Shared Flashcard Set

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Regulation 2
N/A
53
Accounting
Graduate
03/28/2011

Additional Accounting Flashcards

 


 

Cards

Term

Adjustments to Gross Income 

 

FOR AGI

Definition

Anyone, anytime, automatically, always, any amount. 

 

1. Educator Expenses

2. IRA

3. Student Loan Interest Expenses

4. Tuition & Fee Deduction

5. Health Savings Account

6. Moving Expenses

7. 1/2 Self Employment FICA (Social Security)

8. Self-Employed Health Insurance

9. Self-Employed Retirement

10. Interest Withdrawal Penalty

11. Alimony Paid

12. Attorney Fees Paid in Certain Discrimination & Whistleblower Cases

13. Domestic Production Activities Deduction

 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

1. Educator Expenses

 

Definition

Eligible Educator- K-12 teacher, instructor, counselor, principal, aide for at least 900 hrs during a school year.

 

May deduct up to $250 of qualified expenses you paid. 

 

Ordinary & necessary expenses- books, supplies, equipment used in the classroom. 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

2. IRA

a. Individual Retirement Accounts (IRAs)

 

Definition

1. Earnings accumulate tax free 

2. Withdrawals are taxable as ordinary income 

3. Taxpayer will generally not be permitted to deduct a contribution to an IRA if they have excess AGI (over $56,000/$89-$109,000) AND has active participation in Another Qualified Plan. (maximum phase out $167,000-$177,000) 

4. Maximum of $5,000 or individual's compesation ($10,000 for MFJ) 

Compensation: salary, wages, commissions, bonuses, alimony 

5. Indiv. over 50 years of age are allowed an additional contribution of $1,000 

Term

Adjustments to Gross Income 

 

FOR AGI

 

2. IRA

b. Roth IRA

Definition

1. Contributions to a ROTH IRA are not deductible when made. 

2. Earnings accumulate tax free while in a Roth IRA 

3. Tax free distributions (both principal and earings are tax-free) 

4. Contribution Limits (combined with all IRAS)- remain at $5,000 or $10,000 MFJ 

5. Phase Out- S $105-$120,000/ MFJ $167,000-$177,000 

 

*Generally no tax impact, now or later. 

Term

Adjustments to Gross Income 

 

FOR AGI

 

2. IRA

c. Non-Deductible IRA 

Definition

1. Non-deductible contribution limitations up to the lesser of $5,000 or compensation or amount not contributed to other IRAs 

2. Tax-free accumulation of earnings until withdrawn. 

3. Taxable- earnings 

Non-taxable- principal contributions when contributed 

Term

Adjustments to Gross Income 

 

FOR AGI

 

2. IRA

d. Coverdell Education Savings Accounts (education IRA)

Definition

Set up to pay the qualified education expesnes of a designated beneficiary. 

 

1. Non-deductible Contributions- max. contribution PER beneficiary is $2,000 annually (not combined with any other IRA limitations)

2. Tax-free accumulation of earnings 

3. Tax free Distribution/withdrawals- if used for qualified education expenses (elementary & secondary school expenses as well) 

-tuition, fees, tutoring, books, room & board, supplies

-must be distributed by time the beneficiary reaches 30 or rolled over to another family member. 

-beneficiary must be 18 or under 

4. Phase out- S $95,000-$110,000/ MFJ $190-$220,000 

Term

Adjustments to Gross Income 

 

FOR AGI

 

3. Student Loan Interest Expense

Definition

Adjustment for education loan interest is limited to $2,500 

 

Phase out occurs when S $60,000-$75,000/ MFJ $120,000-$150,000

 

A DEPENDENT MAY NOT claim the adjustment 

 

Must be legally obligated to pay the loan, must be for educational purposes. 

Term

Adjustments to Gross Income 

 

FOR AGI

 

4. Tuition and Fees Deduction

Definition

Qualified Higher Education Expense applies regardless of whether the education is work-related. 

 

Expenses ABOVE the maximum are only deductible as education expenses (itemized deductions subject to 2% of AGI limitation). 

 

Max in 2010 - $4,000 

Limit of AGI = or less than $65,000 

 

2,000 when AGI is between $65,000-$80,000 

Term

Adjustments to Gross Income 

 

FOR AGI

 

5. Health Savings Accounts

Definition

Enable workers with high deductible health insurance (deductible of $1200/$2400 for s/fam) at least  to make pre-tax contributions of up to $3,050 in 2010 ($6,150 for families) to cover health care costs. (Over 55 are allowed an additional $1,000). 


Contributions must stop when covered by Medicare A or B. 


Amount paid to cover qualified medical expenses is not included in gross income, distributions NOT used to pay medical expenses are included in gross income & subject to 10% penalty. 


Limited to $5,950/$11,900 for annual out of pocket expenses. 

 

Term

Adjustments to Gross Income 

 

FOR AGI

 

6. Moving Expenses

Definition

Must be work related. 

 

New workplace but be 50 miles further than from old house to old workplace. 

 

Must stay in new location at least 39 weeks during the following 12 month period.  75% of next year. 

 

Only direct moving costs are allowable: travel, lodging, transporting of personal effects.

NOT: meals, pre-move house hunting, expense of breaking lease, temporary living expense. 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

7. Tax on Self Employment (Social Security)

 

Definition
50% of self employed SS/Medicare tax is deducted. 
Term

 

Adjustments to Gross Income 

 

FOR AGI

 

8. Self Employed Health Insurance

 

Definition

Not deductible on Schedule C

 

May deduct all medical insurance premiums paid for the taxpayer, spouse, and dependents 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

9. Keogh (Profit Sharing) Plans

 

Definition

Not deductible on Schedule C

 

1. Maximum annual deductible amount is limited to LESSER of: $49,000 or 25% net earnings 

 

Net Earnings= Business Income-Business Expense-1/2 Self Employment tax- keogh deduction = keogh net earnings 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

9. Penalty on Early Withdrawal of Savings - Interest Forfeited

 

Definition

Do not net against interest income. 

 

Ex. penalties on earth withdrawal of a CD 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

10. Alimony

 

Definition

Deductible when paid as long as follow all requirements for Alimony 

(cash, legally obligated, end at death) 

Term

 

Adjustments to Gross Income 

 

FOR AGI

 

11. Attorney Fees Paid in Discrimination Cases

 

Definition
In connection with age, sex, or racial discrimination, whistleblower fees, limited to amount claimed as income from the judgment 
Term

 

Adjustments to Gross Income 

 

FOR AGI

 

12. Domestic Production Activities

 

Definition
Taxpayers recieve an adjustment for a percentage of qualified production activities income. (9% in 2010) 
Term

Deductions From Adjusted Gross Income 

 

1. Standard Deduction

Definition

Form 1040 EZ

 

2011 Amounts

Single  $5,800

HOH $8,600

MFJ/Surviving Spouse $9,750

MFS $4,875

 

An additional deduction for Elderly and/or Blind 

 

If 1 Qualifies (OR) S $1,400 MFJ $1,100

1 Qualifies (AND) S $2,800 MFJ $2,200

If BOTH Qualify (OR) $2,200

IF BOTH Qualify (AND) $4,400

 

Term

 

Deductions From Adjusted Gross Income 

 

1. Standard Deduction

 

When Dependent

 

Definition

Dependent can take at least $950, or $300 plus earned income. 

 

Remains limited by regular standard decution. 

Term

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

Definition

Limitation on Itemized Deductions No Longer Exists 

 

Reported on Schedule A

Term

 

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

 

a. Medical Expenses

 

Definition

Payments on behalf of yourself, spouse, dependent (50% or more of support from you) 


Paid (cash or check) during the year, or charged during the year, payments for deceased spouse (deductible in year paid regardless of time of death)


Deductible to the extend greater than 7.5% of AGI = Qualified Med. Expenses- Insurance Reimbursements 


Deductible Medical Expenses: medicine, drugs, medicare D premium, doctors, medical/accident insurance, required surgery, transportation to medical facility, physically handicap costs


Non-deductible Medical Expenses: Elective surgery, elective cosmetic operations, life insurance, capital expenditures (increase in FMV of property), health club memberships, personal hygiene products 

Term

 

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

 

b. State, Local, & Foreign Taxes

 

NOT "FIB" 

 

Definition

Deductible Taxes : 

 

1. Real Estate Taxes (state, local, foreign): must be legally obligated to pay, prorate in year of sales/purchases, paid under protest are deductible (recovery is then included in gross income), not include street/sewer/sidewalk assessment taxes

 

2. Income Taxes (state, local, foreign): estimated taxes paid during the year/withheld from paycheck are deductible. Assessments paid during the year for prior year's taxes are deductible. 

 

3. Personal Property Taxes (state and local taxes)

4. Sales Tax (state & local general sales tax)  A taxpayer may elect to dedcut either state & local income tax OR state & local sales tax based on a table or actual general sales taxes paid. 

 

NON DEDUCTIBLE: 

a. Federal Taxes (including SS)

b. Inheritance taxes for states 

c. Business (Schedule C) and rental property taxes (Schedule E)

 

 

Term

 

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

 

c. Interest Expense

 

HIPPE

 

Definition

Home Mortgage Interest- either acquisition indebtedness ($1,000,000 maximum) incurred in buying, constructing, improving 1st or 2nd home or home equity indebtedness (lesser of $100,000 or FMV of equity in home) which can be used for any purposed, secured by 1st or 2nd home 

Investment Interest - limited to net taxable investment income includes interest & dividends, rents, royalties, net long term & short term CGs if not claimed to redcued cap gains tax rate)- does not include interest expense used to purchase tax free bonds - can be carryforwarded indefinitely

Personal- Consumer interest is NOT deductible ( bank, life insurance loans, credit cards, consumer goods, interest on fed/state/local tax underpayments) 

Prepaid - must allocate to proper period, can not prepay mortgage interest

Eductional - IS AN ADJUSTMENT, not an itemized deduction (subject to max of $2500)

Term

 

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

 

d. Charitable Contributions

 

 

Definition

Charities are organizations-churches, hopsitals, universities 


NOT: given to individuals (needy families) or political contributions 


Amount: lesser of basis or FMV of property or Cash amount 


50% of AGI in Cash or

30% of AGI for gifts of long term capitl gain property


May only deduct excess contribution over the consideration received (dinner cost $25, donate $75, only deduct $50) 


May not include services/time donated 


Can deduct exchange students ($50 per month) 


Charity Carryover : FIVE YEARS- FIFO. 

 

 

Term

 

 

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

 

e. Casaulty and Theft Losses (10% AGI Test)

 

 

Definition

Smaller Loss (Lost Cost/Adjusted Basis, Decreased FMV)

(Insurance Recovery)

=

Taxpayer's Loss

($100)

=Eligible Loss

(10% of AGI)

=Deductible Loss 

 

Must be sudden, unexpected

Must file an insurance claim or not have insurance coverage

Doesn't cover Lost, misplaced, or broken 

Term

 

 

Deductions From Adjusted Gross Income 

 

2. Itemized Deduction 

 

f. Miscellaneous Itemized Deduction (2% of AGI)

 

 

 

 

Definition

If the following miscellaneous deduction combined exceed 2% of AGI 

 

a. Unreimbursed Business Expense (employee) 

- overnight business travel 

- transportation expenses (100% deductible)  if out of ordinary communting expenses 

- meals & entertainment (50% deductible) 

 

b. Educational Expenses- (those not deducted above AGI)  if they are job related to maintain or improve skills or keep job 

 

c. Uniforms

d. Business Gifts ($25 per recipient per year)

e. Business use of home - regular and exclusively

f. Employment agency fees- job hunting expenses

g. Expense of Investors- Safety deposit box & investment advice

h. Subscription to Professional Journals 

i. tax prep fees (legal & accounting) 

j. debit card convienence fee incurred to pay income tax 

k. hobbies if deduction would have been allowed regardless of whether or not it was engaged for profit

l. gambling losses (to extent of gambling winnings) 

 

Term

Personal Tax Credits 

 

(NO REFUND) 

Definition

May reduce personal tax liability to zero, but NO REFUND is allowed. 

 

a. child & dependent care credit

b. elderly & permanently disabled credit

c. education credits 

d. adoption credit 

e. retirement savings contribution credit

f. foreign tax credit 

g. general business credit 

Term
Refundable Credits
Definition

Subtracted from income tax liability. May result in cash refund when credit exceeds tax liability owed even if no tax is withheld. 

 

a. Child tax credit (refund is limited)

b. Earned Income Credit 

c. Withholding taxes (W-2)

d. Excess Social Security paid 

e. Long-term Unused Minimum Tax Credit  (greater than 3 years old, recoup greater of $5,000 or 20% of unused amount)

f. American Opportunity Credit (40% refundable)

g. Making Work Pay Credit 

h. Adoption Credit 

Term

 

Personal Tax Credits 

 

(NO REFUND) 

 

a. Child and Dependent Care Credit

 

Definition

A tax credit of 20% to 35% of eligible expenditures 


1 dependent $3,000 X percentage

2 or more dependent $6,000 X percentage


general rule: both parents working, paying someone to babysit 


eligible people: qualifying child under 13, disabled dependent, disabled/dependent spouse


eligible expenses: babysitter, nursery school, day care NOT grammar school 


Percentages:

35%- AGI less than $15,000

20-35% decreases 1% by each $2,000 over $15,000

20% AGI of more than $43,000

Term

 

Personal Tax Credits 

 

(NO REFUND) 

 

b. Credit for the Elderly/Permanently Disabled

 

Definition

Creidt of 15% of eligible income is available to individuals who:

1. 65 and older

2. Under 65 but retired due to permanent disability 

 

Base amount used to figure the credit 

 

S $5,000, MFJ 1 spouse

$7,500 MFJ, both spouses

$3,750 MFS 

 

Eligible income is reduced by: any SS payments, 1/2 of AGI over S $7,500, MFJ $10,000, MFS $5,000

 

Base amount - Social Security payments - (1/2 excess AGI over 5/10/5 amounts) = balance X 15% = CREDIT

Term

Personal Tax Credits 

 

(NO REFUND) 

 

c. Education Tax Incentives 

Definition

1. American Opportunity Credit - available against fed. income taxes for qualified tuition, fees, course materials paid in first four years of college. 

100% of first $2,000 qualified expense

25% of next $2,000 of expenses 

Per Student basis on behalf of taxpayer, spouse, or dependent 

Phase Out begins with MAGI exceeding $80,000,ending at $90,000 (S) 

 

2. Lifetime Learning Credit- Available for unlimited number of years for qualified tuition and related expenses (Not books)

Up to 20% of qualified espenses up to $10,000 

-only ONE per family per year 

-phase out begins with MAGI exceeding $50,000, full phase out at $60,000 (S) 

 

Not limited to one type of credit. 

Term

Personal Tax Credits 

 

(NO REFUND) 

 

d. Adoption Credit

Definition

Qualifying Expense of Adopting A Child 

 

Limited to $13,170 per child 

 

Phase Out for MAGI between $182,520-$222,520

 

Eligible Expenses: reasonable and necessary fees, expenses, costs 

 

Not for adopting a child of a spouse or surrogate parenting arrangement 

 

Medical expenses DO NOT qualify as eligible expenses

Term

 

Personal Tax Credits 

 

(NO REFUND) 

 

e. Retirement Savings Contributions Credit

 

Definition

Non-refundable tax credit may offset both regular and alternative minimum tax is available for contributions to either a traditional or ROTH IRA. 

 

no carryover allowed

 

Eligible taxpayers: at least 18, not full time student, not a dependent 

 

Max contribution $2000 times Credit Rate 

50% for under 16,500 S AGI

20% 16,501-$18,000 S AGI

10% 18,001-$27,750 S AGI

0% over $27,750 S AGI

Term

 

Personal Tax Credits 

 

(NO REFUND) 

 

f. Foreign Tax Credits

 

Definition

There is no limit on foregin taxes used as a deduction, foreign tax credits are limited to the lesser of: 

 

Foreign taxes paid 

 

or 

 

Taxable Income from all foreign operations / (taxable income + exemptions) X U.S. Tax* = Foreign Tax Credit Limit 

 

Carryback 1 year/ Carryforward 10 years. 

Term

 

Personal Tax Credits 

 

(NO REFUND) 

 

g. General Business Credits 

 

Definition

1. Investment Credit

2. Work Opportunity Credit

3. Alcohol Fuels Credit

4. Increased research credit (generally 20% of the increase in qualified research expenditures over the base amount for the year)

5. Low-income housing credit

6. Qualified childcare expenditures

7. Welfare-to-work credit

8. Employer-provided childcare credit

9. Small employer pension plan start-up costs credit

10. Alternative motor vehicle credit 

11. Work retention credit 

 

credit may not exceed "net income tax" (regular income tax plus AMT-nonrefundable tax credits) less the greater of 25% regular liability above $25,000 or tentative minimum tax for year. 

 

carryback 1 year, forward 20 years. 

Term

Refundable Tax Credits 

 

a. "Child" Tax Credit

Definition

Taxpayers may claim a $1,000 tax credit for each "qualifying child" 

 

CARES except must be under 17, must be a citizen, national, or resident of US 

 

Phase out starting at $110,000 MFJ, $75,000 Single, or $55,000 for MFS 

 

Refundable to the extent of the lesser of: Excess child tax credit over tax liability or earned income less $3,000 times 15%. 

Term

Refundable Tax Credits

 

b. Earned Income Credit

Definition

"pathetic credit"

 

1. Live in U.S. for MORE than half the taxable year 

2. Meet certain earned low-income threshold 

3. Be between ages 25-65

 

Earned Income- wages, salaries, tips, earnings from self-employment

 

If have qualifying child, the earned income credit percentage is higher. 

 

Maximum Basic earned income credit percentage (of earned income): 

Single- 7.65% , max. credit of $457

1 Qualifying Child- 34%, max. credit of $3,050

2 Qualifying Children- 40%, max credit of $5,368

3+ Qualifying Children, 45%, max credit of $5,666 

 

Cannot claim the credit if the individual has disqualifed income > $3,100. --> taxable and nontaxable interest, dividends, net rental/royalty income, net capital gians income, net passive income

Term

Refundable Tax Credits

 

 

c. Withholding Tax (paycheck credit) & Excess FICA 

 

Definition

Income taxes withheld are treated as a credit against the liability, and may be refunded. 

 

Excess FICA: If 2 or more employers, the employee may claim the excess as a credit if results from correct withholding. 

 

IF only one employer, employer must refund the excess to the employee. 

Term

 

Personal Tax Credits 

 

(NO REFUND) 


g. General Business Credits

i. Work Opportunity Credit 

 

Definition

Available to employers who hire employees from a targeted group. 

 

Qualified groups ("undesireable workers"):

a. handicapped

b. 18-24 from poor families

c. Vietnam Vets from economically disadvantaged areas

d. disconnected youth

e. certain unemployed veterans

f. certain food stamp receipents

 

Credit:

40% of first $6,000 of first year's wages

40% of first $3,000 to certain summer youth 

Term

 

 

Personal Tax Credits 

 

(NO REFUND) 


g. General Business Credits

ii. Small Employer Pension Plan Start Up Cost Credit 

 

 

Definition
For eligible small businesses (those with 100 or less employees who earned at least $5,000 in preceeding tax year), a credit is allowed for 50% of the first $1,000 of qualified start up costs for establishing a new qualifed pension plan for 3 years. 
Term
Small Business Healthcare Tax Credit
Definition

Credit of up to 35% of the employer's costs of the plan premiums is allowed for eligible employers, provided the employer contributes at least 50% of the costs of health coverage. 

 

Credit is allowable as an offset to AMT

NOT refundable

Carryforward 20 years

 

Costs for family members, sole prorietors, partners, S corps, shareholders of more than 5% are exluded. 

 

IF used as for a Credit- CAN NOT use as an employee benefit expense deduction. 

Term
Health Coverage Tax Credit 
Definition
For eligible individual taxpayers, a credit of 80% of healthcare premiums for qualified health insurance paid by certain taxpayer and qualifying family members is allowed. 
Term
Residential Energy Credit
Definition

A maximum credit of 30% of qualifying nonbusiness energy property or improvements, up to max credit of $1,5000 - heat pumps,, water heaters, air conditioners, windows, doors, certain roofs. 

 

For qualified solar electric property, samll wind energy, geothermal pumps, no limit on the amount. 

Term
Alternative Minimum Tax
Definition

Tax designed to ensure taxpayers who have a lot of deduction pay a minimum amount of taxes. 

 

Pay greater of regular tax or AMT

 

Regular Taxable Income

+/- Adjustments

+Prefences 

= Alternative Minimum Taxable Income 

(Exemption)

= Alternative Minimum Tax Base

X Tax Computation

=Tentative AMT 

(Tax Credits)

=Tentative Minimum Tax

(Regular Income Tax)

=Alternative Minimum Tax *pay in addition to reg. tax*

Term

Alternative Minimum Tax

 

Exemption Amounts

Definition

$33,750 less 25% (AMT-$112,500) for Single

$45,000 less 25% (AMT-$150,000) for MFJ

$22,500 less 25% (AMT- 75,000) for MFS

 

Amount subtracted from AMTI (regular tax +/- adj + pref) to come to Alternative Minmum Tax Base 

 

 

Term

Alternative Minimum Tax

 

Adjustments

 

(PANICTIME)

Definition

* Considered "timing differences", may increase or decrease AMTI 

 

1. Passive Activity Losses*- added back

2. Accelerated Depreciation*- difference between regular tax depreciation and straight line 

3. Net Operating Loss of indiv. taxpayer*

4. Installment income of a dealer*- may not be used for property sales

5. Contract*- percentage completion vs. completed contract difference 

 

ITEMIZED DEDUCTIONS-always ADDS to regular income

1. Tax deductions- taxes reduced by taxable refunds are added back. 

2. Interest deductions- mortgage interest not used to buy, build, or imporve home is added back- ie HOME EQUITY interest is added back. 

3. Medical Deductions - must exceed 10% instead of 7.5% of AGI

4.Miscellaneous deductions not allowed- add back the misc. deductions normally subjet to 2% of floor

5. Exemptions (personal) and standard deduction- may not be claimed. 

 

Term

Alternative Minimum Tax

 

Preferences

 

3 P's. 

Definition

ALWAYS ADD BACKS

 

1. Private activity bond interest income

2. Percentage depletion the excess over adjusted basis of property

3. Pre-1987 accelerated depreciation

Term

Alternative Minimum Tax

 

AMT Credit- Credit for Prior Year Minimum Tax

Definition

Offsets Regular Tax 

 

Certain allowable AMT paid in taxable year may be carried over (INDEFINITELY) as a credit to subsequent taxable years. May only reduce REGULAR TAX, not future alternative minimum tax. 

 

IF AMT is created from certain permanent differences (ie not the first 5 timing differences) it cannot be carried forward as part of the credit. 

Term

Alternative Minimum Tax

 

AMT Credits 


FACCE

Definition

Permitted as a credit to reduce the AMT 

 

Subtracted from Tentative AMT Tax to arrive at Tentative Minimum Tax. 

 

Foreign Tax Credit

Adoption Credit

Child Tax Credit

Contribution to retirement plans Credit

Earned Income Credit

Term
Statute of Limitations on Individual Taxation
Definition

General: 

 

3 years from LATER of 

a. Due date of Return (Apr 15)

B. Date return is filed (including amended return) 

 

UNLESS: there was a 25% understatement of gross income

6 years from Later of :

a. Due date of return (Apr. 15)

b. Date return is filed. 

 

There is NO statute of limitations for fraud or filing false returns

Term
Refunds for Individuals
Definition

Form 1040x 

 

Refund Claim: Later of 

3 years from date was filed or original due date 

or 2 years from time tax was paid 

 

Bad Debts, Worthless Securities

7 years from later of 

a. due date

b. date filed 

 

Term

Forms for Other Refunds

Definition

Form 1139 - refund claim for corporate income taxes 

 

Form 1045 - request quick refund of indiv. income tax due to carryback of NOL

 

Form 843 - request a refund of taxes other than income 

 

Term
Estimated Indiv. Tax and Inadequate Withholding
Definition

A taxpayer is require to make estimated quarterly tax payements IF: 

1. $1,000 or more in tax liability 

2. Taxpayer's withholdings are less then the lsser of 90% current year's taxes or 100% of last year's tax years. 

(If AGI is $150,000 or greater, must withhold 110% of last year) 

 

Failure to Pay- Penalty unless balance of tax due was under $1,000 

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