企业税法复习资料1.docx

CHP 1,2,3FICA TAX - 2 portions: Social Security and Medicare- Employer share matches employees payments except 2011, 12. For 2011 and part of 2012, SSI employee share only reduced to 4.2%- SSI base in 2012 is $110,100 per employee, 6.2% SSI ($113,700 in 2013).- Medicare base is unlimited, 1.45% Medicare- Self employed TPs pay employer share and employee share based on their NI. ESTATE & GIFT TAX Rates: Gift & Estate rate in 2012 is 35%. (2013 is 40%.)- Subject to many year-to-year law changes. Based on value of assets transferred to another. Cumulative lifetime and death time calculation (called Unified Transfer Tax)- Gifts during life excluded from gift tax: $13,000 per done/ year (2012) plus $5,120,000 cumulative excess over lifetime in 2012 (2013 is $14,000 per donee + $5,250,000)- For gifts during life and at death an unlimited amount is allowed if made to spouse.- On death, allowed remaining balance of cumulative excess (called the unified credit equivalent amount) during life.- 2nd to die of married couple gets to use spouses unused unified credit. STATUTE OF LIMITATIONSDue Date Of Return For Individual- 3 months after year end (add if this falls on weekend or holiday)- Extension to file allowed for 6 additional months (No extension to PAY allowed though.) IRS Assessments - 3 years from the later of: April 15 or Date return filed- If gross income is understated by 25%, its 6 years.- If fraud or no return filed, no time limit.TP Refund Request. Later of: - 3 years date return was filed (or 4/15 if later) or- 2 years date tax was paid.- Interest is assessed by IRS from return due date to payment.- Interest is paid by IRS from 45 days after return due date to paymentTP PENALTIESFailure To File Return: 5% per month up to 5 monthsFailure To Pay Tax: 0.5% per Month up to 50 months * Partial month counts as a whole month* If both apply in any month, file penalty is reduced to 4.5%* Penalties start accruing upon April 15 Note: Interest is also assessed on tax + penalties and is compounded daily. Marginal Tax BracketAfter tax cash flow = Pre-tax cash flow x (1 tax rate)CHP 4FILING STATUSDetermined On Last Day Of The Year. Exception: Death of spouse 算作 married entire year.5 Possibilities: 1) Single (S)2) Married Joint (MJ)- Joint and severally liable for tax unless “innocent spouse”- Once elected, cant change to separate returns for that year.3) Qualifying Widow(er) (also called Surviving Spouse) - Must have dependent child.- Child lives with parent entire year (temporary absence OK).- Status allowed for using MJ rates 2 years after year of death.4) Married Separate (MS)- Can later change to MJ status.- Also see “abandoned spouse” rules below.5) Head-of-household (HH) - Unmarried. Exception: No spouse at home during last 6 months of year and child lives in home and qualifies (even if not claimed) as dependent (abandoned spouse rule). - Pay for 1/2 of household costs for self and another.- Dependent relative lives in TPs (TP) home 1/2 year. -Parent doesnt have to live in TPs home. “FROM” AGI Deduct Greater Of Fixed Standard Or Sum Of Itemized Deductions.-Standard deduction in 2012. $5,950 for S or MS, $11,900 for MJ, $8,700 for HH-Extra amounts to standard for each instance TP (or spouse on MJ) are blind or 65 years old. ($1,150 for MJ or MS, $1,450 for S, HH) -If TP is claimed as a dependent on another TPs return, basic standard deduction is limited to: Greater of $950 or Dependents earned income plus $300.Personal & Dependency Exemptions-Worth deduction of $3,800 each in 2012. -Personal: 1 for self, 1 for spouse (unless filing separate) Exception: Spouse OK on separate if they have no income & not anothers dependent. Exception: none if claimed as dependent by another.-Dependents i) Support - Provide 1/2 support for year. Exception: Multiple support agreement. Exception: Custodial ( half year) parent in divorce claims child unless they sign a waiver & waiver is attached to noncustodial parents return. ii) Gross income of dependent 15%, these are taxed at 15%. If not, taxed at 0%.CHP 5GROSS INCOME - GENERAL CONCEPTS-Income can be realized in any form, whether in money, property or services (barter)-Recovery of capital concept requires only profit to be taxed (not gross proceeds) -Loan proceeds are not income.-Income is taxed to owner of principal or service provider, even if contracted to give to another (cant “assign” income to another)-Refunds or reimbursements for items previously deducted are income when insurance reimbursement received for medical costs, or refund received from state income tax return if these were itemized deductions. (Federal Refunds are always non-taxable)Allowable Accounting Methods: Cash method: -Receipt of a check is considered as available. If TP “could” get it, then its available.-Contract to defer OK if done before income is earned. -If cash is received and repayment is known, no income. If maybe repayment, income then deduct later if repaid.-If inventories are material, accrual must be used to compute sales revenue and cost of goods sold.COMMUNITY PROPERTY INCOMEIncome From Services Considered Earned Equally By The “Unit”. Exception for people who live apart entire year: earnings from services is taxed to person who performed them.Income From Property Considered Earned By Owner.- If property purchased with community funds, earnings are community earnings.- If purchased with individual funds, earnings are community earnings (in WI) unless a notarized statement is provided to other spouse before earnings took place. GROSS INCOME- SPECIFIC ITEMSPensions & Annuities - A portion of each payment is tax free return of principal and taxable interest.(Cost/Total return) = exclusion ratio (Pensions typically have $0 cost)- Once cost is recovered, all is income. If not, unrecovered cost is deductible from AGI.Business Income1) Partnership (also LLC) or S Corporation - Entity files a tax form but pays no tax.- Net income flows through to owners tax returns. (even if not distributed) text p 5-14 - Distributions are not taxable (income was already taxed)- Income earned by services used to compute SE tax. Wages and SE income referred to as earned income. Interest, dividends, other income called unearned income.2) Sole proprietorship - Gross income defined as sales less CGS.- File schedule C to report net profit which is included in AGI. (So, deductions are “for” AGI). - Net profit used to compute SE tax.3) Rent & royalty - Not considered a “business”. No SE tax.- Gross income = rents, but special rule* allows expenses deducted FOR AGI.*Note: Most investment expenses are deducted from AGI. Alimony (aka maintenance or support) - All 6 tests below must be passed to be alimony:1) Not a property settlement (Non-taxable event, recipient steps in shoes of payer for cost basis. No gain or loss to transferor)2) Must be in cash (or cash to a third party)3) Divorce or separation document must require payments and not state that they are not alimony.4) Payer & payee not members of same household.5) Cant be required after death of payee.6) Cant be child support. ( If amounts are based on contingency related to child, then contingent amount is child support.)-Income to recipient, deduction for AGI by payer. Exception: front loading (Recapture provision) rules apply if 1st or 2nd year payments $15,000, compared to 3rd year. PAYER income, deduction for RECIPIENT in 3rd year. Prizes & AwardsTaxable except: - Certain awards received for achievement where recipient doesnt keep it. No income, no deduction.- Employer non-cash (tangible property) award received for length of service or safety. (Employer deducts, no employee income) (Up to 400 per yee/year if no formal plan. Up to 1,600 if plan)Gambling- Winnings included in income. Losses deductible up to winnings as an itemized deduction.Social Security Benefits - Threshold (called MAGI) = AGI + Muni Interest + 1/2 Social Security. If MAGI is below threshold 1 then 0% taxable or way above threshold 2 then 85% taxable.- Threshold 1 (0% to 50% SS is taxable) MAGI for MJ $32,000 or S, HH $25,000- Threshold 2 (50% - 85% SS is taxable) MAGI for MJ $44,000 or S, HH $34,000 Unemployment Compensation - All taxable Imputed Interest - Gift loans, yer/yee loans, Corporation/shareholder loans, Any other tax avoidance scheme- Income is required when loan between parties has a below market interest rate. - Impute interest income to lender based on market rate. Borrower has interest expense.-Exceptions (dont impute): I) Loans between individuals $10,000. - Some exceptions.II) Loans between individuals $100,000. - Maximum imputed interest = borrowers investment income net of deductible expenses. - If borrowers net investment income $1,000, then NO imputing. III) Loans between corporation and shareholder and/or employee premiums paid. (Interest on accumulated dividends is taxable.) Life Insurance Proceeds - Nontaxable if paid upon death of insured.- Some may be taxable if cashed in or transferred.- Possible exclusion for cashing in policy if terminally ill. If disabled, limited to medical costs. Scholarships - For a degree candidate are not income to extent of tuition and required books, fees, supplies, equipment (room & board is taxable) Qualified Tuition Program - Distributions are TAX FREE (including income earned on original contributions) if used for: books, tuition, fees, supplies, equipment, room & boardGifts & Inheritances - General rule: No income to recipient- Gift if it is disinterested generosity, no expectation of benefit in return, no payment for previous services- Employer to employee gifts are considered by default as compensation for services.- Business gifts to nonemployees deductible to $25 per donee.- Exception for inheritances: IRD is taxable as income to the recipient. IRD if it would be ordinary income to decedent if they received it. (such as pensions, final paycheck, IRA) Recipient also gets itemized deduction for portion of estate tax paid on IRD.Foreign Earned Income - As a citizen or resident, worldwide income is subject to US taxation.- Exclusion: Perform servicesAND must be a “Bonafide Resident” of foreign country or “Physically Present” in foreign countries 330 days out of any 12 consecutive months, THEN exclude up to $95,100 per person/year plus excess housing costs. Prorate if 12 month period starts in the middle of a tax year. Also prorate for non-qualifying (not in country) daysDamages (Personal Injury) - Generally, income if initiated from business injury.- Punitive damages are always taxable. - No tax on all payments (except on punitive) if initiated from physical injury or damages received for emotional distress due to physical injury.- All payments for medical expenses are nontaxable (includes emotional related).Workers Compensation - You get hurt on the job. - All receipts are NON-TAXABLE. Disability- Insurance premiums paid by employer are non-taxable as a fringe benefit. Payments received under policy are included in income. - Exception: insurance premiums are paid by TP or by employer but are included in wages.Miscellaneous - Welfare, other assistance not income - Federal: refunds, stimulus payments, credits are all not income - Growth of Roth IRAs not income (traditional IRA distributions are all taxable)CHP 6DEDUCTIONS FOR AGIBusiness DeductionsAdjustments For AGI 1. Moving expenses: Deductible FOR AGI if move is due to a change in work location. 2 tests:1) Distance test: Old house to New job location Old house to old job location =50 miles2) Time test: must be employed full-time 39 weeks in first year. If self-employed, must also be employed 78 weeks in first 2 years. Time test waived if employer initiated move.- Deduct all direct costs of moving household items and transportation costs of household members, which include lodging, but no meals. Storage costs up to 30 days included.- Allowed actual gas or 23/mile in 2012 (24 in 2013).- Employer can exclude reimbursements for direct expenses from employees income, which is no deduction for employee.2. Health Insurance - Self employed (and S corporation shareholders) can deduct premiums for self & family for AGI. 3. One half of SE (self employment) See discussion of FICA chapter 1, SE in chapter 7 4. Alimony paid See alimony income discussion chapter 55. Penalty on early withdrawal of savings: Relates to certificate of deposit if cashed in before agreed term. 6. Health Savings Account contributions. - Maximum contributions are the lesser of: The policy deductible or $3,100 self, $6,200 family. (add $1,000 if age 55) ($3,250 self, $6,400 family in 2013) - Reduce maximum by excludible employer contributions.- Distributions are tax free if used for medical costs.- If under age 65, taxable distributions are also subject to a 10% penalty. 7. Student Loan interest: Loan must be for post high school tuition, books, room & board, etc for TP, spouse or dependent. $2,500 maximum deduction per year - AGI phase out, MJ $120,000 - $150,000, S or HH $60,000 - $75,000. 8. Tuition deduction (thru 2013) Optional FOR AGI instead of education credits.- None if AGI $80,000 S, HH ($160,000 for MJ).- $2000 allowed $65,000AGI 80,000 S, HH ($130000 AGI $160,000 MJ).- $4000 allowed AGI $250 only a receipt is allowed.- Deduction of property limited to sale proceeds received by charity for donation of cars, boats, planes. If used by charity instead, then regular property rules apply.- General Rule: Deduct Fair Market Value of non-cash property given regardless of original cost. - Special Rule: Deduction is lower of cost (called adjusted basis) or value: 1) If gift is not a capital asset held 1