Problem 1. What are some of the major differences between GAAP and income tax accounting?
Problem 2. What are all the possible filing statuses? What characteristics distinguish each of the filing statuses?
Problem 3. When is a taxpayer required to file a federal income tax return? What are the consequences of failing to file a tax return that you were otherwise required to file? When would a taxpayer with no income tax liability and no withholding want to file a tax return?
Problem 4. What types of income disqualify taxpayers from claiming the EIC?
Problem 5. What is the definition of being self-employed? What distinguishes a self-employed individual from an employee? Why is this distinction important? Explain.
Problem 6. Suppose you live 60 miles from your old place of business, but you have changed jobs with a new job site 100 miles away from your old residence. You buy a new home one-mile from your new business. Are you qualified for a moving expense deduction? Explain the requirements for moving expense deductions.
Problem 7. A taxpayer receives a $40,000 capital gains distribution in December from a mutual fund. Assuming no estimated tax payments were made during the year and his only withholdings were from his W-2, what can the taxpayer do to avoid an underpayment penalty? How can this taxpayer avoid this situation in future years?
Problem 8. When could overpayment of Social Security taxes occur? How does one go about getting a refund of excess Social Security payments?
Problem 9. Joe Smith paid $500.00 to attend a fund raiser for a qualified charity 100 miles from home. At the fund raiser he purchased a painting at a silent auction for $1000.00. The fair market value of the painting was $250.00 and the dinner was $50.00. While at the fund raiser he met the governor and contributed $500.00 to the governor's re-election campaign. How much can Joe claim as a charitable contribution deduction? Why?
Problem 10. How is the write-off of a bad debt handled on the tax return? How does the debtor have to handle the forgiveness of the debt? Why?
Problem 11. How is basis determined? What events can adjust basis up or down? How does tax basis differ from GAAP accounting basis?
Problem 12. Are you qualified to claim a home office deduction if you have another full-time office? Explain.
Problem 13. What is the difference between a tax credit and a tax deduction? Which is preferable? What is the difference between a refundable and non-refundable tax credit?
Problem 14. What is the difference between tax avoidance and tax evasion?
Problem 15. What are some year-end tax planning strategies you (personally) can employ to minimize your next year's tax liability?