Fed tax Final

If an employee receives a specific monthly amount from his or her employer as a reimbursement for​ employment-related entertainment,​ travel, and transportation​ expenses, why is it necessary to allocate a portion of the total reimbursement to each expense​ category?

A. It is necessary to allocate a portion of the total reimbursement to each expense category because unreimbursed employee business expenses are deductible as a miscellaneous itemized deduction subject to the​ 2% floor. Meals and entertainment expenses must be reduced by​ 50%. B. It is necessary to allocate a portion of the total reimbursement to each expense category because the various unreimbursed amounts would be subject to various limitations such as the​ 2% floor and​ 50% business meal rule. C. It is necessary to allocate a portion of the total reimbursement to each expense category because reimbursed expenses are fully includible in gross income and are deductible for AGI subject to the accountable plan rules. D. All of the above.

Why is it important to distinguish whether an individual is an employee or an independent contractor​ (self-employed)? A. It is important to distinguish whether an individual is an employee or an independent contractor​ (self-employed) because some expenses are only partially deductible by employees or not deductible at all. A​ self-employed individual who incurs a​ business-related expenditure may​ deduct, under Section​ 162, the expense for determining AGI on Schedule​ C, Form 1040. B. Employers pay certain payroll taxes on behalf of their​ employees, whereas,​ self-employed individuals have to pay both the employer and employee portion of payroll taxes.​ Therefore, individuals may prefer to be classified as employees because the employee portion of the social security tax rate in 2015 of​ 7.65% is less than the​ self-employment tax rate of​ 15.3%. C. ​Self-employed individuals receive an income tax deduction equal to​ 50% of their​ self-employment tax. Consideration should also be given to the hospital insurance portion of the FICA​ tax, which continues to apply without limit at a​ 1.45% rate for both employees and employers and at a​ 2.90% rate for​ self-employed individuals. D. All of the above

D

If an employee​ (or self-employed​ individual) uses the standard mileage rate method for the year in which an automobile is​ acquired, may the actual expense method be used in a subsequent​ year? If​ so, what restrictions are imposed​ (if any) on depreciation​ methods? What adjustments to basis are​ required?

D. The actual expense method may be used in subsequent years. ​However, MACRS under the regular method may not be used for computing depreciation ​(straight-line method is​ required) and the basis of the automobile must be reduced by 24 cents per mile in 2015 and 22 cents in 2014.

Qualified moving expenses of an employee deductible/subject to 2% floor?

For AGI; No

Legal expenses incurred to prepare the​ taxpayer's income tax return deductible/subject to 2% floor?

From AGI; Yes

Unreimbursed travel and transportation expenses deductible/subject to 2% floor?

From AGI; Yes

Kaniya is an employee who incurs $ 1 comma 800 of business meal expenses in connection with business entertainment and​ travel, none of which are reimbursed by her employer. $ 400 of the business meal costs are considered to be lavish or extravagant. How much can Kaniya deduct before applying the 2 ​% nondeductible floor on miscellaneous itemized​ deductions?

Kaniya may deduct $700 before applying the 2% nondeductible floor.

Automobile expenses associated with commuting to and from work deductible/subject to 2% floor?

Non-deductible, No

The two basic requirements for a moving expense deduction are A. a distance requirement and a maximum amount requirement. Both requirements must be met. B. a distance requirement and a time requirement. Both requirements must be met. Your answer is correct. C. a distance requirement and the taxpayer must be​ self-employed. Both requirements must be met. D. a new employment and a time requirement. Both requirements must be met.

a distance requirement and a time requirement. Both requirements must be met.

Does it matter whether a moving expense is incurred by an​ employee, a​ self-employed individual, or an unemployed​ person? A. ​Yes, qualifying moving expenses are not deductible if they are incurred by a​ self-employed individual. To be​ deductible, qualifying moving expenses must be incurred by an employee only and met the distance and time requirements. B. ​No, qualifying moving expenses are deductible as long as the distance and time requirements are satisfied. The​ taxpayer's employment status does not affect the deductibility of moving expenses. C. ​Yes, qualifying moving expenses are not deductible if they are incurred by an unemployed or a retired individual. To be​ deductible, qualifying moving expenses must be incurred by an employee or a​ self-employed individual. In​ addition, the required time period to remain in the new location is longer for​ self-employed taxpayers​ (78 weeks) than for employees​ (39 weeks). If the unemployed individual incurred moving expenses to accept a job in the new​ location, the moving expenses would be deductible assuming the other requirements are met. Your answer is correct. D. ​Yes, qualifying moving expenses are deductible as a business expenses by a​ self-employed individual only.

​Yes, qualifying moving expenses are not deductible if they are incurred by an unemployed or a retired individual. To be​ deductible, qualifying moving expenses must be incurred by an employee or a​ self-employed individual. In​ addition, the required time period to remain in the new location is longer for​ self-employed taxpayers​ (78 weeks) than for employees​ (39 weeks). If the unemployed individual incurred moving expenses to accept a job in the new​ location, the moving expenses would be deductible assuming the other requirements are met.