Title REG Cheat Sheet Taitel - R1_ Federal Taxation of Individuals.pdf ✅

REG Cheat Sheet Taitel R1: Federal Taxation of Individuals Filing Requirements Individual Income Tax Formula Qualifying Child (CARES) - must obtain SSN Who - must file if his income is equal or greater than the sum of the: Gross Income C - Close Relative - regular standard deduction amount (Adjustments) - must be taxpayers son, daughter, step son/daughter, siblings, step-sibliings, and decenndants of them - additional standard deduction amount for taxpayers 65+ Adjusted Gross Income (AGI) - also includes legally adopted children or foster children must also file if self employment income is $400+ (Standard or Itemized Deductions) A - Age Limit When - taxpayers must file by April 15th Taxable Income before QBI deduction - child must be younger than tax payer AND under 19 (or 24 for full time students) Extension to file for 6 months to October 15th (QBI Deduction) Full Time Student must attend an educatinal institution for at least part of 5 months of the taxable year - extention to file, not pay taxes; must pay taxes by April 15th still Taxable Income R - Residency and Filing Requirements - fill out Form 4868 Federal Income Tax - child must have the same principal place of abode as tax payer for more than half of the tax year (Tax Credits) - child must be a citizen of the US OR a resident of the US, Canada, or Mexico Filing Status Other Taxes E - Eliminate Gross Income Test Single (based on end of year status) (Payments) - gross income test does not apply to a qualifying child - on the last day of the tax year, they are unmarried or legally seperated Tax Due or Refund S - Support Test Joint Returns (based on end of year status) must be - qualifying child must not have contributed more than half of their own support a) married at year end Children of Divorced Parents - does not include scholarships of the dependents b) living together in a common law marriage parent who has the custody of the child for the greater part of the year qualifies to use them as a dependent not about money c) married and living apart (but not legally seperated) Qualifying Relative (SUPORT) - if divorced during the year → joint return may NOT be filed S - Support Test if spouse dies during the year → joint return may be filed if parents have equal custody, the parents with the higher adjusted gross income. will claim the dependent - tax payers have supplied more than half of the support of a person in order to claim as a relative Married Filing Separately U - Under Gross Income Limitation in a separate property state → separately report own incomes - may not be claimed as a qualifying relative unless the gross income is less than $4,700 in a community property state → most incomes are split 50/50 - only income that is taxable is included (doesnt include social secuity, tax-exempt interest or scholarship Qualifying Widower with Dependent Child Gross Income Basics P - Precludes Dependent Filing a Joint Return - tax payer who may use the joint tax deduction for two years following death Accrual Method: recognition occurs when earned similar to GAAP (with exceptions) - not a dependent if they are a married dependent filing a joing return - Spouse must pay over half of support and lives for the WHOLE year O - Only Citizens of the US or Residents of US, Canada, or Mexico - dependent child must be a child (adopted but not fostered) or stepchild Cash Method: recognition occurs in the period the revenue is actually/constructively received R - Relative Head of Household (single but takes care of dependent) - children, grandchildren, parents, grandparents, siblings, aunts, nieces, step and Inlaws Must meet the following conditions to qualify: Realization: what really happened - children include leggally adopted children, foster children, and step children a) person is unmarried, legally separated, or married living away for 6 months Recognition: what's recorded on the records - foster parents and cousins are not considered relatives b) individual is not a "qualifying widower" T - Taxpayer Lives with Individual (for non-relatives) for the Whole Year c) person is not a nonresident alien Dividend Income (Gross Income) - includes cousins or foster parents becuase they are not technically relatives d) maintains a home for more than HALF the taxable year Distribution of Company's Earnings and Profits Qualifying Child - child, stepchild, legally adopted, foster, bro/sis, or descendant From E&P → taxable dividend Salaries and Wages (Gross Income) Parents - dependent parent is not required to live, but contribute half of costs No E&P but no basis → nontaxable and lowers basis Money: all money received, credited, or available Dependent Relatives - must live with taxpayer (grandpa, siblings, aunts) No E&P and no basis → taxable capital gain income Property: FMV of all property is included in gross income - cousins, foster parents and unrelated dependents do not qualify Qualified Dividends: Those paid by domestic or certain qualified foreign corps Bargain Purchases: if an employer sells property for less than FMV → the difference is income to employee Guaranteed Payments to Partners: treated as self-employment tax Interest Income (Gross Income) Qualified Holding Period: stock must be held for more than 60 days before the dividend date Taxable Fringe Benefits: FMV of fringe benefits is included in employee's income Taxable Interest Income Employer Contributions to Roth 401k: contributions made by the employer are included in income - interest from federal, industrial develpment, and corporate bonds NonQualified Dividends Portion of Life Insurance Premiums: not income up to the first $50k; are taxable above that - part of the proceeds from an installment sale - employer stock held in stock ownership plan Nontaxable Fringe Benefits (Gross Income) - interest paid by government for late payment of a tax refund - amt taken into account as investment income Employer Paid Health Insurance: premiums are excludable from employee's income - bond premium → reduction to intest received and bonds basis - short sale positions Amount paid to the employee are includable in income unless: - bond discount → addition to intest received and bonds basis - certain foreign corportations a) reimbursement for medical expenses actually incurred - gifts given by banks for opening an account are taxable @ FMV - paid by credit unions, mutual savinings ect b) compensation for permanent loss, or loss of use, of a member or function of the body Tax-Exempt Interest Income (Reportable but not taxable) De Minimis Fringe Benefits: benefits so small to account for; excluded from income - State and Local Government Bonds/Obligations Meals and Lodging: not included if used because of the convenience of the employer - Bonds of US Possession (Guam or Puerto Rico) Employer Payment of Employee's Educational Expenses - US Series EE Savings Bonds (Educational Expeneses) - up to $5,250 may be excluded from gross income for payments on behalf of student loans Is tax-exempt when issued after 1989 and: Employee Adoption Assistance Program 1) is used to pay for higher education of taxpayer and dependents Stock Splits: are nontaxable - taxpayer can exclude $16,810 from taxable income of qualified adoption expeneses paid by employer 2) the taxpayer is over age 24 when the bond is issued - allocate the og basis over new shares held - exclusion is phased out for taxpayers with MAGI of $252,150-$292,150 3) married taxpayer files a joint return Stock Dividends: are nontaxable Dependent Care Assistance 4) the taxpayer meets certain income requirements - unless there is the option for cash or propety - employees can exclude $5,000 of benefits for dependent care expenses from gross income 5) purchaser of the bonds must be the sole owner of the bonds Qualifying Dependents Include: Is Phased out when modified AGI reaches a certain level Annuities (Gross Income) a) dependent children under age 13 Single/HOH: $96,800-$111,800 || MFJ: $145,200-175,200 Each annuity payment received consists of: b) spouse or other dependent physically or mentally incapable of self-care a) contribuitions = nontaxable Qualified Tuition Reduction IRA Distributions (Gross Income) b) earnings = taxed as ordinary income - undergraduate level tutition reduction may be excluded from income Type of Distribution Principal Earnings Fixed Period Annuity Payments - graduate level tutition reduction may excluded from income if both: Traditional Deductible IRA Taxable Taxable a) engaged in teaching or research activities Traditional Nondeductible IRA Nontaxable Taxable b) tuition reduction is in addition to the pay for teaching/research Qualified Roth IRA Nontaxable Nontaxable Life Annuity Payments Merchandise Discount: excludable discount is limited to employer's gross profit percentage Non Qualified Roth IRA Nontaxable Taxable - use the IRS life expectancy tables Service Discount: excludable discount is limited to 20% of the FMV of the services Qualified Roth IRAs distribution must be if lives longer → all is taxable income Employer-Provided Parking: value of parking up to $315 per month can be excluded 1) distrubution is made at least 5 years after first contribution if dies earlier → remaining investment is deducted Transit Passes: value of employer-provided passes up to $315 per month can be excluded 2) one of the following other requriements Qualified Non-Roth Retirement Plans a) taxpayer is age 59.5 or older State/Local Tax Refunds (Gross Income) Contributions Made by Employer are not income at the time of contribution b) taxpayer is disabled Interest paid by the state on late refund is taxable Contributions Made by Employee are not income at the time of contribution c) taxpayer is a first time home-buyer and is used to buy house refund in subsequent year is not taxable if no benefit Earnings on the amounts contributed are not taxable income to the employee until distributed d) distribution is made after taxpayers death itemized deduction → refund is taxable Benefits Received are ordinary income the year the amount was made available Premature Distribution is subject to a 10% penalty tax standard deduction → refund is nontaxable Flexible Spending Arrangements (FSAs) Exception to IRA Penalty Taxes (still subject to ordinary taxes) if used to pay for: - stems from Section 125 employee flexible benefit plan; allows a pretax reimbursement of certain exp H - Homebuyer (first time) distribution used to home purchases (10k max) Rental Income - Passive (Gross Income) - can elect to have part of salary (up to $3,200) deposited to pay for certain expenses I - Insurance (medical) if unemployed with 12 weeks of comp - net amount is calculated on Sch E on form 1040 - must be used within the plan year; forfeited if not used with 2.5 months after year end M - Medical Expenses in excess of % of AGI floor Net Amount = Rental Income - Total rental expenses D - Disability (only permanent or indefinite) Unemployment Compensation (Gross Income) Taxable Misc Income (Gross Income) E - Education (books, fees, tution) all of unemployment comp is taxable Prizes and Awards A - Adoption/Child Birth made within one year ($5k max exclusion) - FMV of prizes and awards is taxable UNLESS selected without entering contest and assigns prize to charity D - Disaster qualified natural disasters ($22k max per event) Social Security Income (Gross Income) Gambling Winnings and Losses T - Terminal illness or death of account owner Low Income (Single MAGI - <25k | MFJ - <32k) - winnings are included in gross income E - Emergency expense (up to $1,000 per year) - no SS benefits are taxable - losses are deductible on SchA as an itemized deduction only to the extent of winnings D - Domestic abuse victims (lesser of $10k or 50% of retirement) Middle Income (Single MAGI - 25-34k | MFJ - 32-44k) Damage Awards - if award is compensation for lost profit = the award is income - up to 50% of SS benfits are taxable Punitive Damages - are fully taxable if received in a business context or for loss of personal reputation Payments for Divorce (Gross Income) Upper Income (Single - >34k | MFJ - >44k) - includes personal injury but not wrongful death cases Payments made pursuant to a divorce before Dec 2018 - up to 85% of SS benfits are taxable Cancellation of Debt is taxable - included in gross income and deductible by payor spouse Modified Adjusted Gross Income (AEIOU) Partially Taxable Misc Income (Gross Income) Payments made pursuant to a divorce after Dec 2018 A - Adoption exclusion Degree Seeking Students - scholarships are excludable only up to amounts spent on tuition, fees (not room) - alimony recived is not included in gross income and payment is not deducted E - EE bond Income Non- Degree Seeking Students - scholarships are fully taxable at FMV 1) Alimony/Spousal Support Payments (for agreements before Dec 2018 I - IRA Tuition Reductions - only included in taxes if it is there only compensation - payments must be legally required under written divorce agreement O - Out of US Income Non-Taxable Misc Income (Gross Income) - payments must be in cash or equivalent U - University student loan interest Life Insurance Proceeds are excluded from the gross income of the beneficiary - payments cannot extend beyond the death of the payee - interest income element on deferred payouts is fully taxable - payments cannot be made to members of the same household Rental Income (Gross Income) For policies after Aug 17,2006: beneficary can exclude gross income benefits recived - payments must not be designated as anything other than alimony Gross Rental Income Gifts and Inheritances - not taxable unless its property sold in future terms - filiers can not file a joint tax return Prepaid Rental Income Medicare Benefits - exclude from gross income basic medicare benefits 2) Child Support is nontaxable Rent Cancellation Payment Workers Compensation - exclude from gross income 3) Property Settlements is nontaxable Improvement -in-lieu of rent Personal/Physical Injury or Illness Award - exclude from gross income (Rental Expenses) Accident Insurance (premiums paid) - exclude from gross income Business Income/Loss, Schedule C (Gross Income) Net Rental Income/Loss Foreign-Earned Income Exclusion