Intiuit Academy - W-2 Form

How many income tax brackets are there?

7

Which box on the W-2 uses codes that represent other compensations or reductions applicable on an individual's taxable income?

Box 12

Which W-2 box reports the amount of income subject to Social Security tax?

Box 3

Employers prepare Form W-2 at the end of each year. Which employees must receive a Form W-2?

Every employee that receives payment(including non-cash payments) for services from the employer during the year.

Boxes 15-20 on the W-2 show the details of earnings that are:

Reported state and local earnings and taxes withheld

Enrico and his spouse Helena work for different companies. In 2023, Enrico earned $58,000 and Helena earned $45,000. They jointly contribute $2,500 to charity every year and they have no other itemized deductions. They have one child, age 5. They file their taxes jointly. What deductions and /or credits are Enrico and Helena eligible?

Standard deduction and child tax credit

What is the difference between a tax credit and a tax deduction?

Tax deductions reduce taxable income and tax credits reduce the amount of tax due.

Muriel made a contribution to her IRA and paid her property taxes. How would these deductions be treated on her tax return?

The IRA deduction is above the line and property tax is below the line.

What is adjusted gross income (AGI) also called?

The line

How many deductions regarding the line are there and what are they called?

There are two kinds: Above the line and under the line

A refundable credit is more advantageous. You get payment for them even if you don't have any tax.

True

Above-the-line adjustments for gross income include IRA contributions, self-employed health insurance, student loan interest, and one-half self-employment tax.

True

Tax credits apply to the tax amount you owe.

True

The current Medicare tax rate for employee's share of Medicare wages is 1.45%.

True

There is a tax credit that covers higher education expenses (for those that qualify).

True

To calculate how much the taxpayer owes in taxes, start with the lowest bracket. Multiply the rate by the maximum amount of income for that bracket. The taxpayer will repeat that step for the next bracket and continue until they reach their bracket. Add the taxes from each bracket together to get their total tax bill.

True

While deductions can reduce the amount of income before calculating the taxpayer's tax, tax credits can reduce the actual amount of tax they owe. Taxpayers can even claim certain credits to get a refund if they don't owe any tax.

True

Your filing status impacts your tax bracket, credits, and amount of itemized deductions needed to exceed the benefit of the standard deduction.

True

A nonrefundable credit can't exceed the taxpayer's federal income tax. In other words, your savings cannot exceed the amount of tax you owe. Examples include:

True - Foreign tax credit - Child and dependant care credit

The earned income tax credit is for which workers:

Workers with low to moderate income. The earned income tax credit is for workers with low to moderate income. For 2022, the earned income credit ranges from $560 to $6,935 depending on filing status, number of children, and earned income.

Is a W-2 required even when there is only one household employee?

Yes

Is a W-2 required when wages are less than 600 and the employer withheld any tax?

Yes

What are two examples of a refundable credit?

- Earned income tax credit - American opportunity tax credit

What are some items associated with the above the line deductions?

-IRA contribution - Self employed health insurance - Student loan interest, Tuition and fees deduction - Self employment tax - And other adjustments from schedule 1, line 26

Hassan and his wife Eliza work for different companies. In 2023, Hassan earned $89,000 and Eliza earned $170,000. They jointly contribute $12,500 to charity every year and have no other itemized deductions. They have three children, ages 10, 7, and 4. They file taxes jointly. The standard deduction for a married, filing joint for the year is $27,700. Assuming the couple has no other income and no above-the-line deductions, what is their taxable income?

231,300 - Both of their incomes combined minus the Standard deduction as it is higher than their itemized deduction would be