EA Part 1 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Head of household tests

Taxpayer is unmarried or considered unmarried, paid more than half the cost of maintaining a home, and a qualifying person lived there more than half the year; a dependent parent need not live there.

Qualifying child four tests

Relationship, age (under 19, or under 24 as a full-time student), residency in the taxpayer's home more than half the year, and the child must not provide more than half of their own support.

Qualifying relative income limit

For 2024 a qualifying relative's gross income must be less than $5,050, in addition to the relationship, support, and joint-return tests; the person need not live with the taxpayer unless unrelated.

Failure-to-file penalty rate

The penalty is 5% of the unpaid tax per month or part of a month, capped at 25%, and it is reduced by the failure-to-pay penalty for any month both penalties apply.

Six-year assessment statute

The IRS may assess tax within six years after the return is filed when the taxpayer omits gross income exceeding 25% of the gross income stated on the return.

Automatic extension to file

Form 4868 grants individuals a six-month extension to October 15. It extends only the filing due date and does not extend the time to pay any tax owed.

Section 121 exclusion amounts

A taxpayer may exclude up to $250,000 of gain, or $500,000 if married filing jointly, on the sale of a principal residence owned and used for two of the prior five years.

Social Security provisional income

Provisional income equals AGI plus tax-exempt interest plus one-half of Social Security benefits; benefits become partly taxable above $25,000 for single filers and $32,000 for joint filers.

Gift basis carryover rule

A donee takes the donor's adjusted basis. If fair market value at the gift date is below that basis, a dual basis applies: carryover basis for gain and fair market value for loss.

Kiddie tax 2024 thresholds

A child's unearned income up to $1,300 is offset by the standard deduction, the next $1,300 is taxed at the child's own rate, and the excess is taxed at the parents' marginal rate.

Net investment income tax

A 3.8% tax applies to the lesser of net investment income or the excess of MAGI over $200,000 single, $250,000 joint, or $125,000 married filing separately.

Alimony after 2018 decrees

For divorce or separation instruments executed after December 31, 2018, alimony is neither deductible by the payor nor includible in the recipient's gross income.

Medical expense deduction threshold

Qualifying medical expenses are deductible only as an itemized deduction and only to the extent total expenses exceed 7.5% of adjusted gross income for all taxpayers.

State and local tax cap

The itemized deduction for state and local income, sales, and property taxes is limited to $10,000 in total per return, or $5,000 for a married filing separately return.

American Opportunity Credit amount

Up to $2,500 per eligible student for the first four years of postsecondary education, computed as 100% of the first $2,000 and 25% of the next $2,000 of qualified expenses.

Qualified business income deduction

A 20% deduction for qualified business income from a sole proprietorship, partnership, or S corporation, subject to taxable income thresholds and, above them, W-2 wage and capital limits.

Charitable cash contribution ceiling

Cash gifts to public charities are deductible up to 60% of the taxpayer's contribution base, which is adjusted gross income, with a five-year carryforward for contributions above the limit.

Self-employment tax computation

15.3% applies to 92.35% of net self-employment earnings: 12.4% Social Security up to the wage base and 2.9% Medicare on all earnings, with one-half deductible above the line.

Additional Medicare tax threshold

A 0.9% tax applies to wages and self-employment income above $200,000 for single filers, $250,000 for joint filers, and $125,000 for married filing separately.

AMT exemption 2024

The 2024 alternative minimum tax exemption is $85,700 for single filers and $133,300 for joint filers, phased out at 25 cents per dollar of AMT income above the threshold.

Long-term capital gain 15% range

For 2024 the 15% rate applies to taxable income above $47,025 single or $94,050 joint, up to $518,900 single or $583,750 joint; gains below that range are taxed at 0%.

Estimated tax safe harbor

No underpayment penalty is due if payments equal at least 90% of the current year's tax or 100% of last year's tax, raised to 110% when prior-year AGI exceeded $150,000.

Circular 230 due diligence

Practitioners must exercise due diligence in preparing, approving, and filing returns and other documents, and in determining the correctness of oral and written representations made to the IRS.

Preparer penalty Section 6694

A preparer pays the greater of $1,000 or 50% of fees for an understatement from an unreasonable position, and the greater of $5,000 or 75% of fees for willful or reckless conduct.

Form 2848 authority

Form 2848, Power of Attorney and Declaration of Representative, authorizes a representative to receive confidential tax information and to represent the taxpayer before the IRS for specified matters.

Amended return filing deadline

Form 1040-X must generally be filed within three years after the original return was filed or two years after the tax was paid, whichever is later, to claim a refund.

Taxpayer Bill of Rights count

The Taxpayer Bill of Rights lists ten rights, including the right to be informed, to quality service, to pay no more than the correct amount of tax, and to appeal IRS decisions.

Section 179 limit 2024

The 2024 expensing limit is $1,220,000 with a $3,050,000 investment phase-out, and the deduction cannot exceed taxable income from active trades or businesses.

Bonus depreciation rate 2024

Qualified property placed in service in 2024 is eligible for 60% first-year bonus depreciation, declining to 40% in 2025 and 20% in 2026 under current law.

Annual gift tax exclusion

For 2024 a donor may give up to $18,000 per donee without using lifetime exemption or filing Form 709; gifts above that amount reduce the lifetime exclusion.

FBAR filing threshold

A U.S. person with a financial interest in or signature authority over foreign accounts whose aggregate value exceeds $10,000 at any time during the calendar year must file FinCEN Form 114.

Foreign earned income exclusion 2024

A qualifying individual whose tax home is abroad may exclude up to $126,500 of foreign earned income for 2024, prorated by qualifying days and claimed on Form 2555.