©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
ACTG 470 (Midterm 1-2) Exam Questions
With Correct Answers 100% Verified.
Business expenses for self-employed persons are _______________ for AGI -
Answer✔deductible
where are business expenses for self-employed persons reported? - Answer✔reported on
Schedule C of Form 1040
•Unreimbursed business expenses for employees are generally deductible from AGI as
miscellaneous itemized deductions
(dangerous audit area for IRS)
-^suspended through 2025
the only employee business expenses that are currently deductible are those that are
_______________________________ . - Answer✔reimbursed by an employer
-these expenses, once reimbursed, have no effect on an employee's taxable income
the following items provided to a worker establish an employee-employer relationship: -
Answer✔•Allowing participation in various workplace fringe benefits
•Furnishing tools or equipment and a place of work (ex: get a desk)
•Payments made based on time spent rather than task performed
•Providing support services, including the hiring of assistants to help do the work
•Training the worker to obtain needed job skills
provide an example of employee-employer relationship: furnishing tools or equipment -
Answer✔ex: a desk for you is provided
provide an example of employee-employer relationship: payments? - Answer✔payments made
based on time spent rather than task performed
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
would employers would prefer independent contractors or employees? - Answer✔independent
contractors
-no payroll taxes, health insurance, all benefits, vacation and sick time
An insurance premium is ... - Answer✔the amount you pay each month (or each year) to keep
your insurance policy active
example of this. Rentals electrical works for a building. Are the construction workers employees
or independent contractors - Answer✔they are the independent contractor because they are
not employees of the building owner.
premiums paid by employer for insurance coverage of employee, spouse, and dependents are
_________________ by the employer and ____________________ from the employee's
income - Answer✔deductible, excluded
most Uber drivers would b considered... - Answer✔independent contractors
payments for the permanent loss or the loss of the use of a member or function of the body or
the permanent disfigurement of the employee, the spouse, or a dependent are
_____________________ . [taxable/not taxable] - Answer✔not taxable
what do we do with amounts received for medical expenses that were deductible on a prior
return? - Answer✔amounts received for medical expenses that were deducted on a prior
return must be included in gross income
one way to provide a medical reimbursement plan for employees is as follows... - Answer✔the
employer purchases a medical insurance plan with a high deductible and then makes
contributions to the employee's Health Savings Account (HSA)
Health Savings Account (HSA) - Answer✔Tax-sheltered savings account similar to an IRA but
created primarily to pay for medical expenses.
employer's contribution to HSA and earnings on funds in the account are __________________
. - Answer✔excludible
•Contributions limited to 100 percent of deductible amount for individual or family coverage
monthly deductible amount is limited to one-twelfth of ______________ under a high-
deductible plan for self-only coverage (IF YOUR SINGLE) and one-twelfth of $7,750 for an
individual who has family coverage) - Answer✔Annual amounts:
$3,850, $7,750
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
•Withdrawals from HSA must be used to reimburse the employee for the medical expenses
paid by the employee that are not covered under the high-deductible plan
Meals are not taxable to the employee IF: - Answer✔Furnished by the employer
•On the employer's business premises
•For the convenience of the employer
Lodging is not taxable to the employee IF:
(think of hotel/motel) - Answer✔In case of lodging, the employee is required to accept the
lodging as a condition of employment
from 2018 to 2025, the employer may only deduct _______ percent of the cost of the meals
provided. after 2025, employers ______________ [may/may not] claim any deduction for these
meals - Answer✔50, may not
on the employer's business premises requirement, applicable to both meals and lodging, define
business premises as simply... - Answer✔"the place of employment of the employee"
convenience of the employer test is intended to focus on the ___________________________
for furnishing the meals and lodging rather than on the benefits received by the employee -
Answer✔employer's motivation
Required as a condition of employment test applies only to lodging... - Answer✔if the
employee's use of the housing would serve the convenience of the employer but the employee
is not required to use the housing, the exclusion is not available
-employers are 100% tax deductible
how do employers account for the first $50,000 of premiums on group life term insurance? -
Answer✔premiums on the first $50,000 of group term life insurance are excluded from gross
income
•For each $1,000 of coverage in excess of $50,000, the employee must include the amounts
calculated using the IRS tables (see page 11-9)
3|Page
ACTG 470 (Midterm 1-2) Exam Questions
With Correct Answers 100% Verified.
Business expenses for self-employed persons are _______________ for AGI -
Answer✔deductible
where are business expenses for self-employed persons reported? - Answer✔reported on
Schedule C of Form 1040
•Unreimbursed business expenses for employees are generally deductible from AGI as
miscellaneous itemized deductions
(dangerous audit area for IRS)
-^suspended through 2025
the only employee business expenses that are currently deductible are those that are
_______________________________ . - Answer✔reimbursed by an employer
-these expenses, once reimbursed, have no effect on an employee's taxable income
the following items provided to a worker establish an employee-employer relationship: -
Answer✔•Allowing participation in various workplace fringe benefits
•Furnishing tools or equipment and a place of work (ex: get a desk)
•Payments made based on time spent rather than task performed
•Providing support services, including the hiring of assistants to help do the work
•Training the worker to obtain needed job skills
provide an example of employee-employer relationship: furnishing tools or equipment -
Answer✔ex: a desk for you is provided
provide an example of employee-employer relationship: payments? - Answer✔payments made
based on time spent rather than task performed
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
would employers would prefer independent contractors or employees? - Answer✔independent
contractors
-no payroll taxes, health insurance, all benefits, vacation and sick time
An insurance premium is ... - Answer✔the amount you pay each month (or each year) to keep
your insurance policy active
example of this. Rentals electrical works for a building. Are the construction workers employees
or independent contractors - Answer✔they are the independent contractor because they are
not employees of the building owner.
premiums paid by employer for insurance coverage of employee, spouse, and dependents are
_________________ by the employer and ____________________ from the employee's
income - Answer✔deductible, excluded
most Uber drivers would b considered... - Answer✔independent contractors
payments for the permanent loss or the loss of the use of a member or function of the body or
the permanent disfigurement of the employee, the spouse, or a dependent are
_____________________ . [taxable/not taxable] - Answer✔not taxable
what do we do with amounts received for medical expenses that were deductible on a prior
return? - Answer✔amounts received for medical expenses that were deducted on a prior
return must be included in gross income
one way to provide a medical reimbursement plan for employees is as follows... - Answer✔the
employer purchases a medical insurance plan with a high deductible and then makes
contributions to the employee's Health Savings Account (HSA)
Health Savings Account (HSA) - Answer✔Tax-sheltered savings account similar to an IRA but
created primarily to pay for medical expenses.
employer's contribution to HSA and earnings on funds in the account are __________________
. - Answer✔excludible
•Contributions limited to 100 percent of deductible amount for individual or family coverage
monthly deductible amount is limited to one-twelfth of ______________ under a high-
deductible plan for self-only coverage (IF YOUR SINGLE) and one-twelfth of $7,750 for an
individual who has family coverage) - Answer✔Annual amounts:
$3,850, $7,750
2|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED 12:43 PM.
•Withdrawals from HSA must be used to reimburse the employee for the medical expenses
paid by the employee that are not covered under the high-deductible plan
Meals are not taxable to the employee IF: - Answer✔Furnished by the employer
•On the employer's business premises
•For the convenience of the employer
Lodging is not taxable to the employee IF:
(think of hotel/motel) - Answer✔In case of lodging, the employee is required to accept the
lodging as a condition of employment
from 2018 to 2025, the employer may only deduct _______ percent of the cost of the meals
provided. after 2025, employers ______________ [may/may not] claim any deduction for these
meals - Answer✔50, may not
on the employer's business premises requirement, applicable to both meals and lodging, define
business premises as simply... - Answer✔"the place of employment of the employee"
convenience of the employer test is intended to focus on the ___________________________
for furnishing the meals and lodging rather than on the benefits received by the employee -
Answer✔employer's motivation
Required as a condition of employment test applies only to lodging... - Answer✔if the
employee's use of the housing would serve the convenience of the employer but the employee
is not required to use the housing, the exclusion is not available
-employers are 100% tax deductible
how do employers account for the first $50,000 of premiums on group life term insurance? -
Answer✔premiums on the first $50,000 of group term life insurance are excluded from gross
income
•For each $1,000 of coverage in excess of $50,000, the employee must include the amounts
calculated using the IRS tables (see page 11-9)
3|Page
