Tax Accounting Chapter 4 2023

Which of the following choices is NOT a form of a tax prepayment? A. An overpayment of taxes in the prior year that was applied as an estimated payment for the current year. B. Income tax withheld from a taxpayer's salary or wages by an employer C. Estimated tax payments the taxpayer made directly to the IRS D. A tax refund received in the current year for the prior year: D. A tax refund received in the current year for the prior year T/F A taxpayer may deduct the greater of his standard deduction or his itemized deductions from AGI to arrive at taxable income: True • Yolanda is your client. With her current level of taxable income, she is paying tax at a 24% marginal rate. She received $2,000 in qualified dividends this year. What rate of tax do you expect that Yolanda will pay on her divi- dends?: Reason: Yolanda's 24% marginal tax rate is means her taxable income is more than $85,525 but less than $163,300, and for all values in that range, the long term capital gains rate applied to qualified dividends is 15%. 15% regular rate 20% for high income 0 for low income • What are the FOR AGI Deductions?: •Alimony paid for divorces finalized before 1/1/2019 • Capital losses (net losses limited to $3,000 for the year). • Health insurance for self-employed persons • Contributions to (non-Roth) qualified retirement accounts. • Rental and royalty expenses • One-half of self-employment taxes paid • Business expenses • Losses on the disposition of assets used in a trade or business. • What are the primary categories of itemized deductions?: • Medical and dental expenses: Deductible to the extent these expenses exceed 10% of AGI • Taxes: State and Local income taxes, sales taxes, real estate taxes, personal taxes, and other taxes [the annual aggregate deduction for taxes is limited to $10,000 ($5,000 if married filing separately)]. • Interest expense: Mortgage and investment interest expense. • Gifts to charity (charitable contributions). • Other miscellaneous deductions: Gambling losses (to the extent of gambling winnings) and certain other deductions. • True or False A taxpayer may deduct both his standard deduction and his itemized deduc- tions from AGI in order to calculate taxable income.: False Reason: He can only deduct the one of these amounts and should usually choose the larger of the two. • Dividends from corporations that meet certain requirements may be taxed at a favorable rate. These dividends are referred to as: Qualified Dividends. • True or False: Deductions for AGI cause a reduction in AGI, which increas- es the deductibility of from, AGI deductions subject to AGI limitations: True