Question: Under what circumstances must a taxpayer use

> Can a taxpayer take a deduction for premiums paid for health insurance? How do reimbursements from health insurance policies affect the amount of the medical deduction? What happens if an insurance reimbursement for medical expenses is received in a subs

> What is the proper tax treatment for prescription drugs obtained outside the United States, such as Canada?

> When are travel costs deductible as medical costs? How are medical travel costs calculated?

> What are the general requirements for a medical expense to be considered deductible?

> Explain the treatment of itemized deduction limitations for high-income taxpayers in 2017.

> In May 2017, Regina graduated from USC with a degree in accounting and moved to Portland to look for work. Shortly after arriving in Portland, she obtained work as a staff accountant in a local CPA firm. In her move to Portland, Regina incurred the follo

> Zach attended Champion University during 2012-2016. He lived at home and was claimed by his parents as a deduction during the entire duration of his education. He incurred education expenses of $10,000 during college of which $2,000 was paid for by schol

> What are some of the limitations concerning deductibility of student loan interest? Be specific and comprehensive.

> Three types of payments are associated with a decree of separation or a divorce a. What are those three payments? b. Which one has a tax consequence? c. What is the timing rule regarding the “recapture” period of those payments?

> Adrian contributed an antique vase she had owned for 25 years to a museum. At the time of the donation, the vase had a value of $35,000. The museum displayed this vase in the art gallery. a. Assume that Adrian’s AGI is $80,000, and her basis in the

> Jaylen made a charitable contribution to his church in the current year. He donated common stock valued at $33,000 (acquired as an investment in 1998 for $14,000). Jaylen’s AGI in the current year is $75,000. What is his allowable charitable contribut

> Tyrone and Akira, who are married, incurred and paid the following amounts of interest during 2017: Home acquisition debt interest…………………. $15,000 Credit card interest………………………………………5,000 Home equity loan interest……………………………. 6,500 Investment interest e

> Steve purchased a personal residence from Adam. To sell the residence, Adam agreed to pay $4,500 in points related to Steve’s mortgage. Discuss the tax consequences from the perspective of both Steve and Adam.

> Dante and Rosa, both under 65 and married, have a combined AGI of $45,000 in year 2017. Due to certain heart issues, Dante has been prescribed Lipitor® by a physician. For year 2017, Dante spent a total of $3,100 on the medication and $750 on doctor’s

> Reggie, who is 55, had AGI of $32,000 in 2017. During the year, he paid the following medical expenses: Drugs (prescribed by physicians) $200  Marijuana (prescribed by physicians) 1,400  Health insurance premiums –after taxes 850  Doctors’ fees

> Hortencia is employed as an accountant for a large firm in San Diego. During 2017, she paid the following miscellaneous expenses: Unreimbursed employee business expenses…………………………. $520 AICPA dues…………………………………………………………………………..400 Investment journal subs

> Accountants recognize revenue when it is both realized and a. Recorded. b. Accumulated. c. Collected. d. Earned.

> An example of nontaxable income is a. Wages. b. Dividend income. c. Alimony payment. d. Child support payment.

> Employers can pay (or reimburse) employees for up to _________ per year of educational assistance, whether or not the education is job-related. a. $5,250. b. $5,150. c. $5,000. d. $2,500.

> Payments to employees under written dependent care assistance plans are tax-free. The exclusion cannot exceed the earned income of the lesser earning spouse and cannot exceed ________ for an individual filing as married filing jointly. a. $2,500. b. $5

> Which of the following fringe benefits provided by the employer is not taxable to the employee? a. Sick pay. b. Vacation pay. c. Bonus. d. 10% discount on products sold by the business; the gross profit percentage for the business is 20%.

> Items that must be reported on line 21 (other income) of Form 1040 include. a. Dividend income. b. Capital gains. c. Interest income. d. Jury duty pay.

> Frank, who is single, received $7,000 of social security benefits. His AGI before the social security benefits was $15,000. He also had $100 of tax-exempt interest. What is the amount of taxable social security benefits? a. $18,600. b. $7,000. c. $0

> Provisional income is calculated by starting with Adjusted Gross Income (AGI) before social security benefits and adding back specific items. One of these items is a. Employer-provided adoption benefits. b. Taxable interest income. c. Wages earned. d

> Graciela, who is single, reported itemized deductions of $6,400 on her 2016 tax return. Her itemized deductions included $200 of state taxes paid. In 22017, she received a $150 refund of state taxes paid in 2016. What is the amount that Graciela needs

> When an individual’s marginal ordinary income tax rate is 25%, the tax rate on qualified dividends is a. 0%. b. 15%. c. 25%. d. 5%.

> The basis of the property received as a dividend by a shareholder of a corporation is a. The book value at the date of distribution. b. The original cost at the date of purchase. c. The accounting value at the date of distribution. d. The fair market va

> An individual must complete Schedule B (Forms 1040A or 1040) if the following situation occurs: a. Receives child support payments of $1,600. b. Receives interest income over $1,500. c. Receives qualified dividends of $1,050. d. Receives interest inc

> When filing their tax returns, almost all individuals use a. The cash receipts and disbursements method. b. The accrual method. c. The recognition method. d. The hybrid method.

> Income may be realized in the form of a. Money or services. b. Only money. c. Money, services, or property. d. None of the above.

> For tax purposes, one of the requirements to recognize income is that a. There must be an economic benefit. b. The income must be tax-exempt. c. The transaction must occur but completion of the transaction is not necessary. d. There must be a cash tran

> Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the Form 1040EZ Tax Tables to determine tax liability. Married taxpayers, taxable income of $33,862. Single taxpay

> Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the Form 1040EZ Tax Tables to determine tax liability. a. Married taxpayers, taxable income of $83,877. b. Married

> Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the Form 1040EZ Tax Tables to determine tax liability Single taxpayer, taxable income of $33,862. b. Single taxpa

> Havel and Petra are married, will file a joint tax return, and meet the requirements to file a Form 1040EZ. Havel has W-2 income of $46,152 and Petra has W-2 income of $47,289. What is their tax liability? Determine their tax liability using both the

> Sheniqua, a single taxpayer, had taxable income of $93,678. Her employer withheld $19,003 in federal income taxes from her paychecks throughout the year. Using the tax tables, would Sheniqua receive a refund or would she be required to pay additional t

> The W-2 incomes of Betty and her husband Ronald were $48,466 and $45,128, respectively. If Betty and Ronald use a filing status of married filing jointly, determine their tax liability using the tax tables.

> The W-2 income of Sandra, a single taxpayer, was $98,793. Using the tax tables, determine Sandra’s tax liability.

> Use the Tax Rate Schedules to determine tax liability for each of the cases in problems 46, 47, and 48, above. Data from question 46: Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the fo

> Sean, who is single, received social security benefits of $8,000, dividend income of $13,000, and interest income of $2,000. Except as noted, those income items are reasonably consistent from year to year. At the end of 2017, Sean is considering selling

> Carl and Karina file a joint return. Karina earned a salary of $38,000 and received dividends of $3,000, taxable interest income of $2,000, and nontaxable interest of $1,000. Carl received $9,000 of social security benefits and a gift of $6,000 from his

> A married couple received $10,000 of social security benefits. Calculate the taxable amount of those benefits if the couple’s provisional income is (a) $20,000, (b) $41,000, and (c) $63,000.

> Each of the following taxpayers received a state income tax refund in 2017. In all cases, the taxpayer has a filing status of married filing jointly. What amount of the refund is properly included in 2017 income? a. Refund of $729; taxpayer did not item

> Nancy, who is 59 years old, is the beneficiary of a $200,000 life insurance policy. What amount of the insurance proceeds is taxable under each of the following scenarios? a. She receives the $200,000 proceeds as a lump-sum payment b. She receives the p

> A taxpayer who purchases a Series EE U.S. Savings Bond must report the interest income (i.e., increase in value) on the bond on the date the bond is redeemed, or the taxpayer can elect to report the interest currently in income. Under what circumstances

> Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2017 in each of the following independent cases: a. A taxpayer completes $500 of accounting services in December 2017 for a client who pays for the accounting wor

> In 2012, Marie borrowed $10,000. In 2017, the debt was forgiven. Marie does not believe she should report the forgiveness of debt as income because she received nothing at the time the debt was forgiven in 2017. Do you agree or disagree? Support your

> Burger Store is located near many large office buildings, so at lunch it is extremely busy. Burger Store management previously permitted lunchtime employees a half-hour off-premises lunch break. However, employees could not easily return in a timely ma

> When and at what rate is interest calculated on amounts owed to the IRS?

> What is the standard deduction for each filing status?

> What are the four specific tests necessary to be a qualifying relative of the taxpayer?

> What age must a child be at the end of the year to meet the age test under the qualifying child rules?

> What are the five specific tests necessary to be a qualifying child of the taxpayer?

> What are the three general tests that a qualifying person must meet to be a dependent of the taxpayer?

> What is the amount of the personal and dependency exemptions for 2017?

> George and Debbie were legally married on December 31, 2017. Can they file their 2017 income tax return using the status of married filing jointly? Why or why not? What other filing status choices do they have, if any?

> What are the five types of filing status?

> Itemized deductions are taken when a. The taxpayer wants to. b. They are less than the standard deduction. c. They are higher than the standard deduction. d. The standard deduction is limited by high AGI.

> For 2017, the high income taxpayer limitation percentage of the excess of AGI over the applicable threshold is: a. 3%. b. 2%. c. 1%. d. 0.

> In 2017, high-income individuals are required to forfeit part of their itemized deductions. This effectively: a. Reduces their overall tax rate. b. Does not affect their overall tax rate. c. Increases their overall tax rate. d. None of the above.

> All of the following would qualify as a deductible work or job related expense except: a. A doctor incurring expenses related to studying to become certified as a plastic surgeon. b. An accountant taking a CPA exam review course. c. A teacher taking cou

> Which of the following itemized deductions is not subject to the 2% limit on the Schedule A? a. Tax preparation fees. b. Safe deposit box fee. c. Gambling losses. d. Union dues and fees.

> A tax rate that decreases as the tax base decreases is an example of what kind of tax rate structure? Progressive. Proportional. Regressive. d. Recessive.

> Darren paid the following expenses during November 2017 for his son Sean’s college expenses for spring 2018 semester, which begins in January 2018: Tuition…………………..$12,000 Housing…………………….8,000 Books…………………………1,500 In addition, Sean’s uncle paid $500 i

> DJ and Gwen paid $3,200 in qualifying expenses for their son, Nikko, who is a freshman attending the University of Colorado. DJ and Gwen have AGI of $170,000 and file a joint return. What is their allowable American opportunity tax credit (AOTC) after

> Nathan paid $2,750 in qualifying expenses for his daughter who attended a community college. How much is Nathan’s lifetime learning credit without regard to AGI limitations or other credits? a. $250. b. $550. c. $825. d. $1,375.

> Dennis and Vera are ages 69 and 59, respectively, and file a joint return. They have an AGI of $28,000 and received $2,000 in nontaxable Social Security benefits. How much can Dennis and Vera take as a credit for the elderly or the disabled? a. $0. b.

> Avril and John are ages 70 and 72, respectively, and file a joint return. They have an AGI of $18,000 and received $1,000 in nontaxable Social Security benefits. How much can Avril and John take as a credit for the elderly or the disabled? a. $2,700.

> Dwayne is single with one dependent. He enrolled in a qualified plan through the Marketplace at a cost of $4,200 per year. His household income was $40,000. The SLCSP premium is $4,700. What is Dwayne’s premium tax credit? a. $1,416 b. $3,264 c. $4,

> Which of the following statements is incorrect? a. Taxpayers who purchased qualified health insurance through the Marketplace may be eligible for a premium tax credit. b. Taxpayers must apply the credit towards their health insurance premium. c. The pre

> Which of the following credits is never a refundable credit? a. Earned Income Credit b. Foreign Tax Credit c. Child tax credit d. American opportunity tax credit

> Thomas and Stephani are married with four qualifying children. Their AGI is $26,500. Calculate their EIC using the EIC formula. a. $6,318. b. $5,777. c. $5,616. d. $4,600.

> Allie and Buddy are married, file a joint return, and have one son, Zack, age 5. Buddy has earned income of $42,000 and Allie was a full-time student for 8 months (with no income). They paid a qualified child care center $3,450. How much is Allie and

> Juan and Lydia both work, file a joint return, and have one qualifying child. They have AGI of $19,000. What is their EIC? a. $510. b. $3,400. c. $5,616. d. $10,000.

> Abel and Loni adopted a boy (a U.S. citizen), during the current tax year and incurred a total of $14,675 in qualified adoption expenses. Abel and Loni have modified AGI of $225,000. What is the amount of adoption credit they can take? a. $6,290. b. $

> After two and one-half years of working with the orphanage and the government, Jake and Nikki adopted a two-year-old girl from Korea. The adoption process, which became final in January 2017, incurred the following qualified adoption expenses. How much

> Marcia is a single filer and has AGI of $26,000. During the year, she contributed $800 to a Roth IRA. What amount of retirement savings contributions credit can Marcia take? a. $0. b. $80. c. $160. d. $800.

> Jerry and Ellen are married filing jointly with AGI of $45,000. They made a $1,500 contribution to a qualified retirement plan. How much is their retirement savings contributions credit? a. $0. b. $150. c. $300. d. $750.

> Julian is a single father with a son, Alex, who is 8 years old. If Julian’s AGI is $87,000, what is his child tax credit for Alex? a. $0. b. $400. c. $600. d. $1,000.

> Justin and Janet, whose AGI is $156,000, have twin boys, Jake and Jaime, age 5. How much child tax credit can they take? a. $0. b. $1,000. c. $2,000. d. $2,300.

> Who pays FICA? What are the percentages and limits on the payments?

> If a taxpayer works more than one job, will the withholding from the various jobs necessarily cover his or her tax liability? Explain.

> Explain the purpose of Form 1040-ES. Under what conditions are taxpayers required to file 1040-ES? When is Form 1040-ES filed?

> What is a Form W-9? Why must this form be filed?

> Explain the provisions of backup withholding and the conditions under which an employer must comply with these provisions.

> Explain the two methods for income tax withholding on supplemental wage payments.

> What are the penalties imposed on employers for filing incorrect W-2s?

> How does an employer report wages to the employee, the federal government, and the Social Security Administration? When is this notification due?

> What individuals are subject to the payroll taxes on household employees?

> If a business fails to make payroll deposits, who is held responsible?

> What are the penalties for not making timely payroll deposits?

> When must monthly and semiweekly schedule depositors make their deposits? What taxes must be deposited?

> What is a lookback period?

> Briefly explain when and how each of the two education credits is phased out.

> Explain what qualifies as education expenses for the purposes of educational tax credits.

> To determine the amount of credit for the elderly or the disabled, the appropriate base amount must be adjusted by the effect of two items. What are those two items, and in what way is the base amount adjusted?

> A taxpayer maintains a household and is entitled to a dependency exemption for an incapacitated adult child. The child lives during the week at an adult day care center and on the weekends at home with the taxpayer. The taxpayer pays a fee to the cente

> Briefly explain the purpose of the premium tax credit.

> Briefly explain the difference between a refundable and a nonrefundable tax credit and give three examples of tax credits that may be refundable (or partly refundable) discussed in this chapter.

> Briefly explain the requirements that must be met to receive a tax credit for child and dependent care expenses.