ABA Tax Preparation & Compliance 2

Question 1

A self-employed individual earns $90,000 in net self-employment income. What is the deductible portion of self-employment tax on Form 1040?

Accepted Answer

One-half of the calculated SE tax

Answer

Self-employed individuals may deduct one-half of their self-employment tax as an above-the-line deduction on Form 1040.

Question 2

Which form is used to report wages, tips, and other compensation paid to employees and the taxes withheld?

Accepted Answer

Form W-2

Answer

Form W-2 (Wage and Tax Statement) is issued by employers to report employee wages and withholdings to both employees and the IRS.

Question 3

An accrual-basis taxpayer receives payment in December for services to be performed in February of the next year. When must the income generally be recognized?

Accepted Answer

December, when cash is received

Answer

Under the claim of right doctrine, income received without restriction must be reported in the year received, even for accrual-basis taxpayers.

Question 4

Which of the following is an 'above-the-line' deduction for an individual taxpayer?

Accepted Answer

Student loan interest

Answer

Student loan interest (up to $2,500) is an above-the-line deduction, reducing AGI without requiring itemization.

Question 5

A married couple filing jointly has AGI of $130,000. What is the maximum annual IRA contribution limit per person for 2024?

Accepted Answer

$7,000

Answer

For 2024, the IRA contribution limit is $7,000 per person (or $8,000 for those age 50+), subject to income phase-outs for deductibility.

(ABA) Accredited Business Accountant Practice Test

(ABA) Accredited Business Accountant Practice Test

ABA Tax Preparation & Compliance 2