Question 1

Joyce, age 40, and Sam, age 42, who have been married for seven years, are both active participants in qualified retirement plans. Their total AGI for 2018 is $130,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?

Accepted Answer

Since both Joyce and Sam are active participants in qualified retirement plans and their AGI exceeds the phase-out limit for deductible IRA contributions for 2018, they are not eligible for any deductible contributions to traditional IRAs.

Question 2

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue has unreimbursed expenses.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 3

Which is not an advantage of a § 401(k) plan over a traditional IRA?

Accepted Answer

The answer of Which is not an advantage of a...

Question 4

Dana, age 31 and unmarried, is an active participant in a qualified retirement plan. Her AGI is $124,000. What amount, if any, may Dana contribute to a Roth IRA in 2018?

Accepted Answer

The answer of Dana, age 31 and unmarried, is an...

Question 5

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan. His modified AGI is $55,000 in 2018. The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Accepted Answer

Since Sammy is not an active participant in a qualified retirement plan, he can make a deductible contribution to a traditional IRA regardless of his income level. The maximum contribution for 2018 is $5,500 for individuals under the age of 50. Therefore, Sammy can deduct up to $5,500 from his taxable income for a contribution to a traditional IRA.

Question 6

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years. The account is now worth $376,000. How much of these funds can Frank withdraw tax-free?

Accepted Answer

In a Roth IRA, contributions are made with after-tax dollars, and both contributions and earnings can be withdrawn tax-free after age 59½, provided the account has been open for at least 5 years. Since Frank is over 59½ and the account has been open for 38 years, he can withdraw the entire $376,000 tax-free.

Question 7

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $199,000, consisting of $75,000 in contributions plus $124,000 in accumulated earnings. How much can Mary withdraw tax-free?

Accepted Answer

Mary can withdraw the entire $199,000 tax-free because she is over 59½ and has held the Roth IRA for more than 5 years, meeting the requirements for tax-free qualified distributions.

Question 8

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue does not work for other parties.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 9

Paul is employed as an auditor by a CPA firm. On most days, he commutes by auto from his home to the office.
During one month, however, he has an extensive audit assignment closer to home. For this engagement, Paul drives directly from home to the client's premises and back. Mileage information is summarized below:
Home to office 12 miles Office to audit client 15 miles Audit client to home 10 miles
If Paul spends 20 days on the audit and provides an adequate accounting to his employer, what is his reimburseable mileage?

Accepted Answer

The answer of Paul is employed as an auditor by...

Question 10

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-The services are performed at Sue's premises.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 11

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue was trained by Lynn.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 12

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue files a Schedule SE with her Form 1040.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 13

Merrill is a participant in a SIMPLE § 401(k) plan, and he elects to contribute 4% of his $40,000 compensation to the account, while his employer contributes 3%. What amount will vest immediately, if any?

Accepted Answer

In a SIMPLE § 401(k) plan, both employee and employer contributions are immediately 100% vested. Merrill's contribution is 4% of $40,000, which is $1,600, and the employer's contribution is 3% of $40,000, which is $1,200. Therefore, the total amount that vests immediately is $1,600 + $1,200 = $2,800.

Question 14

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue uses her own helpers.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 15

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue uses her own tools.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 16

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k)] may contribute up to what amount in 2018?

Accepted Answer

The maximum contribution limit for participants in a cash or deferred arrangement plan [§ 401(k)] is $18,500 in 2018.

Question 17

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue does not file a Schedule SE with her Form 1040.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 18

Jana has $225,000 of earned income in 2018. Calculate the amount she can contribute to a SEP.

Accepted Answer

The maximum contribution to a SEP is 25% of net earnings or $55,000 for 2018, whichever is less. Since Jana's earned income is $225,000, the maximum she can contribute is $55,000. Therefore, the correct answer is C.

Question 19

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Lynn determines when the services are to be performed.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Question 20

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement.
a. Indicates employee status.
b. Indicates independent contractor status.
-Sue charges by the hour for her work.

Accepted Answer

The answer of Sue performs services for Lynn. Regarding this...

Quiz 9: Deductions: Employee and Self-Employed-Related Expenses

Joyce, age 40, and Sam, age 42, who have been married for seven years, are both active participants in qualified retirement plans. Their total AGI for 2018 is $130,000. Each is employed and earns a salary of $65,000. What are their combined deductible contributions to traditional IRAs?

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue has unreimbursed expenses.

Which is not an advantage of a § 401(k) plan over a traditional IRA?

Dana, age 31 and unmarried, is an active participant in a qualified retirement plan. Her AGI is $124,000. What amount, if any, may Dana contribute to a Roth IRA in 2018?

Sammy, age 31, is unmarried and is not an active participant in a qualified retirement plan. His modified AGI is $55,000 in 2018. The maximum amount that Sammy can deduct for a contribution to a traditional IRA is:

Frank established a Roth IRA at age 25 and contributed a total of $131,244 to it over 38 years. The account is now worth $376,000. How much of these funds can Frank withdraw tax-free?

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $199,000, consisting of $75,000 in contributions plus $124,000 in accumulated earnings. How much can Mary withdraw tax-free?

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue does not work for other parties.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -The services are performed at Sue's premises.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue was trained by Lynn.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue files a Schedule SE with her Form 1040.

Merrill is a participant in a SIMPLE § 401(k) plan, and he elects to contribute 4% of his $40,000 compensation to the account, while his employer contributes 3%. What amount will vest immediately, if any?

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue uses her own helpers.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue uses her own tools.

A participant, who is age 38, in a cash or deferred arrangement plan [§ 401(k) ] may contribute up to what amount in 2018?

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue does not file a Schedule SE with her Form 1040.

Jana has $225,000 of earned income in 2018. Calculate the amount she can contribute to a SEP.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Lynn determines when the services are to be performed.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. a. Indicates employee status. b. Indicates independent contractor status. -Sue charges by the hour for her work.