EA flashcards

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

Head of household requirements

Unmarried or considered unmarried taxpayer pays more than half cost of maintaining home that is principal residence for qualifying person for more than half year.

Long-term capital gain

Gain on capital asset held more than one year; net long-term gain taxed at preferential 0%, 15%, or 20% rates based on taxable income.

Traditional IRA deduction

Deductible unless taxpayer or spouse is covered by workplace retirement plan and MAGI exceeds phaseout; nondeductible contributions create basis.

Roth IRA qualified distribution

Distribution after five-taxable-year period and after age 59½, disability, death, or first-time home purchase; earnings excluded from gross income.

Self-employment tax deduction

Above-the-line deduction equal to 50% of self-employment tax; reduces income tax but not self-employment tax itself.

Qualified business income deduction

Generally 20% deduction for qualified business income from pass-through entities, subject to taxable income thresholds, wage limits, and specified service trade restrictions.

American Opportunity Credit

Credit up to $2,500 per eligible student for first four years postsecondary education; 40% refundable, subject to MAGI phaseout.

Child tax credit

Credit up to $2,000 per qualifying child under age 17; partially refundable; phased out at higher MAGI; dependent tests apply.

Single-member LLC default

Disregarded entity for federal tax unless check-the-box election made; owner reports business income and expenses on owner's return.

S corporation eligibility

Domestic corporation with no more than 100 eligible shareholders, only one class of stock, and not an ineligible corporation.

Partnership basis increase

Partner's outside basis increases by contributions and share of partnership liabilities; decreases by distributions and share of losses.

Reasonable compensation

S corporation shareholder-employee must receive reasonable wages for services before non-wage distributions; wages subject to payroll taxes.

Section 179 expensing

Election to deduct cost of qualifying business property in year placed in service, subject to annual limit and taxable income limitation.

FUTA tax

Employer tax of 6.0% on first $7,000 wages per employee; credit up to 5.4% for state unemployment tax, generally resulting in 0.6%.

Meals deduction limit

Business meals generally deductible at 50%; entertainment and recreational expenses are nondeductible unless specific exception applies.

C corporation dividends

Dividends paid are not deductible by corporation; shareholders include them in income, creating potential double taxation of corporate earnings.

Form 2848

Power of attorney authorizes enrolled agent or other eligible representative to represent taxpayer before IRS for specified tax matters.

Form 8821

Tax information authorization allows designated person to receive confidential tax information but does not authorize representation before IRS.

Circular 230 written advice

Practitioner must base written advice on reasonable factual and legal assumptions and not rely on unreasonable representations; must consider relevant facts.

Taxpayer interview right

Taxpayer may be represented at IRS interview and may request to consult representative; IRS generally must suspend interview to allow consultation.

Collection Due Process hearing

Taxpayer may request Appeals hearing within 30 days after receiving CDP notice of lien or levy; preserves Tax Court review.

Innocent spouse relief

Taxpayer may request relief from joint liability by Form 8857; must show qualifying conditions; three types include innocent spouse, separation of liability, equitable relief.

Accuracy-related penalty

Twenty percent penalty for negligence or substantial understatement; substantial understatement generally exceeds greater of 10% of tax or $5,000.

Assessment statute

IRS generally has three years after return filed to assess tax; six years if gross income omitted exceeds 25%; no limit for fraud or failure to file.

Individual return due date

Form 1040 generally due April 15 following tax year; timely Form 4868 extends filing to October 15, but not payment.

Estimated tax safe harbor

Avoid underpayment penalty by paying 90% of current tax or 100% of prior year tax; 110% of prior year for higher-income taxpayers.

Form 1099-NEC deadline

Payers must furnish Form 1099-NEC for nonemployee compensation by January 31; IRS filing also generally due January 31.

Form 8879

IRS e-file signature authorization signed by taxpayer authorizing preparer to electronically file return; retain with records, not send to IRS.

Amended return deadline

Form 1040-X generally must be filed within three years after original return due date or two years after tax paid, whichever later.

Installment agreement

IRS payment plan allowing taxpayer to pay balance over time; compliance with filing, payment, and deposit requirements generally required.

Offer in compromise

IRS program to settle tax debt for less than full amount based on doubt as to collectibility, doubt as to liability, or effective tax administration.

First-time abate

IRS may abate certain failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with clean compliance history.