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Understanding Deductions and Tax Computations for Effective Reporting

This lesson covers essential aspects of tax deductions and computations, including identifying the correct standard deduction based on various factors such as filing status and dependency. It also explains how to calculate and accurately report itemized deductions on Schedule A, including medical expenses, state taxes, interest, and miscellaneous deductions subject to the 2% AGI limitation. Additionally, the lesson discusses the Qualified Dividends and Capital Gain Tax Worksheet and the process of reporting tax liability. Comprehensive guidance ensures taxpayers are well-informed for effective tax filing.

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Understanding Deductions and Tax Computations for Effective Reporting

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  1. Lesson 4 Deductions and Tax Computations

  2. OBJECTIVES • Identify the correct standard deduction. • Calculate and accurately report itemized deductions on Schedule A. • Identify the miscellaneous deductions reported on Schedule A, lines 22 through 22 that are subject to the 2% AGI limitation. • Complete the Qualified Dividends and Capital Gain Tax Worksheet. • Explain the process to calculate and report tax liability.

  3. Intake/Interview Process Form 13614 – Intake and Interview Sheet – Credits Section

  4. Standard Deduction • Based on the following factors: • Filing Status • Dependency Status • Blindness • Age

  5. Taxable Income Computation • Taxable income less than $100,000

  6. Itemized Deductions • Standard Deduction vs Itemized Deductions • When MFS taxpayer must itemize deductions

  7. Medical Expenses • Whose expenses • What expenses • Deductible • Nondeductible • Long-Term Care Premiums • New tax law • Medical standard mileage rate

  8. Taxes • State and Local Income Taxes • Real Estate Tax • Personal Property Tax

  9. Interest • Home Mortgage • Points • Investment

  10. Contributions • Recipient • Deductible • Nondeductible

  11. Miscellaneous Deductions on Schedule A • Expenses subject to the 2% Adjusted Gross Income (AGI) limitation vs. expenses not subject to the 2% AGI limitation

  12. Total Itemized Deductions • Work Exercise 6

  13. Taxable Income Computation • Taxable income less than $100,000 • Qualified Dividends and Capital Gain Tax Worksheet

  14. Quality Review (QR) Form 8158 – Quality Review Checklist Adjustments, Deductions, and Credits Section

  15. Lesson Summary • Standard Deduction or Itemized • Medical Expenses, Taxes, Interest, Contributions, Miscellaneous Deductions • Tax Charts • Qualified Dividends and Capital Gains worksheet

  16. Travel Expenses • Fully reimbursed • Accountable Plan • Adequate records • Form 2106

  17. Deductible Expenses • Away from home • Local travel • Meals • Reimbursable Expenses

  18. Reservists • Temporary Active Duty • More than 100 miles • Form 2106

  19. Other Miscellaneous Deductions • Worn off-duty? • Uniform allowances • Insignia of rank, corps devices, epaulets, aiguillettes, and swords • Professional society dues

  20. Educational Expenses • Qualifications • Deductible Expenses • Education Credits

  21. Business Travel Expenses • Travel Expenses • Deductible Expenses • Car, Meal, Home Leave • How To Report • Form 2106 • Foreign Earned Income Exclusion

  22. Military/International Summary • Travel Expenses • Uniforms • Professional dues • Education • Home Leave

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