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

Question 1

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

Answer 1

False

Question 2

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 2

True

Question 3

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

Answer 3

False

Question 4

The work-related expenses of an independent contractor will not be subject to the 2%-of-AGI floor.

Question 5

A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year.

Question 6

If an individual is subject to the direction or control of another only to the extent of the end result but not as to the means of accomplishment, an employer-employee relationship does not exist.

Question 7

A taxpayer who maintains an office in the home to conduct his only business will not have nondeductible commuting expense.

Question 8

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

Question 9

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 away from home.

Question 10

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 11

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

Question 12

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

Question 13

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

Question 14

A deduction for parking and other traffic violations is allowed under the actual cost method but not the automatic mileage method.

Question 15

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

Question 16

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

Question 17

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

Question 18

A statutory employee is not a common law employee but is subject to income tax withholdings.

Question 19

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

Question 20

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

Question 21

In May 2012, after 11 months on a new job, Ken is fired after he assaults a customer. Ken must include in his gross income for 2012 any deduction for moving expenses he may have claimed on his 2011 tax return.

Question 22

In November 2012, Katie incurs unreimbursed moving expenses to accept a new job. Katie cannot deduct any of these expenses when she timely files her 2012 income tax return since she has not yet satisfied the 39-week time test.

Question 23

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

Question 24

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 25

Qualified moving expenses include the cost of lodging but not meals during the move.

Question 26

At age 65, Camilla retires from her job in Boston and moves to Florida.As a retiree, she is not subject to the time test in deducting her moving expenses.

Question 27

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 28

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

Question 29

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

Question 30

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 31

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

Question 32

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

Question 33

Kelly, an unemployed architect, moves from Boston to Phoenix to accept a job as a chef at a restaurant.Kelly's moving expenses are not deductible because her new job is in a different trade or business.

Question 34

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 a deductible travel expense.

Question 35

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

Question 36

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

Question 37

Qualified moving expenses of an employee that are not reimbursed are a deduction for AGI.

Question 38

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 39

An education expense deduction is not allowed if the education results in a promotion or pay raise for the employee.

Question 40

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

Question 41

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

Question 42

Mallard Corporation furnishes meals at cost to its employees by means of a cafeteria it maintains.The cost of operating the cafeteria is subject to the cutback adjustment.

Question 43

Tired of renting, Dr.Smith buys the academic robes she will wear at her college's graduation procession.The cost of this attire qualifies as a uniform expense.

Question 44

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 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

Dana contributes $2,000 too much to a § 401(k) plan which is not returned within 2 1/2 month after the close of the tax year. The employer will have to pay a tax of $200

Question 47

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

Question 48

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 49

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

Question 50

As Christmas presents, Lily sends gift certificates (each valued at $25) to Caden (a key client) and to each of his two minor children.Lily can deduct $75 (3 ´ $25) as to these gifts.

Question 51

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

Question 52

Any pre-tax amount elected by an employee as a contribution to a § 401(k) plan that does not exceed the statutory limit is not includible in gross income in the year of deferral and is 100% vested.

Question 53

Madison is an instructor of fine arts at a local community college.If she spends $600 (not reimbursed) on art supplies for her classes, $250 of this amount can be claimed as a deduction for AGI.

Question 54

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 55

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

Question 56

Jackson gives his supervisor a $30 box of chocolates on her birthday.Jackson may claim only $25 as a deduction.

Question 57

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 58

Tickets to a theater performance or sporting event can be treated as either business entertainment or a business gift if the taxpayer does not accompany the client to the event.

Question 59

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

Question 60

Frank, a recently retired FBI agent, pays job search expenses to obtain a position with a city police department.Frank's job search expenses do not qualify as deductions.

Question 61

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

Question 62

In a direct transfer from one qualified retirement plan to another qualified retirement plan, the employer must withhold 20% of the amount of the direct transfer.

Question 63

A direct transfer of funds from a qualified retirement plan to an IRA is not subject to the withholding rules.

Question 64

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 2012.

Question 65

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

Question 66

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 67

For the spousal IRA provision to apply, a joint return must be filed.

Question 68

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

Question 69

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

Question 70

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

Question 71

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

Question 72

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

Question 73

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

Question 74

An individual is considered an active participant in an employer-sponsored retirement plan merely because an individual's spouse is an active participant for any part of a plan year in applying the IRA phase-out provision.

Question 75

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

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

Question 76

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

Question 77

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

Question 78

If a married taxpayer is an active participant in another qualified retirement plan, the traditional IRA deduction phaseout begins at $92,000 of AGI for a joint return in 2012.

Question 79

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 training (i.e., job skills) from Jordan.
C)Ryan is paid based on tasks performed.
D)Ryan makes his services available to others.
E)None of the above.

Question 80

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.