Chapter 9 In Class Notes

Question 1

Define a self employed person?

Answer 1

Files a 1099. Pays the whole 15.3% for Social Security on their net income.

Question 2

Define employee?

Answer 2

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

Question 3

If an employee pays 1,000 in travel expense and then the employer reimburses the employee the full amount, what happens in taxes?

Answer 3

Nothing. no deductions. nothing taxed

Question 4

If the reimbursement is 12000 what happens with tax.

Answer 4

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.

Question 5

If the reimbursement is 800 what happens in tax.

Answer 5

800 would be a For AGI deduction. The 200 is a misc itemized deduction.

Question 6

If a self employee has a business expense what happens with it?

Answer 6

It’s a for AGI deduction. With an employee it’s a lot more complicated. Next questions go over it.

Question 7

Next questions are ONLY for employees. Not self employees.

Define Transportation?

Answer 7

Means going around within your local tax home (primary place of business)

Question 8

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.

Answer 8

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.

Question 9

If you pay 2500 for your business transportation expense and your employer reimbursed you 2500, what happens with tax?

Answer 9

Nothing

Question 10

If your reimbursed 2000, what happens?

Answer 10

For AGI deduction of 2000 and itemized deduction of 500.

Question 11

If your reimbursed 3000, what happens.

Answer 11

Gi of 500

Question 12

If more than 50% of the trip is spent on business, how much of the air faire is deductible?

Answer 12

100%

Question 13

If you have business on Friday and business on Monday and then play around on Saturday and Sunday, what are Saturday and Sunday considered?

Answer 13

Considered business days because they’re are sandwhiched between two business days.

Question 14

Travel days are considered business days even if the trip isn’t completely business if it’s over 50% business?

Answer 14

True

Question 15

If your considered to have 6 business days on a trip, how much of your meals can be deductible?

Answer 15

Cost of Meals * 6/7 * 50%

Question 16

What about for hotels, renting a car, transportation cabs?

Answer 16

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

Question 17

Travel vs Transportation

Answer 17

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.

Question 18

If SLC is your main location and your assigned temporarily to price utah for 5 months where is your primary location?

Answer 18

SLC because you’ll be there for less than a year. It’s considered temporary if your there less than a year

Question 19

Moving expenses

Answer 19

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.

Question 20

3 ways to deduct education expenses?

Answer 20

For AGI deduction
Personal itemized deduction
Tax Credit

Question 21

If you pay tuition how much can you deduct?

Answer 21

You can deduct a For AGI deduction up to 4,000

Question 22

OR you can deduct it as a tax credit through

Answer 22

American Opportunity Tax Credit or lifetime learning

Question 23

3 types of IRA

Answer 23

Regular Deductible IRA
Non Deductible IRA
Roth IRA

Question 24

In all 3 accounts how much can you contribute

Answer 24

5000

Question 25

What can you deduct in all 3 IRA

Answer 25

Regular is 5000. The other 2 are 0 deductions

Question 26

If your tax bracket is going to be really high when you retire what type of IRA would be best to invest in.

Answer 26

Roth IRA because it is tax free. REgular deductible IRA is ordinary income. non0deductible IRA is OI and Tax free

Question 27

What does it mean if your an active participant?

Answer 27

It means you have a 401k or some other qualified plan.