filing taxes?
Filing taxes (1) manually -paper return and (2) electronically -using software--e.g. Tax Cut, Turbo Tax
Deborah is single and incurred the following cost as a elementary school teacher : materials 260, other supplies 65. What can she deduct for or from AGI in this tax year?
a. 325 for AGI deduction and 0 from AGI deduct
b. 260 for AGI deduction and 65 from AGI deduct
c. 300 for AGI deduction and 0 from AGI deduct
d. 0
What is c (max is 300)?
Barbara has tax liability of $5,000 this tax year and income of $30,000. She paid $2,250 in qualifying expenses, as a full-time student- first year in college, was not claimed as a dependent on her parents' tax return, and her AOC was not subject to phase out. She has no prior felonies. What is the AOC tax credit allowed?
a. 2,500
b. 5,000
c. 2,250
d. 2,600
e. None of the above
What is none of the above ( 2,000x 100% + 25% X 250.00) or 2,062.50
AOC calculated as 100% on first 2,000 of expenses and 25% on the next 2,000 of expenses for a max of 2,500.
What is the EIC for the Owens family this tax year-married couple who earned $29,200 in this tax year and $31,025 in the prior tax year for an average earnings of $30,113? They had two children that meet the qualifications for qualifying child.
What is 7,152? Look up the earned income of 29,200 for the applicable filing status and number of children.
Richard, now a cash basis owner for "YOU Know It" provides the following information: Gross receipts 35,000, Dividend income personal-200, CGS 16,000, operating expenses 4,000 and state taxes paid of 450. How much are net profits from the business?
What is 14,550? GR 35,000-16,000, - 4,000 and 450)- dividend is personal not business
What is the official document that taxpayers use to file their Federal Tax return?
What is form 1040?
On December 1 of this tax year, Cathy entered into a lease on a building for use in her business for 2,000 per month. Cathy pays 18 months rent in advance on December 1. How much an Cathy deduct for rent in this tax year?
a. 2,000
b. 36,000
c. 18,000
d. 12,000
What is 2,000 ( only one month for December)?
To receive the child and dependency care credit the child must be under the age of 13 unless disabled.
True
False
True
Jackie is head of household for her 5 year old son (dependent) and 10 year old dependent daughter. She reported the following income: Wages 34,500, Interest Income 700, Gross Earnings from self employment of 7,000 prior to expenses of 3,000 from self employment. What is her EIC?
What is 3,956? 34,500(Wages) + 4,000(Net self employment income =38,500
Under the SEP plan provision, deductible contributions to a qualified retirement plan on behalf of an employee whose net earned income is 18,000 are limited to?
a. 4,000
b. 4,500
c. 9,000
d. None of the above
What is (b) 4,500 (18,000 X 25%)?
For this tax year, Mary and Jeff had adjusted gross income of $25,000. They contributed $1,300 to Red Cross for the recent flood in Georgia, Paid tuition for their son who is a freshman at Athens Technical College of $1,500, made cash contribution to a qualified charity of $700 and helped their mother who needed $250 for utilities. What is the max to deduct for Charitable contributions for this tax year?
a.3,750
b.3,500
c. 2,000
d. 700
What is 2,000? (1,300 + 700)