EA 2022 Details... of mixed fun

What is the total amount a sole proprietor is obligated to report on Forms 1099-NEC based on the following expenses claimed on schedule C? Attorneys' fees to incorporated law firm: $600 Sign painter: $800 ($600 labor and $200 materials) Web page designer: $500 Incorporated janitorial company: $800 Consultant A: $1,000 ($400 paid in cash and $600 paid by check) Consultant B: $500 paid in cash Consultant C: $400 paid by check A. $1,400 B. $1,600 C. $2,000 D. $2,400

$2,400 References: Instructions for Form 1099-MISC and 1099-NEC pages 8-10; Pub 15-A (2022), pages 4-9 covers whether someone is an employee or a nonemployee independent contractor. (Key is computed as $600 to law firm + $800 to sign painter + $1,000 to Consultant A = $2,400)

A 62-year-old, married taxpayer files Married Filing Separately, and lives apart from the spouse for the entire taxable year. What is the taxpayer's base amount for computing taxable social security benefits for the taxable year? A. Zero B. $9,000 C. $25,000 D. $32,000

$25,000

if a taxpayer or a taxpayer's spouse actively participated in a passive rental real estate activity, the taxpayer can deduct up to

$25,000 of loss from the activity from the nonpassive income Rental real estate activities are generally considered passive activities, and the amount of loss a taxpayer can deduct is limited. If a taxpayer or a taxpayer's spouse actively participated in a passive rental real estate activity, the taxpayer can deduct up to $25,000 of loss from the activity from the nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Similarly, a taxpayer can offset credits from the activity against the tax on up to $25,000 of nonpassive income after considering any losses allowed under this exception. If the taxpayer is married, is filing a separate return (which is not the case here), and lived apart from his or her spouse for the entire tax year, the taxpayer's special allowance cannot be more than $12,500. If the taxpayer lived with his or her spouse at any time during the year and is filing a separate return, the taxpayer cannot use the special allowance to reduce his or her nonpassive income or tax on nonpassive income. The maximum amount of the special allowance is reduced if the taxpayer's modified adjusted gross income is more than $100,000 ($50,000 if married filing separately) and totally phased out if it equals or exceeds $150,000.

Rev. Elvin Snider is the ordained minister at Crossroads United Methodist Church. His salary on his Form W-2 is $20,000. He also receives a $12,000 housing allowance. His housing costs for the year are $14,000. What is Rev. Snider's self-employment income? $34,000 $32,000 $20,000 None of the answer choices are correct.

$32,000 Per Publication 517, page 4, all wages and self-employment income are subject to either SECA (Self-employment Contribution Act) or FICA (Federal Insurance Contribution Act). Per Table 1, on the same page, a minister is not covered by FICA, but is covered under SECA - meaning is subject to self-employment taxes. Page 3 further provides: "if you are a member of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church." Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting church or church denomination. Furthermore, even though all of the income from performing ministerial services is subject to self-employment tax for social security purposes, you may be an employee for income tax or retirement plan purposes, in which case your income is considered wages and not self-employed income. Publication 517 provides that a member of the clergy (minister, member of a religious order etc.) can request an exemption from self-employed tax. Provided that the clergy member meets the conditions prescribed in the publication (page 6), they would start by filing Form 4361. Publication 17, page 49, states, in part, that a member of the clergy must include in income offerings and fees received for marriages, baptisms, funerals, masses, etc., in addition to the taxpayer's salary. If the offering is made to the religious institution and not the minister, the amount is not taxable to the minister. In addition to salary, special rules for housing apply to members of the clergy. Under these rules, a minister does not include in income the rental value of a home (including utilities) or a designated housing allowance that is provided to the minister. The exclusion, however, cannot be more than the lesser of the following amounts: The amount actually used to provide or rent a home; The fair market rental value of the home (including furnishings, utilities, garage, etc.); The amount officially designated (in advance of payment) as a rental or housing allowance; or An amount that represents reasonable pay for the taxpayer's service. The home or allowance must be p

Ricky, age 35, and Lucy, age 51, are married and file a joint return. Ricky is covered by an employer plan. In 2022, Ricky had compensation of $50,000 and Lucy had compensation of $2,000. Their modified AGI was $215,000. What is the amount of the deductible contribution that can be made for Lucy to her traditional IRA for 2022? $2,000 $3,000 $6,000 $0

0 Deductible contributions to a traditional IRA are reduced, or eliminated, under certain conditions such as the taxpayer's filing status, participation in a qualified plan, and modified AGI (MAGI) amounts. In the case of a taxpayer with a married filing joint status (see Publication 590-A, page 13), the deductible contribution limits to a traditional IRA are as follows for a wage earner that is covered by an employer's qualified plan: If MAGI is $109,000 or less, a full deduction is permitted. If MAGI is between $109,000 and $129,000, a partial deduction is permitted. If MAGI is $129,000 or more, no deduction is permitted. Traditional IRA deductible contribution limits are as follows for the spouse that is not covered by an employer's qualified plan: If MAGI is $204,000 or less, a full deduction is permitted. If MAGI is between $204,000 and $214,000, a partial deduction is permitted. If MAGI is $214,000 or more, no deduction is permitted. In light of the couple's MAGI amount, no deductible contribution can be made for Lucy or for Ricky to their traditional IRA for 2022. The couple could make a nondeductible contribution since there is no AGI limit on these contributions. Publication 590-A, page 13

A single taxpayer in 2022 may enjoy the benefit of IRC Section 199A without limitation if she does not have taxable income in excess of what amount?$170,050

170,050The Tax Cuts and Jobs Act of 2017 (TCJA) created IRC Section 199A, which allows owners of pass-through entities to deduct 20% of their qualified business income, with certain limitations being phased in for taxpayers with taxable income exceeding $340,100 (joint filers) or $170,050 (other filers) in 2022.

Which of the following statements is correct regarding Form 8995 Qualified Business Income (QBI) Deduction Simplified Computation? A. Corporations should complete the Form 8995 to claim the QBI Deduction on their corporate returns B. Taxpayers will receive the Form 8995 from the IRS, if they are determined to be eligible for the QBI Deduction C. A single individual with QBI, whose taxable income doesn't exceed the threshold amount, should use the Form 8995 to claim the QBI Deduction D. A partnership is required to attach Form 8995 to their partnership tax return to claim the QBI Deduction

A single individual with QBI, whose taxable income doesn't exceed the threshold amount, should use the Form 8995 to claim the QBI Deduction

David is an interstate truck driver subject to Department of Transportation hours of service but is not an employee. In 2022, what percent of his meals can he deduct while working as an interstate truck driver?

A taxpayer can deduct 50% of the expenses incurred for business-related meals. The Consolidated Appropriations Act, 2021 (CAA) allows businesses to deduct 100% of business meals for years 2021 and 2022. The business meal expenses are required to be incurred for food and beverages provided by a restaurant. However, a taxpayer can deduct a higher percentage of their meal expenses while traveling away from their tax home if the meals take place during or incident to any period subject to the Department of Transportation's "hours of service" limits. The percentage, in this situation, is 80%.

The standard deduction is increased for individuals who are age 65 and older and/or: A. Blind B. Retired from the military C. A beneficiary of a trust D. Receiving unemployment compensation

A. Blind

20. Which of the below is a correct statement regarding Form 8938, Statement of Specified Foreign Financial Assets? A. Form 8938 is attached to your annual return and filed by the due date, including extensions B. If an income tax return is not required to be filed for the tax year, you are still required to file Form 8938 when specified foreign financial assets is more than the appropriate reporting threshold C. If you are required to file Form 8938, you must report the specified foreign financial assets in which you have an interest only if the assets affect your tax liability for the year D. Filing Form 8938 relieves you of the requirement to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) if you are otherwise required to file the FBAR

A. Form 8938 is attached to your annual return and filed by the due date, including extensions

13. Which of the following is correct regarding a personal casualty loss? A. Loss of property due to progressive deterioration is not deductible B. It is reduced by the amount of your standard deduction C. It must be less than 10% of your adjusted gross income D. It is deducted over a three-year consecutive period

A. Loss of property due to progressive deterioration is not deductible

1. Two taxpayers married on November 30. That same year, the husband enrolled in an accredited college to further his career and subsequently received a Form 1098-T, Tuition Statement. The wife was employed with an income of $45,000 and paid for the husband's education expenses. The taxpayers did not receive any other income for the year. Based on their circumstances, what is the correct method to report the education credit? A. Taxpayers must file a joint return to claim an education credit B. Based on the wife's AGI, they do not qualify to claim an education credit C. Husband is ineligible to claim an education credit because the wife paid his education expenses D. Wife should report nonqualified education expenses on Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

A. Taxpayers must file a joint return to claim an education credit

A single taxpayer filed their 2008 return and claimed $7,500 for the first-time homebuyer credit. The home was used as a primary residence until it was foreclosed on in the current tax year. Which is correct regarding the first-time homebuyer credit? A. The balance of the credit must be repaid and is reported on the tax return for the tax year which the foreclosure is completed B. The remaining unpaid credit is pro-rated over 15 years C. Since the home was purchased in 2008, there is no longer a requirement to repay the balance of the credit D. There is no requirement to repay the credit when the home is used as a primary residence for at least 5 years

A. The balance of the credit must be repaid and is reported on the tax return for the tax year which the foreclosure is completed

Tax preparation fees for individuals are deductible for the current year as: A. They are not deductible B. A tax credit on Schedule 1 C. An investment expense on Schedule A D. A miscellaneous itemized deduction subject to the 2% limit

A. They are not deductible

unreimbursed employee expenses in 2022:

Always zero Taxpayer can no longer claim any miscellaneous itemized deductions that are subject to the 2% of adjusted gross income limitation, including unreimbursed employee expenses. However, a taxpayer may be able to deduct certain unreimbursed employee business expenses if they fall into one of the following categories of employment: Armed Forces reservists; Qualified performing artists; Fee-basis state or local government officials; or Employees with impairment-related work expenses. As a result of the elimination of the miscellaneous itemized deductions subject to the 2% floor by the Tax Cuts and Jobs Act of 2017, none of the above items are deductible as miscellaneous itemized deductions.

Which of the following cannot claim the premium tax credit? An individual whose spouse is enrolled in a qualified health plan An individual who inherited a $1.5 million non-income-producing vacation home An individual whose household income increases to 390% of the federal poverty line An individual who becomes eligible as a dependent on their parent's joint tax return

An individual who becomes eligible as a dependent on their parent's joint tax return Publication 974, page 4, addresses the issue of who can take the premium tax credit (PTC). A person can take the PTC for 2022 if they meet the conditions under (1) and (2): For at least one month of the year, all of the following were true:An individual in the person's tax family was enrolled in a qualified health plan offered through the Health Insurance Marketplace on the first day of the month.That individual was not eligible for minimum essential coverage for the month, other than coverage in the individual market. An individual is generally considered eligible for minimum essential coverage for the month only if he or she was eligible for every day of the month. (See "Minimum Essential Coverage" on page 8 of Publication 974.)The portion of the enrollment premiums for the month for which the individual is responsible was paid by the due date of their tax return (not including extensions). However, if the individual became eligible for the advanced premium tax credit (APTC) because of a successful eligibility appeal, see "Enrollment premiums" on page 6 of Publication 974 for the date by which the individual's portion of the enrollment premiums must be paid. The individual is an applicable taxpayer for 2022, which means they must meet all of the following requirements:The individual's household income for 2022 is at least 100% but no more than 400% of the federal poverty line for their family size (see "Line 4" in the Form 8962 Instructions). However, having household income below 100% of the federal poverty line will not disqualify the individual from taking the PTC if they meet certain requirements described under "Household income below 100% of the federal poverty line" under "Line 6" in the Form 8962 Instructions, page 8.No one can claim the individual as a dependent on a tax return for 2022.If the individual was married at the end of 2022, generally they must file a joint return. However, filing a separate return from the individual's spouse will not disqualify the individual from being an applicable taxpayer if they meet certain requirements described under "Married taxpayers," which is covered in Publication 974, pa

Anil is a U.S. resident. His grandfather resides in Canada. Unbeknownst to Anil, when Anil turned 21, his grandfather opened a certificate of deposit account in Canada with Anil as the transfer-on-death beneficiary of the account. His grandfather passed away in 2020. The highest balance in the Canadian account for each year was $8,000 (in 2020), $12,000 (2021) and $15,000 (2022). Anil found out about the account and his FBAR filing requirement in 2022. What is Anil's best option to disclose his beneficiary interest in the Canadian account? In considering your answer, assume the IRS has not commenced any civil action or sent any examination notices to Anil. Anil should file a current FBAR for the year 2022 listing the Canadian account on his 2022 FBAR submission with the highest balance of $15,000. Anil should also submit his 2021 FBAR as a late filer and amend his 2021 and 2020 tax returns to include any interest he may have accrued from the certificate of deposit. Anil should submit his delinquent FBAR forms under the streamlined filing compliance procedures program. Anil should just amend his 2020 and 2021 tax returns and include his FBAR information. Anil is not required to file an FB

Anil should file a current FBAR for the year 2022 listing the Canadian account on his 2022 FBAR submission with the highest balance of $15,000. Anil should also submit his 2021 FBAR as a late filer and amend his 2021 and 2020 tax returns to include any interest he may have accrued from the certificate of deposit. Since Anil's failure to file was not due to negligence and was not willful, he can submit a late FBAR filing for 2021, and select "did not know I had to file" as the reason why he is filing late. For 2020, he did not have a filing requirement. To the extent he earned interest in 2020 and 2021, Anil should amend his returns to include the additional income. The streamlined filing compliance is for taxpayers who were negligent, but non-willful, which is not Anil's case. Amending the returns without any FBAR filing would make Anil delinquent on his foreign asset reporting. Even though Anil did not know about the existence of the account, he needs to show he took steps to remedy the situation as soon as he received pertinent information.

Deductable charitable contributions

As a result of TCJA of 2017, if a taxpayer makes cash contributions during the year to a 50% organization, their deduction for the cash contributions is limited to 60% of their AGI. (Publication 526, page 14) Publication 526, pages 15 and 16, provides the general rules when a taxpayer's contributions are subject to more than one of the contribution limits (i.e., 50%, 30%, and 20%). In general, the rules state that a taxpayer can deduct charitable contributions as follows: Cash contributions subject to the limit based on 60% of adjusted gross income (AGI). Deduct the contributions that don't exceed 60% of your adjusted gross income. Noncash contributions (other than qualified conservation contributions) subject on the limit based on 50% of AGI. Deduct the contributions that don't exceed 50% of your AGI minus your cash contributions falling under the 60% limit to a 50% organization. Cash and noncash contributions (other than capital gain property) subject to the limit based on 30% of AGI. Deduct the contributions that don't exceed the smaller of:30% of adjusted gross income or50% of adjusted gross income (minus the taxpayer's contributions to 50% limit organizations), including contributions of capital gain property subject to the special 30% limit

Additional Medicate tax

As provided in the instructions for Form 8959, page 1, all wages that are currently subject to Medicare tax are subject to Additional Medicare Tax to the extent they exceed the threshold amount for the taxpayer's filing status. Thus, Medicare wages and self-employment income are combined to determine if a taxpayer's income exceeds the threshold amount. In the case of a single taxpayer, the threshold amount is $200,000.

ABLE

As provided on pages 7-8 of Publication 907, contributions to an ABLE account are not tax deductible and must be in cash equivalents. Anyone, including the designated beneficiary, can contribute to an ABLE account. In addition, a person may establish an ABLE account if their blindness or disability occurred before age 26. As a disabled individual, a person may be eligible if either of the following applies: The person is entitled to benefits based on blindness or disability under Title II or XVI of the Social Security Act, or The person files a disability certification with their qualified ABLE program, including their diagnosis relating to their relevant impairment or impairments signed by a physician (as defined in section 1861(r) of the Social Security Act). In addition, the person must certify one of the following:The person has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, which can be expected to result in death or lasted or can be expected to last for a continuous period of not less than 12 months; orThe person is blind (within the meaning of section 1614(a)(2) of the Social Security Act). The total annual contributions to an ABLE account (including those rolled over from a Section 529 account, but not other amounts received in rollovers and/or program-to-program transfers) are limited to the annual gift tax exclusion amount ($16,000 for 2022, not $16,000 per person), plus certain employed ABLE account beneficiaries may make an additional contribution up to the lesser of these amount: the designated beneficiary's compensation for the tax year, or the poverty the continental United States of $12,880, $14,820 in Hawaii, and $16,090 in Alaska. (Publication 907, page 8) Therefore, the only correct response is an ABLE account can be established for the couple's son because he is disabled. Publication 907, pages 7-8

16. For medical expenses to be deductible as an itemized deduction in the current year, the expense must exceed what percentage of adjusted gross income? A. 2.0% B. 7.5% C. 10% D. Medical expenses are no longer deductible

B. 7.5%

12. A child may be subject to kiddie tax in the current year if: A. Neither parent of the child is alive at the end of the year B. The child is under age 18 at the end of the tax year C. The child has only nontaxable income of more than $2,300 D. The child is required to file a tax return and he or she files a joint return for the year

B. The child is under age 18 at the end of the tax year

The taxpayer has a child under the age of 24 who is a full-time student in their second year of college. The student will be claimed as a dependent on the taxpayer's return. The student's educational expenses included $8,000 for tuition and $4,000 for room and board. The student received a $5,000 scholarship for tuition use only, as well as an additional $2,500 scholarship to pay any of the student's college expenses. The taxpayer paid the remaining $4,500. Which of the following statements is correct, based on the information above? A. The student can claim the American Opportunity credit on the student's return for tuition expenses of $3,000 when the student reports the additional $2,500 scholarship as income B. The taxpayer can claim the American Opportunity credit on the taxpayer's return for tuition expenses of $3,000 when the student reports the additional $2,500 scholarship as income C. The taxpayer can claim the American Opportunity credit on the taxpayer's return for tuition expenses of $3,000, and neither the taxpayer nor the student should report any of the additional $2,500 scholarship as income D. The taxpayer can claim the American Opportunity credit on the taxpayer

B. The taxpayer can claim the American Opportunity credit on the taxpayer's return for tuition expenses of $3,000 when the student reports the additional $2,500 scholarship as income

4. The Net Investment Income Tax may apply to which of the following? A. Alimony B. Traditional IRA distribution C. Taxable mutual fund distribution D. Tax exempt municipal bond interest

C. Taxable mutual fund distribution

3. Which of the following statements is correct regarding Form 1095A, Health Insurance Marketplace Statement? A. Taxpayers do not need Form 1095-A to complete Form 8962, Premium Tax Credit, to reconcile advance payments of the premium tax credit or claim the premium tax credit on their tax return B. Taxpayers will receive Form 1095-A to complete Form 8962, Premium Tax Credit, if they have been covered by an employer insurance plan for the entire year C. Taxpayers will use Form 1095-A to complete Form 8962, Premium Tax Credit, to reconcile advance payments of the premium tax credit or claim the premium tax credit on their tax return D. Taxpayers will attach a Form 1095-A to their tax return to reconcile advance payments of the premium tax credit or claim the premium tax credit on their return

C. Taxpayers will use Form 1095-A to complete Form 8962, Premium Tax Credit, to reconcile advance payments of the premium tax credit or claim the premium tax credit on their tax return

. If you have a dependent that you cannot claim for the child tax credit, the dependent may still qualify you for which $500 credit? A. The Alternative Minimum Tax Credit B. The State and Local Income Tax Credit C. The Credit for Other Dependents D. The Credit for Foreign Dependents

C. The Credit for Other Dependents

19. The interest on qualified U.S. savings bonds may not be taxable if an individual pays: A. A reduced rent that is government subsidized B. Mortgage interest for a rental property C. Household employee wages more than $1,000 D. Qualified higher educational expenses in the same year

D. Qualified higher educational expenses in the same yea

Derek is a self-employed carpenter and is also an employee of Krispy, Inc. His self-employment net income is $55,000, and he received a W-2 for salaries and wages of $45,000. He is covered by his employer's pension plan. Which of the following statements is correct for 2022's Form 1040? Derek is eligible to take a deduction for his IRA contribution. Derek is eligible to take a deduction of up to 50% of his self-employment taxes. Derek is eligible to take a deduction of up to 100% of his health insurance premiums. Derek is eligible to take a deduction of up to 50% of his self-employment taxes and up to 100% of his health insurance premiums.

Derek is eligible to take a deduction of up to 50% of his self-employment taxes and up to 100% of his health insurance premiums. IRA TP deduction Single = or < 68,000 a full deduction Single > 68,00 < 78,000 partial deduction Partial deduction H of H $78,000 or more no deduction MFJ = or < 109,000 a full deduction MFJ > 109,00 < 129,000 Partial deduction Qualiying Widow(er) =129,000 or > no deduction MFS less than $10,000 partial deduction 10,000 or more no deduction If you did not live with your spouse at any time during the year, your filing status is considered "single" for this purpose (therefore, your IRA deduction is determined under the "Single" column). Please note that even though Derek is covered under his employer's plan, he is still eligible to set up a self-employed pension (SEP) based on his self-employed earnings. Making a contribution to a SEP would be deducted as an adjustment to income. However, this is not one of the answer options above. Second, self-employed taxpayers may deduct up to 50% of the taxpayer's self-employment taxes (Publication 17, Table 11-1, page 96). Finally, self-employed taxpayers may deduct from gross income 100% of amounts paid during the year for health insurance for themselves, spouses, and dependents (Publication 502, pages 21-22) and the taxpayer's children who were under age 27 at the end of 2022. As a result, Derek, who is single and covered under his employer's pension plan, is unable to take a deduction for an IRA, because his modified AGI is more than $74,000. However, Derek, who is self-employed, is eligible to deduct 50% of his self-employment taxes in 2022, and he is able to deduct 100% of his health insurance premiums in 2022. IRC Section 162(l)(1) Publication 17, pages 78 and 96 Publication 502, pages 21-22

Which of the following items could be subject to the Net Investment Income Tax? Alimony income Distribution from a taxable mutual fund Interest from a tax-exempt municipal bond Distribution from a traditional IRAtraditional IRA

Distribution from a taxable mutual fund

Which of the following items could be subject to the Net Investment Income Tax? Alimony income Distribution from a taxable mutual fund Interest from a tax-exempt municipal bond Distribution from a traditional IRA

Distribution from a taxable mutual fund Generally, net investment income includes gross income from interest, dividends, annuities, royalties, and rents, unless they are derived from the ordinary course of a trade or business that is not (a) a passive activity or (b) a trade or business of trading in financial instruments or commodities, or unless it is specifically excluded. Excluded income includes but is not limited to the following: Income excluded from gross income in Chapter 1 of the Internal Revenue Code (IRC) Income not included in net investment income Gross income and net gain specifically excluded by IRC Section 1411, related regulations, or other guidance published in the Internal Revenue Bulletin Examples of excluded items are: wages, unemployment compensation, Alaska Permanent Fund Dividends, alimony, Social Security benefits, tax-exempt interest income, income from certain qualified retirement plan distributions, and income subject to self-employment taxes. Instructions for Form 8960, page 1

ABLE

Distributions to pay for qualified disability expenses are not included in gross income. The earnings portion of a distribution in excess of qualified disability is included in gross income. Any distribution amount included in taxable income from an ABLE account is assessed an additional tax of 10%. Publication 907, pages 7-9, provides the general rules for the taxing of distributions from ABLE accounts. In general, a person can take distributions from their ABLE account to pay for any qualified disability expenses such as expenses for maintaining or improving their health, independence, or quality of life. Qualified disability expenses include those for education; housing; transportation; employment training and support; assistive technology; personal support services; health, prevention and wellness; financial management; administrative services; legal fees; expenses for oversight and monitoring; and funeral and burial. If distributions from a person's ABLE account during a year are not more than their qualified disability expenses for that year, no amount is taxable for that year. If the total amount distributed during a year is more than their qualified disability expenses for that year, the earnings portion of the distribution is included in their income for that year. The includible portion is calculated as follows: (Qualified portion of distribution ÷ Total distribution) × Earnings portion of distribution = Nontaxable earnings amount In addition, the tax on any distribution included in a person's taxable income is increased by 10%. This tax is figured on Form 5329, Part II, and is filed even if the taxpayer is not otherwise required to file a federal income tax return. Publication 907, pages 7-9

1099s

Due to the creation of Form 1099-NEC, Form 1099-MISC, Miscellaneous Income, has been redesigned and box numbers rearranged for reporting certain income (Form 1099-MISC Instructions, page 1). File Form 1099-MISC for each person in the course of your business to whom you have paid the following during the year: rents (box 1); prizes and awards (box 3); other income payments (box 3); generally, the cash paid from a notional principal contract to an individual, partnership, or estate (box 3); any fishing boat proceeds (box 5); medical and health care payments (box 6); crop insurance proceeds (box 9); payments to an attorney (box 10); section 409A deferrals (box 12); or nonqualified deferred compensation (box 14) On the other hand, the reintroduced Form 1099-NEC will be used to report nonemployee compensation (NEC) for each person in the course of your business to whom you have paid the following during the year: Services performed by someone who is not your employee (box 1) Cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish Payments to an attorney (box 1) Instructions for Form 1099-MISC and 1099-NEC, pages 1 and 7

706

Funeral expenses (Schedule J, Form 706) Generation-skipping transfer tax (Schedule R and R-1, Form 706) Charitable, public, and similar gifts and bequests (Schedule O, Form 706)

If an involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award,

Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home.You may not have to report a gain on an involuntary conversion if you receive property that is similar or related in service or use to the converted property.If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can choose to postpone reporting the gain. Publication 544, pages 6 and 7, provides that an involuntary conversion occurs when a person's property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and the person receives other property or money in payment, such as insurance or a condemnation award. Involuntary conversions are also called involuntary exchanges. In addition, a gain or loss from an involuntary conversion on a taxpayer's property is usually recognized for tax purposes unless the property is the taxpayer's main home. The gain or loss is reported on the taxpayer's tax return for the year that it is realized. A taxpayer cannot deduct a loss from an involuntary conversion of property that was held for personal use unless the loss resulted from a casualty or theft. However, depending on the type of property received by the taxpayer, a gain may not need to be reported on an involuntary conversion. That is, the gain is not reported if the taxpayer received property that is similar or related in service or use to the converted property. The basis for the new property is the same basis for the converted property. This means that the gain is deferred until a taxable sale or exchange occurs. If the taxpayer receives money or property that is not similar or related in service or use to the involuntarily converted property and the taxpayer buys qualifying replacement property within a certain period of time, the taxpayer can choose to postpone reporting the gain. As a result, all of the statements given in this question are correct responses.

net investment income

Generally, net investment income includes gross income from interest, dividends, annuities, royalties, and rents, unless they are derived from the ordinary course of a trade or business that is not (a) a passive activity or (b) a trade or business of trading in financial instruments or commodities, or unless it is specifically excluded. Excluded income includes but is not limited to the following: Income excluded from gross income in Chapter 1 of the Internal Revenue Code (IRC) Income not included in net investment income Gross income and net gain specifically excluded by IRC Section 1411, related regulations, or other guidance published in the Internal Revenue Bulletin Examples of excluded items are: wages, unemployment compensation, Alaska Permanent Fund Dividends, alimony, Social Security benefits, tax-exempt interest income, income from certain qualified retirement plan distributions, and income subject to self-employment taxes. Instructions for Form 8960, page 1

if taxpayer has more than one business - Self employement tax reporting

If a taxpayer has more than one business, the taxpayer must combine the net profits and losses of all businesses. Publication 334, page 44, provides that if a taxpayer has earnings subject to self-employment (SE) tax from more than one trade, business, or profession, the taxpayer must combine the net profit (or loss) from each to determine total earnings subject to SE tax. A loss from one business reduces the taxpayer's profit from another business. Publication 334, page 44 Instructions for Schedule SE (Form 1040)

EIC and that her error was due to reckless or intentional disregard of the EIC rules.

If the IRS determined that a taxpayer was not entitled to the EIC and that the taxpayer error was due to reckless or intentional disregard of the EIC rules, then they are unable to claim the credit for 2 years. The date on which the EIC was denied and the date on which the taxpayer filed their 2022 return affect the years for which they are prohibited from claiming the EIC. ( the notice date +2) No additional penalty

estimated tax if

In general, a taxpayer must pay estimated tax if both of the following apply: The taxpayer expects to owe at least $1,000 in tax for 2022 after subtracting his or her withholdings and refundable credits. The taxpayer expects his or her withholdings and credits to be less than the smaller of 90% of the tax to be shown on the 2022 tax return or 100% of the tax shown on the 2021 tax return. Moreover, the 2021 tax return must cover all 12 months. In this case, Charles satisfies both tests. He expects to owe $1,500, which is greater than $1,000. In addition, his withholdings of $0 are less than the smaller of $1,350 (90% of $1,500, which is the expected tax for 2022) or $2,000, which is 100% of his 2021 tax liability.

Deductable Charitable Contributions

In order to deduct charitable contributions, those contributions must be made to a qualified organization. To become a qualified organization, most organizations, other than churches and governments, must apply to the IRS for such status. (Publication 526, page 2) The money or property you give to the following organizations would be deductible as charitable contributions as provided in Table 1 (Publication 526, page 3): Churches, a convention or association of churches, synagogues, temples, mosques, and other religious organizations Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt) Nonprofit hospitals and medical research organizations Most nonprofit charitable organizations such as United Way, including the Salvation Army, American Red Cross, CARE, and Goodwill Industries Most nonprofit educational organizations, including Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, colleges, and museums War veterans' groups Expenses paid for a student living with the taxpayer, sponsored by a qualified organization Out-of-pocket expenses when the taxpayer serves a qualified organization as a volunteer With respect to contributed property to a qualified organization, a taxpayer generally can deduct the fair market value of the property at the time of the contribution (Publication 526, page 8). In the case of clothing and household items, a person cannot take a deduction for these items unless the item is in good used condition or better. An exception to this rule is if the taxpayer deducts more than $500 for an item and a qualified appraisal of the item is included in the return, a deduction for an item that is not in good used condition or better is deductible. (Publication 526, page 8)

interest deduction after limitation calculation

Instructions to Schedule A, Form 1040, page A-8 indicate a taxpayer cannot deduct personal interest. Examples of personal interest include car loans, credit card interest, etc.he instructions also indicate the taxpayer is entitled to deduct qualified home mortgage interest and interest on student loans (on Schedule 1). It can be main or second home. The loan may be a mortgage to buy the taxpayer's home, a second mortgage, a line of credit, or a home equity loan (provided that the equity loan is used to buy, build or improve the residence). Deductibility of interest associated with a mortgage loan is limited to $750,000 for loans originating after December 15, 2017 (Publication 936, page 2).

Which of the following statements is correct about filing Form 8867 with a 2022 tax return concerning the paid preparer's earned income credit (EIC)? It is a taxpayer's checklist that is filed with their tax return. It contains a due diligence requirements section for tax returns claiming the EIC. It is set up for taxpayers with one or two children only. All of the responses are correct.

It contains a due diligence requirements section for tax returns claiming the EIC. Form 8867 is a paid preparer's (not a taxpayer's) due diligence checklist that should be completed by a tax preparer. It is required to be filed with tax returns for any taxpayer claiming the EIC, child tax credit (CTC), additional child tax credit, and American opportunity tax credit (AOTC). In addition, beginning with 2018 tax returns, this form must be filed for any taxpayer claiming Head of Household. The checklist for 2022 has six parts: The first part (Due Diligence Requirements) is applicable to all taxpayers claiming any of the four tax credits to determine whether the taxpayer satisfies the basic requirements for claiming the credit. The second part pertains to Due Diligence Questions pertaining to Returns Claiming EIC. The third part pertains to Due Diligence Questions pertaining to Returns Claiming CTC/ACTC/ODC. The fourth part pertains to Due Diligence Questions pertaining to Returns Claiming the AOTC. The fifth part pertains to claiming Head of Household. The sixth part certifies the credit eligibility by the tax preparer. As a result, the only correct response for this question is that the checklist contains a due diligence requirements section for tax returns claiming the EIC. Form 8867, pages 1-2

Earned Income Tax Credit

Low-income individuals who have earned income and meet certain requirements may be eligible for the refundable earned income tax credit. Publication 596, page 7, explicitly identifies under Rule 7 those amounts that fall under earned income and items that are not included in earned income. Earned income includes: wages, salaries, tips, and other taxable employee pay, net earnings from self-employment, and gross income received as a statutory employee. Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. However, there is an exception for nontaxable combat pay. A taxpayer can elect to include his or her nontaxable combat pay in earned income for the earned income credit calculation. Publication 596, page 8, states that earned income does not include interest and dividends, pensions and annuities, Social Security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Additionally, earnings while an inmate are not includible in earned income when determining the earned income credit. In addition, whether or not a person has an approved Form 4361 (Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners), amounts received for performing ministerial duties as an employee count as earned income. Therefore, in determining the earned income for earned income tax credit purposes in the above question, wages of a minister who has an exemption from self-employment tax are the only monies that would be deemed earned income. Publication 596, pages 7-8

Additional Medicare Tax MFJ

MFJ threshold amount is $250,000

. Which of the following is NOT included when calculating if any social security benefits are taxable : A. Interest that is tax-exempt B. Foreign earned income C. Meals excluded form gross income under section 119 D. Employer-provided adoption benefits

Meals excluded form gross income under section 119

. Which of the following is true regarding the premium tax credit (PTC)? A. Married individuals are always required to file a joint return to qualify for the credit B. For at least 6 months during the year the individual was enrolled in a qualified health plan C. Form 1095-A, Health Insurance Marketplace Statement, is not needed to complete Form 8962, Premium Tax Credit (PTC) D. No PTC is allowed for an individual's coverage for any period that an individual is not lawfully present in the United States

No PTC is allowed for an individual's coverage for any period that an individual is not lawfully present in the United States

Which of the following is treated as compensation for purposes of determining an allowed IRA contribution? Income passed through to a limited partner Foreign earned income that is excluded from income Pension income None of the answer choices are treated as compensation for determining an allowed IRA contribution.

None of the answer choices are treated as compensation for determining an allowed IRA contribution. Publication 590-A, page 7, provides some situations where income does not count as compensation for IRA contribution purposes. Compensation does not include any of the following: Earnings and profits from property, such as rental income, interest income, and dividend income Pension or annuity income Deferred compensation received (compensation payments postponed from a past year) Income from a partnership for which the taxpayer does not provide services that are a material income-producing factor Any amounts the taxpayer excludes from income, such as foreign earned income and housing costs All of the answer choices are items that would not qualify as compensation for IRA purposes. Publication 590-A, page 7

1244 stock

Ordinary loss and capital gain loss is ordinary and reported in 4797 gain is capital and reported in 8949 A taxpayer can deduct as an ordinary loss, rather than as a capital loss, his or her loss on the sale, trade, or worthlessness of a small business investment company (also known as Section 1244 stock or a SBIC stock). The loss is reported on Form 4797, Part II, line 10. Any gain on this stock is capital gain and is reported on Form 8949 if the stock is a capital asset in the taxpayer's hands (Publication 550, page 53).

6. Which of the following situations is reported on Form 1099 MISC: A. Payment of non-employee compensation of $600 or more B. Payments of rent of $400 C. Payments of $5 in royalty income D. Payments made to a physician or other supplier or provider of medical or healthcare services of $600 or more made in your trade of business

Payments made to a physician or other supplier or provider of medical or healthcare services of $600 or more made in your trade of business

Alternative Minimum Tax (AMT)

Publication 17, page 104, provides a list of the more common adjustments and tax preference items in computing the alternative minimum tax (AMT). The list includes the following items: Addition of the standard deduction (if claimed) Addition of itemized deductions claimed for state and local taxes, certain interest, most miscellaneous deductions, and part of medical expenses Subtraction of any refund of state and local taxes included in gross income Changes to accelerated depreciation of certain property Difference between gain and loss on the sale of property reported for regular tax purposes and AMT purposes Addition of certain income from incentive stock options Change in certain passive activity loss deductions Addition of certain depletion that is more than the adjusted basis of the property Addition of part of the deduction for certain intangible drilling costs Addition of tax-exempt interest on certain private activity bonds Additional information about the alternative minimum tax can be found in the instructions for Form 1040 or 1040-SR, Schedule 2, line 1, and Form 6251, Alternative Minimum Tax—Individuals. Given the information above, the addition of all itemized deductions, if claimed, is not a tax preference item or adjustment to taxable income for AMT purposes. The addition is limited to a select few itemized deductions as given above. Publication 17, page 104

Alternative minimum tax

Publication 17, page 104, provides a list of the more common adjustments and tax preference items in computing the alternative minimum tax (AMT). The list includes: addition of the standard deduction (if claimed), addition of itemized deductions claimed for state and local taxes, certain interest, most miscellaneous deductions, and part of medical expenses, subtraction of any refund of state and local taxes included in gross income, changes to accelerated depreciation of certain property, difference between gain and loss on the sale of property reported for regular tax purposes and AMT purposes, addition of certain income from incentive stock options, change in certain passive activity loss deductions, addition of certain depletion that is more than the adjusted basis of the property, addition of part of the deduction for certain intangible drilling costs, and addition of tax-exempt interest on certain private activity bonds.

Child tax credit childs age limit

Publication 17, page 105, provides that a taxpayer is eligible for the child tax credit of $2,000 for each qualifying child. A qualifying child is defined as a child that is under age 17 at the end of 2022, is a citizen or resident of the United States, did not provide over half of his or her own support, lived with the taxpayer for more than half of 2022 (with limited exceptions), and satisfies the relationship test (taxpayer's son, daughter, adopted child, stepchild, or a descendent of any of them (e.g., grandchild); brother, sister, stepbrother, stepsister, or a descendent of any of them (e.g., niece or nephew) if the taxpayer cares for the individual as their own child; or eligible foster child). Under age 17 at the end of the tax year, A U.S. citizen, U.S. national, or resident of the United States, Did not provide over half of his or her own support, Lived with the taxpayer for more than half of 2022 (with limited exceptions), and Must be the taxpayer's:Son, daughter, adopted child, stepchild, foster child, or a descendent of any of them (e.g., grandchild), orBrother, sister, stepbrother, stepsister, or a descendent of any of them (e.g., niece or nephew). Additionally, the credit is further reduced below $2,000 by modified adjusted gross income starting at the following amounts: Married filing jointly: $400,000 All other tax filers: $200,000 Under certain circumstances, all or part of the child tax credit may be refundable. In this case, the age requirement for a qualifying child is violated since the child is age 17 by year-end (not under age 17). Hence, the couple does not qualify.

Traditional IRA Qualigied Charitable Distribution

Publication 17, page 82, states, in part, that in general, distributions from a traditional IRA are taxable in the year the taxpayer receives them. The following are exceptions to the above rule: rollovers, qualified charitable distributions (QCDs) , tax-free withdrawals of contributions, and return of nondeductible contributions. The amount should be less than $100,000 The person should be over 70-1/2 when the gift is given , and the entire amount would otherwise be taxable income. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of a taxpayer's IRA to an organization eligible to receive tax-deductible contributions. The taxpayer must have been at least age 70-1/2 when the distribution was made and the total QCD cannot be more than $100,000. In addition, the amount of the QCD is limited to the amount of the distribution that would otherwise be included in income. (Publication 590-B, page 14)

Investment Income Carla borrowed $100,000 to buy land for investment. Her income sources for the year include $3,000 interest, $1,000 dividends (assume nonqualified), and $4,000 royalties. How much of the $5,000 interest expense paid on the land loan can she deduct this year? $8,000 $4,000 $3,000 $5,000

Publication 550, page 31, provides that in the case where a taxpayer borrows money to buy property that is held for investment, the interest that the taxpayer pays is investment interest expense and it can be deducted up to the amount of investment income. However, a person cannot deduct interest incurred to produce tax-exempt income. Investment income generally includes gross income from property held for investment such as interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Form 4952, Investment Interest Expense Deduction, is used to figure a taxpayer's deduction for investment interest unless one of the exceptions apply (see Publication 550, page 34). For Carla, she is able to deduct the entire $5,000 of interest expenses because it is less than her total investment income of $8,000, which is the sum of her interest of $3,000, dividends of $1,000, and royalties of $4,000. Note: This is a tricky question in that royalties are not always investment income; they can be business income appearing on a Schedule C. In general, you should assume that royalties are investment income unless told otherwise or it is obvious from the facts given in the question. Further please note, that Instructions to Form 4952 indicate that only ordinary dividends represent income that can offset investment interest expense. Qualified dividends are subtracted.

early distribution excise tax

Publication 590-B, page 25, provides the general exceptions to the early distribution excise tax penalty. The following are some exceptions to this excise tax: The taxpayer has unreimbursed medical expenses that are more than 7.5% of the taxpayer's AGI. The distributions are not more than the cost of the taxpayer's medical insurance due to a period of unemployment. The taxpayer is totally and permanently disabled. The taxpayer is the beneficiary of a deceased IRA owner. The taxpayer is receiving distributions in the form of an annuity. The distributions are not more than the taxpayer's qualified higher education expenses. The taxpayer uses the distributions to buy, build, or rebuild a first home. The distribution is due to an IRS levy of the qualified plan. The distribution is a qualified reservist distribution. As given in the listing above, all three distributions are exceptions to the early distribution penalty.

Household Employee

Publication 926 addresses issues associated with household employment. In particular, Schedule H is used to report household employment taxes and is necessary if the taxpayer pays any of the following wages to the employee (Publication 926, page 11): Social Security and Medicare wages FUTA wages Wages from which a taxpayer withholds federal income tax As provided in Table 1 on page 5 of Publication 926, a person needs to pay employment taxes if they: Pay cash wages of $2,400 or more in 2022 to any one household employee. But wages are not counted if they are paid to a taxpayer's spouse, child under the age of 21, parent, or any employee under the age of 18 at any time in 2022; or Pay cash wages of $1,000 or more in any calendar quarter of 2021 or 2022 to any household employee. Wages are not counted if they are paid to a taxpayer's spouse, child under the age of 21, or parent. Schedule H is filed with a taxpayer's federal income tax return by April 15. If the taxpayer gets an extension to file his or her tax return, the extension also will apply to the Schedule H filing. In this case, Janice does not need to file a Schedule H for her mother since she satisfies the exception given above. Publication 926, pages 5 and 11

Joe had a taxable gain on the sale of his main home, which could not be totally excluded on his 2022 tax return. He had no business use of the home. Which schedule does he need to submit to report the gain? Schedule C, for sole proprietors Schedule A, for itemized deductions Schedule D, for capital gains Schedule SE, for self-employment income

Schedule D, for capital gains In the case of a sale of a personal residence, the sale is not reported on a taxpayer's tax return unless the taxpayer: has a gain and the taxpayer does not qualify to exclude all of it, has a gain and the taxpayer chooses not to exclude it, or receives Form 1099-S. If, on the other hand, the taxpayer has a taxable gain of any amount on the sale of the personal residence that cannot be excluded, the entire gain realized is reported on Form 8949 and the details on how to report the gain or loss are found in the instructions for Schedule D (Form 1040 or 1040-SR) and the instructions for Form 8949. Publication 523, page 16

Sue must make estimated tax payments of $4,000 for the tax year. She makes the following payments: 1st Payment—credit of $1,000 from her previous year refund 2nd Payment—$500 on April 20 3rd Payment—$500 on May 31 4th Payment—$1,000 on August 15 5th Payment—$500 on October 15 6th Payment—$500 on December 30 Which of the following statements is correct? She has not made timely payments because her second and third payments were not made by April 15. She has not made timely payments because her fourth payment was not made by June 15. She has made timely estimated payments. She has not made any timely payments because none of the payments were made by the required IRS schedule.

She has made timely estimated payments. For estimated tax purposes, the tax year is divided into four payment periods for taxpayers that are required to make estimated tax payments. Each period has a specific payment due date and if the taxpayer does not pay enough tax by the due date of each of the payment periods, then a penalty may be charged even if the taxpayer is due a refund when the income tax return is filed (Publication 17, page 41). The specific payment dates for estimated tax payments are as follows: April 15, June 15, September 15, and finally January 15 of the following year. Per Publication 505, page 26, the regular installment method provides: "if your first estimated tax payment is due April 15, you can figure your required payment for each period by dividing your annual estimated tax due by 4. (...) However, use this method only if your income is basically the same throughout the year." In this case, Sue made at least a $1,000 payment ($4,000 ÷ 4 periods) by each payment date. Hence, she has made timely estimated payments. Publication 17, page 41 Publication 505, page 23

American Opportunity Credit vs lifetime learning Credit

The American Opportunity Credit can be claimed for up to $2,500 per eligible student for no more than 4 years. The Lifetime Learning Credit, on the other hand, has no limit on the number of years for which it can be claimed on the same student's expenses, but it is limited to $2,000 per tax return. Neither the American Opportunity Credit nor the Lifetime Learning Credit is adjusted for inflation. In addition, qualified education expenses for both education credits include tuition and required enrollment fees Books, supplies, and equipment qualify for the American Opportunity Credit even if they are not purchased from the educational institution. Books, supplies, and equipment qualify for the Lifetime Learning Credit only if they are required to be paid to the educational institution. (Publication 970, pages 13-14) Qualified education expenses do not include amounts paid for insurance, medical expenses (including student health fees), room and board, transportation, or similar personal, living, or family expenses. (Publication 970, page 17) Publication 970, pages 11, 13-14, and 17

Which of the following is true regarding the Report of Foreign Bank and Financial Accounts (FBAR) requirements: A. The FinCEN Form 114 (FBAR) is filed online with the Financial Crimes Enforcement Network B. The due date for the FBAR filing is generally July 15 of the current tax year for individuals C. The FinCEN Form 114 (FBAR) is filed with the current tax year individual income tax return D. FinCEN will not grant an automatic extension if unable to meet the FBAR annual due date

The FinCEN Form 114 (FBAR) is filed online with the Financial Crimes Enforcement Network

When e-filing a taxpayer's federal return ... FINCEN

The Form 8938 Instructions, page 1, provide that the purpose of this form is to report specified foreign financial assets if the total value of all the specified foreign financial assets in which the taxpayer has an interest is more than the appropriate reporting threshold. The threshold amounts vary by the taxpayer's filing status and are given on pages 3 and 4 of the Form 8938 Instructions. Form 8938 is attached to a taxpayer's annual return (or an amended return) and is filed by the due date (including extensions) for that return. Publication 54, page 8, provides that a taxpayer must file Fin CEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), if they had any financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country. Also, a taxpayer does not need to file the report if the assets are with a U.S. military banking facility operated by a financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year. Finally, Form 114 is filed electronically with the Financial Crimes Enforcement Network (FinCEN). See the filing instructions at the BSA (Bank Secrecy Act) e-filing system web page at www.bsaefiling.fincen.treas.gov. Thus, the taxpayer needs to file Form 8938 with their tax return and Form 114 is electronically submitted separately with the Financial Crimes Enforcement Network (FinCEN). Instructions for Form 8938, pages 1 and 3-4 Publication 54, page 8

Which of the following statements is incorrect? The deemed intangible income considers a routine 10% rate of return on the adjusted tax basis of its intangible assets. Eligible income for FDII purposes does not include Subpart F income. FDII is available to U.S. corporations that sell products on foreign markets. The formula for FDII includes comparing the foreign portion of sales relative to the total amount of sales recorded at the company level.

The deemed intangible income considers a routine 10% rate of return on the adjusted tax basis of its intangible assets. IRS Code Section 250(b)(1)(A) and (B) defines deemed intangible income as the difference between deduction-eligible income less the deemed tangible income return. Deemed tangible income return "means, with respect to any corporation, an amount equal to 10 percent of the corporation's qualified business asset investment as defined in section 951(A)(d)...." In a simplified approach, deemed intangible income is calculated as a "residual" from total eligible income (as defined per Code Section 250) less a return on investment in fixed assets. The statement "the deemed intangible income considers a routine 10% rate of return on the adjusted tax basis of its intangible assets" is false because the 10% rate of return is considered for the adjusted tax basis of fixed assets rather than intangible assets. All the other statements are true because they meet the definitions of IRS Code Section 250 and 951A. IRC Section 250 IRC Section 951A

gross estate

The gross estate is valued at the date of death and includes all property in which the decedent had an interest (including real property outside the United States). (Form 706 Instructions, page 2) It also includes: certain transfers made during the decedent's life without an adequate and full consideration in money or money's worth; annuities; the includible portion of joint estates with right of survivorship; the includible portion of tenancies by the entirety; certain life insurance proceeds (even though payable to beneficiaries other than the estate); property over which the decedent possessed a general power of appointment; dower or curtesy (or statutory estate) of the surviving spouse; and community property to the extent of the decedent's interest as defined by applicable law. Instructions for Form 706, page 2

if a tenant provide repair receipts to landlord in lieu of the payment of rent

The landlord is entitled to deduct the repair expenses (noncapital improvements) on his tax return but must also report these amounts as rental income. Publication 527, page 3, states in part that expenses paid by a tenant are considered rental income by the landlord or owner of the rent property. That means the taxpayer must include the amount spent by the tenant in gross income. In addition, the taxpayer (i.e., property owner) can deduct the expenses paid by the tenant if they are deductible rental expenses.

Alternative Minimum Tax (AMT)

The special treatment of some items of income and expense only allows a taxpayer to postpone paying tax until a later year. If in prior years a taxpayer paid alternative minimum tax (AMT) because of these tax postponement items, the taxpayer may be able to take a credit for prior-year minimum tax against the current year's regular tax. (Form 8801 Instructions, page 2) A credit against regular tax is possible if for 2021, the taxpayer had an AMT liability and adjustments or preferences other than exclusion items, a minimum tax credit that was carried forward to 2022, or an unallowed qualified electric vehicle credit. Deferral items (for example, depreciation) generally do not cause a permanent difference in taxable income over time. Exclusion items (for example, the standard deduction) do cause a permanent difference. The minimum tax credit is allowed only for the AMT caused by deferral items (Form 8801 Instructions). A taxpayer figures his or her 2022 nonrefundable credit and any carryforward to 2022 on Form 8801, which is attached to Form 1040 or 1040-SR. More importantly, a taxpayer may carry forward any unused credit for prior-year minimum tax to later years until it is completely used.

What action should a taxpayer take regarding the repayment of Social Security benefits received in a prior year if the total figure shown in box 5 for all of the taxpayer's current-year Forms SSA-1099 and RRB-1099 is a negative amount and the portion of the negative amount that represents benefits the taxpayer included in gross income in the prior year is $3,000 or less?

The taxpayer cannot claim a deduction because it is a miscellaneous itemized deduction and can no longer be deducted. Pursuant to Publication 17, pages 64 and 65, there are some situations where a taxpayer's Form SSA-1099 or Form RRB-1099 will show that the total benefits repaid (box 4) are more than the gross benefits (box 3) received. If this occurred, the taxpayer's net benefits in box 5 will be a negative figure (a figure in parentheses) and none of their benefits will be taxable. If the total amount shown in box 5 of all the taxpayer's Forms SSA-1099 and RRB-1099 is a negative figure, a taxpayer may be able to deduct the part of this negative figure that represents benefits they included in gross income in an earlier year if the figure is more than $3,000. If the figure is $3,000 or less, it is a miscellaneous itemized deduction and can no longer be deducted.

EIC limit MFJ one Qualified child

The threshold amount for a couple filing married with one qualifying child is $49,622 if you have a non taxable combat pay tp can include or exclude that amount to calculation

If Employee receives educational assistance benefits from the employer under educational assistance program

They can exclude up to $5,250 of those benefits each yer. It means these benefits are not included in their wages but shows as compensation in their W-2 box 1 tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment to enroll at or attend an educational institution. Education generally includes any form of instruction or training that improves or develops the person's capabilities. The payments do not have to be for work-related courses or courses that are part of a degree program. Education assistance benefits do not include payments for meals, lodging, or transportation. Hence, amounts used for room and board would not qualify for the exclusion.

Larry purchased 100 shares of ABC stock on May 31, 2021, for $100 per share. On October 28, 2021, he sold the 100 shares for $90 per share. On November 22, 2021, his wife, Vickie, purchased 100 shares of ABC stock for $80 per share. Vickie held the stock until September 30, 2022. On that date, she sold the stock for $110 per share. They filed married filing separately on all returns. Larry has a short-term loss of $1,000 on his 2021 tax return. Vickie has short-term gain of $3,000 on her 2022 tax return. Vickie will have a short-term gain of $3,000 on her 2022 tax return and Larry takes the short-term loss $1,000 on his 2021 tax return. Vickie will have a long-term gain of $2,000 on her 2022 tax return and Larry will not have any capital loss on his 2021 tax return

Vickie will have a long-term gain of $2,000 on her 2022 tax return and Larry will not have any capital loss on his 2021 tax return. Publication 550 (on pages 56-57) discusses the treatment of property transactions that are known as a wash sale. In general, a taxpayer cannot deduct losses from sales or trades of stock or securities in a wash sale. A wash sale occurs when a taxpayer sells or trades stock or securities at a loss and within 30 days before or after the sale whereby the taxpayer or spouse: buys substantially identical stock or securities, acquires substantially identical stock or securities in a fully taxable trade, acquires a contract or option to buy substantially identical stock or securities, or acquires substantially identical stock or securities for the taxpayer's IRA or Roth IRA. Furthermore, if a taxpayer sells stock and the taxpayer's spouse or a corporation controlled by the taxpayer buys substantially identical stock, the taxpayer has a wash sale. (See "Wash Sales" in chapter 4 of Publication 550.) In the case of a wash sale, the disallowed loss is added to the cost of the new stock or securities. The adjustment postpones the loss deduction until the disposition of the new stock or securities. Furthermore, the taxpayer's holding period for the new stock or securities begins on the same day as the holding period of the stock or securities sold. In this problem, Larry has a wash sale since Vickie, his wife, purchased the same stock within 30 days of Larry's sale. The loss of $10 per share is added to Vickie's purchase price of $80 per share to yield an adjusted basis of $90 per share. When Vickie sells the stock for $110 per share, she has a long-term capital gain of $2,000 ($20 per share × 100 shares). It is long-term because the holding period began on the date that Larry purchased the stock and ended on the date that Vickie sold it, which is more than 1 year. Publication 550, Chapter 4

Diane, single and age 49, made a $4,000 contribution to her traditional IRA in 2022. Her compensation for 2022 was $3,000. She filed a Form 4868 for an extension until October 15, 2023, to file her 2022 return. In order to avoid the 6% additional tax on excess contributions, Diane must do which of the following? Withdraw the $1,000 excess contribution and all interest earned on the $1,000 by December 31, 2022. Withdraw the $1,000 excess contribution and all interest earned on the $1,000 by April 15, 2023. Withdraw the $1,000 excess contribution and all interest earned on the $1,000 by October 15, 2023. File an election to deduct the $1,000 on her 2023 return by attaching a statement to her 2022 return.

Withdraw the $1,000 excess contribution and all interest earned on the $1,000 by October 15, 2023. Publication 590-A, page 34, provides the general rules for the tax when making an excess contribution to an IRA. In general, the taxpayer is subject to a 6% tax if the excess contributions (including interest earned) for a year are not withdrawn by the date the taxpayer's return for the year is due (including extensions). Example For 2022, a taxpayer is 45 years old and single, his compensation is $31,000, and he contributed $6,500 to his traditional IRA. The taxpayer has made an excess contribution to his IRA of $500 ($6,500 minus the $6,000 limit). The contribution earned $5 interest in 2022 and $6 interest in 2023 before the due date of the return, including extensions. He does not withdraw the $500 or the interest it earned by the due date of his return, including extensions. The taxpayer figures his additional tax for 2022 by multiplying the excess contribution ($500) by 6%, giving him an additional tax liability of $30. To avoid the 6% additional tax on excess contributions, Diane must withdraw the $1,000 excess contribution and all interest earned on the $1,000 by October 15, 2023. Publication 590-A, page 34

What is the latest date for treating medical expenses as paid at the time the medical services were provided for a decedent that are paid from his or her estate?

Within 1 year after the date of death The time limit for payment is only 1 year following the death of the decedent. This privilege is an election that is made by the surviving spouse or personal representative by attaching a statement to the Form 1040 on which the expenses are claimed stating that the expenses have not and will not be claimed on the estate tax return. Publication 502, page 5, states that the survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. The expenses must be paid within the 1-year period beginning with the day after the date of death. Publication 502, page 5

Ministers -Housing allowance reporting

has to pay both income tax and self-employment tax on his salary, but only self-employment tax for the housing allowance. The housing allowance is not subject to income tax.

=American Opportunity Credit (AOC)

in general, taxpayers are able to claim the American Opportunity Credit (AOC) if they can satisfy all three of the following requirements (Publication 970, page 11): the taxpayer pays qualified education expenses of higher education, the taxpayer pays the tuition and related expenses for an eligible student, and the eligible student is the taxpayer, the taxpayer's spouse, or a dependent for which the taxpayer claims on their tax return. The student must be enrolled at least half-time for at least one academic period that began during 2022 (or the first 3 months of 2023 if qualified expenses were paid in 2022) The AOC is an education tax credit that is available for 2022.In this case, a person is able to claim a maximum credit per student of $2,500 (100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses). The credit is available for the first 4 years of postsecondary education, and 40% of the credit is refundable for most taxpayers. (Publication 970, page 20)The threshold for the AOC is higher than the Lifetime Learning Credit. For 2022, AGI limit is $80,000 for single and $160,000 for married filing jointly individuals (Publication 970, page 22) .If the taxpayer is married and filing a joint return, the amount of their Lifetime Learning Credit for 2022 is gradually reduced (phased out) if their modified adjusted gross income (MAGI) is between $160,000 and $180,000. For all other taxpayers, the phaseout range is between $80,000 and $90,000 (Publication 970, page 22).The amount of the Lifetime Learning Credit is 20% of the first $10,000 of qualified education expenses the taxpayer paid for all eligible students. The maximum amount of Lifetime Learning Credit the taxpayer can claim for 2023 is $2,000 (0.20 × $10,000) (Publication 970, page 23). The Lifetime Learning credit phaseout threshold was increased beginning in 2022 and the deduction for tuition and fees is no longer available. The Lifetime Learning Credit is gradually reduced if MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return).

loaning money to friend who goes to bankrupcy

is 0 if no loan is signed no debtor-creditor relationship is established In general, a taxpayer may deduct the amount arising as a nonbusiness bad debt if it is totally worthless and is deducted on the tax return for the year the debt becomes worthless. The debt, however, must be genuine for the taxpayer, which means it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. (See Publication 550, page 54.) In the case where a taxpayer lends money to a relative or friend with the understanding that it may or may not be repaid, it is considered a gift and not a loan, and as such, it cannot be taken as a bad debt deduction. See Publication 550, page 54, for more information on this topic

To determine net capital gains/losses for the year:

net short-term gains/losses and long-term gains/losses separately, then combine. The determination of a taxpayer's capital gains or losses in a particular year goes through a process that is better known as the netting rules. That is, a taxpayer figures the total net gain or loss by combining the net short-term capital gain or loss (line 7 of Schedule D, Form 1040) with the net long-term capital gain or loss (line 15 of Schedule D, Form 1040). All short-term items are netted separately, and all long-term items are netted separately before the two are combined. For more information on this issue, you should read Chapter 4 of Publication 550.

social Security benefits become taxable if

social Security benefits become taxable if one-half of the benefits plus all other income, including tax-exempt interest, exceed the base amount of $32,000 in the case of a couple filing married ($25,000 if filing single or head of household and $0 if married, filing separate, and living with one's spouse at any time during 2022).

Child Tax Credit (CTC)

taxpayer is eligible for the child tax credit of $2,000 for each qualifying child. A qualifying child is defined as a child that is under age 17 at the end of 2022, is a citizen or resident of the United States, did not provide over half of his or her own support, lived with the taxpayer for more than half of 2022 (with limited exceptions), and satisfies the relationship test (taxpayer's son, daughter, adopted child, stepchild, or a descendent of any of them (e.g., grandchild); brother, sister, stepbrother, stepsister, or a descendent of any of them (e.g., niece or nephew) if the taxpayer cares for the individual as their own child; or eligible foster child). The child tax credit is further reduced below $2,000 if the taxpayer's modified adjusted gross income (AGI) is above $400,000 and the taxpayer is married filing jointly; $200,000 for all other tax filers. (Publication 17, page 106)

No estate tax return needs to nbe filed for 2022 if

the gross estate plus adjusted taxable gifts and specific exemption is not more than $12,060,000,

Earned Income Credit

the rules applicable for tax year 2020 to everyone are as follows: Your adjusted gross income (AGI) must be less than: single $53,057 MFj $59,187 for married filing jointly) if you have three or more qualifying children single ,$49,399 MFj ($55,529 for married filing jointly) if you have two qualifying children, single $43,492 MFJ ($49,622 for married filing jointly) if you have one qualifying child, or no qualifying child single $16,480 mfj ($22,610 for married filing jointly) or if you do not have a qualifying child. You must have a valid Social Security number (SSN). Your filing status cannot be "married filing separately." You must be a U.S. citizen or resident alien all year. You cannot file Form 2555 (relating to foreign-earned income). Your investment income must be $10,300 or less. You must have earned income.