Individual Tax Quiz 3

Front 1

What does the American Opportunity Credit apply to?

Back 1

First 4 years of college or trade school.

Front 2

What does the American Opportunity Credit allow you to deduct?

Back 2

You can deduct tuition, fees, books, and a computer if it's given to you as part of your curriculum. IF IT IS REQUIRED.

Front 3

Lifetime learning Credit can deduct

Back 3

Up to 10,000 at 20% so max EVER is 2000. So if you spend 10,000 per year can only use it the first year.

Front 4

What can you deduct under lifetime learning credit?

Back 4

Can deduct TUITION not good on books, fees, or anything else.

Front 5

What does form 2106 deal with

Back 5

Employee business expenses

Front 6

Unreimbursed employee expenses?

Back 6

Expenses incurred that you HAVE to spend in order to complete your job Your company either doesn't reimburse you for ANYTHING or they reimburse you but your expenses exceed reimbursement.

Front 7

What must expenses be to be included?

Back 7

NORMAL to complete your job.

Front 8

What is the biggest unreimbursed employee expense?

Back 8

Auto

Front 9

For automobiles how can you do your expenses?

Back 9

Can do mileage or actual expenses.

Front 10

What is time to and from office considered?

Back 10

If REQUIRED to go to and from office on a daily basis, these are not business miles and are not business expenses. IF Required to come in for a meeting that is a business expense.

Front 11

If you use actual for your car what can you do?

Back 11

If actual you can deduct car repairs but you have to allocate. If you use the car for bus 80% and personal 20% can deduct 80% cost of repairs.

Front 12

If an employee is given a monthly allowance what happens?

Back 12

It is usually included in gross wages and is subject to social security tax. It's part of the wages the co is paying and as such it is gross income.

Front 13

What happens if you are reimbursed for expenses?

Back 13

If reimbursed, you get to deduct if necessary/normal part of your job. Away from home meals and lodging are deductible if you aren't reimbursed.

Front 14

Other business expense

Back 14

Can be a cell phone.

Front 15

Home office phone line

Back 15

CAN NEVER DEDUCT A LANDLINE. Unless it is a second line.

Front 16

Meals and entertainment deduction

Back 16

If necessary to impress the client, these are deductible. This is all deductible at 50% because IRS says we will pay for your client not for you.

Front 17

Unreimbursed employee expenses are subject to

Back 17

2% AGI. Can only deduct amount over 2% of AGI.

Front 18

Statutory

Back 18

Required, permitted, or enacted by statute.

Front 19

Statutory employees

Back 19

These are employees of the business called statutory because employees of the company but by tax law they are outside the bounds of the company in most cases they are business owners.but the law calls them statutory employees.

Front 20

Statutory employees are

Back 20

employees who under normal circumstances would be sole proprietors, but by statutory law, they become considered employees.

Front 21

why is it important to know if someone is a statutory employee?

Back 21

A statutory employee is literally allowed to file a schedule C which means 100% of business expenses are dedcutible. They are not subject to 2% limitation.

Front 22

Traveling city salesperson

Back 22

Independent agents home workers who work in their own homes on contract lease basis. Get to deduct 100% of your stuff. CAn also deduct your home office.

Front 23

Schedule C

Back 23

sole proprietorship.

Front 24

Sole proprietor

Back 24

One person who runs his business for the sole purpose of profits.

Front 25

Business code

Back 25

Must ALWAYS identify your business code so the IRS can use it for statistics.

Front 26

What basis are sole proprietors on?

Back 26

Cash basis

Front 27

Special tax treatment code

Back 27

They sometimes qualify for special stuff.

Front 28

Form 1099 Misc.

Back 28

If you pay someone over a certain amount right now set at 500. If you pay them more then you must file a 1099 misc.

Front 29

Line 7 non-employee compensation

Back 29

When you subcontract business out they become contract labor. If they earn over 500 must send them a 1099 saying paid non-employee compensation because the only way IRS can make sure they are paying ppl correctly.

Front 30

Schedule C line 1B

Back 30

Represents gross receipts from our business.

Front 31

Box 6 of schedule C

Back 31

Income directly related ot the business but not what you are in business to do. For example, interest income. Outside of what you are in business to do.

Front 32

Checking account for sole-proprietorship

Back 32

Want to make sure you have a separate checking account. Don't comingle personal and business. Keep accounts separate no matter how small.

Front 33

Tickets and fines

Back 33

NEVER deductible

Front 34

Professional fees

Back 34

accounting legal if they're for the business they are ALWAYS deductible for personal only time legal fees has to do with taxes. If it has to do with legal fees it is deductible.

Front 35

COGS

Back 35

If selling a finished product you MUST keep track of this. Are you buying stuff for the business and using it for personal use?

Front 36

Family health coverage

Back 36

Allows you to take a deduction for your personal and family health coverage. This flows into your 1040 adjustments line 9. This is a deduction for AGI. We will give you a deduction but you must pay social security on it.

Front 37

In home office

Back 37

If you are deducting must specify at home EXCLUSIVELY for business, nothing else. NOt allowed to have personal stuff in there or entire deduction is disallowed. CAn have photos and memorabelia. If you are suprise audited and they find personal use, then your current and previous year deductions are all disallowed.

Front 38

Can deduct anything related to home office at

Back 38

100%

Front 39

Indirect expense mortgage interest

Back 39

Relates to whole house but you can only deduct portion related to office. Same with repairs. IF you have 1000 sq ft home and 200 ft office can deduct 20% of expenses.

Front 40

Contract labor and children

Back 40

Can pay children 400 without having them claim social security. BUT MUST BE for doing work related to the business.

Front 41

Hobby

Back 41

This is something you do for fun that's entertaining. People try to have the IRS pay for their hobby. People who like to take pictures try to deduct nice cameras.

Front 42

2 keys to hobby/business

Back 42

1. Intent-do you intend it to be a business, do you do it full time.
2. You don't want profit if it's a hobby. Must turn profit for 3-5 years to be considered a business.

Front 43

IF not a business you are a hobby and you report income on

Back 43

line 21 other inome. Not subject to social security

Front 44

Where are expenses related to a hobby shown?

Back 44

Schedule A part of misc deduction subject to 2% AGI.