Question 1

Avantra Inc.is a professional firm with the professional employee group generally in the top tax bracket and the support staff generally in the 15% 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?

Accepted Answer

A) The support staff will prefer the raise because the after-tax raise will be $510 ($600 × 85%) which exceeds their medical costs, but the professional staff will only have $362 ($600 × 60.4%) of after-tax income which is less than the medical costs.

Question 2

A taxpayer moves for employment in November 2017 and pays all of the moving expenses by December 31.Because he cannot satisfy the 39-week employment test,he cannot claim the moving expense deduction until the following year.

Accepted Answer

The taxpayer can take the deduction in the year of the move, but if he subsequently fails the test, gross income for that second year will be increased by the previous tax benefit.

Question 3

At her employer's request,Kim moves from Albany to Chicago.She incurs $20,000 of costs to move her household goods and to travel to the new location,plus $8,000 of temporary living expenses because the new home was not ready when she needed to start work.Her employer reimburses her the full $28,000 cost associated with the move.She cannot deduct the moving costs,but she is not economically impacted because she is fully reimbursed.

Accepted Answer

The reimbursement associated with the $8,000 of temporary living expenses will be taxable so Kim will be out-of-pocket for the incremental taxes. She could negotiate a tax "gross-up."

Question 4

Jack takes a $7,000 distribution from his Health Savings Account.$2,000 is used to pay for X-rays and dental surgery.The other $5,000 is used to make a down payment on a new car.What are the tax consequences to Jack?

Accepted Answer

The answer of Jack takes a $7,000 distribution from his...

Question 5

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?

Accepted Answer

C) Younger taxpayers are more likely to benefit because of the years available to accumulate earnings tax-free.

Question 6

An employee has unreimbursed travel and business auto expenses.In order to claim the deduction,the employee will report the details (amounts and type of expenditure) on Schedule A (Itemized Deductions) of Form 1040.

Accepted Answer

The details of employee business expenses for travel and auto must be reported on Form 2106 before the final amount is transferred to Schedule A.

Question 7

Why did Congress establish Health Savings Accounts (HSAs)? How do HSAs operate?

Accepted Answer

The answer of Why did Congress establish Health Savings Accounts...

Question 8

Discuss the tax treatment of a nonqualified stock option plan.

Accepted Answer

The answer of Discuss the tax treatment of a nonqualified...

Question 9

Johanna is single and self-employed as a technology consultant.She wants to set money aside for her retirement.What tax and financial issues should she consider?

Accepted Answer

The answer of Johanna is single and self-employed as a...

Question 10

Raul and Jenna are married and are both working.They are both over age 50.Jenna participates in her employer's Sec.401(k) plan and makes the maximum contribution and enjoys a company matching contribution.Raul's employer does not maintain a retirement plan so he would like to save as much as possible in a tax-advantaged manner for retirement.They expect to report $190,000 of AGI for 2017.
a.What is the maximum amount that Raul can contribute to a traditional IRA and how much can he deduct?
b.What is the maximum amount that Raul can contribute to a Roth IRA and how much can he deduct?
c.How could Raul contribute to both the traditional IRA and Roth IRA to maximize current and future tax savings?

Accepted Answer

The answer of Raul and Jenna are married and are...

Question 11

Daniel has accepted a new job and is reviewing the retirement plan information.He has a choice of participating in the company's conventional Sec.401(k) plan or a Roth 401(k) plan.Explain the difference between the two plans in terms of employee contributions and retirement distributions from the plan.

Accepted Answer

The answer of Daniel has accepted a new job and...

Quiz 9: Employee Expenses and Deferred Compensation