R2- Adjustments

Question 1

What are Adjustments?

Answer 1

These are above the line deductions to arrive at AGI

Question 2

What is IRA?

Answer 2

Individual Retirement Accounts

Question 3

What are the 4 types of IRA?

Answer 3

Deductible IRA, Roth IRA, Non-deductible IRA and Coverdell Education Savings Accounts

Question 4

What are the features of Deductible IRA?

Answer 4

• Max Lesser of >5000 or Individual Compensation
• Catch up 1000, if 50yr or older
• Phase out
• No deduction if- 1. Rich 2. Have retirement plan i.e another Qualified Plan
• Each H&W tested separately, Unless Super rich
• Accumulate Tax Free/Deferred
• Withdrawals Taxed Principal and Earnings

Question 5

Features of Roth IRA

Answer 5

• Non-Deductible
• No Tax impact now or later
• Max 5000, combined with other IRA
• Accumulate Tax free
• Withdrawals Tax free Principal and Earnings

Question 6

Features of Non-Deductible IRA

Answer 6

-Max 5000
-Fall back if not eligible for Deductible or Roth
-Non-Deductible
- Withdrawals
Principal Tax Free
Earnings Taxed

Question 7

Coverdell Education Savings Accounts

Answer 7

• Max 2000 per beneficiary
• Not combined with other IRA
• Earnings tax free if used for Education
• Withdrawals Tax free
• Time limitation- Beneficiary 30 yrs
• Direct distribution to beneficiary- 10% Penalty
• Can rollover to another beneficiary
• Contribution Requirment- 18 yr or under Beneficiary
• No limit on Number of beneficiary

Question 8

Student Loan Interest Expense

Answer 8

Max 2500
Phase out
Any Excess is disallowed and is personal interest
is non deductible
Parent paid by parent on a child’s loan does not qualify

Question 9

Individual Compensation for IRA Calcualtion Includes

Answer 9

Salary, Wages, Commissions, Bonus and Alimony
Not included-
Interest
Dividends
Annuity Income
Pensions

Question 10

Health Savings Account

Answer 10

• Pre-tax contributions
• High Deductible health insurance
• Max 3100
• Add 1000 for for 55 yr and older
• No contribution if part of Medicare A or B

Question 11

Moving Expenses

Answer 11

-Work Related
-50 Miles Farther
-39 Week Stay/ 75% of next year
-Only Direct Moving Expenses
Travel and lodging of taxpayer and family
Transporting of household goods and personal effects
-Reduce for any employer reimbursements

Question 12

Which Moving Expenses are no allowed?

Answer 12

Non-Deductible

• Meals
• Pre-Move House hunting
• Expense of breaking a lease
• Temporary living expenses

Question 13

Tax on Self Employment

Answer 13

50% allowed
to arrive at AGI
Not on Schedule C

Question 14

Self Employed Health Insurance

Answer 14

100% allowed

Not deducted on Schedule C

Question 15

Keogh Plans

Answer 15

Max Lesser of-

$50,000 or 25% Net Keogh/ self employed earnings

Question 16

Penalty for Early withdrawal from Savings Account

Answer 16

Interest forefeited
withdrawn before maturity
do not net against interest income

Question 17

Alimony

Answer 17

-Income for receiver/ adjustment for payer
Payments must be-
1.legally required
2.in cash or its equivalent
3.cannot extend beyond death of the receiver
4.may not file a joint return

Question 18

Child Support

Answer 18

Non-taxable to receiver
Non-deductible for payer
Payments apply to child support first

Question 19

Property Settlement

Answer 19

Non-taxable

Non-deductible

Question 20

Attorney fees paid in discrimination cases

Answer 20

adjustment amount is limited to the amount claimed

as income from the judgement

Question 21

Domestic Production Activity

Answer 21

adjustment for a percentage of qualified production activity