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FICA
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Federal Insurance Contributions Act
Controls SS Tax and Medicare
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A qualifying relative cannot be considered as such if they file their own tax return under what status?
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MFJ
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Accumulated Earnings
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The employee's year-to-date gross earnings, or the employee's gross earnings from the beginning of the year through the end of each pay period.
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Exemptions
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A specified deduction is allowed for each qualifying exemption. There are two classifications of exemption: personal and dependency
For 2010 the exemption amount is $3650
Persons who qualify as dependents cannot qualify for their own personal exemption; those filing dependents can receive their exemption
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Estate Tax
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Paid by the administrator, executor, of a deceased taxpayer's estate from the assets of the estate. Based on the fair market value of the property transferred. Many exclusions mostly on large gifts or estates.
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Assignment-of-Income Doctrine
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all income earned from services provided by an entity is to be taxed to that entity, and income from property is to be taxed to the entity that owns the property. Can't direct wages earned to another and not pay taxes, person who earns it pays it.
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Direct Deposit
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When the employer deposits the employee's check into his or her personal banking account.
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Ability to Pay
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- Principle of Taxation
Belief that people should be taxed on their ability to pay
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outsourcing
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(of a company or organization) to purchase (goods) or subcontract (services) from an outside supplier or source.
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Other Taxes
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Many different ones; most common is employment taxes, and penalty for premature IRA withdrawls
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Ordinary Income
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Recurring income earned by a taxpayer for a tax year.
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Realization Concept
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No income is recognized for tax purposes until it has been realized by the taxpayer. Realization occurs when an arm's length transaction takes place, Goods are sold, Services rendered. Mere changes in value without the advent of a realization event, in which the taxpayer receives the change in value, do not result in a taxable recognition. Ex: building built on leased land.
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Net Pay
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The amount left after the total deductions are subtracted from gross earnings.
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401 (k) Plan
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A personal employee's retirement plan which is exempted from taxes on earnings.
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Federal Income TAx
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includes ordinary and capital gains tax
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Certainty
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A taxpayer should know when and how a tax is to be paid. In addition, the taxpayer should be able to determine the amount of the tax to be paid.
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Business Purpose Concept
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Deduction is allowed only for an expenditure that is made for some business or economic purpose that exceeds any tax avoidance motive. 1) trade or business expenses 2) Investment Exp 3) Personal Exp
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What is secondary authority?
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Consists of interpretations of primary authority and is an unofficial source of tax informaiton. Examples include tax services, journals, textbooks and treatises, and newsletters. These are not considered substantial authority.
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What are treasury regulations?
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They constiture the IRS's, and thereby, the Treasury's official interpretation of the Internal Revenue Code. They are issued in the form of Treasury Decisions.
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Inheritance Tax
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One paid by the heir who receives property from deceased person's estate.
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public debt
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all of the money borrowed by the governmetn and not yet repaid, phys the accrued interest on that money; also called the national debt or federal debt.
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Custom Daily Tax
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Tax on paid goods brought in from other countries
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What were the reasons for the changes on determining a qualifying child dependent?
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Dependency exemption
Chld credit
Earned income credit
Dependent care credit
Hea dof house-hold filing status
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Tax Benefit Rule
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Any deduction taken in a prior year that is recovered in a later year is reported as income in the year it is recovered, to the extent that a tax benefit is received from the deduction.
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What are administrative sources?
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They include the various rulings of the Treasury department and the IRS. These are issued in the form of regulations, revenue rulings, and other pronouncements.
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What are temporary regulations?
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Regulations issued in response to a congressional or judicial change in the tax law or its interpretation. They are effective immediately upon publication. They expire 3 years after issuance. Issued to provide the taxpayer with immediate guidance concerning a new provision of the law. Also good until it is replaced with final regulation. Treated as a final reg until that time.
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Form W2
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a form given to each employee at the end of the year and contains a summary of the income you earned for the year and all amounts the employer withheld for taxes.
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custom duty
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a tax laid on goods brought into teh United States form abroad, also known as tariffs, import duties, or imposts.
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What are the exceptions to a child physically residing within a residence for more than half of the year?
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Absences due to illness
education
business
vacation
military service
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How is the qualifying relative's annual support calculated?
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Lodging Costs
Direct items such as food, clothing education, transportation, medical
Aproportionate share of indirect expenses not included in the lodging
Taxpayer's Support Percentage= Taxpayer Support/ Total support expenditure for and by Dependents
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What is the only court where the taxpayer doesn't have to pay firts?
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The U.S. Tax Court
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How would you interprate section 121(b)(2)(A)(ii)?
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121 = Section number
b = subsection
2 = paragraph
A = subparagraph
ii = clause
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What are law issues?
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They arise when the facts are well established, but it is not clear which portion of the tax law applies to the issue.
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Deductions for Adjusted Gross Income (AGI)
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Generally referred to as "Above line deductions"; this includes things like business expenses, IRA and Keogh contributions, alimony, and moving expenses
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What are some limitations and qualifications for the Child Tax Credit?
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The credit is $1000 per "qualifying child"
"Qualifying child" is the same as in the dependent exemption except for (a) the child has not reached age 17 by the end of the taxpayer's tax year and (b) the child must be a Citizen or resident of the US
The credit is phased out in $50 increments for each $1000 of "modified adjusted gross income" (MAGI) above a threshold amount; (a) $110,000 for MFJ, (b)$55,000 for MFS, and (c) $75,000 for Single Taxpayers
Credit is generally limited to the taxpayer's income tax liability
Child credit is refundable to the extent of 15% of the taxpayer's earned income in excess of $3000
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What is the Court of Appeals?
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The first level of Federal appellate courts. Involved in both tax and nontax litigation. Carries precedential weight because each circut is independent of the others and must follow only the decisions of the U.S. Supreme court.
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What is nolo contendere?
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A party does not want to fight or continue to maintain a defense; the defendant will not contend a charge made by the government; no contest.
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What are the other primary sources of the tax law, and what is their primary function?
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Administrative sources and judicial sources. To interpret and explain the application of the provisions of the Internal Revenue Code.
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What is the importance of Federal Taxation?
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Affects most business and many common personal decisions
Important to understand marginal tax rate (MTR) when choosing between two decision alternatives.
Common decisions affected by current tax laws
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What are the five tests to be filed as a qualifying relative?
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Gross Income Test
Support Test
Relationship or Residence Test
Joint Return Test
Citizenship Test
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Ch 7, What do the BNA DTRs do?
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Provide up to date information concerning statutory, administrative, and judicial tax law developments that affect state, Federal, and international taxation. Also includes interviews with government officials, articles reviewing the day's events, and full text of key documents discussed in the newsletter.
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What is the permanent citation for the Tax Court?
Hillman, D.H.,114 T.C. 103(2000)
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All proper citations italicize or underline the name of the court case.
114 = volume number
T.C. = Tac Court reporter
103 = page number
(2000) = year of decision
Most of the time includes name of both parties, ignored here because it is always agains the government.
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Employer's Federal Tax Table (Tax Table)
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Shows the amount of taxes to be withheld from employees each pay period based on their filing status, such as single, married, etc.
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What is something a taxpayer can do to maximize itemized deductions?
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If the taxpayer's itemized deductions are close to the standard deduction amount, they should bunch two year's of itemized deductions in alternate years in order to maximize.
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How is the Court of Appeals split up?
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Into 13 courts, 11 geographical, 1 assigned to Washington D.C., and 1 for Federal Circut.
11 geographical Courts are organized into circuits, utah is in 10th, Idaho and California are in 9th.
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How do you interprate the citation of this regulation. Reg. Section 1.162-21(a)(2)
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1 = type of regulation
162 = related code section
21 = regulation number
a = regulation paragraph
2 = regulation subparagraph
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Ch 7, What is the BNA best known for?
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As the publisher of the BNA Tax managment portfolios and its newsletter, the Daily Tax Report (DTR).
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