Individual Income Taxes
43rd Edition
ISBN: 9780357109731
Author: Hoffman
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 4, Problem 1RP
To determine
Write a letter to T Funeral Home Incorporation, suggesting a way to resolve the issue.
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Issue: Under the Federal Insurance Contributions Act (FICA) every person is an employer if the person employs one or more individuals for the performance of services in the United States. The Internal Revenue Service (IRS) test for an employer/employee relationship is if a business tells, or has a right to tell a worker how, when, and where to work then the worker is an employee, and if they meet these tests, must withhold and pay FICA taxes on those employees’ wages. During your life, you may have noticed many employees performing work for a company without paying FICA taxes (i.e. being paid “under the table”).
Questions to be Answered: 1) What are the concerns from a business perspective on this legally questionable practice?
2) What are the concerns from a social perspective on this legally questionable practice?
With respect to spousal and child support, which of the following statements is
NOT correct.
A) Any amounts that are not specifically identified in the agreement as
spousal support will be considered child support.
B) An amount qualifies as a support payment only if it is payable or receivable
on a periodic basis.
C) The recipient of child support payments will include this amount in income.
D) Deductible support payments reduce the taxpayer's Earned Income for
RRSP purposes.
Rent payments that are processed through a third-party net
work after March 11, 2021, should be reported to the
taxpayer on:
Either form 1099K, payment card and third-party net work
transactions, or form 1099 miscellaneous, miscellaneous
income
Form 1099K, payments card and third-party network
transactions.
Form 1099 NEC, non-employment compensation
Form 1099 miscellaneous, miscellaneous income
Chapter 4 Solutions
Individual Income Taxes
Ch. 4 - According to the Supreme Court, would it be good...Ch. 4 - Prob. 2DQCh. 4 - Prob. 3DQCh. 4 - Ben lost his job when his employer moved its...Ch. 4 - Howard buys wrecked cars and stores them on his...Ch. 4 - On December 29, 2019, an employee received a 5,000...Ch. 4 - Prob. 7DQCh. 4 - A Series EE U.S. government savings bond accrues...Ch. 4 - The taxpayer performs services with payment due...Ch. 4 - Wade paid 7,000 for an automobile that needed...
Ch. 4 - Prob. 11DQCh. 4 - Prob. 12DQCh. 4 - A divorce agreement entered into in 2017 requires...Ch. 4 - Prob. 14DQCh. 4 - Patrick and Eva are planning to divorce in 2019....Ch. 4 - Prob. 16DQCh. 4 - Prob. 17DQCh. 4 - Prob. 18DQCh. 4 - Prob. 19DQCh. 4 - Prob. 20DQCh. 4 - On January 1, 2019, Kunto, a cash basis taxpayer,...Ch. 4 - Bigham Corporation, an accrual basis calendar year...Ch. 4 - LO.3 Simba and Zola are married but file separate...Ch. 4 - Casper and Cecile divorced in 2018. As part of the...Ch. 4 - LO.4 Elizabeth made the following interest-free...Ch. 4 - Prob. 26CECh. 4 - Prob. 27CECh. 4 - Prob. 28PCh. 4 - Prob. 29PCh. 4 - Determine the taxpayers gross income for tax...Ch. 4 - Prob. 31PCh. 4 - Prob. 32PCh. 4 - Prob. 33PCh. 4 - Your client is a partnership, ARP Associates,...Ch. 4 - Trip Garage, Inc. (459 Ellis Avenue, Harrisburg,...Ch. 4 - Prob. 36PCh. 4 - Marlene, a cash basis taxpayer, invests in Series...Ch. 4 - Drake Appliance Company, an accrual basis...Ch. 4 - Freda is a cash basis taxpayer. In 2019, she...Ch. 4 - Prob. 40PCh. 4 - Prob. 41PCh. 4 - Troy, a cash basis taxpayer, is employed by Eagle...Ch. 4 - Prob. 43PCh. 4 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Nell and Kirby are in the process of negotiating...Ch. 4 - Alicia and Rafel are in the process of negotiating...Ch. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - For each of the following, determine the amount...Ch. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Linda and Don are married and file a joint return....Ch. 4 - Charles E. Bennett, age 64, will retire next year...Ch. 4 - Donna does not think she has an income tax problem...Ch. 4 - Prob. 1RPCh. 4 - Prob. 2RPCh. 4 - Prob. 3RPCh. 4 - Prob. 1CPACh. 4 - Fred and Wilma were divorced in year 1 (before...Ch. 4 - Bill and Jane Jones were divorced on January 1,...Ch. 4 - Jake pays the following amounts to his former...Ch. 4 - Mary purchased an annuity that pays her 500 per...
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- The taxpayer performs services with payment due from the customer within 30 days. All customers pay within the time limit. What would be the benefit to the taxpayer using the cash method of accounting rather than the accrual method?arrow_forwardTrue or False Points paid in connection with the purchase of a second residence may be deducted in the year paid. Answer: Points paid to refinance a mortgage on a principal residence are fully deductible in the year paid. Answer: If an employee incurs travel expenditures and is fully reimbursed by the employer, neither the reimbursement nor the deduction is reported on the employeeʹs tax return if reporting is pursuant to an accountable plan. Answer: answer all 3arrow_forwardAlexa owns a condominium near Cocoa Beach in Florida. In 2023, she incurs the following expenses in connection with her condo: Insurance $ 2, 050 Mortgage interest 7, 450 Property taxes 4, 200 Repairs & maintenance 650 Utilities 4, 650 Depreciation 23, 700 During the year, Alexa rented out the condo for 137 days. Alexa's AGI from all sources other than the rental property is $200,000. Unless otherwise specified, Alexa has no sources of passive income. Assume that in addition to renting the condo for 137 days, Alexa uses the condo for 8 days of personal use. Also assume that Alexa receives $47, 750 of gross rental receipts, her itemized deductions exceed the standard deduction before considering expenses associated with the condo, and her itemized deduction for non-home business taxes is less than $ 10,000 by more than the real property taxes allocated to rental use of the home. Answer thearrow_forward
- Determine whether the taxpayer in each of the following situations is in constructive receipt of income. If not, explain when the income will be constructively received. Regan is an employee of BIF Manufacturing, earning $3,000 per month. She purchases merchandise from BIF costing $2,000 in January of the current year. To pay for the merchandise, BIF agrees to deduct $75 per month from her pay, reducing it to $2,925 per month before other withholdings. Answer: see the attached file. My question: I don't understand why $75 is the constructive receipt of income. Regan is not receiving anything and it is not available to him. Also, why would Regan include $3,000 include in gross income? isn't it 3000-75?arrow_forwardDrake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effect of each of the following transac-tions on the company’s 2019 gross income assuming that the company uses any available options to defer its taxes.a. In December 2018, the company received a $1,200 advance payment from a customer for an appliance that Drake special ordered from the manufacturer. The appliance did not arrive from the manufacturer until January 2019, and Drake immediately delivered it to the customer. The sale was reported in 2019 for financial accounting purposes.b. In October 2019, the company sold a 6-month service contract for $240. The company also sold a 36-month service contract for $1,260 in July 2019.c. On December 31, 2019, the company sold an appliance for $1,200. The company received $500 cash and a note from the customer for $700 and $260interest, to be paid at the rate of $40 a month for 24 months. Because of the customer’s poor credit…arrow_forwardWhich of the following should be included in an individual taxpayer's federal gross income? Child support payments received in accordance with a pre-2019 divorce decree. No changes have been made to the agreement. Disaster relief payments. Jury duty pay. Welfare benefits.arrow_forward
- Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2022 in each of the following independent cases: Required: A taxpayer completes $300 of accounting services in December 2022 for a client who pays for the accounting work in January 2023. A taxpayer is in the business of renting computers on a short-term basis. On December 1, 2022, she rents a computer for a $100 rental fee and receives a $250 deposit. The customer returns the computer and is refunded the deposit on December 20, 2022. Same facts as (b) except that the computer is returned on January 5, 2023. On December 18, 2022, a landlord rents an apartment for $385 per month and collects the first and last months' rent up front. It is customary that tenants apply the security deposit to their last month's rent upon moving out. An accountant agrees to perform $315 of tax services for an auto mechanic who has agreed to perform repairs on the car of the accountant’s wife. The mechanic repairs…arrow_forwardT uses frequent flyer miles to take his family on a vacation. T received the miles duringbusiness travel paid for by his employer. The normal airfare for his vacation wouldhave cost $7,000.a. T must realize and recognize $7,000 as income.b. Although T has realized income, he will not be required to recognize it becausethe IRS has chosen, as a matter of administrative convenience, not to requiretaxpayers to recognize the value of frequent flyer tickets earned duringemployer-paid travel.c. Had T earned the frequent flyer miles during travel he had paid for himself, theissue of income realization and recognition would not arise.d. Both (a) and (c) are correct.e. Both (b) and (c) are correct. T buys a parcel of real estate for $100,000, which he finances by giving the seller a nonrecoursemortgage for the full purchase price. The debt is due in one balloon payment inYear 5. When the debt becomes due in Year 5, T decides to give the property back to theseller in satisfaction of the debt…arrow_forwardExpenditure incurred by an employee in performing their employment may be deductible under s 8-1. Which of the following is correct (ignoring any substantiation requirements)? Select one:Employees are generally able to claim all employment-related expenses as deductions under s 8-1Travel to and from work is tax deductible for the employee under s 8-1, if the car is provided by an employer as part of a salary package arrangement.Laundry costs are deductible for protective clothing when it is related to income producing activities.None of theseAll clothing costs are normally tax deductible for employees under s 8-1.arrow_forward
- The Federal Insurance Contributions Acta. requires employer FICA liabilities to be recorded upon issuance of an employee's paycheck.b. prohibits employees from paying FICA taxes before their paycheck is received.c. requires the employer to deposit FICA taxes immediately upon issuance of the employee's paycheck.d. requires deduction from employee paychecks to be made; these amounts are recorded as liabilities when withheld.arrow_forward1. Form 1096 is completed by the employer and submitted to the IRS for what purpose? Answer: A. To report total annual earnings for a single independent contractor B. To report all overtime paid to all independent contractors C. To report total compensation paid to all independent contractors during the year D. To report all expenses incurred by and reimbursed to an independent contractor 2. Which statement regarding SUTA taxes is accurate? Answer: A. The SUTA tax rate is the same as the FUTA tax rate in all fifty states. B. The SUTA tax rate is reduced by a 5.4% credit for most states. C. There is no threshold over which SUTA taxes are not levied. D. In most states, SUTA taxes are paid solely by the employer and never by the employee. 3. FUTA tax payments must be made at the end of a quarter when the total tax…arrow_forwardAn employer may withhold portions of an employee's total earnings for a.state and county sales taxes. b.state unemployment taxes. c.local property taxes. d.federal unemployment taxes. e.charitable contributions.arrow_forward
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