REG - CPA EVOLUTION 2024

Qualifying Surviving Spouse filing status

A qualifying surviving spouse is a taxpayer who may use the married filing jointly tax return standard deduction and rates for each of two taxable years following the year of death of his or her spouse, unless he or she remarries. The surviving spouse must maintain a household that, for the entire taxable year, was the principal place of abode of a son, stepson, daughter, or stepdaughter (whether by blood or adoption). The child must be considered either a qualifying child or a qualifying relative.

HOH v. Surviving Spouse

A taxpayer qualifies for HOH if the taxpayer is unmarried and maintained his or her home as the principal residence for the qualifying child for more than half the year. To qualify as a surviving spouse, the surviving spouse must pay over half of the cost of maintaining a home where a dependent child lives for the whole year.

Surviving Spouse

A taxpayer qualifies for surviving spouse for the two years following the year the taxpayer's spouse dies if the taxpayer maintains a household where a dependent child lives for the entire year

Jury duty payments

Are included in gross income

Taylor, an individual, commenced business on August 4 of this year. Taylor does not keep adequate records. On which of the following dates must Taylor's tax year end? A. July 31 B. December 31 C. August 3 D. August 31

Because Taylor is an individual, she is required to use a calendar year as her tax year. As such, the tax year will end December 31. Individuals are not permitted to use a fiscal year as tax years, they must use calendar years. The fact that she started business on August or that she does not keep adequate records is irrelevant.

Qualifying Child

C close relative A age under 19, or 24 FTE R residency & filing req. E eliminate GI test S support test

A taxpayer's spouse dies in August of the current year. Which of the following is the taxpayer's filing status for the current year? A. Single. B. Married filing jointly. C. Qualifying surviving spouse. D. Head of household.

Choice "B" is correct. The surviving spouse is considered to be married (and thus able to file as married filing jointly) for the entire current year even if the spouse dies earlier in the year (in this case in August).

Head of Household Filing Status

HOH filing status is available to a single taxpayer who maintains a separate home for a dependent parent. To qualify for HOH, a taxpayer must be unmarried as of the last dat of the tax year and maintain a home that is the principal residence of a qualifying person for more than half of the tax year. A qualifying person includes a dependent child, parent or relative. A dependent parent is not required to live with the taxpayer, provided the taxpayer maintains a home that was the principal residence of the parent for the entire year.

When is interest on Series EE savings bond tax-exempt?

When the following conditions are met: - interest is used to pay for higher education of taxpayer, a spouse or dependents - eligible higher education expenses are reduced by tax-free scholarships - taxpayer is over age 24 when bonds are issued - bonds are acquired after 1989 the interest exclusion is subject to a phase-out

Scholarships as support

With respect to anyone other than parents, scholarships count as support and counts towards a child/qualifying relative meeting dependency requirements for providing their own support.

Head of Household filing status

Head of household filing status is available to a single taxpayer who maintains a separate home for a dependent parent. To qualify as head of household filing status, a taxpayer must be un married as of the last day of the tax year and maintain a home that is the principal residence of a qualifying person for more than half of the tax year. A qualifying person includes a dependent child, parent, or relative. A dependent parent is not required to live with the taxpayer, provided that the taxpayer maintains a home that was the principal residence of the parent for the entire year. Another requirement for head of household is that the taxpayer is not a surviving spouse.

Exempt Taxable Interest

Interest on municipal bonds (bonds issued by state or local governments) is excluded from gross income. Although the exemption calls them municipal bonds, it includes state and local bonds. Think SALT.

Limits on benefits before they become taxable

Life insurance premiums up to $50,000 Parking up to $315 per month Educational expenses paid by the employer up to $5,250

Single Filing Status

Marital status for the tax year is determined as of the last day of the year. Taxpayers who are divorced or legally separated are considered unmarried. Otherwise never married people are also under this filing status.

Tax year end for individuals

Individuals are not permitted to use fiscal year as tax year. They are required to use calendar year as their tax year. When the individual started their business is irrelevant, or whether the individual keeps adequate records or not.

What are the correct requirements that enable a taxpayer to be classified as a "qualifying surviving spouse"?

1. The taxpayer spouse died in one of the two previous years and the taxpayer did not remarry in the current tax year 2. The taxpayer has a child who can be claimed as a dependent 3. This child lived in the taxpayer's home for all of the current tax year 4. the taxpayer paid over half of the cost of keeping up a home for the child; and 5. The taxpayer could have filed a joint return in the year the spouse died.

Penalty payments on early withdrawal from IRA

If a taxpayer withdraws money from and IRA before the age of 59.5, is unemployed, and has received 12 consecutive weeks of unemployment compensation under federal or state law, and purchases medical insurance, there is no penalty for the early withdrawal. If the taxpayer is fully employed, the taxpayer is subject to the penalty. The unemployment and the receipt of the 12 weeks of unemployment as pre-requisites to avoid the tax penalty when buying medical insurance

Surviving Spouse

If a taxpayer's spouse dies during the year, a joint return may be filed for that year. For the subsequent two years, the taxpayer may use surviving spouse as long as the taxpayer remains unmarried and maintains a household for a qualifying child for the entire year.

In which of the following situations may taxpayers file as married filing jointly? A. Taxpayers who were married but lived apart during the year. B. Taxpayers who were legally separated but lived together for the entire year. C. Taxpayers who were married but lived under a legal separation agreement at the end of the year. D. Taxpayers who were divorced during the year.

In order to file a joint return, the parties must be married at the end of the year. Exception: If the parties are married but are legally separated under the laws of the state in which they reside, they cannot file a joint return (they will file either under the single or head of household filing status). Choice "A" is correct. Taxpayers who are married but lived apart during the year are allowed to file a joint return for the year. The fact that they did not live together during the year has no bearing on the issue. Choice "B" is incorrect. Taxpayers who were legally separated but lived together for the entire year may not file a joint return. They will generally file either under the single or head of household filing status. Choice "C" is incorrect. Taxpayers who are married but lived under a legal separation agreement at the end of the year may not file a joint return. They will generally file either under the single or head of household filing status. Choice "D" is incorrect. Taxpayers who were divorced during the year may not file a joint return together, as they are not married at the end of the year. [Note, however, that they may become married again in the year and file a joint return with the new spouse.]

Early Traditional IRA Withdrawal Income tax and penalty

Income tax at the marginal rate is paid on the entire distribution. It is not relevant whether the taxpayer rolls it into a Roth IRA or not. The penalty is paid on the entire amount as well, unless the taxpayer rolled it over to another IRA. In that case, the penalty applies only to the amount that was not rolled over to an IRA, at a rate of 10%.

Taxable Injury Payments

Punitive Damages Disability Damages Damages for a personal injury (workers compensation) is not taxable

Qualifying Relative

S support test U under GI max test P precludes filing jointly O only US CAN MX R relative test, or T taxpayer lives all yr

John and Theresa are in the process of obtaining a divorce. Although they are not legally separated, John moved out of the family home in October of Year 1 and moved into an apartment nearby. John and Theresa's two children, Jenna and Stella, lived with Theresa in the family home for more than half of the tax year. What filing status can Theresa use to file her Year 1 tax return? A. Head of household. B. Single. C. Married filing jointly/separately. D. Qualifying surviving spouse.

Since they are still married at year-end and not legally separated, and they have not lived apart for the last six months of the taxable year, Theresa must file as married. However, she may choose to file married filing separately.

Where is the deduction for qualified business income (QBI) applied in the individual tax formula?

The QBI deduction is taken from adjusted gross income ("below the line"). It is not part of the itemized deductions, and is not an alternative to the standard deduction. The QBI deduction is not an adjustment to arrive at AGI (Not above the line), but after AGI (below the line)

Who claims the child in equal custody?

The parent with custody of the child for the greater part of the year may claim the child as a dependent (determined by time, not the divorce decree). If the parents have equal custody during the year, the parent with the higher AGI would be eligible to claim the child as a dependent, but the parent with the highest AGI could also wave the right to claim the child as a dependent.

Married Filing Jointly when a spouse passes away

The surviving spouse may use MFJ the year of the spouse passing, even if they were not married, but widowed, at year end. The surviving spouse can file MFJ for two years after the year of death providing that there is a dependent child.

Early distributions penalty exemptions on IRA

There is not penalty on early withdrawal if the distribution: - is used to pay medical expenses in excess of 7.5% of AGI - is used to pay for a first-time home buyer. maximum exclusion is 10K and the home purchase must be made within 120 days (3 months) from the distribution - is used to pay college tuition fees, books, supplies, and equipment and the student attends school at least half-time.

Multiple Support Agreements

Under a multiple support agreement, the taxpayers that can claim the dependent are those that contribute 10% or more of the dependent's support.