Chapter 8 Other Income /Adjustment

if Receiver of Taxable Alimony, report on 1040 line 11 Alimony received, no 1040A 1040EZ CA treatment = same as FEDERAL payment made by one spouse to the other spouse under written separation or divorce instrument. Qualified alimony and separate maintenance payments are included in the gross income of the recipient and are deductible by the payer. .Child support payments and property settlements are not treated as alimony--therefore, never taxed. If taxpayer receives family support, Determine if any of that income is alimony or child support

eg. Educator expenses, alimony paid, student loan interest payment.

if the expenses are incurred to maintain or improve existing job related skills of to meet the express requirement of the employer or legal requirements to retain current employment status. Education expenses may qualify the taxpayer for a tuition and fees deduction, an American Opportunity Credit or a lifetime learning credit.

up to $250 for qualified out of pocket expenses. 1040A line 16 Amounts exceed $250 goes to miscellaneous itemised deductions on form 1040 schedule A to eligible educators from kindergarten thru 12th grade qualified expenses must be reduced by: 1. reimbursement received 2. Excludible US series EE and I saving bond interest from form 8815 3. Nontaxable earnings from Coverdell Education Savings Accout 4. Nontaxble qualified tuition program earnings or distributions.

Any educator works at least 900 hours during a school year as a teacher, in a public or private schools.

a personal savings plan that allows a taxpayer to accumulate money tax deferred until withdrawal, usually upon retirement. 2 types, Traditional IRA and Roth IRA

contribution may or mayn't be deductible depending on the taxpayers' AGI and whether or not he is covered under an employer-sponsored retirement plan. .Earnings are tax-deferred. . Distributions are taxable except to the extent they represent nondeductible contributions.

contribution are not tax deductible, Earning grow tax-deferred Withdrawals - if qualified, tax free

. Income . Fully Taxable if receive W-2, the scholarship is income and fully taxable--- report on 1040 or 1040A line 7, 1040EZ line 1 if non-degree candidates who did not receive W-2, on the dotted line to the left of line 7, or line 1 on Form 1040EZ, write "SCH" and the scholarship amount .Partially Taxable - Degree Candidate- no need to report scholarship $ spent for qualified education expenses, which include tuition, fees, course-required books, supplies and equipment counts used to pay the expenses are excluded from gross income. if must report then on the dotted line to the left of line 7 (or 1 on 1040EZ), write "SCH" and the taxable scholarship amount . Nontaxable Definition: Financial aid grants awarded to students for the purpose of attending a college or performing research(Fellowship)

adjusted gross income - deductions.

expense that is helpful in furthering the taxpayer's business or income-producing activity.

a test for the deductibility of expenses incurred or paid in connection with a trade or business.

FED: Fully taxable Form 1040A line 13;1040 line 19;1040EZ line 3 CA: not taxable- no adjustment on 540 2EZ - yes adjustment on CA 540 subtraction taxpayer can request payer 10% of benefit to go toward Federal income tax withhold. this can be done by filing W-4V with the payer. Overpayment of unemployment compensation:(-) the the amount repaid form amount shown on for 1099G. in the space to the left of the line, write "Repaid" and the amount repaid.

Taxable 1040 line 21 . withholding of income tax may be required then reported to 1040 line 64 (Federal income tax withheld from W2 or 1099), will receive W-2G, . losses may NOT be netted out. loss may be deducted only in Schedule A and ONLY to the extent of winning.

1040A or 1040 line 7 if taxpayer < minimum retirement age, the disability pension payment 1040A lines 12a & 12b or 1040 line 16a & 16b Client receives 1099-R box 7 with code "3" from employer .

1)Prizes and awards-taxable/may or mayn't be shown in 1099-MISC box 3/ e.g.. cash, merchandise won in sweepstakes, in contests, on game shows/ no services were performed 2) Jury duty pay- taxable/if employee is required to give back his jury pay to his boss in exchange for his regular pay the amount may be deducted as an adjustment to income 3) Cancelled Debts - usually taxable/may receive 1099-C, Cancellation of Debt, from the creditor.

1. Educator expenses 1040A line 16 2. IRA deduction 1040A line 17 3. Student loan interest deduction 1040A line 18 4. Tuition and fees deduction 1040A line 19

up to $2,500/return on form 1040A line 18 student received form 1098-E reduce the total qualified education expenses by the amounts the tax-free funds are used to pay .Qualified Student loan is includes loan taken out by not only the taxpayer but spouse or the taxpayer's dependent too. Eligible student is enrolled at least 1/2time in a program leading to a degree

1. no MFS 2. taxpayer can not be someone else's dependent 3. taxpayer must be legally obligated to pay the interest 4. paid the interest

Use student loan interest deduction worksheet total student loan interest received (1098-E), or max 2,500 (-) fractions computed below = deduction amount. goes to 1040A line 18 MAGI = AGI + any tuition and fee deduction + any other student loan interest deduction. MFJ 130,000; MAGI; 160,000 interest paid (or 2,500 max) X (MAGI-130,000)/30,000 all other (except MFS) 65,000;MAGI;80,000 interest paid (or 2,500 max) X (MAGI-65,000)/15,000

need to review