question

What are the classification of tax credits and which is more prevelant

answer

refundable and nonrefundable. nonrefundable is more prevalent

question

Foreign Tax Credit is the lesser of..

answer

foreign taxes paid US income tax * (foreign source taxable income/worldwide income)

question

How can unused foreign Tax Credits be used

answer

Carried back 1 year and forward 10 years

question

Child and Dependent Care Credit requirements

answer

Child and dependent care expenses incurred to enable taxpayer to maintain gainful employment Provides more than 1/2 cost of maintaining household for 13 or under child, incapacitated spouse or dependent

question

Does the taxpayer need to be employed to receive the Child and Dependent Care Credit?

answer

No

question

Child and Dependent Care Credit limitation

answer

Cannot exceed taxpayers earned income. For married taxpayers, the income for this limitation is the smaller income of the two 3k for 1 dependent and 6k for 2+

question

Child and Dependent Care Credit if spouse full time student what is their income considered with 1 or 2+ dependents

answer

250$ per month with 1 child; 500$ if 2+ dependents

question

Child and Dependent Care Credit how is it figured out

answer

35% of child and dependent care expenses up to lowest earned income. rate is reduced by every 2k increases over 15k by 1% but it cannot be lower than 20%

question

What is the Lifetime Learning Credit

answer

20% of qualified tuition expenses for any student up to 10k in expenses. cannot be used with the american opportunity credit

question

What are the phase out limits of the Lifetime Learning Credit

answer

Phased out for AGI between 52K and 62K for singles and between 104K and 124K on a joint return

question

What are the Retirement savings contribution credit limits

answer

AGI 30K single and 60K MFJ only 2k of contributions can receive the credit

question

Retirement savings contribution credit what are the ranges of the credit % allowed

answer

50%, 20%, 10%, 0

question

what is the maximum possible Retirement savings contribution credit

answer

$1000 (2K * .5)

question

What is the Child Tax Credit

answer

taxpayers who have qualifying children receive 1k credit per child

question

What constitutes an qualifying child for the Child Tax Credit

answer

i. Qualifying child taxpayers child, stepchild, sibling, step-sibling or a descendant of any of these or an eligible foster child (1) who is a us citizen or resident alien, (2) whom TP may claim as a dependent (3) younger than 17 years old at YE ii. only allowed for tax years of 12 months

question

Child Tax Credit AGI limitations

answer

For 2014, the Child Tax Credit begins to phase out at an adjusted gross income of $75,000 for Single filers and Heads-of-Household, $110,000 if Married Filing Jointly, and $55,000 if Married Filing Separately.

question

Elderly or Disabled Credit who can take advantage of this credit

answer

65+ or retired before the end of the tax year due to a total and permanent disability

question

Elderly or Disabled Credit what is the initial base amount

answer

a. Credit is equal to 15% multiplied by the initial base amount which is... i. 5K single ii. 7.5K MFJ both 65+ iii. 3.75K MFS

question

Elderly or Disabled Credit what reduces the base amount to get to the credit

answer

i. Tax exempt SSN ii. Pension or annuity benefits excluded from GI iii. Disability income under 65 iv. One-half the excess of AGI over 1. 7.5k S 2. 10K MFJ 3. 5L MFS

question

Elderly or Disabled Credit what will cause you not to be able to claim the credit even if 65+ or permanently disabled?

answer

MFS while living with the spouse at anytime throughout the year

question

General Business Credit (GBC) what is it

answer

GBC is a set of several credits commonly available to businesses Credits for investment, research, work opportunity, welfare-to-work, low-income housing, alternate motor vehicle and alcohol fuels, among others

question

General Business Credit overall limit

answer

GBC is limited to net income tax minus the greater of the tentative minimum tax or 25% of net regular tax over 25K

question

General Business Credit how is the limit calculated

answer

Net Income Tax [the sum of regular income tax and minimum tax liability reduced by nonrefundable credit other than those that comprise the GBC] reduced by the greater of the tentative minimum tax or 25% of net regular tax over 25K

question

General Business Credit what is the tentative minimum tax

answer

Tentative minimum tax is an amount used in computing the alternative minimum tax

question

General Business Credit what can be done with the excess

answer

Any excess of the combined GBC over the limit and not allowed as a current deduction may be carried back 1 year and forward 20 as a credit. It is carried to the earliest year to which it could be used then to the next and so on

question

Work Opportunity Tax Credit (WOTC) what is it

answer

Employers may take a credit equal to 40% of the first 6K paid to employees from certain targeted groups who work at least 400 hours

question

Work Opportunity Tax Credit (WOTC) what is the rates and their limits (hours)

answer

120 - 399 hrs 25% of first 6k (10K for LT family assistance recipients; 3k for Qualified summer youth employees 400+ hrs 40% of first 6k (10K [@ 50% if second year cannot exceed 9k for the individual] for LT family assistance recipients; 3k for Qualified summer youth employees)

question

Work Opportunity Tax Credit (WOTC) what are the employees that receive a more advantageous credit

answer

LT Family assistance Employees

question

Work Opportunity Tax Credit (WOTC) what are the employees that receive a less advantageous credit

answer

Qualified Summer youth emloyees

question

Work Opportunity Tax Credit (WOTC) what is an example of a certain targeted group subject to the normal rules

answer

Veterains

question

Work Opportunity Tax Credit (WOTC) LT Family second year limitation

answer

50% of first 10K earned in the second year

question

Work Opportunity Tax Credit (WOTC) what is included in qualified wages

answer

1. Remuneration for employment 2. Amount received under accident and health plans 3. Contributions by employers for a tax year exceed its base period amount

question

What are the refundable tax credits

answer

1. Taxes withheld 2. The earned income credit 3. Additional child tax credit 4. American opportunity credit 5. The adoption credit

question

What are the nonrefundable tax credits

answer

1. Foreign tax credit 2. Child and dependent care credit 3. Lifetime learning credit 4. Retirement savings contribution credit 5. Child tax credit 6. Credit for the elderly or the disabled 7. General business credit 8. Work Opportunity Tax Credit (WOTC)

question

Earned Income Credit (EIC) what are the requirements for the taxpayer and spouse

answer

i. Have a valid SSN ii. Have earned income from employment, self-employment or another source 1. Includes wages, salaries, tips and net earnings from self-employment. Disqualified income includes interest, dividends, capital gain net income, net passive income, unemployment compensation and any compensation that is not taxable (other than excluded combat-zone pay) iii. Cannot use the MFS status iv. Must be a US citizen or resident alien married to a us citizen or resident alien and choose to file a joint return and be treated as a resident alien v. Cannot be the qualifying child of another person vi. Have AGI and earned income less than thresholds vii. Have investment income less than 3.35k

question

Earned Income Credit (EIC) what is the additional requirement if no QC

answer

Those without a QC must have their principal residence in the US for more than half of the tax year, be at least 25 but not over 65yrs old not a dependent of another

question

Earned Income Credit (EIC) what are the requirements for a QC

answer

i. Relationship: related by birth or adoption or an eligible foster child or stepchild ii. Residency: must provide the child's principal place of abode for more than ½ the year iii. Age: under 19, be permanently disabled or student under 24

question

Earned Income Credit (EIC) how does it affect taxpayers with a QC compared to those that do not

answer

TPs with 1+ QCs have higher applicable percentage and higher phase out rates

question

Earned Income Credit (EIC) how does the phase out rate work?

answer

Phased out by taking beginning phase out amount and subtracting the rate by the excess over the limit hence once income is double the beginning phase out amount 0 credits are allowed

question

Additional Child Tax Credit who is it for?

answer

Taxpayers who get less than the full amount of the child Tax Credit

question

Additional Child Tax Credit what portion is refundable

answer

Through 2017 the credit is refundable up to the lesser of 15% earned income in excess of 3k or the unclaimed potion of the nonrefundable credit the refund is capped at the per child credit amount.

question

American Opportunity Credit what is it

answer

provides maximum allowed credit of 2.5k per student per year for the first 4 years of post-secondary education. The credit may be used for qualified tuition and expenses. (1098-T)

question

American Opportunity Credit how is it calculated?

answer

Credit computed as 100% of the first 2k expenses and 25% of the second 2K expenses

question

American Opportunity Credit what are qualified expenses?

answer

Qualified expenses include required tuition, fees, and course materials the credit is not allowed for room and board, activity fees, and any other fees or expenses not related to the student's academic course of instruction

question

American Opportunity Credit phase out limits

answer

Credit phases out for AFI between 80k (160K MFJ) and 90k (180K MFJ)

question

American Opportunity Credit how is the reduction calculated?

answer

Amount of credit x [ (AGI-80K (160K MFJ))/(10K (20K MFJ))]

question

American Opportunity Credit how much is refundable

answer

40% of the credit is refundable

question

American Opportunity Credit allowed to be taken with the lifetime learning credit?

answer

Not for the same student. AOC is allowed for multiple students

question

Adoption Credit what is it

answer

credit allowed for qualified adoption expense incurred by the tax payer

question

Adoption Credit what is the maximum credit allowed per child?

answer

Max credit is 13,910 per child include a special-needs adoption

question

Adoption Credit can it be used concurrently with the deduction

answer

Yes

question

Adoption Credit what are the AGI limits?

answer

The amount of the credit reduces for MAGI above 197,880 and is completely gone at 237,880

question

Adoption Credit how does the carry forward and exclusion work?

answer

Any unused credit may be carried forward up to 5 years and not subject to MAGI phase out. Expense for a child in a previous reduce the max credit in the current year i.e. in 2013 3,910 paid and in 2014 15k paid only 10k can be credited in 2014 as 3910 was credited in 2013

question

What is the adoption credit for special needs child

answer

13910 no matter the qualifying expenses

Tax Credits 2014 CPA REG 2015 – Flashcards

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