Question 1

Which of the following conditions would generally not favor the rollover of an untaxed retirement fund (e.g.,traditional IRA or 401(k)plan)to a Roth account?
A)expected higher tax rates at retirement
B)significant after-tax funds available to pay taxes
C)an advanced age of the taxpayer
D)All of the above create favorable conditions for a rollover to a Roth.

Accepted Answer

An advanced age of the taxpayer generally would not favor a rollover to a Roth account as there may not be enough time for the tax-free growth and the tax savings to offset the taxes paid on the conversion. Expected higher tax rates at retirement and significant after-tax funds available to pay taxes would favor a rollover to a Roth account as it may result in greater tax savings over the long term. Therefore, option D is incorrect.

Question 2

A sole proprietor has met the requirements to deduct the costs of a home office.The deduction will be calculated on Schedule C.

Accepted Answer

The answer of A sole proprietor has met the requirements...

Question 3

Avantra Inc.is a professional firm with the professional employee group generally in the top tax bracket and the support staff generally in the 12% tax bracket.Due to rising costs and administrative burden,the company is considering discontinuing its dental and eye care insurance plan and instead giving all employees a $600 raise.Based on insurance records the average employee incurs about $400 of dental and eye care expense per year.Which of the following statements is correct?
A)The support staff will generally prefer the raise,and the professional staff will prefer to keep the insurance coverage.
B)The professional staff will generally prefer the raise,and the support staff will prefer to keep the insurance coverage.
C)Employees overall will generally prefer the raise.
D)Employees overall will generally prefer to retain the insurance coverage.

Accepted Answer

The support staff, being in a lower tax bracket, will benefit more from the raise as it provides more after-tax income compared to the insurance coverage. The professional staff, in a higher tax bracket, will prefer the insurance coverage as it is a tax-free benefit, making it more valuable than a taxable raise.

Question 4

Which of the following statements regarding Health Savings Accounts is incorrect?
A)Taxpayers are allowed to deduct contributions to a health savings account for AGI.
B)All taxpayers are eligible to establish a health savings account.
C)Distributions from a health savings account are excluded from gross income if used to pay qualified medical expenses.
D)Health savings account contributions are limited to the lesser of 100% of annual deductible under a high-deductible health plan or $3,500 in 2019 for taxpayers without family coverage.

Accepted Answer

Not all taxpayers are eligible to establish a health savings account. To be eligible, the taxpayer must have a high-deductible health plan and cannot be covered by another health plan that is not also a high-deductible health plan.

Question 5

In order to simplify recordkeeping,a self-employer taxpayer elects to use the federal per diem rate for business travel expenses.This election eliminates the requirement of maintaining documentation of time,place and business purpose of the travel.

Accepted Answer

While using the federal per diem rate for business travel expenses may simplify recordkeeping, it does not eliminate the requirement of maintaining documentation of time, place, and business purpose of the travel. The IRS still requires documentation to support business expenses, even when using the per diem rate.

Question 6

Angie starts a new job on July 1 and becomes covered under the employer's health insurance plan which has an annual deductible of $2,400.Angie contributes the maximum amount into a Health Savings Account.Which of the following statements regarding Angie's Health Savings Account is correct?
A)Angie can contribute and deduct $1,200 for AGI.
B)Angie's contribution will be deductible if she itemizes,and the contribution along with her out-of-pocket medical expenses exceed 10% of AGI.
C)If Angie withdraws $500 to pay for X-rays,the $500 is taxable.
D)Interest income earned on the HCA is taxable.

Accepted Answer

Angie can contribute and deduct $1,200 for AGI because the maximum contribution for 2023 is $3,850, and the annual deductible is $2,400.

Quiz 23: Business Expenses and Deferred Compensation

Which of the following conditions would generally not favor the rollover of an untaxed retirement fund (e.g.,traditional IRA or 401(k) plan) to a Roth account?

A sole proprietor has met the requirements to deduct the costs of a home office.The deduction will be calculated on Schedule C.

Which of the following statements regarding Health Savings Accounts is incorrect?

In order to simplify recordkeeping,a self-employer taxpayer elects to use the federal per diem rate for business travel expenses.This election eliminates the requirement of maintaining documentation of time,place and business purpose of the travel.

Angie starts a new job on July 1 and becomes covered under the employer's health insurance plan which has an annual deductible of $2,400.Angie contributes the maximum amount into a Health Savings Account.Which of the following statements regarding Angie's Health Savings Account is correct?