Tax Preparation Self-Employment and Business Taxes 3

Question 1

The Qualified Business Income (QBI) deduction under Section 199A allows eligible self-employed taxpayers to deduct up to what percentage of QBI?

Accepted Answer

20%

Answer

Section 199A allows a deduction of up to 20% of qualified business income from pass-through entities and sole proprietorships.

Question 2

A self-employed person's net loss from Schedule C may:

Accepted Answer

Reduce other income on the tax return (subject to at-risk rules)

Answer

Schedule C losses from an active trade or business can offset other income on Form 1040 subject to at-risk and basis limitations.

Question 3

Which of the following expenses is NOT deductible on Schedule C?

Accepted Answer

Personal vacation expenses

Answer

Personal vacation expenses are not deductible business expenses; only the business portion of a trip with both business and personal elements is deductible.

Question 4

Section 179 expensing allows a business to:

Accepted Answer

Immediately deduct the full cost of qualifying property in the year of purchase

Answer

Section 179 allows immediate expensing of qualifying business property rather than depreciating it over its useful life.

Question 5

A self-employed person with no employees wants to open a retirement plan with the highest possible contribution. Which plan is best?

Accepted Answer

Solo 401(k)

Answer

A Solo 401(k) allows contributions both as employee ($23,000 in 2024) and employer (up to 25% of compensation), potentially exceeding SEP-IRA limits.

Tax Preparation Practice Test

Tax Preparation Practice Test

Tax Preparation Self-Employment and Business Taxes 3