AC256: Federal Taxation Seminar: Unit 9 April 29, 2011 Emil Koren, CPA, MBA

Welcome Introduction Read Chapter 9 View the PowerPoint Chapter 89Post to this weeks discussion questions – Original post by Saturday and two follow up posts – all on three separate days Finish this weeks assignment Finish this weeks Web-Field trip Complete the Quiz

Introduction Welcome to Unit 9 of AC256 We will look at a summary of Chapter 9 Special note: this will be the last Seminar for this term

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Employee Expenses Travel Transportation Moving Entertainment Education Office in Home

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Travel Expenses In pursuit of trade or business or related to taxpayer’s employment Includes: while away from home – Transportation – Lodging – Meals – Other reasonable and necessary Limitations: Foreign travel, Education, Luxury water travel

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Transportation Expense Local transportation Trade or Business: for AGI Production of rental or royalty income: for AGI Reimbursed employee Transportation: for AGI Unreimbursed employee Transportation: from AGI, subject to 2% floor Commuting expense: not deductible, – Except for going to second job from first job

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Entertainment Expenses: subject to 50% limit Must be either directly related or associated to conduct of business Substantiation Requirement Business meals: must meet the two requirements above Entertainment facilities and club dues: NOT deductible Business gifts: Ceiling of $25 per donee

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Reimbursed Employee Business Expenses Accountable Plan – Substantiation – Return of excess reimbursement Unaccountable Plan – Reimbursements included in gross income – Deductible from AGI Per Diem Allowances: Set by IRS for Meals and Lodging ( in lieu of actual expenses)

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Moving Expenses Distance requirement – At least 50 miles further from old residence than old residence from old employment Time requirement – Employed 39 weeks during 12 months after move Non-deductible – House-hunting trips – Temporary living expenses

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Education Expenses Expenditure incurred to maintain or improve skills required in employment Expenditure incurred to meet requirements imposed by law or retention of employment Not Deductible – Meet minimum educational requirements – Qualification for new trade or business

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Office in Home Expenses Office s principle place of business Used to meet or deal with customers Used exclusively and regularly in connection of business

Chapter 9 EMPLOYEE EXPENSES AND DEFERRED COMPENSATION Deferred Compensation Qualified pension and profit sharing plans – Not taxed on contributions (401(k)) Nonqualified deferred compensation pans – Unfunded promise to pay in future Self-employed retirement plans and IRA’s – Keogh Plan (self-employed) – Traditional IRA: Deductible ($5,000 per year)or non-deductible (Exceeds AGI limits)contributions – Roth IRA: Nondeductible but non taxable

Questions ?