Ch 9

Question 0

Deferred compensation

Answer 0

Methods of compensating employees based on their current

Service, but actual payments deferred to future period

Question 1

How does tax law consider employee expenses?

Answer 1

Deductible in connection with trade or business

Question 2

2 types of deferred compensation methods

Answer 2

Qualified plans and nonqualified plans

Question 3

Qualified plans

Answer 3

Tax advantageous but strict eligibility and coverage

requirements

Question 4

Non qualified plans

Answer 4

Not as tax advantageous as qualified plans

Very useful for highly compensated employees

Question 5

2 classifications of employee expenses

Answer 5

1 Reimbursed employee expenses

2 unreimbursed employee expenses

Question 6

Reimbursed employee expenses

Answer 6

Deducted for AGI

Question 7

Unreimbursed employee expenses

Answer 7

Deducted from AGI

Question 8

6 most frequently encountered employee expenses

Answer 8

1 travel
2 transportation
3 moving
4 entertainment
5 education
6 office in home

Question 9

Expenses for self employed

Answer 9

Deductible for AGI

reported on schedule c

Question 10

When does the employer-employee relationship exist?

Answer 10

Employer has right to control and direct individual who

Provides services w/regard to end result being accomplished

Question 11

Social security and Medicare tax: employee

Answer 11

If classified as employee, employer must match SS and

Medicare taxes paid by employee

Question 12

Social security and Medicare tax: self employed

Answer 12

Self employed most pay both employee and employer

portions of social security and Medicare tax

Question 13

3 factors in determining whether person is an employee or independent contractor

Answer 13

1 behavioral control

2 financial control

3 relationship of parties

Question 14

Behavioral control

Answer 14

Entails whether payor has right to control how individual
Does work

Also Accounts for training provided

Question 15

Financial control

Answer 15

Independent contractor has significant investment in work,

Is not reimbursed for expenses, has opportunity for profit/loss

Question 16

Relationship of parties

Answer 16

Looks at employee benefits and explicit written contracts

Question 17

Limitations on unreimbursed employee expenses: 2% nondeductible floor, 4 items

Answer 17

1 unreimbursed employee business expenses
2 investment expenses
3 fees for tax advice/prep
4 expenses for hobby activity

Question 18

3 general groups of miscellaneous itemized deductions

Answer 18

1 professional journals, professional dues, union dues,
Small tools and supplies
2 job hunting expenses in same trade/business
3 cost/maintenance of special clothing (uniforms)

Question 19

Miscellaneous itemized deduction not subject to 2% floor

Answer 19

Gambling losses

Question 20

Deductibility of travel expenses: For AGI, 3

Answer 20

1Tax payer engaged in trade or business as self employed

2 engaged in production of rent/royalty

3 employee reimbursed for expenses by employer

Question 21

Deductibility of travel expenses: from AGI

Answer 21

Employee incurs travel expenses related to job and isn’t

Reimbursed, subject to 2% AGI Floor

Question 22

Deductibility of travel expenses: not deductible

Answer 22

Personal travel expenses

Question 23

Travel expenses

Answer 23

Include transportation, meals, lodging and other necessary

Expenses while away from home

Question 24

Transportation expenses

Answer 24

Individual not away from home

Related to local transportation

Question 25

Meals during transportation expenses

Answer 25

Not deductible

Question 26

2 rules to qualify as travel expense

Answer 26

1 trip must be connected to trade or business

2 taxpayer must be away from home overnight for
Sufficient duration to require sleep+ rest before returning

Question 27

Taxpayers home

Answer 27

Place closest to taxpayers principle place of business

Question 28

Indefinite work assignments

Answer 28

Work assignments for over 1 year away from home
Or expected to be over 1 year

Not deductible

Question 29

Temporary work assignments

Answer 29

Work away from home less than 1 year

Deductible

Question 30

Business vs. personal travel

Answer 30

Deduct all expenses if primarily business, with 50% on meals

If primarily personal only deduct items allocated to business
And may not deduct travel expenses

Question 31

3 transportation expenses deductible for AGI

Answer 31

1 trade or business
2 production of rent/royalty
3 reimbursed transportation exp.

Question 32

Transportation expense deductible from AGI

Answer 32

Unreimbursed transportation

Question 33

Non deductible transportation expenses

Answer 33

Commuting and personal expenses

Question 34

Classification of transportation expenses

Answer 34

Included items as taxi fairs, automobile expenses,

Airfares, tolls and parking fees of trade/business

Question 35

2 treatments for auto expenses

Answer 35

1 actual auto expenses

2 standard mileage rate

Question 36

Who can use the actual auto expense deduction

Answer 36

Self employed

Question 37

Actual (auto) expense method

What is included in automobile expenses?

Answer 37

Based on ratio of business expense to personal

2) gas, oil, repairs, depreciation, interest, property taxes,
License fees, insurance

Question 38

Standard mileage method

Answer 38

Available to tax payers

Deduct 56.5 cents per mile for 2013

Question 39

Meal and entertainment deduction

Answer 39

Limited to 50% (includes meals and tickets for entertainment)

Anything considered lavish isn’t deductible

Question 40

Directly related business entertainment expense

Answer 40

Business benefit comes from the entertainment expense

Question 41

Associated with entertainment expense

Answer 41

Taxpayer must show clear business purpose

Ex. Obtaining new business or encouraging existence of
business relationship

Question 42

An accountable plan is a reimbursement arrangement that meets both of the following 2 tests

Answer 42

1 substantiation

2 return of excess reimbursement

Question 43

Substantiation

Answer 43

Employee must make adequate accounting of expenses

To his employer

Question 44

Return of excess reimbursement

Answer 44

Within reasonable time, employee required to return any

Portion of reimbursement in excess of substantiated expenses

Question 45

Accountable plan deduction

Answer 45

For AGI

Question 46

Non accountable plan, is it deductible

Answer 46

Yes as from AGI subject to 2% AGI Floor

Question 47

Intention of per diem allowances

Answer 47

To simplify the burden of keeping detailed records for
Taxpayers that incur significant travel expenses

Derived from special tables

Question 48

Moving expense deductions

Answer 48

Limited deduction form moving expenses for employees
And self employed people

Deductible for AGI for both employees and self employed

Question 49

2 conditions must be met for moving expenses to be deductible

Answer 49

1 distance requirement

2 time requirement

Question 50

Moving expenses: Distance requirement

Answer 50

Must be 50 miles farther from taxpayer’s old residence

Than old residence was from former place of employment

Question 51

Moving expenses: time requirement

Answer 51

Must be employed for 39 weeks in 12 month period following
Move for employee

Self employed must work 78 weeks in following 2 year period

Question 52

Definition of moving expenses

Answer 52

Traveling to new residence

Moving household goods from former residence to new
Residence

Question 53

Non deductible indirect moving expenses, 3

Answer 53

1 house hunting trips, meals, lodging, transport

2 temporary living exp. new job location

3 qualified expenses related to sale, purchase or lease of
Residence

Question 54

An employee may deduct education expenses if either of the 2 requirements are met

Answer 54

1 expenditure made to improve skills for trade/business

2 expenditure incurred to meet requirements imposed by
Law or employer for retention of employment, rank or
Compensation rate

Question 55

Education expenses are not deductible if 2 things

Answer 55

1 Education required to meet minimal education requirements
For taxpayer’s employment

2 education qualifies taxpayer for new trade or business

Question 56

Office in home 3 requirements for deduction

Answer 56

1 principal place of business
2 used for clients, patients, customers
3 located in separate structure away from dwelling area

Question 57

Deductible expenses for home office

Answer 57

Any expenses solely for home office