Test - Standard Block Advisors Small Business Renewal Assessment (FY23)

Lucretia meets the requirements to deduct expenses related to a home office that she maintains in the spare bedroom of her rented house. She incurred the following expenses during the year: Annual cost of electricity for the entire house: $1,728. Cost of repairing light fixture in the home office: $200. Annual rent for the house: $24,000 . The house is a total of 2,000 square feet. The home office measures 156 square feet.If Lucretia uses the actual method of deducting expenses, what is her total home office deduction? $780 $1,500 $2,163 $2,207

2207

Generally, for Tax Year 2021, the de minimis safe harbor election allows taxpayers with business or investment property income to claim an automatic deduction for property that does not exceed a threshold amount. For each item or invoice, the threshold is ______ if they have appropriate accounting procedures in place. $500 $1,000 $2,000 $2,500

2500

In 2021, Jackson purchased a copier for his office. He paid $18,000 and elected to take bonus depreciation. His adjusted basis for depreciation in 2021 will be _____. $0 $4,500 $9,000 $18,000

0

Melba has a small business that sells cosmetics. During 2021, she uses $7,425 of her inventory for her personal use. How much of that $7,425 may Melba deduct from the gross income of the business? $7,425 $5,000 $3,713 $0

0

This year, Manuel purchased, and placed into service, a single-family rental house. He paid the following amounts to acquire his property: $325,000 sales price (which included $20,000 for the land). $4,200 for legal fees and recording costs (which includes $4,000 allocated to the building and $200 allocated to the land.) $250 to have the property professionally cleaned before the house was placed into service. What is Manuel's basis for depreciation in the house? $305,000 $309,250 $329,000 $329,250

309250

Arthur is a ride-hailing driver. He spent $500 on bottled water during the year. He personally consumed $20 of the water he purchased, but the remaining $480 was consumed by riders. How much is Arthur's Schedule C (Form 1040) deduction for refreshments? $0 $240 $480 $500

480

All of the following represent a potential loss limitation for partners and S corporation shareholders EXCEPT: At-risk limitations. Basis limitations. Passive activity limitations. Statute of limitations.

Statue of limitations

Clara received virtual currency in exchange for some work she performed as an independent contractor. How should Clara report this payment on her tax return? The fair market value of the virtual currency at the time she received it. The excess of the fair market value of the virtual currency over the amount she would normally have been paid in U.S. dollars for similar work. Nothing in the current tax year. She will report this income when she sells or exchanges the virtual currency. The average of the highest and lowest fair market values of the currency for the calendar year in which she received it.

The fair market value of the virtual currency at the time she received it

All of the following taxes are collected or deducted from an employee's wages EXCEPT: Federal income tax. Medicare tax. Social security tax. Unemployment taxes (FUTA).

Unemployment taxes FUTA

Kenny owns a small business with two employees. Which form will Kenny need to file to report wages, withholding, and employment taxes? Form 720, Quarterly Federal Excise Tax Return. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Form 941, Employer's Quarterly Federal Tax Return. Form 1099-NEC, Nonemployee Compensation.

Form 941, EMPLOYERS QUARTERLY FEDERAL TAX RETURN

Fred is a sole proprietor who owns and operates a retail shop. He does not perform services for any other business. In addition to his cash receipts, information about income he received as a result of his business activities may be reported to both him and to the IRS on which of the following forms? Form 1099-K, Payment Card and Third Party Network Transactions. Form 1099-MISC, Miscellaneous Income. Form 1099-NEC, Nonemployee Compensation. Form W-2, Wage and Tax Statement.

form 1099k

Dorothy is a cash-basis taxpayer and self-employed guitar instructor. All of the following income or services were provided by Dorothy in 2021: $11,700 for 156 guitar lessons given in 2021; $375 payment for five guitar lessons that will take place in January 2022; $915 received for sheet music that Dorothy bought from a distributor and sold at cost. Dorothy paid the distributor $915 during 2021. A $450 makeover from a spa owner in exchange for six guitar lessons. (No cash changed hands.) She had no other income in 2021. What amount should Dorothy report for gross income from this business? $12,525 $12,990 $13,065 $13,440

12525

Camille is a calendar-year taxpayer and a sole proprietor who operates a landscaping business using the cash method of accounting. Based on the following information, how much income will she report for this business on her 2021 Schedule C (Form 1040)?" $10,000 check received January 4, 2022, for job completed December 20, 2021; $15,000 check received December 29, 2021, for job completed December 28, 2021, deposited January 5, 2022; $9,500 unpaid balance due for work that Camille performed in June 2021. Camille took her client to small claims court in December 2021, but did not receive any satisfaction. $9,500 $15,000 $19,500 $25,000

15000

Marcus, a prior client, wants you to prepare his taxes again this year. During the interview, he discloses that he did some work for a friend's business and was paid cash. Marcus states that he knows this income is not taxable. What is an appropriate action to take? Ask Marcus if he received any reporting documents. If he did not, then advise Marcus that the IRS is not aware of this income and as such, he has the choice of whether to report it or not. Do as Marcus requests. To get Marcus the best refund, ignore Marcus's statement about receiving cash compensation and avoid asking anymore questions about it. Advise Marcus to ask his friend to issue a Form 1099-NEC, Nonemployee Compensation. If he gets one, report the income, but if the friend refuses, do not report the income. Advise Marcus that he is required to report all income received during the year, including cash payments. If he is not able to obtain Form 1099-NEC, Nonemployee Compensation, assist him in reconstructing his income and expenses for proper reporting on Schedule C (Form 1040).

Advise marcus that he is required to report all income received during the year, including cash payments. IF he is not able to obtain form 1099 nec, non-employee compensation assists him in reconstructing his income and expenses for proper reporting on schedule c form 1040

Fill in the blank. Savannah purchased a machine in 2018 and claimed a Section 179 expense deduction on the total purchase price. In 2021, business use dropped below 50%. As a result of this drop, Savannah must __________. Continue to use the same depreciation method and basis. Change to a straight-line method. MACRS is not allowed. Complete a calculation to determine the amount of recapture to report as ordinary income for this tax year, and she will need to increase her adjusted basis in the asset accordingly. Stop taking depreciation on the machine.

Complete a calculation to determine the amount of recapture to report as ordinary income for this tax year, and she will need to increase her adjusted basis in the asset accordingly

For a taxpayer starting their first small business, which of the following may NOT serve as a simple primary record-keeping system for their income and expenses? Business checkbook. Business credit card statements and receipts. Fixed asset listing. Summary of daily cash receipts.

Fixed asset listing

Karen is a sole proprietor. Although Karen may obtain an employer identification number at any time, she will be required to obtain an EIN in which of the following situations? She: Begins her business. Has independent contractors. Has employees. Files her tax return.

Has employees

In 2017, Mateo purchased a building that he used exclusively for business purposes, then he sold it in 2021 to an unrelated buyer. The value of the building was $12,000, excluding the land. He sold the building in December 2021 to a neighbor for $11,000. He is surprised that, even though he sold it at a loss, his return would show a gain. What is the best explanation for why Mateo had a gain? There is a mistake on Mateo's return. Mateo had a gain because the sales price was more than the basis after it was adjusted for depreciation allowed or allowable. Mateo had a gain because he owned the property for less than 27½ years. Mateo had a gain because he owned the property for less than 39 years.

Mateo had a gain because the sales price was more than the basis after it was adjusted for depreciation allowed or allowable

Which of the following is TRUE regarding sales tax? Sales tax ______. Has a tax form that may be used for any location where the business operates. Is collected and paid when the business files their income tax return. Is only collected for sales in the state where the business is headquartered. May need to be collected and paid for any locations where the business operates.

May need to be collected and paid for any locations where the business operates

Isaiah, who is single, received $52,000 of qualified business income from a partnership. Isaiah's taxable income prior to the calculation of the QBI deduction is $50,000. This amount includes: $5,000 in long-term capital gains. $450 in qualified dividends. How much is Isaiah's QBI deduction? $8,910 $9,910 $10,000 $10,400

NOT: 10400 CORRECT:

Benjamin purchased several assets in 2021 that meet the requirements for a Section 179 expense deduction. Because his total cost of $2,800,000 exceeds $2,620,000, his Section 179 expense deduction is limited to ________. $20,000 $320,000 $870,000 $1,050,000

NOT: 1050000 CORRECT:

Traci is a self-employed physician. She uses the finished basement of her house for her business and meets the requirements to deduct associated expenses. The basement measures 350 square feet. If Traci uses the simplified method to deduct expenses, how much may she deduct for the business use of her home? $1,200 $1,400 $1,500 $1,750

NOT: 1200 CORRECT:

A sole proprietorship that began business on May 1, 2021, incurred $7,500 of start-up expenses. If the business elects to report the maximum amount of start-up costs as a current expense, what is the amortization amount reported as an "other expense" on Schedule C (Form 1040) for the first year of business? $0 $111 $167 $333

NOT: 167 CORRECT:

Sergio sold a rental house he had owned for several years. He claimed $24,787 in depreciation over the years. He claimed the allowable depreciation deduction each year except the first year he owned the house, when he could have claimed $1,342 but failed to do so. In order to determine his gain or loss on the sale, Sergio must now deduct depreciation from his cost to determine his adjusted basis. While other events (such as improvements and casualty losses) may also affect Sergio's basis, what is the amount he must deduct for depreciation? $1,342 $23,445 $24,787 $26,129

NOT: 24787 CORRECT:

Jonathan is a single taxpayer with modified adjusted gross income of $110,000 and an active participation rental real estate loss of $30,000. Assuming he has no other source of passive income, what is his adjusted special allowance? $10,000 $20,000 $25,000 $30,000

NOT: 30000 CORRECT:

Aaliyah is a sole proprietor who is creating a single-member limited liability company. All of the following statements about the assets and liabilities of her business are correct EXCEPT: All of Aaliyah's existing business debt will automatically transfer to the LLC when the LLC is registered with her state government. Because Aaliyah personally owns all of the assets, she may convert them to personal use. Aaliyah should transfer the nonresidential real property she owns into the LLC name. Aaliyah should not use personal bank accounts for the business. Instead, she should open accounts using the employer identification number and name of the LLC.

NOT: Because Alaiyah personally owns all the assets, she may convert them to personal use CORRECT:

If a sole proprietor converts their business to an S corporation, how is their income taxed? Compensation for services is taxed as wages reported on Form W-2. The owner's share of the business profit is reported on Schedule K-1 and taxed as ordinary income. Compensation for services is reported on Schedule K-1 and subject to ordinary income tax and self-employment tax. All income from the business is reported on Schedule C (Form 1040) and is subject to ordinary income tax and self-employment tax. All income from the business is taxed to the business. The business owner pays no income tax or self-employment tax.

NOT: Compensation for series is reported on schedule k-1 and subject to ordinary income tax and self-employment tax CORRECT:

A taxpayer who failed to claim the depreciation deduction for the last 12 years may correct this by _______. Filing amended returns for all open years when the incorrect amount was claimed. Filing Form 3115, Application for Change in Accounting Method. Including the unclaimed depreciation as "Other Depreciation" on line 16 of Form 4562, Depreciation and Amortization, in the current year. Increasing the basis of the property by the amount of depreciation that could have been claimed.

NOT: Including the unclaimed depreciation as other depreciation on line 16 of form 4562 depreciation and amortization in the current year CORRECT:

Jason and Marie are married, and they will file a joint return. They run a business together, and they elect to be treated as a qualified joint venture. Their business has a net profit of $850 for the year. The couple should file: One Schedule C (Form 1040) and one Schedule SE. One Schedule C (Form 1040) and two Schedules SE. Two Schedules C (Form 1040) and one Schedule SE. Two Schedules C (Form 1040) and two Schedules SE.

NOT: One schedule c form 1040 and two schedules se CORRECT:

Faith's 2021 tax liability is $51,293. Her adjusted gross income is greater than $150,000. Her 2021 withholding was $46,910, and she made no other payments during the year. Her 2020 tax liability was $30,570. Why or why not will Faith owe an estimated tax payment penalty for 2021? She will owe a penalty because her balance due is greater than $1,000. She will owe a penalty because she did not have at least 100% of her tax liability withheld during the year. She does not owe a penalty because her 2021 withholding was greater than 110% of her 2020 tax liability. She does not owe a penalty because her 2021 withholding is at least 90% of her 2021 tax liability.

NOT: She will owe a penalty because her balance due is greater than 1,000 CORRECT:

A small business must use a calendar tax year in which of the following situations? The owner: Does not keep books. Has inventory. Uses the accrual method of accounting. Uses the cash method of accounting.

NOT: Uses the cash method of accounting CORRECT:

Juan is a self-employed business owner. How does Juan report the owner compensation for his sole proprietorship? Juan reports the owner compensation as _____. Net profit on a Schedule C (Form 1040). He is subject to income tax and self-employment tax. Nonemployee compensation on Form 1099-NEC, Nonemployee Compensation. He is subject to income tax and self-employment tax. Pass-through, ordinary income on a Schedule K-1. He is subject to income tax only. Wages on a Form W-2, Wage and Tax Statement. He is subject to income tax only.

Net profit on schedule c form 1040. he is subject to income tax and self-employment tax

In order to take a deduction for business use of a home, the space must be used exclusively and regularly as the principal place of business. To meet the exclusive-use test, the space must be used: For business, but may be used as a playroom for children after working hours. For business, but may also be used as a guest room as long as such use is less than 10% of its total use. For business more than 50% of its overall use. Only for the trade or business.

Only for the trade or business

Which of the following is NOT a key part of a balance sheet? Assets. Liabilities. Operating expenses. Shareholders' equity

Operating expenses

Where would a sole proprietor deduct employer matching contributions to the owner's retirement plan? Schedule 1 (Form 1040), line 16, Self-employed SEP, SIMPLE, and qualified plans. Schedule C (Form 1040), line 14, Employee benefit programs. Schedule C (Form 1040), line 19, Pension and profit-sharing plans. Schedule C (Form 1040), line 27a, Other expenses.

Schedule 1 form 1040 line 16 self employees sep simple and qualified plans