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Chapter I14 Special Tax Computation Methods, Tax Credits, and Payment of Tax Learning Objectives After studying this chapter, the student should be able to 1. Calculate the alternative minimum tax. 2. Describe what constitutes self-employment income and compute the self- employment tax. 3. Describe various business and personal tax credits. 4. Understand the mechanics of the federal withholding tax system and the requirements for making estimated tax payments. Areas of Greater Significance The areas of alternative minimum tax, self-employment tax, payment of tax, child care credit, and lifetime earning credit may have the widest application. Areas of Lesser Significance In the interest of time, the instructor may determine that the following areas are best covered by student reading, rather than class discussion: 1. Work opportunity credit 2. Disabled access credit 3. Tax credit for rehabilitation expenditures 4. Business energy credits 5. Tax credit for the elderly and disabled 6. Earned income credit 7. Welfare-to-work credit Problem Areas for Students 2009 Pearson Education Inc publishing as Prentice Hall IIO14-1 The following areas may prove especially difficult for students: 1. The alternative minimum tax calculation. 2. Calculation of the credit for increasing research activities. Highlights of Recent Tax Law Changes The following tax law items have changed since the 2008 edition of this chapter: 1. The AMT exemption on a joint return is $66,550 and $44,350 for single individuals. 2. The 2008 ceiling for the full 15.3% FICA/self-employment tax is $102,000. 3. The child tax credit is now refundable to the extent of 15% of the taxpayers earned income in excess of $12,050. 4. The expense limit and the AGI phase-out limits for the Adoption Credit increased. 5. The maximum Hope Scholarship Credit has increased to $1,800 (100% of the first $1,200 of qualifying expenses, and 50% of the second $1,200 of qualifying expenses) 6. The phase-out limits for the Hope Scholarship Credit and Lifetime Learning Credit increased. 7. The business energy credit for purchase of solar and qualified fuel cell property has increased to 30%.. 8. The earned income credit phase-out amounts changed. Teaching Tips 1. The alternative minimum tax calculation is difficult, but the basic concepts need to be mastered by the students to properly plan for clients. 2. There are several complex credits discussed in this chapter. You may want to concentrate on those that occur most frequently (i.e., child and dependent care credit, certain general business credits). 2009 Pearson Education Inc publishing as Prentice Hall IIO14-2 Lecture Outline I. Alternative Minimum Tax (Example I14-1) The current alternative minimum tax (AMT) applies only if the calculated AMT exceeds the taxpayer's regular tax liability. Most taxpayers do not pay AMT because of the liberal exemption and insufficient tax preferences.... View Full Document

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