Question 1

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

Accepted Answer

This statement is true. If a taxpayer's home office is their primary place of business, then they do not have nondeductible commuting expenses since they are not traveling from their home to another location for work. However, there are specific requirements that must be met in order for a home office to qualify for tax deductions.

Question 2

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

Accepted Answer

The provision of a helper and tools by the employer is indicative of an employment relationship, rather than an independent contractor relationship.

Question 3

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

Accepted Answer

This is true. The automatic mileage method includes expenses such as gas, oil, insurance, repairs, and depreciation. However, tolls and parking are not included in the standard mileage rate, so they can be deducted separately as a business expense.

Question 4

A statutory employee is not a common law employee but is subject to Social Security tax.

Accepted Answer

A statutory employee is a specific classification under tax law, different from a common law employee, but they are still subject to Social Security tax.

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.

Accepted Answer

A taxpayer who uses the automatic mileage method can switch to the actual cost method in a later year if they choose to do so. However, once the actual cost method is chosen, the taxpayer cannot switch back to the mileage method for that vehicle.

Question 6

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.

Accepted Answer

For tax purposes, being "away from home" typically requires an overnight stay, which did not occur in Amy's scenario as she returned to St. Louis the same evening.

Question 7

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

Accepted Answer

This statement is true. The IRS can issue a determination as to whether a worker is an employee or an independent contractor for tax purposes. However, this determination is not always the final say and can be challenged by the worker or the employer.

Question 8

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

Accepted Answer

Travel includes not only transportation, but also lodging, meals, and other expenses while away from home, whereas transportation only includes the costs associated with getting to and from a specific destination.

Question 9

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

Accepted Answer

The answer of For tax purposes, a statutory employee is...

Question 10

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.

Accepted Answer

This statement describes a situation where a person may be performing work for someone else, but if they have control over the method in which the work is done, then they are not considered an employee by legal standards. In this case, the employer does not have sufficient control over the employee's work to create an employment relationship.

Question 11

James has a job that compels him to go to many different states during the year. It is possible that James was never away from his tax home during the year.

Accepted Answer

The answer of James has a job that compels him...

Question 12

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).

Accepted Answer

The answer of Marvin lives with his family in Alabama....

Question 13

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

Accepted Answer

Taxpayers can switch between the actual cost method and the automatic mileage method from year to year, as long as they have kept accurate records of their vehicle expenses.

Question 14

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 first and second job.

Accepted Answer

Ann may deduct the mileage between her first and second job as it is considered a business expense.

Question 15

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

Accepted Answer

The IRS can change the automatic mileage rate at any time during the year if they deem it necessary.

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.

Accepted Answer

If a taxpayer has both employee business expenses (that would be reported on Form 2106) and business expenses related to self-employment (that would be reported on Schedule C), they may need to use both forms to accurately report all of their expenses. However, this situation would be relatively rare as most taxpayers are either employees or self-employed, but not both.

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.

Accepted Answer

When deciding between the actual expense method and the standard mileage rate for deducting automobile expenses, the cost of insurance is one of the actual expenses to be considered, as it can significantly impact the total expense calculation.

Question 18

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

Accepted Answer

Independent contractors can deduct work-related expenses directly from their income without being subject to the 2%-of-AGI floor, which applies to employees.

Question 19

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).

Accepted Answer

One indicia of independent contractor status is when the individual is paid based on tasks performed or results achieved, rather than on time spent. Payment based solely on time spent is more indicative of an employer-employee relationship.

Question 20

A deduction for parking and other traffic violations incurred during business use of the automobile is allowed under the actual cost method but not the automatic mileage method.

Accepted Answer

The answer of A deduction for parking and other traffic...

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