AICPA读书笔记REG之Tax Credits( 三）（完）

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F. Retirement Savings Contributions Credit

For 2012, non-refundable tax credit that may offset both regular and alternative minimum tax is available for contributions to either a traditional IRA or Roth IRA (other eligible retirement plans are beyond the scope of the CPA Examination).

1. Eligible Taxpayers

a. At least 18 by the close of the tax year

b. Not a full-time student

c. Not a dependent

G. Foreign Tax Credit

1. Allowable Credit

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

a. Foreign taxes paid or

b. Taxable income from all foreign operations/ (Taxable income + Exemptions) x U.S. Tax = Foreign tax credit limit

H. Work Opportunity Credit

Credit is generally 40% of the first $6,000 of qualified first year wages paid to each qualified new employee who begins work before January 1, 2014. For qualified summer youth employees, the credit is 40% of the fi rst $3,000 of wages for services performed during any ninety-day period between May 1 and September 15.

1. Employer’s deduction for wages is reduced by the amount of credit.

2. Taxpayer may elect not to claim credit (to avoid reducing wage deduction).

I. "Child" Tax Credit

Taxpayers may claim a $1,000 tax credit for each "Qualifying Child."

1. Qualifying Child

The rules mentioned in exemption apply, except that a child must be under the age of 17 (not the 19- year or 24-year age). Further, the qualifying child must be a citizen, a national, or a resident of the United States.

Question 4

Which of the following credits can result in a refund even if the individual had no income tax liability?

    a. Lifetime learning credit.         

b. Credit for the elderly or the disabled.

c. Earned income credit.

d. Child and dependent care credit.

Difficulty: Minimal

Explanations:

(c) The requirement is to determine the credit that can result in a refund even if an individual had no income tax liability. The earned income credit is a refundable credit and can result in a refund even if the individual had no tax withheld from wages.

Question 5

Which one of the following statements is not correct with regard to the child tax credit?

  a. The credit is $1,000 per qualifying child for tax years beginning in 2012.

b. The amount of credit is reduced if modified adjusted gross income exceeds certain  thresholds.

c. To qualify for the credit, a dependent child must be less than sixteen years old.

d. A qualifying child must be a US citizen or resident.

Difficulty: Minimal

Explanations:

(c) The requirement is to determine the incorrect statement concerning the child tax credit. Individual taxpayers are permitted to take a tax credit based solely on the number of their dependent children under age seventeen. The amount of the credit is $1,000 per qualifying child, but is subject to reduction if adjusted gross income exceeds certain income levels. A qualifying child must be a US citizen or resident.

J. Withholding Tax (paycheck credit)

All income taxes withheld from a taxpayer's paycheck are treated as a "credit" against the taxpayer's tax liability. When this credit exceeds the tax liability, a refund is generated to the taxpayer.

K. Excess FICA (social security tax withheld)

Excess Social Security tax withheld is treated as additional tax payments withheld.

1. Two or More Employers

An employee who has had Social Security tax withheld in an amount greater than the maximum for a particular year may claim the excess as a credit against income tax (in the payment section), if that excess resulted from correct withholding by two or more employers.

L. Health Coverage Tax Credit

For eligible individual taxpayers, a credit of 80% of healthcare premiums for qualified health insurance paid by certain taxpayers for the taxpayer and qualifying family members is allowed.

M. Small Business Healthcare Tax Credit

1. Allows some employers a tax credit for providing health care coverage to their employees.

2. The credit is allowable as an offset to Alternative Minimum tax.

3. The costs for family members, sole-proprietors, partners, S corporation owners with greater than 2% ownership, and shareholders owning more than 5% of corporations are excluded.

4. If the expenses were used to qualify for the credit, they are not allowable as tax deductions for employee benefits expense.

AICPA2016

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