Question

Can I get some help with this please.

e. What are deductions from AGI? Why is it important to distinguish deductions for AGI and deductions from AGI? (9-2a) What is the basic standard deduction? What is the additional standard deduction? Who qualifies for an additional standard deduction? (9-2b) How do you calculate the standard deduction of an individual who can be claimed as a dependent on another person's tax return? (9-3) When does someone qualify as a dependent? a. (9-3a) What tests does a qualifying child have to meet? (Don't worry about the tiebreaker rules.) b. (9-3b) What tests does a qualifying relative have to meet? What is a multiple support agreement? c. (9-3c) What is a joint return test? (9-4a) What are the five filing statuses? a. When does a taxpayer file as a single taxpayer? b. What are the two options of filing for a married couple? What are the advantages and disadvantages of filing jointly? What are the advantages and disadvantages of filing separately? c. When is a taxpayer qualified to file as a qualifying widow/widower (surviving spouse)? What tax rate applies to them? d. When is a taxpayer qualified to file as a head of household? What are the abandoned spouse rules? (9-4b) When is an individual required to file a tax return? (Also remember that an individual due a refund must file a tax return to obtain a tax refund even if they are not required to file a tax return.) (9-5a) know how to calculate the tax liability using tax rate schedules. (9-5c) After calculating the tax liability, how do you compute net taxes payable or refund due?

Answer 1

e. AGI- Adjusted Gross Income, by the name says that is the gross income which has been adjusted. The word "adjusted" implies the deduction of allowances and exemption available to an individual. Remember, for tax purposes, adjusted gross income is more important than gross income of an individual.

These deductions include :-

1 Expenses from business which consists of rental activities

2 Business expenses

3 Moving expenses

4 In case of self-employment tax- one half of such tax

5 Education fees, tution fees, student loan interest

6 Contribution to retirement accounts

7 alimony paid

8 Any penalty by financial institution if savings are withdrawal early

9 other deductions as provided

Deductions for AGI are also known as above-the-line deductions and includes the deductions mentioned above.

Deductions from AGI are also known as down-the-line deductions and it is the greater of 1 itemized deductions 2 standard deduction

It is important to distinguish both deductions for AGI and deductions from AGI because there are different items listed in both the deductions with different treatments and allowances.

(9-2a)

Basic standard deduction is the deduction allowed to an individual taxpayer on basis of filing status (single, married and filing jointly, married and filing separately, widow r widower, head of household etc.)

Additional standard deduction is available if:-

1 person is 65 or more

And/or

2 person is blind

Two additional standard deductions are provided for the above said and amount for the same is also dependent on filing status

(9-2b)

Standard deduction for person who claims to be dependent on another person is calculates as

The greater of following two-

1 $1050.

2 $350+ earned income.(Limited to basic deduction)

9-3

A person is qualified as a dependent if atleast half of the person's requirement is met by the individual. It includes food, shelter, clothing etc.

(9-3a)

Tests for a qualifying child-

1 there should be a relationship between two- own child, adopted, foster, bother and sister and descendant

2 residence of both should be same for more than half year

3 age should be under 19.

Or under 25( provided atleast 5 month full time student)

4 should not provide more than half of his own support

5 should not file joint return.

(9-3b)

Tests a qualifying relative has to meet-

1 he should not fall under "qualifying child category"

2 he should not have gross income of more than $4200

3 he should not provide more than 50% of his total support

4 both the person should live together for whole year.

Multiple support agreements are the agreements signed among two or more taxpayers agreeing to provide support to a single dependent

For example - multiple support agreements are signed between siblings to provide financial support to their parent.

(9-3c)

Joint return test is a test for individuals in order to know whether they are qualified to claim another person as a dependent on their taxes.

(9-4a)

Five filing status -

1 single

2 married, filing jointly

3 married, filing separately

4 qualifying widow(er)

5 head of household