AFTR AFTR Business Tax Basics 1

Question 1

A sole proprietor reports business income and expenses on which schedule attached to Form 1040?

Accepted Answer

Schedule C

Answer

Schedule C, Profit or Loss from Business, is used by sole proprietors to report gross income, deductible business expenses, and net profit or loss.

Question 2

Under the cash method of accounting, a business recognizes income when:

Accepted Answer

Payment is constructively or actually received

Answer

Under the cash method, income is recognized when payment is actually or constructively received, and expenses are deducted when actually paid.

Question 3

Section 179 expensing allows a business to:

Accepted Answer

Deduct the full cost of qualifying business property in the year it is placed in service

Answer

Section 179 lets businesses immediately expense (deduct) the cost of qualifying depreciable business property placed in service during the tax year, up to the annual dollar limit.

Question 4

What is the primary purpose of Form 1099-NEC?

Accepted Answer

To report nonemployee compensation paid of $600 or more to independent contractors

Answer

Form 1099-NEC is used to report nonemployee compensation of $600 or more paid to individuals who are not employees, such as independent contractors.

Question 5

Bonus depreciation under current law generally allows businesses to deduct what percentage of the cost of qualifying new or used property in the first year?

Accepted Answer

100%

Answer

The Tax Cuts and Jobs Act allowed 100% bonus depreciation for qualifying property placed in service after September 27, 2017, though this percentage phases down after 2022.

AFTR - Annual Federal Tax Refresher Practice Test

AFTR - Annual Federal Tax Refresher Practice Test

AFTR AFTR Business Tax Basics 1