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

Question 1

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

Answer 1

True

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

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

Answer 3

False

Question 4

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 5

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

Question 6

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

Question 7

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 8

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

Question 9

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 10

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 11

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).

Question 12

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 13

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

Question 14

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

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

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

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

Question 23

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 24

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 25

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 26

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

Question 27

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 28

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 29

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 30

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

Question 31

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 32

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

Question 33

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 34

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 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

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

Question 37

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 38

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

Question 39

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 40

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 41

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 42

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

Question 43

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 44

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 45

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 46

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 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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 53

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 54

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

Question 55

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 56

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 57

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 58

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 59

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 60

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

Question 61

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

A) To claim unreimbursed work-related expenses as a deduction for AGI.
B) To avoid the self-employment tax.
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 62

During the year,Peggy went from Nashville to Quito (Ecuador)on business.She spent four days on business,two days on travel,and four days on vacation.Disregarding the vacation costs,Peggy's unreimbursed expenses are: Peggy's deductible expenses are:

A) $2,500.
B) $2,800.
C) $3,100.
D) $4,300.
E) None of the above.

Question 63

During the year,Walt went from Louisville to Hawaii on business.Preceding a five-day business meeting,he spent four days vacationing at the beach.Excluding the vacation costs,his expenses for the trip are: Presuming no reimbursement,deductible expenses are:

A) $5,500.
B) $4,800.
C) $3,900.
D) $3,200.
E) None of the above.

Question 64

Which,if any,of the following factors is not a characteristic of independent contractor status?

A) Services are performed for more than one party.
B) Receipt of a Form 1099 reporting payments received.
C) Workplace fringe benefits are not available.
D) Work-related expenses are reported on Form 2106.
E) None of the above.

Question 65

Aaron is a self-employed practical nurse who works out of his home.He provides nursing care for disabled persons living in their residences.During the day he drives his car as follows. Aaron's deductible mileage for each workday is:

A) 10 miles.
B) 12 miles.
C) 20 miles.
D) 22 miles.
E) 32 miles.

Question 66

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

Question 67

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 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

Dave is the regional manager for a national chain of auto-parts stores and is based in Salt Lake City.When the company opens new stores in Boise,Dave is given the task of supervising their initial operation.For three months,he works weekdays in Boise and returns home on weekends.He spends $410 returning to Salt Lake City but would have spent $350 had he stayed in Boise for the weekend.As to the weekend trips,how much,if any,qualifies as a deduction?

A) $0, since the trips are personal and not work related.
B) $0, since Dave's tax home has changed from Salt Lake City to Boise.
C) $60.
D) $350.
E) $410.

Question 70

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

A) 0 miles.
B) 30 miles.
C) 46 miles.
D) 76 miles.
E) None of the above.

Question 71

Allowing for the cutback adjustment (50% reduction for meals and entertainment),which of the following trips,if any,will qualify for the travel expense deduction?

A) Dr. Jones, a general dentist, attends a two-day seminar on developing a dental practice.
B) Dr. Brown, a surgeon, attends a two-day seminar on financial planning.
C) Paul, a romance language high school teacher, spends summer break in France, Portugal, and Spain improving his language skills.
D) Myrna went on a two-week vacation in Boston. While there, she visited her employer's home office to have lunch with former co-workers.
E) None of the above.

Question 72

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

Question 73

During the year,Oscar travels from Raleigh to Moscow (Russia)on business.His time was spent as follows: 2 days travel (one day each way),2 days business,and 2 days personal.His expenses for the trip were as follows (meals and lodging reflect only the business portion): Presuming no reimbursement,Oscar's deductible expenses are:

A) $6,000.
B) $5,500.
C) $4,500.
D) $3,500.
E) None of the above.

Question 74

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 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

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

A) Car registration fees.
B) Auto insurance.
C) Interest expense on a car loan (taxpayer is an employee).
D) Dues to auto clubs.
E) None of the above.

Question 77

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

Question 78

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

A) Engine tune-up.
B) Parking.
C) Interest on automobile loan.
D) MACRS depreciation.
E) None of the above.

Question 79

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 not been claimed on the automobile.
E) None of the above.

Question 80

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.