Chapter 9 In Class Notes Flashcards
Define a self employed person?
Files a 1099. Pays the whole 15.3% for Social Security on their net income.
Define employee?
Somebody who has an employer. You only have to pay 7.65% of your net income because the business pays the other 7.65% of Social Security
If an employee pays 1,000 in travel expense and then the employer reimburses the employee the full amount, what happens in taxes?
Nothing. no deductions. nothing taxed
If the reimbursement is 12000 what happens with tax.
You have 1200 in Gross Income and then 1000 in for AGI deductions so pretty much 200 in income, but you don’t have to report it because it’s given with the deduction.
If the reimbursement is 800 what happens in tax.
800 would be a For AGI deduction. The 200 is a misc itemized deduction.
If a self employee has a business expense what happens with it?
It’s a for AGI deduction. With an employee it’s a lot more complicated. Next questions go over it.
Next questions are ONLY for employees. Not self employees.
Define Transportation?
Means going around within your local tax home (primary place of business)
If you live in sandy and have an office in SLC and then you visit clients from your work, what transportation expense can you deduct.
The mileage from Sandy to SLC is not considered a business expense deduction. When traveling to clients from your SLC office you can consider that a business expense deduction.
If you pay 2500 for your business transportation expense and your employer reimbursed you 2500, what happens with tax?
Nothing
If your reimbursed 2000, what happens?
For AGI deduction of 2000 and itemized deduction of 500.
If your reimbursed 3000, what happens.
Gi of 500
If more than 50% of the trip is spent on business, how much of the air faire is deductible?
100%
If you have business on Friday and business on Monday and then play around on Saturday and Sunday, what are Saturday and Sunday considered?
Considered business days because they’re are sandwhiched between two business days.
Travel days are considered business days even if the trip isn’t completely business if it’s over 50% business?
True
If your considered to have 6 business days on a trip, how much of your meals can be deductible?
Cost of Meals * 6/7 * 50%
What about for hotels, renting a car, transportation cabs?
Total cost * 6/7. Meal is the only one that can only be deducted 50%. Airfare is deductible 100% if trip is more than 50% business
Travel vs Transportation
Travel is away from your tax home over night (longer than the normal work day). Transportation is not. So even if you travel to St. George and come back in the same day it would still be considered travel because it’s more than 8 hours even though it wasn’t over night.
If SLC is your main location and your assigned temporarily to price utah for 5 months where is your primary location?
SLC because you’ll be there for less than a year. It’s considered temporary if your there less than a year
Moving expenses
For AGI Deduction. are deductible for moves in connection with the commencement
of work at a new principal place of work.19 Both employees and self-employed individuals
can deduct these expenses. To be eligible for a moving expense deduction,
a taxpayer must meet two basic tests: distance and time.
3 ways to deduct education expenses?
For AGI deduction
Personal itemized deduction
Tax Credit
If you pay tuition how much can you deduct?
You can deduct a For AGI deduction up to 4,000
OR you can deduct it as a tax credit through
American Opportunity Tax Credit or lifetime learning
3 types of IRA
Regular Deductible IRA
Non Deductible IRA
Roth IRA
In all 3 accounts how much can you contribute
5000
What can you deduct in all 3 IRA
Regular is 5000. The other 2 are 0 deductions
If your tax bracket is going to be really high when you retire what type of IRA would be best to invest in.
Roth IRA because it is tax free. REgular deductible IRA is ordinary income. non0deductible IRA is OI and Tax free
What does it mean if your an active participant?
It means you have a 401k or some other qualified plan.
