CPA reg exam
Individual income tax formula - ANSGross income
- adjustments
=adj gross income
- Standard or itemized deductions
- exemptions
=taxable income
*tax rate
=federal income tax (reg or amt)
- tax credits
Other taxes
- payments
= tax due or refund
Gross income - ANSWages
Interest
Dividends
State tax refunds
Alimony received
Business income (schedule C)
Capital gain/loss (schedule D)
IRA income
Pension annuity
Rental income/loss
K-1 income/loss
Unemployment compensation
Social security benefits
Other income
Social security tax base is - ANSa self-employed person's net profit from self-employment
for employees, it is based on gross wages, employers also pay the tax
Adjustments - ANS"deductions to arrive at adjusted gross income"
Educator expenses
IRA
Student loan interest expenses
Tuition and fee deduction
Health savings account
Moving expenses
One half self employment taxes
Self employed insurance
Self employed retirement
,Interest withdrawal penalty
Alimony paid
Attorney fees in rare cases
Domestic production activities deduction
Filing Status - ANSDetermined by end of year status
Exceptions:
Divorced must not be joint.
Death of spouse can still be filed jointly
Qualifying widower - ANSMust have had dependent with you the whole year to qualify
Birth or death during the year - ANSStill get the full exemption.
head of household - ANSMust have a dependent for more than half the year.
Dependent can be:
Qualifying child
Mother or father(nursing home is fine)
Dependent relatives (must live with you)
Personal exemption - ANSParents use your exemption then you lose it
Phase out of personal exemptions - ANSExemptions reduced by 2% for every 2,500 over a
certain limit
Can a pet be a dependent - ANSNEVER
Qualifying child (CARES) - ANSClose relative
Age limit (19 or 24+ college)
Residency and filing requirement (1/2 year)
Eliminate gross income test
Support test changes (not more than one half of their own support)
Qualifying relative (SUPORT) - ANSSupport (tax payer supplied over 50%) test
Under exemption amount of taxable (gross) income test
Precludes dependent filing a joint tax return test
Only citizens (resident of US/Canada or Mexico) test
Relative test or Taxpayer lives with individual for the whole year test
Multiple support agreement - ANS1 supporter gets full exemption but contribute more than
10% of persons support
-all must be qualifying relatives that contribute cumulative more than 50% of the support of
the defendant
Increased standard deduction - ANSAge 65 or older
Blind
,Does not get an extra exemption
Computation of income - ANSTaxable =fmv income and fmv basis
Non taxable = no income and nbv basis
2 taxes on net business income - ANS1.Income Tax
2. Federal self-employment (SE) tax
as employee and employer you pay both
No deductible expenses on Schedule C - ANSSalary to sole proprietor
Federal income tax
Personal portion of any expenses
Bad debt expense of cash basis
Charitable contributions
Schedule C deductions - ANSlegal commissions
travel
supplies
office and phone
(penalties and illegal commissions are not deductible)
Net taxable loss - ANS2 year carryback
20 year carryforward
Uniform Capitalization Rules (inventory) - ANSProduced for use
Produced for sale
Acquired for resale
Schedule E - ANSRental income or loss (passive activity)
Tax planning - ANSDefer taxable income
Accelerate tax deductions
3 factors limiting losses - ANSTax basis (carried forward)
At-risk basis (carried forward until more at risk generated)
Passive loss limitations (deduct on to extent of income from passive activities)
No net rental loss allowed - ANSCarry forward
Offset future passive income
Deduct in year property sold
Exception to passive activity loss rules - ANSMom and pop exception
Real estate professional (not passive activity)
Mom and pop exception - ANS(25,000) and active
Carry-forward
, Phase-out
DNI - ANS-distributable net income
-maximum amount taxable to beneficiary, if distributed to them
Interest income - ANS- all interest income is taxable unless specifically excluded
Specifically excluded interest income (must be sole owner) - ANS-State and Local
Government Bonds/Obligations
-Bonds of a U.S. Possession
-Series EE (U.S. Savings Bonds)
-Veterans Administrations Income
Series EE - ANSEducational Expenses
Tax-free Dividend distributions - ANS-return of capital
-stock split
-stock dividend
-life insurance dividend
Penalty tax (10%) for early withdrawal of IRS - ANSHIM DEAD
-Home buyer (first time)
-Insurance (medical)
-Medical expenses over 10% of AGI
-Disability
-Education
-And
-Death
Schedule C - ANSBusiness Income or Loss
Schedule D - ANSGains and Losses on Disposition of Property
Schedule F - ANSFarm Income
Rental Income Calculation - ANSGross Rental Income
Prepaid Rental Income
Rent Cancellation payment
Improvement-in-lieu of rent
(rental expenses)
=Net rental income
Employee Taxation: W/ & W/o readily ascertainable value - ANSW/ - taxable when granted
W/o - Taxed at exercise
No IRA deduction if - ANS1. Rich
&
2. In a retirement plan
Individual income tax formula - ANSGross income
- adjustments
=adj gross income
- Standard or itemized deductions
- exemptions
=taxable income
*tax rate
=federal income tax (reg or amt)
- tax credits
Other taxes
- payments
= tax due or refund
Gross income - ANSWages
Interest
Dividends
State tax refunds
Alimony received
Business income (schedule C)
Capital gain/loss (schedule D)
IRA income
Pension annuity
Rental income/loss
K-1 income/loss
Unemployment compensation
Social security benefits
Other income
Social security tax base is - ANSa self-employed person's net profit from self-employment
for employees, it is based on gross wages, employers also pay the tax
Adjustments - ANS"deductions to arrive at adjusted gross income"
Educator expenses
IRA
Student loan interest expenses
Tuition and fee deduction
Health savings account
Moving expenses
One half self employment taxes
Self employed insurance
Self employed retirement
,Interest withdrawal penalty
Alimony paid
Attorney fees in rare cases
Domestic production activities deduction
Filing Status - ANSDetermined by end of year status
Exceptions:
Divorced must not be joint.
Death of spouse can still be filed jointly
Qualifying widower - ANSMust have had dependent with you the whole year to qualify
Birth or death during the year - ANSStill get the full exemption.
head of household - ANSMust have a dependent for more than half the year.
Dependent can be:
Qualifying child
Mother or father(nursing home is fine)
Dependent relatives (must live with you)
Personal exemption - ANSParents use your exemption then you lose it
Phase out of personal exemptions - ANSExemptions reduced by 2% for every 2,500 over a
certain limit
Can a pet be a dependent - ANSNEVER
Qualifying child (CARES) - ANSClose relative
Age limit (19 or 24+ college)
Residency and filing requirement (1/2 year)
Eliminate gross income test
Support test changes (not more than one half of their own support)
Qualifying relative (SUPORT) - ANSSupport (tax payer supplied over 50%) test
Under exemption amount of taxable (gross) income test
Precludes dependent filing a joint tax return test
Only citizens (resident of US/Canada or Mexico) test
Relative test or Taxpayer lives with individual for the whole year test
Multiple support agreement - ANS1 supporter gets full exemption but contribute more than
10% of persons support
-all must be qualifying relatives that contribute cumulative more than 50% of the support of
the defendant
Increased standard deduction - ANSAge 65 or older
Blind
,Does not get an extra exemption
Computation of income - ANSTaxable =fmv income and fmv basis
Non taxable = no income and nbv basis
2 taxes on net business income - ANS1.Income Tax
2. Federal self-employment (SE) tax
as employee and employer you pay both
No deductible expenses on Schedule C - ANSSalary to sole proprietor
Federal income tax
Personal portion of any expenses
Bad debt expense of cash basis
Charitable contributions
Schedule C deductions - ANSlegal commissions
travel
supplies
office and phone
(penalties and illegal commissions are not deductible)
Net taxable loss - ANS2 year carryback
20 year carryforward
Uniform Capitalization Rules (inventory) - ANSProduced for use
Produced for sale
Acquired for resale
Schedule E - ANSRental income or loss (passive activity)
Tax planning - ANSDefer taxable income
Accelerate tax deductions
3 factors limiting losses - ANSTax basis (carried forward)
At-risk basis (carried forward until more at risk generated)
Passive loss limitations (deduct on to extent of income from passive activities)
No net rental loss allowed - ANSCarry forward
Offset future passive income
Deduct in year property sold
Exception to passive activity loss rules - ANSMom and pop exception
Real estate professional (not passive activity)
Mom and pop exception - ANS(25,000) and active
Carry-forward
, Phase-out
DNI - ANS-distributable net income
-maximum amount taxable to beneficiary, if distributed to them
Interest income - ANS- all interest income is taxable unless specifically excluded
Specifically excluded interest income (must be sole owner) - ANS-State and Local
Government Bonds/Obligations
-Bonds of a U.S. Possession
-Series EE (U.S. Savings Bonds)
-Veterans Administrations Income
Series EE - ANSEducational Expenses
Tax-free Dividend distributions - ANS-return of capital
-stock split
-stock dividend
-life insurance dividend
Penalty tax (10%) for early withdrawal of IRS - ANSHIM DEAD
-Home buyer (first time)
-Insurance (medical)
-Medical expenses over 10% of AGI
-Disability
-Education
-And
-Death
Schedule C - ANSBusiness Income or Loss
Schedule D - ANSGains and Losses on Disposition of Property
Schedule F - ANSFarm Income
Rental Income Calculation - ANSGross Rental Income
Prepaid Rental Income
Rent Cancellation payment
Improvement-in-lieu of rent
(rental expenses)
=Net rental income
Employee Taxation: W/ & W/o readily ascertainable value - ANSW/ - taxable when granted
W/o - Taxed at exercise
No IRA deduction if - ANS1. Rich
&
2. In a retirement plan
