CPA Test Questions and Answers

CPA Test Questions and Answers Educator Expenses - Correct Answer-Deduction to arrive at AGI $250 per person, $500 MFJ Have to be ordinary and excess expenditures Deductible IRA - Correct Answer-$5500 or individual's compensation (lesser of) Not permitted when: 1) AGI 61K-71K (98-118 MFJ) 2) TP or spouse actively participates in another qualified plan. Random rule --> If one spouse is not active participant, phase-out is 118K-184K Roth IRA - Correct Answer-No deduction up front, earnings and distributions are tax free. Same amount of contribution as above, amount allowed to contribute is calculated after IRA Phase-out: Screw it Penalty: 10% if withdrawn before 59 1/2 (death) or not disabled/used for first time residence (10K limit) Nondeductible IRA - Correct Answer-The fallback, no aggregate of amounts for contribution purposes. Earnings are taxed, contributions are not because no deduction up front. Coverdell Education Savings Account - Correct Answer-Deduction to arrive at AGI Student Loan Interest Expense - Correct Answer-Deduction to arrive at AGI Can't be a dependent and must be legally obligated to pay the loan. $2,500/yr. No carryover period Phase out: Single 65K-80K double for MFJ Tuition and Fees Deduction - Correct Answer-Deduction to arrive at AGI $4000, can't use if expenses were applied to American Opportunity/Lifetime Learning Credit or Nontaxable Education Savings Account Distributions Same phase out amounts as student loan, only get 2K Health Savings Accounts - Correct Answer-Deduction to arrive at AGI Moving Expenses - Correct Answer-Deduction to arrive at AGI New Business and Old Residence > 50 miles apart, New residence must be reasonable distance from work 39/52 weeks must work at new location (75%) Direct Moving Costs ONLY: Travel and Lodging/Transportation Expenses Not allowed: Meals, Temporary Living Expenses, Costs of Breaking a Lease, Pre-Move House Hunting