Deck 9: Deductions: Employee and Self-Employed-Related Expenses

Question 1

A common law employee who chooses the standard deduction will be unable to claim any unreimbursed work-related expenses as a deduction.

Answer 1

False

Question 2

A taxpayer who uses the automatic mileage method to compute auto expenses can also deduct the business portion of tolls and parking.

Answer 2

True

Question 3

Janet,who lives and works in Newark,travels to Atlanta for a Thursday-Friday business conference.She stays over after the conference and visits relatives and friends on Saturday.Under certain circumstances,the meals and lodging expenses for Saturday can be considered as business related.

Answer 3

True

Question 4

In some cases it may be appropriate for a taxpayer to report work-related expenses by using both Form 2106 and Schedule

Question 5

Jake performs services for Maude.If Jake provides his own helper and tools,this is indicative of independent contractor (rather than employee)status.

Question 6

The tax law specifically provides that a taxpayer cannot be temporarily away from home for any period of employment that exceeds one year.

Question 7

Once the actual cost method is used,a taxpayer cannot for a later year change to the automatic mileage method.

Question 8

Amy lives and works in St.Louis.In the morning she flies to Boston,has a three-hour business meeting,and returns to St.Louis that evening.For tax purposes,Amy was not away from home.

Question 9

For tax purposes,a statutory employee is treated the same as a common law employee.

Question 10

For tax purposes,"travel" is a broader classification than "transportation."

Question 11

Unfortunately,the IRS will not issue advanced rulings as to whether a worker's status is that of an employee or an independent contractor.

Question 12

The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.

Question 13

After the automatic mileage rate has been set by the IRS for a year,it can later be changed.

Question 14

A statutory employee is a common law employee and is subject to income tax withholdings.

Question 15

After she finishes working at her main job,Jean returns home,has dinner,then drives to her second job.Jean may deduct the mileage between her first and second jobs.

Question 16

Marvin lives with his family in Alabama.He has two jobs: one in Alabama and one in North Carolina.Marvin's tax home is where he lives (Alabama).

Question 17

A taxpayer who lives and works in Kansas City is sent to Chicago on an eight-day business trip.While in Chicago,taxpayer uses the hotel valet service to have some laundry done.The valet charge is not a deductible travel expense.

Question 18

One indicia of independent contractor (rather than employee)status is when the individual performing the services is paid based on time spent (rather than tasks performed).

Question 19

In choosing between the actual expense method and the automatic mileage method,a taxpayer should consider the cost of insurance on the automobile.

Question 20

A taxpayer who lives and works in Tulsa travels to Buffalo for five days.If three days are spent on business and two days are spent on visiting relatives,only 60% of the airfare is deductible.

Question 21

Bob lives and works in Newark,NJ.He travels to London for a three-day business meeting,after which he spends six days touring Scotland.All of his air fare is deductible.

Question 22

Alexis (a CPA and JD)sold her public accounting practice in Des Moines and accepted a job with the Seattle office of a national law firm.Her moving expenses are not deductible because she has changed employment status (i.e. ,went from self-employed to employee)and changed occupations (i.e. ,practice of public accounting to practice of law).

Question 23

A taxpayer who always claims the standard deduction (i.e. ,does not itemize his or her deductions from AGI)will not be able to receive a tax benefit from any education expenses incurred.

Question 24

Lloyd,a practicing CPA,pays tuition to attend law school.Since a law degree involves education leading to a new trade or business,the tuition is not deductible.

Question 25

A taxpayer takes six clients to an NBA playoff game.If all of the tickets (list price of $120 each)are purchased on the Internet for $1,800 ($300 each),only $150 ($300 ´ 50% cutback adjustment)per ticket is deductible.

Question 26

An education expense deduction can be allowed even if the education results in a promotion or pay raise for the employee.

Question 27

Kelly,an unemployed architect,moves from Boston to Phoenix to accept a job as a chef at a restaurant.Kelly's moving expenses are deductible even though her new job is in a different trade or business.

Question 28

Ethan,a bachelor with no immediate family,uses the Pine Shadows Country Club exclusively for his business entertaining.None of Ethan's annual dues for his club membership are deductible.

Question 29

Tired of her 60 mile daily commute,Margaret purchases a condo that is only five miles from her job.Margaret's moving expenses to her new condo are allowed and can be claimed by her as a deduction.

Question 30

There is no cutback adjustment for meals and entertainment as to employees who are subject to regulation by the U.S.Department of Transportation.

Question 31

Under the right circumstances,a taxpayer's meals and lodging expense can qualify as a deductible education expense.

Question 32

In May 2010,after 11 months on a new job,Ken is fired after he assaults a customer.Ken must include in his gross income for 2010 any deduction for moving expenses he may have claimed on his 2009 tax return.

Question 33

Daniel just graduated from college.The cost of moving his personal belongings from his parents' home to his first job site qualifies for the moving expense deduction.

Question 34

A moving expense deduction is not allowed if at the time of the move the taxpayer did not have a job at the new location.

Question 35

A sole proprietor is not allowed a deduction for a $25 gift he gives to his office manager on her birthday.

Question 36

Crow Corporation pays for a trip to Bermuda for its two top salespersons.This expense is not subject to the cutback adjustment.

Question 37

Every year,Penguin Corporation gives each employee a fruit basket and a bottle of wine at Christmas.These gifts are not subject to the cutback adjustment.

Question 38

Mallard Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is not subject to the cutback adjustment.

Question 39

Edna lives and works in Cleveland.She travels to Berlin for a nine-day business meeting,after which she spends four days touring Germany.All of Edna's airfare is deductible.

Question 40

In November 2010,Katie incurs unreimbursed moving expenses to accept a new job.Katie can deduct any of these expenses when she timely files her 2010 income tax return even though she has not yet satisfied the 39-week time test.

Question 41

When contributions are made to a traditional IRA,they are deductible by the participant.Later distributions from a the IRA,however,are fully taxed.

Question 42

Contributions to a Roth IRA can be made up to the due date (including extensions)of the taxpayer's income tax return.

Question 43

If an individual is ineligible to make a deductible contribution to a traditional IRA,nondeductible contributions can be made to a traditional IRA.

Question 44

Although a § 401(k)plan avoids taxation on any employer contributions,any income earned on such contributions is taxed yearly.

Question 45

After graduating from college with a degree in chemistry,Alberto obtains a job as a chemist with DuPont.Alberto's job search expenses qualify as deductions.

Question 46

Qualifying job search expenses are deductible even if the taxpayer does not change jobs.

Question 47

A participant has an adjusted basis of $0 in any nondeductible contributions to a traditional IRA.

Question 48

The portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

Question 49

A taxpayer who claims the standard deduction will not be able to claim an office in the home deduction.

Question 50

Both traditional and Roth IRAs possess the advantage of tax-free accumulation of income within the plan.

Question 51

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five-year holding period.

Question 52

If a taxpayer does not own a home but rents an apartment,the office in the home deduction is not available.

Question 53

An individual,age 40,who is not subject to the phase-out provision may contribute a deductible amount to a Roth IRA up to $5,000 per year in 2010.

Question 54

Distributions from a Roth IRA that are subject to taxation are treated first as from earnings and last as from contributions.

Question 55

The maximum annual elective contribution for a participant who is age 40 in a § 401(k)plan is $16,500 for 2010.

Question 56

Madison is an instructor of fine arts at a local community college.If she spends $600 on art supplies for her classes,none of this amount can be claimed as a deduction for AGI.

Question 57

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $89,000 of AGI for a joint return in 2010.

Question 58

In the case of an office in the home deduction,the exclusive business use test does not apply when the home is used as a daycare center.

Question 59

The maximum annual contribution to a Roth IRA for an unmarried taxpayer who is age 35 is the smaller of $5,000 or the individual's compensation for the year.

Question 60

If the cost of uniforms is deductible,their maintenance cost (e.g. ,laundry,dry cleaning,alterations)also is deductible.

Question 61

By itself,credit card receipts will constitute adequate substantiation for travel expenses.

Question 62

A traditional IRA may not be rolled over into a Roth IRA.

Question 63

Amy works as an auditor for a large major CPA firm.During the months of September through November of each year,she is permanently assigned to the team auditing Garnet Corporation.As a result,every day she drives from her home to Garnet and returns home after work.Mileage is as follows: For these three months,Amy's deductible mileage for each workday is:

A)0.
B)30.
C)35.
D)60.
E)None of the above.

Question 64

Ryan performs services for Jordan.Which,if any,of the following factors indicate that Ryan is an employee,rather than an independent contractor?

A)Ryan provides his own support services (e.g. ,work assistants).
B)Ryan obtained his own training (i.e. ,job skills).
C)Ryan is paid based on tasks performed.
D)Ryan does not make his services available to others.
E)None of the above.

Question 65

A participant has a zero basis in the deductible contributions made to a traditional IRA.

Question 66

A worker may prefer to be treated as an independent contractor (rather than an employee)for which of the following reasons:

A)Avoids the cutback adjustment as to business meals.
B)All of the self-employment tax is deductible for income tax purposes.
C)Work-related expenses are not subject to the 2%-of-AGI floor.
D)A Schedule C does not have to be filed.
E)None of the above.

Question 67

Employees who render an adequate accounting to the employer and are fully reimbursed will shift the 50% cutback adjustment to their employer.

Question 68

In which,if any,of the following situations is the automatic mileage available?

A)A limousine to be rented by the owner for special occasions (e.g. ,weddings,high school proms).
B)The auto belongs to taxpayer's mother.
C)One of seven cars used to deliver pizzas.
D)MACRS statutory percentage method has been claimed on the automobile.
E)None of the above.

Question 69

Michael is the city sales manager for "Chick-Stick," a national fast food franchise.Every working day,Michael drives his car as follows: Michael's deductible mileage is:

A)0 miles.
B)30 miles.
C)47 miles.
D)77 miles.
E)None of the above.

Question 70

If only one spouse is employed,both spouses (ages 34 and 39)may contribute a maximum of $5,000 to an IRA in 2010 if the employed spouse has compensation of at least $10,000.

Question 71

Corey performs services for Sophie.Which,if any,of the following factors indicate that Corey is an independent contractor,rather than an employee?

A)Corey sets the work schedule.
B)Sophie provides the tools used.
C)Corey files a Form 2106 with his Form 1040.
D)Corey is paid by the hour.
E)None of the above.

Question 72

A worker may prefer to be classified as an employee (rather than an independent contractor)for which of the following reasons:

A)To avoid the self-employment tax.
B)To claim unreimbursed work-related expenses as a deduction for AGI.
C)To avoid the cutback adjustment on unreimbursed business entertainment expenses.
D)To avoid the 2%-of-AGI floor on unreimbursed work-related expenses.
E)None of the above.

Question 73

For self-employed taxpayers,travel expenses are not subject to the 2%-of-AGI floor.

Question 74

The Federal per diem rates that can be used for "deemed substantiated" purposes are not the same for all locations in the country.

Question 75

A taxpayer who claims the standard deduction will not be affected by the 2% floor on unreimbursed employee expenses.

Question 76

An employed taxpayer can avoid the cutback adjustment on entertainment expenses by claiming the standard deduction.

Question 77

When using the automatic mileage method,which,if any,of the following expenses also can be claimed?

A)Engine tune-up.
B)Parking charges.
C)Gasoline.
D)MACRS depreciation.
E)None of the above.

Question 78

The total of traditional deductible,traditional nondeductible,and Roth IRA contributions in 2010 may not exceed $5,000 per year for a taxpayer age 39.

Question 79

Under the actual expense method,which,if any,of the following expenses will not be allowed?

A)Parking fines incurred during business use.
B)Interest expense on a car loan (taxpayer is self-employed).
C)Auto insurance.
D)Dues to auto clubs.
E)None of the above.

Question 80

Statutory employees:

A)Report their expenses on Form 2106.
B)Include common law employees.
C)Are subject to income tax withholdings.
D)Claim their expenses as deductions from AGI.
E)None of the above.