ch14 Special Tax Computation Methods, Tax Credits, and Payment of Tax.ppt

Chapter 14
Special putation Methods, Tax Credits, and Payment of Tax
Learning Objectives
Calculate the Alternative Minimum Tax
Describe what constitutes self-employment e pute the self-employment tax
Describe the various business and personal tax credits
Understand the mechanics of the federal withholding tax system and the requirements for making estimated payments
Alternative Minimum Tax
COMPUTATIONAL ASPECTS TAXABLE E PLUS+: TAX PREFERENCE ITEMS PLUS+: PERSONAL AND DEPENDENCY EXEMPTION PLUS+ OR MINUS: ADJUSTMENTS REQUIRED EQUALS =: ALTERNATIVE MINIMUM TAXABLE E MINUS: EXEMPTION AMOUNT ($45,000 MFJ & SS, $33,750 single, & $22,500 MFS)
EQUALS =: ALTERNATIVE TAX BASE TIMES x: TAX RATE (26% of first $175,000; 28% amounts in excess of $175,000)
EQUALS =: TENTATIVE MINIMUM TAX MINUS: REGULAR TAX EQUALS =: THE ALTERNATIVE MINIMUM TAX
Alternative Minimum Tax
Tax preference items
Include excess depreciation over S\L depreciation
Tax-exempt interest on certain activity bonds
Exclusion of gain on the sale of certain small business stock under Sec. 1202
Alternative Minimum Tax
AMT adjustments
For most taxpayer AMTI adjustments represent itemized deductions that are not allowed puting AMTI
Only certain itemized deductions allowed for AMT purposes
Casualty and theft loss in excess of 10% of AGI
Charitable contributions
Medical expenses in excess of 10% of AGI
Qualified housing interest
Alternative Minimum Tax
AMT adjustments due to timing differences
For real property placed in service after 1986, difference between MACRS and ADS
Alternative Minimum Tax
AMT adjustments due to timing differences
For personal property placed in service after 1986, difference between MACRS deduction and the amount determined by using 150% DB method
Self-employment Tax
Distinction between independent contractor and an employee is important
Self-employed individuals are subject to self-employment tax on the amount earnings from the self-employment
Employees who have a small busi