H&R Block Income Tax Course

Circular 230 - Regulations governing the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries, and appraisers before the IRS. Disclosure - The release of tax information by an IRS employee. Due Diligence - Requirements that tax professionals must follow when preparing income tax returns. Noncompliance - Failure or refusal to comply with the tax code. Privilege - Protection from being required to disclose confidential communications between two parties, such as attorney and client. Estimated Tax - The amount of tax a taxpayer expects to owe for the year after subtracting expected amounts withheld and certain refundable credits. Estimated Tax Voucher - A statement by an individual of (1) the amount of income tax he estimates he will incur during the current taxable year on income that is not subject to withholding, (2) the excess amount over that withheld on income which is subject to withholding, and (3) his estimated self-employment tax. Exemption from Withholding - Status claimed on Form W-4 directing the employer not to withhold federal income taxes from the employee. Underpayment Penalty - If a taxpayer did not pay enough tax on a timely basis during the year, he may be required to pay an underpayment penalty. Withholding Allowances - An increase by which income tax withholding on certain income is reduced. Two Ways to Pay as You Go - Withholding and Estimated Tax Payments Form W-4 - Employee's Withholding Allowance Certificate Form 8815 - Exclusion of Interest From Series EE and I U.S. Savings Bonds Issued After 1989 Form 2210 - Underpayment of Estimated Tax by Individuals, Estates, and Trusts Form 4868 - Application for Automatic Extension of Time To File U.S. Individual Income Tax Return Form 8888 - Allocation of Refund Form 9465 - Installment Agreement Request Amended Return - A tax return filed on Form 1040X after the original return has been filed. Closed Year - A tax year for which the statute of limitations has expired. Open Year - A taxable year for which the statute of limitations has not yet expired. Failure-to-File Penalty - Generally 5% for each month or part of a month the return is late, but not more than 25% of the tax not paid. Failure to File - Taxpayer fails to file the return by the due date, and there is a balance due. Failure to Pay - Taxpayer fails to pay the tax owed by the due date. Failure-to-Pay Penalty - 0.5% of the unpaid taxes for each month or part of a month after the due date, but not more than 25%. Negligence or Intentional Disregard - Taxpayer shows negligence or disregard of the rules or regulations causing an underpayment. Negligence-or-Intentional-Disregard Penalty - 20% of the underpayment. Substantial Understatment - Taxpayer understates their tax by the larger of $5,000 or 10% of the correct tax. Substantial-Understatement Penalty - 20% of the underpayment. Form 1040X - Amended U.S. Individual Income Tax Return When can an amended return be filed? - Within three years of the date the original return was filed, or within two years of the date the tax was paid, whichever is later. Can the 1040X be e-filed? - No. Household Employee - An individual who performs nonbusiness services in a taxpayer's home. Active Income and Losses - Those for which a taxpayer performs services. Partnership - A form of business in which two or more persons join their money and skills in conducting the business as co-owners. Passive Income and Losses - Those from business activities in which the taxpayer does not materially participate, and all rental activities. Portfolio Income and Losses - Those from such sources as dividends, interest, capital gains and losses, and royalties. Rental Income - Income received by the taxpayer for allowing another person's use of the taxpayer's property. Royalty - (1) A payment received for the right to exploit a taxpayer's ownership of natural resources or a taxpayer's literary, musical, or artistic creation. (2) An interest in the oil and gas in place that entitles the holder to a specified fraction, in kind or in value, of the total production from the property, free of any expenses of development and operation. S Corporation - A qualified small business corporation that has elected special tax treatment under subchapter S of the Internal Revenue Code. S corporations pass income, losses, and deductions through to shareholders to report on their individual returns. Trust - A tax entity that distributes all or part of its income to beneficiaries as instructed by the trust agreement. Requirements for a Real Estate Professional - 1. More than half of the personal services performed by the taxpayer in all trades or businesses during the tax year were performed in real property trades or businesses in which the taxpayer materially participated. 2. The taxpayer performed more than 750 hours of services during the year in real property trades or businesses in which the taxpayer materially participated. Trade or Business Activities - Any activity that: Involves the conduct of a trade or business; is conducted in anticipation of starting a trade or business; Involves research or experimental expenditures that are deductible under IRS Code 174. Nonpassive Income - Income derived from activities that are not passive. Types of Nonpassive Income - Portfolio income; personal service income; other income. Portfolio Income - Includes interest, dividends, annuities, and royalties not derived in the ordinary course of business. Personal Service Income - Salaries, wages, commissions, self-employment income from trade or business in which the taxpayer materially participates, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. Rent - Income received for the use of property. Is rent earned or unearned income? - Unearned. Schedule E - Supplemental Income and Loss Deductible Maintenance and Repairs - Those that do not appreciably add to the value or useful life of the property. Is the value of the owner's labor deductible when it comes to rental property? - No. Rental Property Depreciable Basis - Basis MINUS land value TIMES the rental use percentage. Vacation home - A dwelling unit and may be a house, apartment, condominium, mobile home, boat, or any other property that provides normal living accomodations. Used as a Residence - A dwelling unit is used for personal purposes during the year for whichever is greater: more than 14 days; more than 10% of the days the house is rented at fair rental value. Royalty - Payments received for the right to extract natural resources from the taxpayer's property or to use a taxpayer's literary, musical, or artistic creation. Economic Interest - One acquired by investment, the return on which is dependent upon the extraction of the natural deposit or cutting of the timber. Two Methods of Computing Depletion - Cost and Percentage What tax form must estates and trusts file? - Form 1041 What tax form must partnerships file? - Form 1065 Do partnerships pay income taxes? - No. General Partner - One who is personally responsible for partnership debts. Limited Partner - A partner in a partnership organized under a state's limited partnership law, whose personal liability for partnership debts is limited to their investment in the partnership. Limited Liability Company - A business entity formed under state law by filing articles of organization as a limited liability company. Passive Activity - A business activity in which the taxpayer does not materially participate. Form 8582 - Passive Activity Loss Limitations Annuity - A series of payments under a contract made at regular intervals over a period of more than one year. Beneficiary - The owner or recipient of funds in an account, such as an IRA, or from an insurance policy or will. Contribution - When a person puts money into a retirement plan. Defined Benefit Plan - An employee benefit plan that provides determinable benefits not based on employer profits. Defined Contribution Plan - An employee benefit plan that provides a separate account for each person covered and pays benefits based on account earnings. Disability Pension - A taxable pension from an employer-funded disability plan or a disability provision of a retirement plan. Distribution - When a person takes or receives money from a retirement plan. Pension - Generally a series of definitely determinable payments made to a taxpayer after retirement from work. Rollover - A qualified transfer of funds from one tax-favored account to another, usually of the same type. Roth IRA - A type of individual retirement arrangement in which contributions are not tax deductible, earnings grow tax deferred, and qualified withdrawals are tax free. Traditional IRA - An individual retirement arrangement, contributions to which may or may not be deductible depending on the taxpayer's AGI and whether or not he is covered under an employer-sponsored retirement plan. What is the full retirement age? - For workers born before 1938, it is 65. For those born after it is gradually being increased to 67. How much of a client's social security and equivalent tier 1 RR benefits may be taxable? - Up to 85%. Form SSA-1099 - Social Security Benefits Form RRB-1099 - Railroad Retirement Benefits None of Social Security Benefits Taxable - Single, Head of Household, Qualified Widow - $0-$25,000; Married Filing Jointly - $0-$32,000 Up to 50% of Social Security Benefits Taxable - Single, Head of Household, Qualified Widow - $25,001-$34,000; Married Filing Jointly - $32,001-$44,000 Up to 85% of Social Security Benefits Taxable - Single, Head of Household, Qualified Widow - $34,001+; Married Filing Jointly - $44,001+; Married Filing Single - $1+ Fully Taxable Pension - Pensions to which the taxpayer did not make after-tax contributions or from which all pre-tax amounts have been recovered in previous years. Partly Taxable Pensions - Those pensions funded through employer plans to which the employee contributed some after-tax money. Form 1099-R - Distributions from Pensions, Annuities, Retirement, or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc. Distribution Code 1 - Early distribution, no known exception to penalty applies. Distribution Code 2 - Early distribution, exception to penalty applies. Distribution Code 3 - Disability. Distribution Code 4 - Death. Distribution Code 7 - Normal distribution. Distribution Code A - May qualify for ten-year averaging and/or capital gain election. Distribution Code G - Direct rollover to a qualified retirement plan, tax-sheltered annuity, 457(b) plan, or IRA, or from a conduit IRA to a qualified plan. Distribution Code J - Early distribution from a Roth IRA, no known exception to penalty applies. Distribution Code Q - Qualified distribution from a Roth IRA. Distribution Code T - Roth IRA distribution due to death or disability or taxpayer has reached age 59 1/2, but the payer does not know if the five-year holding period was met. Exceptions to the Early Withdrawal Penalty - 01 - The distribution was made to an employee who separated from service during or after the year in which they reached age 55. 02 - The distribution is part of a series of substantially equal periodic payments, made at least annually for the life of the participant or the life expenctancy of the participant. 03 - The distribution was made due to permanent and total disability. 04 - The distribution was made due to the death of the employee. 05 - The distribution was made in a year that the taxpayer's medical expenses exceeds 7.5% of AGI. 06 - The distribution was made to an alternate payee under a qualified domestic relations order. 07 - The distribution was made in a year an unemployed taxpayer paid health insurance premiums. 08 - The distribution was made to pay qualified higher education expenses for the taxpayer, spouse, their child, or their grandchild. 09 - The distribution was made to pay qualified first-time, home-buying expenses. 10 - The distribution was made due to an IRS levy of the qualified plan. 11 - The distribution was made to a reservist while serving on active duty for at least 180 days. 12 - Other. Form 5329 - Additional Taxes on Qualified Plans and Other Tax-Favored Accounts 401(k) Plan - Deferred compensation plan available through a wide range of employers. Contributions to a 401(k) plan are tax deferred to the employee. Distributions from the plan are taxed as ordinary income to the recipient when received. 403(b) Plan - Deferred compensation plan available to employees of many public educational institutions and non-profit organizations. 457 Plan - Deferred compensation plan available to employees of many government entities. Roth IRA - A type of individual arrangement in which contributions are not tax deductible, earnings grow tax deferred, and qualified withdrawals are tax free. Traditional IRA - An individual retirement arrangement, contributions to which may or may not be deductible depending on the taxpayer's AGI and whether or not he is covered under an employer-sponsored retirement plan. Earnings within a traditional IRA grow tax-deferred. Distributions from a traditional IRA are taxable except to the extent they represent nondeductible contributions. Qualified Plan - A plan which is eligible for favorable tax treatment because it meets the requirements of both the following: IRC 401(a); the Employment Retirement Income Security Act of 1974. Nonqualified Plan - A plan that does not meet the requirements of IRC 401(a) and ERISA and do not qualify for favorable tax treatment. 403(b) Plans - A tax-advantaged retirement savings plan available for employees of: public education organizations; some non-profit organizations; cooperative hospital service organizations. Contribution - When a taxpayer puts money into an IRA. Rollover - When a taxpayer moves money from one IRA to another. Three Sets of Rules for IRAs - Taxpayers who are active participants in employer-maintained retirement plans at any time during the year; taxpayers who are not active participants, including joint filers whose spouses are not active participants; joint filers who are not active participants, but whose spouses are active participants. American Opportunity Credit (AOC) - Credit for qualifying education expenses available for tax years 2009 through 2012. The AOC may be partially refundable. Credits - Reductions of tax liability allowed for various purposes to taxpayers who meet the qualifications. Some credits are refundable; that is, the IRS will send the taxpayer a refund for any amount in excess of the tax liability. Some credits are nonrefundable; that is, they can only reduce tax liability to zero. Some credits may be carried to other tax years. Lifetime Learning Credit - A nonrefundable credit equal to 20% of the first $10,000 of qualified higher education tuition and fees paid during the year on behalf of the taxpayer, his spouse, or his dependents. Nonrefundable Credit - A credit which cannot exceed the taxpayer's tax liability. Refundable Credit - A credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer's tax liability. Tuition and Fees Deduction - An above-the-line deduction of up to $4,000 per tax return for qualified tuition and course-related expenses. Requirements to Claim the AOC - The taxpayer pays qualified education expenses of higher education; the qualified education expenses are paid for an eligible student; the eligible student is the taxpayer, spouse, or dependent for whom the taxpayer actually claims an exemption. Modified Adjusted Gross Income (MAGI) - AGI plus foreign earned income exclusion, foreign housing exclusion, foreign housing deduction, income excluded by residents of Puerto Rico and American Samoa. Eligible Educational Institution - Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the US Department of Education. Reduction of Qualified Educational Expenses - Qualified expenses must be reduced by any nontaxable: scholarships; grants; veteran's or military educational benefits; any other nontaxable benefits. Eligible Student - The student has not claimed an AOC in any four earlier tax years; the student had not completed the first four years of postsecondary education before 2011; the student was enrolled at least half-time in a program leading to a degree for at least one academic period beginning in 2011; the student had not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2011. Calculating the AOC - The amount of the AOC is the sum of: 100% of the first $2,000 of qualified education expenses paid for the eligible student; 25% of the next $2,000 of qualified education expenses. Form 1098-T - Tuition Statement Amount of the Lifetime Learning Credit - 20% of the total qualified expenses for all eligible students on the tax return. Form 8863 - Education Credits Form 8917 - Tuition and Fees Deduction Adoption Credit - A nonrefundable credit for qualified adoption expenses incurred for each eligible child. The credit cannot exceed $13,360 per child. The limit is a per-child limit, not an annual limit, and can be carried forward for up to five years or until used. Cafeteria Plan - A plan wherein an employer offers a choice of nontaxable fringe benefits from which participating employers may select. The plan may be funded with employer contributions, employee contributions, or a combination of both. Child and Dependent Care Credit - A nonrefundable tax credit of 20-35% of employment-related child and dependent care expenses for amounts of up to $6,000, available to individuals who are employed and have a qualifying child or disabled spouse or dependent. Credits - Reductions of tax liability allowed for various purposes to taxpayers who meet the qualifications. Nonrefundable Credit - A credit which cannot exceed the taxpayer's tax liability. Refundable Credit - A credit for which the IRS will send the taxpayer a refund for any amount in excess of the taxpayer's tax liability. Special-Needs Child - For the adoption credit, a child determined by the state to be difficult to adopt due to factors such as racial or ethnic background, age, a condition that requires special care, or whether the child has siblings. Deductions - These lower the tax by reducing the amount of income that would otherwise be taxable. Requirements to Claim the Child and Dependent Care Credit - Married taxpayers must file a joint return; the care must have been provided so the taxpayer could work or look for work; the taxpayer must have some earned income; the taxpayer and the person for whom the care was provided must have lived in the same home; the person who provided the care must not be someone the taxpayer can claim as a dependent. Qualified Child or Dependent Care Expenses - Those incurred for the primary purpose of assuring the well-being and protection of a qualifying person while the taxpayer works or looks for work. Computing the Child Care Credit - A percentage of the smallest of the following: the amount of qualified expenses incurred and paid during the year; $3,000 for one qualifying individual or $6,000 for two or more; the taxpayer's earned income for the year. Section 125 Plans - Salary reduction arrangements offered by some employers. These plans allow employees to reduce their salaries by a certain amount in return for one or more nontaxable benefits. Form 2441 - Child and Dependent Care Expenses Form 8839 - Qualified Adoption Expenses Amount of Adoption Credit - Up to $13,360 per eligible child. Eligible Child - For purposes of the adoption credit or exclusion must be under age 18 or physically or mentally incapable of self-care. Special-Needs Child - A child who the state has determined should not be returned to his parents' home and who probably will not be adopted unless special assistance is provided to the adopting family. Form 5405 - First-Time Homebuyer Credit and Repayment of the Credit Requirements for Homebuyer Credit - Taxpayer was or is a member of the uniformed services; taxpayer purchased their main home in the US; taxpayer did not own any other main home. Amount of the Homebuyer Credit - The smaller of $8,000 or 10% of the purchase price of the home. Nonbusiness Energy Property Credit - Applies to improvements such as adding insulation, energy-efficient exterior windows and doors, and energy-efficient heating and air conditioning systems. Form 5695 - Residential Energy Credits Form 1116 - Foreign Tax Credit Form 3800 - General Business Credit Form 8396 - Mortgage Interest Credit Form 8801 - Credit for Prior-Year Minimum Tax Accelerated Cost Recovery System (ACRS) - The system of depreciation in effect from 1981 through 1986. Adjusted Basis - The cost or other original basis of property reduced by adjustments such as depreciation allowed or allowable and increased by capital improvements and other adjustments. Alternative Straight-Line Depreciation System - A MACRS system of depreciation using the straight-line method over an alternative recovery period. Asset - An item of useful or valuable property. Business Assets - Assets used in a trade or business or used to produce rental or royalty income. Business-Use Property - Property used for the production of income. Depreciation - The deduction of a reasonable allowance for the wear and tear of assets used in a trade or business or held for the production of income. Disposition - The act of taking an asset out of service in a trade or business. Estimated (Useful) Life - The period of time over which a depreciable asset will be used by a particular taxpayer. General Depreciation System - The most commonly used MACRS system. Personal property is depreciated using the declining-balance method switching to straight-line when that method results in the larger deduction. General Straight-Line Depreciation System - A MACRS system of depreciation using the straight-line method over the normal MACRS recovery period for the asset. Listed Property - Listed property includes passenger autos and other property used for transportation, property generally used for purposes of entertainment, recreation, or amusement, computers not used exclusively at a regular business establishment, and other property to be specified by the IRS. Modified Accelerated Cost Recovery System (MACRS) - The method of depreciation used for most depreciable assets placed in service after 1986. Under MACRS, assets of qualified property are written off over predetermined periods. Personal Property - Generally, all property other than real estate. Real Property - Also known as real estate, includes land, buildings, and their structural components. Section 179 Expense Deduction - An election to treat the cost of certain qualified property as a currently deductible expense rather than as a capital expenditure. Straight-Line Depreciation Method - The most commonly used method of depreciation prior to 1981. Basis less salvage value or land value divided by useful life equals depreciation deduction. Unadjusted Basis - The basis of property for purposes of figuring depreciation under ACRS or MACRS. The unadjusted basis is the original cost or other basis. To be depreciable, the property must be: - Owned by the taxpayer; be used in business or be income-producing; have a determinable useful life; be expected to last longer than one year. Properties That Are Not Depreciable - Personal-use assets; assets with an unlimited or indeterminable life; inventory or stock in trade. MACRS - The depreciation method generally used for most assets placed in service after 1986. Two Tables Used to Compute MACRS Depreciation Deduction - Table of Asset Class Lives and Recovery Periods; Modified Accelerated Cost Recovery System Percentage Tables Eight Classes of MACRS Property - 3-year 5-year 7-year 10-year 15-year 20-year 25-year 50-year The Additional Depreciation Allowance (Bonus Depreciation) - A special first-year depreciation bonus for qualified assets. The bonus is an additional deduction for 30% or 50% of the unadjusted basis of the asset for property acquired between Sep. 10, 2001, and Jan. 1, 2005. How is residential real property depreciated? - Such property placed in service after 1986 is depreciated using a straight-line method over 27.5 years. Straight-Line Method - An equal amount of depreciation is claimed each full year the asset is depreciated. How is nonresidential real property depreciated? - Such property placed in service after May 13, 1993, is depreciated using the straight-line method over 39 years. Such property placed in service between 1986 and May 13, 1993 is depreciated over 31.5 years. Form 4562 - Depreciation and Amortization Listed Property - Assets that are subject to depreciation restrictions under certain circumstances. Types of Listed Property - Most passenger autos weighing 6,000 pounds or less; property generally used for entertainment, recreation, or amusement; computers and related peripheral equipment. If listed property is used 50% or less for business purposes.... - ...no 179 deduction or special depreciation allowance may be claimed. 179 Expense Deduction - An election to expense up to $500,000 of the cost of certain property in the year it is placed in service instead of recovering that amount under MACRS. Property Eligible for the 179 Expense Deduction - Generally new or used tangible personal property purchased for use in a trade or business. 179 Restrictions - $2,000,000 Limitation; Business Income Limitation $2,000,000 Limitation - If the cost of all property eligible for the 179 deduction during the year exceeds $2,000,000, the deduction is reduced dollar for dollar by the amount in excess of $2,000,000. Business Income Limitation - The total amount expensed cannot exceed the taxpayer's business income from all trades or businesses. At-Risk Rules - Special rules limiting the taxpayer's deductible business, partnership, S corporation, or real estate loss to cash invested plus debt he is legally obligated to pay and the adjusted basis of any property contributed. Cost Method of Inventory Valuation - Valuing inventory purchased during the year at cost; that is, the invoice price less any discounts plus transportation or other costs incurred in acquiring the merchandise. Cost of Goods Sold - Beginning inventory plus direct purchases, direct labor costs, and overhead costs less withdrawals for personal use and ending inventory. FICA - The law that provides for social security and medicare benefits. This program is financed by payroll taxes imposed equally on the employer and employee. Hybrid Method of Accounting - A combination of accounting methods, usually of the cash and accrual methods. Inventory - A list of articles of property. For income tax purposes, inventory refers only to a list of articles comprising stock in trade - articles held for sale to customers in the regular course of a trade or business. Lower of Cost or Market Method of Inventory Valuation - Inventory valuation considering the actual cost or the replacement cost of merchandise on the inventory date. Partnership - A form of business in which two or more persons join their money and skills in conducting the business as co-owners. Proprietorship - A business controlled and operated by one person. Self-Employed Individuals - Taxpayers who work for themselves. They decide when, how, and where to work, obtain their own jobs or sales, pay their own expenses, and receive social security and medicare coverage through payment of self-employment tax. Sole Proprietorship - A business owned by one individual. Schedule C - Profit or Loss From Business Form 1065 - US Return of Partnership Income How many businesses may be reported on each Schedule C? - Each business must have its own Schedule C. Principal Business or Profession - The business or professional activity that provided the principal source of income. Employer Identification Number (EIN) - Required if the business has any employees. Obtained by filing Form SS-4. Gross Receipts - The gross amount of cash receipts and the fair market value of any property and services the proprietor receives in exchange for the goods or services he sells. Returns and Allowances - Amounts included in gross receipts that were refunded to customers who returned merchandise for refund or who were given a partial refund because they received damaged merchandise or for other similar reasons. Two Most Common Methods of Valuing Inventory - Cost Lower of Cost or Market Gross Profit - Gross receipts minus returns and allowances and cost of goods sold. Operating Expenses - The ordinary and necessary expenses of conducting a business, trade, or profession. Payroll Taxes - Taxes that a business must pay on behalf of its employees. Bad Debts - Customer accounts receivable and notes receivable determined to be uncollectible. Schedule SE - The form used to determine the sole proprietor's social security and medicare taxes. Schedule SE - Self-Employment Tax Schedule F - Farming Income Key Points to Determine if Home-Office Expenses are Deductible - Is the office used exclusively for business? Is the office used regularly for business? Is the taxpayer an employee? Is the office for the employer's convenience? Does the taxpayer meet clients in the office in the normal course of business? Is the office in a separate structure? Is the office the principal place of business? Form 8829 - Expenses for Business Use of your Home Direct Expenses - Those that are fully chargeable to the home office. Indirect Expenses - Expenses that cover the entire home and must be prorated to determine the portion attributable to the home office. Adjusted Basis - The cost or other original basis of property reduced by adjustments such as depreciation allowed or allowable and increased by capital improvements and other adjustments. Casualty Loss - A casualty is the complete or partial destruction of property resulting from an identifiable event of sudden, unexpected, or unusual nature. Itemized Deductions - Certain personal expenditures allowed as deductions from adjusted gross income. Qualified Charitable Organization - An entity, usually an association or nonprofit corporation, designed to provide some form of public charity or service and specifically approved by the US Treasury as a recipient of deductible charitable contributions. Casualty - The complete or partial destruction of property resulting from an identifiable event of a sudden, unexpected, or unusual nature. Is loss due to termite or moth damage deductible? - No Can you deduct damage to property owned by another person? - No Form 4684 - Casualties and Thefts What portion of casualty and theft loss is deductible? - The portion that exceeds 10% of the taxpayer's adjusted gross income. Adjusted Basis - Usually the original cost plus the cost of capital improvements and the cost of restoring the property, minus any reimbursement or deduction of previous casualty losses and depreciation taken. How is the amount of casualty loss determined for real property? - Loss is determined for the entire property as a single item. How is the amount of casualty loss determined for personal property? - Loss is determined separately for each item. When do you deduct a loss? - Loss is deducted only for the year in which the casualty occurred or the theft was discovered. AGI Limitation of Most Miscellaneous Itemized Deductions - 2% Form 2106-EZ - Unreimbursed Employee Business Expenses Two Methods for Computing Allowable Transportation Expenses - The Regular Method The Optional Method What must a taxpayer do to qualify to use the optional method with the standard mileage rate? - Own or lease the vehicle; not use the vehicle for hire; not have more than four vehicles in simultaneous business use at any time during the year; use the optional method the first year the car or truck is placed in service. When are education expenses not deductible? - If the education is required to meet the minimum educational requirements in effect when the taxpayer first obtained the job or if it qualifies him for a new trade or business. Are tax preparation fees deductible? - Yes What line of Schedule A are investment expenses included on? - Line 23 Hobby - An activity not entered into for profit. What portion of hobby expenses are deductible? - The portion up to the amount of income from the hobby that is reported on the tax return. Are funeral expenses deductible? - No Is homeowner's or renter's insurance deductible? - No Are gambling losses deductible? - Only to the extent of winnings reported as income. Form 6251 - Alternative Minimum Tax - Individuals Form 8801 - Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts Acquisition Debt - Debt incurred to acquire, construct, or improve the taxpayer's principal or secondary residence. General Sales Tax - A general sales tax is a sales tax imposed on retail sales of a broad range of items at a single rate. Itemized Deductions - Certain personal expenditures allowed as deductions from adjusted gross income. Personal Property Tax - An annual tax imposed on certain personal property, such as cars or boats, and based on the value of the property. Points - A loan-origination fee that a buyer generally may deduct as interest. Prepaid Interest - Interest paid in advance is deductible as an interest expense only as it accrues. Schedule A - Itemized Deductions Sections on Schedule A - Medical and dental expenses; taxes you paid; interest you paid; gifts to charity; casualty and theft losses; job expenses and certain miscellaneous deductions; other miscellaneous deductions. Long-Term Care Contract - An insurance contract that provides only coverage for long-term care services. Insurance Policies for which Premiums are not Deductible - Loss of earnings while injured; loss of life, limb, or sight; paying guaranteed amount for a given time period while hospitalized or injured; paying for medical care from a portion of auto insurance premiums.