REG CPA Exam Questions with 100% Correct Answers | Graded A+

Individual Income Tax Formula - Gross income < Deductions for AGI > = AGI < Deductions from AGI (greater of itemized or standard deduction) > < Exemptions > = Taxable Income x Tax rate = Gross tax liability < Tax credits and prepayments > = Tax due or refund 2017 Exemption amount - 4050: Taxpayer, spouse, dependents Who must file? - 1. Income greater than or equal to the sum of: Personal exemption + Standard Deduction (Except MFS) + Additional Standard Deduction (65 or older or blind) 2. Net earnings from self-employment > 400 3. Dependents -Unearned income: 1050 -Earned income: 6350 -Total income exceeds larger of 1050 or earned income + 350 Qualifying widower with dependent child - -Can file MJ for 2 years following death (unless remarries) -Surviving spouse must pay over half of cost of maintaining household where dependent child lives for the whole taxable year Head of Household - -Not married, legally separated, can be married and lived apart for last 6 months of the taxable year -Not a qualifying widower - Not nonresident alien -Maintains household that is principal residence of a qualifying person (more than 1/2 the year)- dependent child or parent Head of Household: Living Requirements 1. Dependent (qualifying) child 2. Qualifying relative 3. Dependent parent - 1. Required to live with taxpayer 2. Required to live with taxpayer 3. Not required to live with taxpayer 1. To be a widow/widower, must be principal residence of dependent child for: 2. HOH: Must be principal residence of qualifying person: - 1. Whole year 2. More than half of a year Exemption: Birth or death during the year - Get full exemption; not prorated Qualifying Child: CARES - 1. Close relative: Child must be taxpayer's son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or descendant of any of these. Adopted & foster children count 2. Age limit: under 19 or 24 and under if full time college student 3. Residency and filing requirements: Same principal place of residence as taxpayer > 1/2 the year. Child can't file joint tax return for the year 4. Eliminate gross income test. Doesn't apply to qualifying child. 5. Support test changes: Did child contribute more than half of his or her support? Qualifying Relative: SUPORT - 1. Support test: taxpayer gave > 50% support 2. Taxable gross income is under exemption amount: 4050 3. Precludes dependent filing joint return 4. Only citizens of US or residents of US, Mexico, or Canada 5. Relative OR 6. Taxpayer lives with them for whole year if non-relative Multiple Support Agreements - -One supporter gets full exemption -Must be qualifying relative or lived with the taxpayer the whole year -Must have contributed > 10% of person's support MFS: Personal exemption claimed for spouse if: - 1. Spouse has no gross income 2. Not claimed as dependent of another taxpayer 1. Dividend income 2. SS benefits (low income) - 1. Taxable 2. Not taxable 2 years after death of spouse, surviving spouse - No longer qualify. Can use head of household. Phaseout of personal exemptions - Reduces exemption by 2% for every 2500 (1250 MFS) by which AGI > -MFJ/SS: 313800 -HOH: 287650 -Single: 261500 -MFS: 156900 Property & Services Obtained - Income- Basis at FMV Cancellation of debt - Debt forgiveness. Gross income Bargain purchases from employer -