Mixed Deck — All AFTR Topics Flashcards

What fiduciary duty applies to risk assessment?

Answer: Act in the client's best interest with loyalty, care, and full disclosure

Fiduciary duty requires acting in the client's best interest with loyalty, care, and full disclosure of all material facts.

The Additional Medicare Tax of 0.9% applies to wages and self-employment income that exceeds what threshold for single filers?

Answer: $200,000

The 0.9% Additional Medicare Tax applies to wages, RRTA compensation, and self-employment income exceeding $200,000 for single filers ($250,000 for MFJ).

How should conflicts of interest be managed in portfolio management?

Answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

Which form is used by individuals to pay estimated federal income taxes?

Answer: Form 1040-ES

Form 1040-ES, Estimated Tax for Individuals, is used to calculate and pay quarterly estimated taxes.

What continuing education requirement supports regulatory compliance competence?

Answer: Ongoing education in regulatory changes, market developments, and best practices

Financial markets, regulations, and best practices evolve constantly, requiring ongoing education for competent practice.

Employers who pay wages must deposit employment taxes by using:

Answer: EFTPS (Electronic Federal Tax Payment System)

Employers must deposit federal employment taxes (income tax withheld, Social Security, and Medicare) through EFTPS; deposits by check directly to the IRS are no longer permitted.

Bonus depreciation under current law generally allows businesses to deduct what percentage of the cost of qualifying new or used property in the first year?

Answer: 100%

The Tax Cuts and Jobs Act allowed 100% bonus depreciation for qualifying property placed in service after September 27, 2017, though this percentage phases down after 2022.

What is the purpose of the Lifetime Learning Credit?

Answer: To offset the costs of postsecondary education

The Lifetime Learning Credit is a nonrefundable tax credit intended to help taxpayers pay for courses taken for undergraduate, graduate, or professional degree programs, or to acquire job skills. It can cover qualified education expenses for eligible students enrolled at an eligible educational institution. This credit supports lifelong learning and workforce development by making higher education more affordable.

How should conflicts of interest be managed in investment analysis?

Answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

Business meals that are 50% deductible must be:

Answer: Ordinary and necessary, with a business purpose, and not solely for entertainment

Business meals are 50% deductible if they are ordinary and necessary, have a bona fide business purpose, and are not lavish or extravagant.

A taxpayer who uses part of their home exclusively and regularly for business may be able to deduct home office expenses using which form?

Answer: Form 8829

Form 8829, Expenses for Business Use of Your Home, is used to calculate and claim home office deductions for self-employed taxpayers using the regular method.

Which form does an employee complete to tell their employer how much federal income tax to withhold?

Answer: Form W-4

Form W-4, Employee's Withholding Certificate, is submitted to the employer to designate withholding allowances and any additional withholding amounts.

What is a tax credit?

Answer: A reduction in the amount of taxes owed

A tax credit is a dollar-for-dollar reduction in the actual amount of tax a taxpayer owes. Unlike a tax deduction, which reduces taxable income, a credit directly lowers the final tax liability. This makes tax credits generally more valuable than deductions, as they directly decrease the amount of money sent to the government.

How should regulatory compliance performance be reported to clients?

Answer: Provide accurate, complete, and timely performance reporting with appropriate benchmarks

Accurate, complete, and timely reporting with appropriate benchmarks enables informed decision-making by clients.

What regulatory compliance requirement applies to portfolio management?

Answer: Full compliance with all applicable federal, state, and industry regulations

Full regulatory compliance is mandatory regardless of practice size, ensuring market integrity and client protection.

Which of the following is NOT a deductible business expense for a sole proprietor?

Answer: Personal life insurance premiums

Personal life insurance premiums are a personal expense and are not deductible as a business expense on Schedule C.

How should conflicts of interest be managed in regulatory compliance?

Answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.

How should risk be assessed in financial planning?

Answer: Evaluate risk tolerance, capacity, time horizon, and investment objectives systematically

Comprehensive risk assessment considers tolerance, capacity, time horizon, and objectives to create appropriate strategies.

Estimated tax payments made by a self-employed taxpayer are reported on Form 1040 as:

Answer: A credit against tax on the payments line

Estimated tax payments are entered on the 'Estimated tax payments' line of Form 1040, reducing the tax owed (or increasing the refund).

How should conflicts of interest be managed in tax strategies?

Answer: Identify, disclose, and mitigate all actual and potential conflicts of interest

All actual and potential conflicts of interest must be identified, disclosed to clients, and mitigated to maintain trust and compliance.