Chapter6_2of4 - 1 2 Reimbursement of Employee Expenses...

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3 Reimbursement of Employee Expenses Misc Itemized Deduction Deduction for AGI Income (Unreimbursed) Reimbursement Expenses for travel (100) ----0---- (1,000) (900) (1,000) $1,000 $1,000 $1,000 200 (100) Wash (1,200) (900) (1,000) $1,000 $1,000 $1,000
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4 Employer Gifts § 102(c) Employ er cannot make gifts Compensation unless… Excluded only if a de minimis or other fringe benefit or qualified award Gifts to clients, customers, etc. Individuals may deduct gifts to customers, clients, etc. up to $25 (non-cash gifts only)
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5 BROWNSVILLE, Texas (AP) — For nearly seven years Melina Salazar did her best to put on a smile and tend to the every need of her most loyal and cantankerous customer. She made sure his food was as hot as he wanted, even if it meant he burned his mouth. And she smiled through his demands and curses. The 89-year-old "Buck" Swords obviously appreciated it, leaving the waitress $50,000 and a 2000 Buick when he died. "I still can't believe it," the Luby's cafeteria employee told Harlingen television station KGBT-TV. “Actually, I thought he was kind of mean,” she said. Swords, a World War II veteran, died in July. But Salazar learned just a few days before Christmas that he had left her the money and car.
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6 Employer Achievement Awards [§74(c)] Awards are compensation except employment achievement awards: Awards for length of service Safety achievement Requirements Must be tangible personal property not cash Meaningful presentation 5 year rule for length of service awards No safety award for management, professional, clerical Treatment Employer deducts Employee excludes up to $400 annually; Awards under a qualified award plan up to $1,600
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8 On January 31, 1940, the first monthly retirement check from Social Security was issued to Ida May Fuller of Ludlow, Vermont in the amount of $22.54. She lived to be 100!
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9 Social Security Benefits §86 General rule: Social security benefits are nontaxable State treatment Nontaxable Social security statement: Medicare B payments deductible as medical expense Exception for high income earners Up to 85% of social security is taxable
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10 Social Security Benefits §86 Adjusted gross income + Tax-exempt income + Other adjustments + 1/2 of social security benefits Modified AGI – THRESHOLD > $0 = TAXABLE Married Married Unmarried Jointly Separately Taxpayers MAGI threshold #1 $32,000 $ 0 $25,000 MAGI threshold #2 44,000 0 34,000
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11 Social Security Benefits §86 Married (single amounts in parentheses) MAGI Over But not over Amount taxed: 32,000 44,000 Step 1: Lesser of (25,000) (34,000) (1) 50% x benefits or (2) 50% x (MAGI - $32,000 ($25,000) $44,000 Step 2: Lesser of (34,000) (1) Step 1 amount not > $6,000 ($4,500) + 85% x (MAGI - $44,000 ($34,000)) (2) 85% of benefits
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12 Problem 6-27 STEP 1 AMOUNT: M.A.G.I. < 34,000 4,300 50% (M.A.G.I. – threshold) 50% x (33,600 – 25,000 = 8,600) 3,600 50% of benefits STEP 2 AMOUNT: M.A.G.I. < 34,000 Taxable amount: lesser of 33,600 M.A.G.I. ( if > $25,000, taxable) 3,600 ½ Social Security 7,200 8,000 Tax Exempt 22,000 A.G.I.
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This note was uploaded on 03/23/2010 for the course ACCT 402 taught by Professor Toleno during the Spring '10 term at Providence College.

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Chapter6_2of4 - 1 2 Reimbursement of Employee Expenses...

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