Ind. IO Chap. 9 - 2008

Ind. IO Chap. 9 - 2008 - Chapter I:9 Employee Expenses and...

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Chapter I:9 Employee Expenses and Deferred Compensation Learning Objectives After studying this chapter, the student should be able to 1. Determine the proper classification and deductibility of travel and transportation expenses. 2. Determine the proper deductible amount for entertainment expenses under the 50% disallowance rule. 3. Identify deductible moving expenses and determine the amount and year of deductibility. 4. Describe the requirements for deducting education expenses. 5. Determine whether the expenses of an office in home meets the requirements for deductibility and apply the gross income limitations. 6. Discuss the tax treatment and requirements for various deferred compensation arrangements. Areas of Greater Significance The areas of travel, transportation, and deferred compensation will affect the vast majority of employees and employers. Students should understand the rules and planning opportunities in these areas. Areas of Lesser Significance In the interest of time, the instructor may determine that the following areas are best covered by student reading, rather than class discussion: 1. Deferred Compensation (Selected Topics) a. Qualification requirements for a qualified plan. b. Nonqualified plans. c. Plans for self-employed individuals. I:IO9-1
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2. Tax planning considerations (Selected Topics) a. Providing nontaxable compensation to employees b. Rollover of traditional IRA to Roth IRA. Problem Areas for Students The following areas may prove especially difficult for students: 1. The rules regarding deductibility of foreign travel. 2. Whether an educational expense qualifies for a deduction. 3. Qualification requirements for a qualified retirement plan. Highlights of Recent Tax Law Changes The following items of tax law have changed since the 2007 edition of this chapter: 1. The limits for FICA and self-employment taxes have increased due to indexing for inflation (See page I:9-3). 2. The standard automobile mileage rate for business travel increased to 48.5 cents per mile effective January 1, 2007. 3. The standard mileage rate for moving expenses increased to 20 cents per mile. 4. The dollar and percentage amounts of certain limitations on employer contributions to qualified plans have been increased. 5. The traditional IRA deduction phase-out range has increased. 6. Certain dollar limitations for Health Savings Accounts have increased. See page I:9-42. Teaching Tips 1. Concentrate on the appropriate place to deduct employee expenses (i.e., for AGI, from AGI, subject to 2% limitation or not) as this is confusing for many students. 2. You may wish to give only a broad overview of deferred compensation in a first course in taxation, as the concepts are very complex. However, a full discussion of IRAs is appropriate due to the frequent occurrence of this topic in the real world.
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Ind. IO Chap. 9 - 2008 - Chapter I:9 Employee Expenses and...

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