David, a newly licensed CPA, opened an office in 2019 as a sole practitioner engaged in the
Question:
David, a newly licensed CPA, opened an office in 2019 as a sole practitioner engaged in the practice of public accountancy. David reports on the cash basis and has adopted the calendar year for income tax reporting purposes. David has many items for both business and personal matters that can be included in income and as deductions.
1. Fee for the biennial permit to practice as a CPA
2. Alimony paid to his former spouse, pursuant to a divorce finalized in 2015, who reports the alimony as taxable income
3. Personal medical expenses charged on a credit card in December 2019 but not paid until January 2020
4. Gambling losses
5. Insurance premiums paid on David’s life
6. Penalty paid to bank on early withdrawal of savings
7. Interest income on mortgage loan receivable
8. Write-offs of uncollectible accounts receivable from accounting practice
9. Foreign income tax withheld at source on dividend received
10. Employer’s portion of self-employment tax paid with 2019 return filed in April 2020
Options:
Not taxable
Deductible on Schedule 1 of Form 1040 to arrive at adjusted gross income
Deductible in full in Schedule A -- Itemized Deductions, 100% deductible
Deductible in Schedule A -- subject to threshold of 10% of adjusted gross income
Deductible in Schedule A -- limited to gambling winnings
Deductible in Schedule B -- Interest and Dividend Income
Deductible in Schedule C -- Profit or Loss from Business
Deductible in Schedule D -- Capital Gains or Losses
Deductible in Schedule E -- Supplemental Income and Loss
Deductible in Form 4797 -- Sales of Business Property
Claimed in Form 1116 -- Foreign Tax Credit, or in Schedule A -- Itemized Deductions
Based on gross self-employment income
Based on net earnings from self-employment
Not deductible
Taxable as interest income in Schedule B -- Interest and Dividend Income
Taxable as other income on Schedule 1 of Form 1040
Employment Law for Business
ISBN: 978-0077347383
6th Edition
Authors: Dawn Bennett Alexander, Laura p Hartman