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

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

The IRS will issue advanced rulings as to whether a worker's status is that of an employee or an independent contractor.

Question 8

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

Question 9

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

Question 10

For tax purposes,a statutory employee is not treated the same as a common law employee.

Question 11

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 12

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

Question 13

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

Question 14

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 15

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.

Question 16

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

Question 17

After the automatic mileage rate has been set by the IRS for a year,it cannot later be changed by the IRS.

Question 18

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

Question 19

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 20

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 21

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 22

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 23

In May 2011,after 11 months on a new job,Ken is fired after he assaults a customer.Ken must include in his gross income for 2011 any deduction for moving expenses he may have claimed on his 2010 tax return.

Question 24

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 not allowed and cannot be claimed by her as a deduction.

Question 25

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 26

In November 2011,Katie incurs unreimbursed moving expenses to accept a new job.Katie cannot deduct any of these expenses when she timely files her 2011 income tax return since she has not yet satisfied the 39-week time test.

Question 27

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 28

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

Question 29

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

Question 30

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 31

Daniel just graduated from college.The cost of moving his personal belongings from his parents' home to his first job site does not qualify for the moving expense deduction.

Question 32

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

Question 33

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 34

Crow Corporation pays for a trip to Bermuda for its two top salespersons.This expense is subject to the cutback adjustment.

Question 35

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

Question 36

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 37

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 38

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 39

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 40

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

Question 41

Ethan,a bachelor with no immediate family,uses the Pine Shadows Country Club exclusively for his business entertaining.All of Ethan's annual dues for his club membership are deductible.

Question 42

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 43

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

Question 44

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

Question 45

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 46

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

Question 47

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

Question 48

The $25 limitation on the deductibility of business gifts can be circumvented by making separate gifts to the family (e.g.,spouse,children)of the client.

Question 49

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

Question 50

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 51

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

Question 52

A sole proprietor is allowed a deduction for a $25 gift he gives to his office manager on her birthday.

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 $60 ($120 ´ 50% cutback adjustment)per ticket is deductible.

Question 54

The maximum annual elective contribution for a participant who is age 40 in a § 401(k)plan is $16,500 for 2011.

Question 55

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 56

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 57

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 58

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 59

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

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

Question 62

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 63

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

Question 64

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 65

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

Question 66

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 67

The Federal per diem rates that can be used for "deemed substantiated" purposes are the same for all locations in the country.

Question 68

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 69

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

Question 70

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 71

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

Question 72

If a married taxpayer is an active participant in another qualified retirement plan,the traditional IRA deduction phaseout begins at $90,000 of AGI for a joint return in 2011.

Question 73

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 2011.

Question 74

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

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) Sophie 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 tasks performed.
E) None of the above.

Question 76

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 77

By itself,credit card receipts will not constitute adequate substantiation for travel expenses.

Question 78

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

A) Jordan provides Ryan with 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 makes his services available to others.
E) None of the above.

Question 79

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

Question 80

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.