Tax

What is the normal due date for the tax return of calendar year​ taxpayers? What happens to the due date if it falls on a​ Saturday, Sunday, or​ holiday?

The normal due date for calendar year individuals and C corporations is April 15. The normal due date for calendar year partnerships and S corporations is March 15. If the normal due date is a​ Saturday, Sunday, or​ holiday, the normal due date is delayed to the next day that is not a​ Saturday, Sunday, or holiday.

Explain the distinction between a deduction and a credit.

A deduction is an amount that is subtracted from gross income (or adjusted gross income). ​, while a credit is an amount that is subtracted from the tax itself.

Under what​ circumstances, if​ any, can a married person file as a head of​ household?

A married​ person, if otherwise​ qualified, can claim head of household status if he or she is married to a nonresident alien or if he or she qualifies as an abandoned spouse. To be an abandoned​ spouse, the person must have lived apart from his or spouse for the last six months of the year and maintain a household for a qualifying child in which they both live.

Sometimes taxpayers may not be able to file their tax returns by the normal due date. Are extensions​ available? How long are the​ extensions? Do extensions enable taxpayers to delay paying the tax they​ owe?

Automatic extensions of six months are generally available. For a C​ corporation, the extension is six or seven​ months, depending on fiscal​ year-end. Any tax that may be owed must be paid with the application for an extension.

Explain the difference between refundable and nonrefundable credits

If a refundable credit exceeds the​ taxpayer's tax liability the taxpayer will receive a refund equal to the excess. If a nonrefundable credit exceeds the​ taxpayer's tax liability the taxpayer will not receive a refund, but may be entitled to a carryover or carryback.

Is an individual required to file a tax return if he or she owes no​ tax?

Individuals who owe no tax because of deductions or other reasons must still file a return if they have gross income in excess of the filing requirement amounts.

Which is worth​ more, a​ $10 deduction or a​ $10 credit?

In​ general, a​ $10 credit is worth more than a​ $10 deduction because the credit results in a​ $10 tax savings. The savings from a deduction is less than​ 100% of​ $10, depending on the tax bracket that applies to the taxpayer

What determines if an individual must file a tax​ return?

In​ general, it is an​ individual's gross income that determines whether he or she must file a return when their gross income is in excess of the filing requirement amounts. Certain individuals must file even if they have less than the specified gross income​ amounts: (1) taxpayers with $400 or more of the​ self-employment income,​ (2) dependent individuals whose unearned income exceeds ​$1,100 or whose total gross income exceeds the standard​ deduction, and​ (3) taxpayers who owe the​ 0.9% Additional Medicare Tax or the 3.8​% Net Investment Income Tax.

Summarize the rules that explain which parent claims their children as dependents in cases of divorce.

In​ general, the parent with custody for the greater part of the year may claim the children as dependents. The noncustodial parent may claim them as dependents only if required documentation provides for it.

Which of the following taxpayers must file a 2020 return? a) Amy age 19 and​ single, has $8,050 of​ wages, $800 of​ interest, and $350 of​ self-employment income. b) Betty, age 67 and​ single, has a taxable pension of $9,100 and Social Security benefits of $6,200 (the Social Security benefits are wholly​ tax-exempt in this​ situation). c) Chris, age 15 and​ single, is a dependent of his parents. Chris has earned income of $1,900 and interest of $400. d) Dawn, age 15 and​ single, is a dependent of her parents. She has earned income of $400 and interest of $1,600. e) Doug, age​ 25, and his wife are separated. He earned $5,000 while attending school during the year.

a) Amy need not file because her gross income is less than the threshold of $12,400 and her​ self-employment income is less than $400. b) Betty need not​ file, as her gross income is less than $14,050. c) Chris must​ file, as his gross income of $2,300 exceeds his standard deduction of $2,250. d) Dawn must file because her unearned income is over ​$1,100 and her total gross income exceeds her standard deduction. e) Doug age​ 25, and his wife are separated. He earned $5,000 while attending school during the year.

Robert provides more than half of the support for his​ daughter, Jane, and her two children. Jane earned​ $20,000. Robert, whose AGI is​ $160,000, paid the rent of​ $11,000 on​ Jane's apartment and provided an additional​ $15,000 support. Jane is age​ 30, and her children are age 7 and age 4. Robert is not married. a) Can Robert claim Jane as a dependent? b) Can Jane claim her children as dependents? c) Who is entitiled the child credit?

a) No b) Yes c) Jane

Indicate whether the taxpayer qualifies as a head of household. a) Allen is divorced from his wife. He maintains a household for himself and his dependent mother. b) Beth is divorced from her husband. She maintains a home for herself and supports an elderly aunt who lives in a retirement home. c) Cindy was widowed last year. She maintains a household for herself and her dependent​ daughter, who lived with her during the year. d) Dick is not​ divorced, but lived apart from his wife for the entire year. He maintains a household for himself and his dependent daughter. He does not receive any financial support from his wife.

a) Yes b) No (the qualifying relative does not live with the taxpayer) c) No (the taxpayer qualifies for the more favorable surviving spouse status) d) Yes

Select the additional requirements that must be met in order to be a qualifying child. ​(Select all the applicable​ answers.) Qualifying children​ must:

be the​ taxpayer's child or sibling or a descendant of the​ taxpayer's child or sibling be under age​ 19, a​ full-time student under age​ 24, or disabled. live with the taxpayer more than half of the year. not provide more than half of his or her own support.

Income _______, based on principles of economics​ and/or accounting. Gross income _________

includes all income from whatever source derived refers only to income from taxable sources.

List the conditions that must be met in order to claim qualifying children and qualifying relatives as dependents. Briefly explain each one. Select the requirements applicable to all dependents​ (qualifying children and qualifying​ relatives). ​(Select all the applicable​ answers.) All​ dependents:

must meet a citizenship test. cannot claim others as dependents cannot normally file a joint return

Select the additional requirements that must be met in order to be a qualifying relative. ​(Select all the applicable​ answers.) A qualifying relative​ must:

not be a qualifying child. be related to the taxpayer or reside in the​ taxpayer's household for the entire year. have gross income less than $4300 (2020) receive more than half of his or her support from the taxpayer.