Tax Regulations and Premium Tax Credits 2023
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Questions and Answers

What is the threshold for a child's unearned income to be included on the parents' return for the kiddie tax in 2023?

  • $1,250 to $13,850 (correct)
  • More than $20,000
  • Less than $1,250
  • $13,851 to $20,000

    • The FinCEN Form 114a must be submitted with the FBAR filing.

    False (B)

    What percentage of household income makes all individuals eligible for the premium tax credit (PTC)?

    8.5%

    The exemption from the kiddie tax for 2023 is $_____

    <p>2,500</p> Signup and view all the answers

    Match the following terms with their descriptions:

    <p>Kiddie Tax = Tax on unearned income of minor children Premium Tax Credit = Aid for taxpayers to afford health insurance FinCEN Form 114a = Record of authorization to file FBARs Advanced Premium Tax Credit = Based on projected income for health insurance enrollment</p> Signup and view all the answers

    Which act adjusted the affordability percentages for premium tax credits?

    <p>American Rescue Plan Act of 2021 (B)</p> Signup and view all the answers

    To qualify for premium tax credits, gross income must be below 100% of the current poverty level.

    <p>False (B)</p> Signup and view all the answers

    What must taxpayers do if they are not eligible for a health insurance plan through their employer?

    <p>Purchase health insurance through a federal or state marketplace.</p> Signup and view all the answers

    What taxes must an employee in the United States generally pay?

    <p>Social Security and Medicare taxes (D)</p> Signup and view all the answers

    Totalization agreements prevent dual coverage and dual contributions for the same work.

    <p>True (A)</p> Signup and view all the answers

    What is the purpose of totalization agreements?

    <p>To coordinate the taxation of United States citizens employed in foreign countries and foreign citizens working in the U.S.</p> Signup and view all the answers

    An American citizen must report all income, regardless of where it is earned, due to the U.S. __________ income tax.

    <p>extraterritorial</p> Signup and view all the answers

    Match the following concepts to their definitions:

    <p>Social Security tax = A tax for funding social benefits Medicare tax = A tax for funding health insurance for the elderly Totalization agreements = An agreement to avoid dual contributions for social security Extraterritorial income tax = A tax requiring citizens to report income from anywhere</p> Signup and view all the answers

    In general, U.S. Social Security and Medicare taxes apply to wages for services performed as an employee in the United States, regardless of:

    <p>The citizenship or residence of the employee or employer (A)</p> Signup and view all the answers

    An employer is not responsible for deducting Social Security and Medicare taxes from employee wages.

    <p>False (B)</p> Signup and view all the answers

    What must be considered when determining tax obligations under totalization agreements?

    <p>Whether an alien is subject to U.S. Social Security/Medicare tax or whether a U.S. citizen is subject to foreign country taxes.</p> Signup and view all the answers

    What is the threshold amount for Net Investment Income Tax for joint returns in 2023?

    <p>$250,000 (A)</p> Signup and view all the answers

    Payments in lieu of dividends are always considered qualified dividends.

    <p>False (B)</p> Signup and view all the answers

    What tax is levied at a rate of 3.8% on net investment income for individuals over a threshold amount?

    <p>Net Investment Income Tax (NIIT)</p> Signup and view all the answers

    The basis of new stock received as a dividend is determined by the fair market value on the date it is ______.

    <p>received</p> Signup and view all the answers

    Which of the following must be reported even if undistributed?

    <p>Capital gain distributions (B)</p> Signup and view all the answers

    Individuals must report only the cash received when given an option between stock or cash.

    <p>False (B)</p> Signup and view all the answers

    What form is used to report Net Investment Income Tax for individuals?

    <p>Form 8960</p> Signup and view all the answers

    What is the tax rate for qualified dividends that fall into the 15%–37% income bracket?

    <p>15% (C)</p> Signup and view all the answers

    Ordinary dividends are taxed at a lower rate than qualified dividends.

    <p>False (B)</p> Signup and view all the answers

    What is the minimum holding period for a dividend to be classified as a qualified dividend?

    <p>greater than 60 days</p> Signup and view all the answers

    Qualified dividends cannot include capital gain distributions or ________ paid by an employee stock ownership plan (ESOP).

    <p>dividends on employer securities</p> Signup and view all the answers

    Match the types of dividends with their descriptions:

    <p>Ordinary dividends = Taxed at ordinary tax rate Qualified dividends = Taxed at favorable rates Capital gain distributions = Not considered qualified dividends Dividends on employer securities = Subject to specific regulations</p> Signup and view all the answers

    Which of the following must a taxpayer do to qualify for the lower tax rates on dividends?

    <p>Meet the holding period requirement (A)</p> Signup and view all the answers

    Dividends classified as 'interest' can be considered qualified dividends.

    <p>False (B)</p> Signup and view all the answers

    What is the potential tax rate for qualified dividends that would be taxed at a higher rate than 37%?

    <p>20%</p> Signup and view all the answers

    What is the maximum amount a taxpayer can exclude from income for foreign earned income in 2023?

    <p>$120,000 (A)</p> Signup and view all the answers

    A U.S. citizen living abroad is taxed only on income earned within the United States.

    <p>False (B)</p> Signup and view all the answers

    List one requirement a taxpayer must meet to claim the foreign earned income exclusion.

    <p>The taxpayer’s tax home must be in a foreign country.</p> Signup and view all the answers

    To qualify for certain exclusions and deductions, a taxpayer must be physically present in a foreign country for at least _____ full days during any period of 12 consecutive months.

    <p>330</p> Signup and view all the answers

    Match the following types of taxpayers with their respective criteria for foreign earned income exclusion eligibility:

    <p>Bona fide resident = Must reside in a foreign country for an entire tax year U.S. resident alien with tax treaty = Must be a citizen or national of a treaty country Physically present taxpayer = Must be in foreign countries for at least 330 days U.S. citizen = Can claim exclusion if qualified</p> Signup and view all the answers

    What does a taxpayer need in addition to having foreign earned income to qualify for exclusions and deductions?

    <p>Tax home in a foreign country (D)</p> Signup and view all the answers

    Only U.S. citizens can qualify for the foreign earned income exclusion.

    <p>False (B)</p> Signup and view all the answers

    What is required of a U.S. resident alien to qualify for foreign income exclusions?

    <p>Must be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.</p> Signup and view all the answers

    Which of the following conditions allows a taxpayer to qualify for material participation?

    <p>Participation in significant activities for more than 500 hours (A)</p> Signup and view all the answers

    A taxpayer can materially participate by participating at least as much as any individual who does not own any interest in the activity.

    <p>True (A)</p> Signup and view all the answers

    What is the minimum number of hours a taxpayer must participate in a significant participation activity to meet material participation criteria?

    <p>100 hours</p> Signup and view all the answers

    A significant participation activity is defined as any trade or business activity in which a taxpayer participated for more than _____ hours during the year.

    <p>100</p> Signup and view all the answers

    Which of the following is NOT a condition for material participation?

    <p>Participation must be linked directly to ownership interest (C)</p> Signup and view all the answers

    Participation in an activity must be continuous, regular, and substantial to qualify as material participation.

    <p>True (A)</p> Signup and view all the answers

    List one field that qualifies as a personal service activity.

    <p>Health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting</p> Signup and view all the answers

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