ACCT 3200 Lecture Notes - Lecture 3: Job Hunting, Union Dues, Independent Contractor

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26 Aug 2016

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Paid based on time you spent rather than task performed. Revenue ruling 87-41: 20 factors for testing employee/self-employed. Right to quit at any time without any consequences. Work at home or wherever you want. 15. 3% of every dollar you make goes to the government in payroll taxes; if you are an employee, half is paid by you and half is paid by your employer. Employer can say you are self-employed: no benefits, employee must pay entire payroll tax, and no retirement plans. From a business expense standpoint, it does not matter if you are employed or self-employed: they are deductible. Self-employed person uses to report his/her income and business expenses that are incurred with respect to that income. Business expenses have to be ordinary and necessary and reasonable in amount. Name, business address, cash method, yes material, no to 1099, last blank. Pt 1 report all income from business (shoebox 4)

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Please build the answer in your own words based on flowing textfrom studding book (provide the example):

text from book:

Group Term Life Insurance Plans.

Many employers offer group term life insurance as part of theiremployee benefit package. Life insurance coverage is normallycalculated as a multiple of the employeeâs annual salary, roundedup to the nearest thousand ($1,000.00). The premiums paid by theemployer for coverage under a group term life insurance policy areconsidered a taxable benefit to the employee. If the employershares the premium cost with the employee, for example, theemployer pays half and the employee pays half, then the taxablebenefit would only be the portion of the premiums the employerpays, or 50%. Group term life insurance taxable benefitcalculations are based on the premium rates and sales taxes theemployer pays and the amount of coverage provided. Premium ratesare expressed per $1,000.00 of coverage on a monthly basis. Thetaxable benefit must be calculated on a pay period basis forinclusion in the employeeâs taxable income.

The following formula calculates the employeeâs monthly taxablebenefit:

Coverage amount = Annual salary x coverage multiplier Roundcoverage amount up to nearest $1,000.00 Monthly taxable benefit =Coverage amount x premium rate $1,000.00 To ensure that the benefitis included in the employeeâs income as it is earned or enjoyed,the monthly benefit must be annualized and then prorated on a payperiod basis, as follows: Pay period taxable benefit = Monthlytaxable benefit x 12 Pay period frequency

"Example: Rhonda Goldâs life insurance coverage, through heremployerâs group plan is two times her annual salary of $30,300.00.Her employer pays the insurer 100% of the cost of her lifeinsurance coverage at a premium rate of $1.00 per $1,000.00 ofcoverage per month. Rhonda is paid on a weekly basis; her taxablebenefit is calculated as follows: Coverage amount = Annual salary xcoverage multiplier Round coverage amount up to nearest $1,000.00 =($30,300 x 2) = $60,600.00 = $61,000.00 (rounded) Monthly taxablebenefit = coverage amount x premium rate $1,000.00 = $61,000 x$1.00 $1,000.00 = $61.00"

Group Sickness and Accident Insurance Plans.

These are group plans that provide employees with income for aperiod of time, should the employee be away from work for reasonsof sickness or accident. A group plan is generally one thatprovides coverage to a class or association of employees. There canalso be multiple plans for a group of employees, for example, oneplan for clerical staff and one for management staff. The types ofsickness and accident insurance plans considered in this categoryinclude:

? short term disability plans (wage loss replacement, weeklyindemnity)

? long term disability plans

? accident insurance plans (accidental death anddismemberment)

If an employer pays the premiums for group short-term orlong-term disability plans there is no taxable benefit implicationfor the employee, however employer-paid accidental death anddismemberment (AD&D) premiums are considered a non-cash taxablebenefit. As a result, employer-paid AD&D premiums, plus the 8%RST (Manitoba and Ontario), the 9% tax on insurance premiums(QuÃ©bec) and the 6% PST (Saskatchewan) as applicable, areconsidered pensionable for C/QPP contributions and taxable forfederal and provincial income taxes. Employer-paid premiums for anon-group plan are considered a non-cash taxable benefit in alljurisdictions. A non-group plan is one that generally does notcover a group or association of employees. For example, if theorganization pays the premiums for a long-term disability plan foronly the president of the organization, this would be considered anon-cash taxable benefit to the president. When the benefit istaxable it is also pensionable for C/QPP contributions; however, asit is a non-cash benefit, it is not insurable, and no EI or QPIPpremiums are deducted. GST and HST are not included in the value ofthis type of benefit, but the provinces of Manitoba, Ontario,QuÃ©bec and Saskatchewan assess sales tax on AD&D insurancepremiums.

Question : Your organization, located in Manitoba,will be enhancing the group benefits plan offered to employees intwo months by adding accidental death and dismemberment (AD&D)coverage and vision care coverage. The organization will pay 50% ofthe cost of the AD&D premiums and 50% of the cost of the visioncare premiums, with the employees paying the other 50% of eachpremium. The Manager of Finance, Laura Bruce, has requested thatyou, as the Payroll Supervisor, prepare a communication for theemployees, explaining how these new benefits will impact their netpay.

(200 â 350 words)

You work for an organization in Nova Scotia and your manager,Jessica Boyer, has asked you to prepare a memo detailing theremittance responsibilities and legal consequences ofnon-compliance with statutory remittance requirements.

studing material :

Employers are responsible for registering and maintaining apayroll program account with the Canada Revenue Agency. Theemployer will remit the statutory deductions withheld from theemployeesâ remuneration for Canada Pension Plan (CPP)contributions, Employment Insurance (EI) premiums, and federal andnon-QuÃ©bec provincial income taxes, along with the employerportions of CPP and EI to this account.
In Trust

Statutory deductions are deemed to be held in trust for theReceiver General for Canada. This means the amounts withheld fromemployees, along with the employerâs portion, must be kept separatefrom the operating funds of the business and cannot be part of anestate in liquidation, assignment, receivership, or bankruptcy.Employers who make their own government remittances, as opposed tohaving them remitted by a service provider, must separate all CPPcontributions, EI premiums and income tax withholdings, along withany employer portion, from the organizationâs regular bank account.All statutory deductions and contributions must be held in aseparate payroll account until the remittance is made to theReceiver General.

Remitter Type

An organizationâs remittance frequency depends on its averagemonthly withholding amount for the second preceding calendar year.For example, the withholding amount for 2017 will depend on theemployerâs average monthly withholding amount made in 2015.Employers may apply to the Canada Revenue Agency to have theiraverage monthly withholding amount for the current or previous yearused instead of the second preceding year. This would beadvantageous if the employerâs payroll for the previous year waslower than the payroll for the second preceding year.

Remittance Schedule

Once an employer has been advised by the CRA what type ofremitter they are, a schedule, based on that type, is used todetermine when the remittances are due to the CRA. The payment forthe first three types of remitters â quarterly, regular, andaccelerated threshold 1 â is due by a specified date based on thepayroll cheque/deposit date. The remittance for acceleratedthreshold 2 remitters is due three business days after the end ofthe weekly period, established by the CRA, in which the payrollcheque/deposit date falls. In all cases, the payroll cheque/depositdate is the date when the money is paid to the employee or directlydeposited in their bank account. The period end date, the payrollprocessing date and the date the pay statement is handed to theemployee are all irrelevant in determining the remittance date.

Penalties and Interest Charges

The CRA may assess a penalty of up to 10% of the required amountof CPP contributions, EI premiums and income taxes due for lateremittances (20% on the second and later occurrences). An employerwho withholds the statutory deductions but does not remit them, orfails to deduct the required deductions will be subject to a 10%penalty for the first occurrence on the amount that should havebeen deducted and remitted (20% on the second and lateroccurrences). The penalties for late remittances are asfollows:
ï· 3% if payment is late 3 business days or less
ï· 5% if payment is late 4 or 5 business days
ï· 7% if payment is late 6 or 7 business days
ï· 10% if payment is 8 or more business days late Normally thepenalty is only applied to the part of the amount that the employerfails to remit that is more than $500.00, however the CRA may applythe penalty to the total amount if the failure to remit, or thelate remittance, was made knowingly or under circumstances of grossnegligence. Again, special attention is required at the end of theyear if producing any manual cheques after the final pay period forthe year has been processed

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Assignment Help >> Managerial Accounting

INDIVIDUAL TAX RETURN PROBLEM 5

Required:

Use the following information to complete Paul and Judy Vance's2014 federal income tax return. If information is missing, usereasonable assumptions to fill in the gaps.

You may need the following forms and schedules to complete theproject: Form 1040, Schedule A, Schedule B, Schedule C, Schedule D,Schedule E, Schedule SE, Form 2106-EZ, Form 4562 (for the dentalpractice), Form 4562 (for the rental property), Form 4797, Form8863, and Form 8949. The forms, schedules, and instructions can befound at the IRS website (www.irs.gov). The instructions can behelpful in completing the forms.

Facts:

Paul J. and Judy L. Vance are married and file a joint return.Paul is self-employed as a dentist, and Judy is a collegeprofessor. Paul and Judy have three children. The oldest is Vincewho lives at home. Vince is a law student at the University ofCincinnati and worked part-time during the year, earning $1,500,which he spent for his own support. Paul and Judy provided $6,000toward Vince's support (including $4,000 for Vince's fall tuition).They also provided over half the support of their daughter, Joan,who is a full-time student at Edgecliff College in Cincinnati. Joanworked part-time as an independent contractor during the year,earning $3,200. Joan lived at home until she was married inDecember 2014. She filed a joint return with her husband, Patrick,who earned $20,000 during the year. Jennifer is the youngest andlived in the Vances' home for the entire year. The Vances provideyou with the following additional information:

Paul and Judy would like to take advantage on their return ofany educational expenses paid for their children.

The Vances do not want to contribute to the presidentialelection campaign.

The Vances live at 621 Franklin Avenue, Cincinnati, OH45211.

Paul's birthday is 3/5/1957 and his Social Security number is333-45-6666.

Judy's birthday is 4/24/1960 and her Social Security number is566-77-8888.

Vince's birthday is 11/6/1991 and his Social Security number is576-18-7928.

Joan's birthday is 2/1/1995 and her Social Security number is575-92-4321.

Jennifer's birthday is 12/12/2002 and her Social Security numberis 613-97-8465.

The Vances do not have any foreign bank accounts or trusts.

Judy is a lecturer at Xavier University in Cincinnati, where sheearned $30,000. The university withheld federal income tax of$3,375, state income tax of $900, Cincinnati city income tax of$375, $1,860 of Social Security tax and $435 of Medicare tax. Shealso worked part of the year for Delta Airlines. Delta paid her$10,000 in salary, and withheld federal income tax of $1,125, stateincome tax of $300, Cincinnati city income tax of $125, SocialSecurity tax of $620, and Medicare tax of $145.

The Vances received $800 of interest from State Savings Bank ona joint account. They received interest of $1,000 on City ofCincinnati bonds they bought in January with the proceeds of a loanfrom Third National Bank of Cincinnati. They paid interest of$1,100 on the loan. Paul received a dividend of $540 on GeneralBicycle Corporation stock he owns. Judy received a dividend of $390on Acme Clothing Corporation stock she owns. Paul and Judy receiveda dividend of $865 on jointly owned stock in Maple Company. All ofthe dividends received in 2014 are qualified dividends.

Paul practices under the name "Paul J. Vance, DDS." His businessis located at 645 West Avenue, Cincinnati, OH 45211, and hisemployer identification number is 01-2222222. Paul's gross receiptsduring the year were $111,000. Paul uses the cash method ofaccounting for his business. Paul's business expenses are asfollows:

Advertising

1,200 $

Professional dues

490

Professional journals

360

Contributions to employee benefit plans

2,000

Malpractice insurance

3,200

Fine for overbilling State of Ohio for work performed on welfarepatient

5,000

Insurance on office contents

720

Interest on money borrowed to refurbish office

600

Accounting services

2,100

Miscellaneous office expense

388

Office rent

12,000

Dental supplies

7,672

Utilities and telephone

3,360

Wages

30,000

Payroll taxes

2,400

In June, Paul decided to refurbish his office. This project wascompleted and the assets placed in service on July 1. Paul'sexpenditures included $8,000 for new office furniture, $6,000 fornew dental equipment (seven-year recovery period), and $2,000 for anew computer. Paul elected to compute his cost recovery allowanceusing MACRS. He did not elect to use Â§179 immediate expensing, andhe chose to not claim any bonus depreciation.

Judy's mother, Sarah, died on July 2, 2009, leaving Judy herentire estate. Included in the estate was Sarah's residence (325Oak Street, Cincinnati, OH 45211). Sarah's basis in the residencewas $30,000. The fair market value of the residence on July 2,2009, was $155,000. The property was distributed to Judy on January1, 2010. The Vances have held the property as rental property andhave managed it themselves. From 2010 until June 30, 2014, theyrented the house to the same tenant. The tenant was transferred toa branch office in California and moved out at the end of June.Since they did not want to bother finding a new tenant, Paul andJudy sold the house on June 30, 2014. They received $140,000 forthe house and land ($15,000 for the land and $125,000 for thehouse), less a 6 percent commission charged by the broker. They haddepreciated the house using the MACRS rules and conventionsapplicable to residential real estate. To compute depreciation onthe house, the Vances had allocated $15,000 of the property's basisto the land on which the house is located. TheVances collected rentof $1,000 a month during the six months the house was occupiedduring the year. They incurred the following related expensesduring this period:

Property insurance

$500

Property taxes

800

Maintenance

465

Depreciation (to be computed)

The Vances sold 200 shares of Capp Corporation stock onSeptember 3, 2014, for $42 a share (minus a $50 commission). TheVances received the stock from Paul's father on June 25, 1980, as awedding present. Paul's father originally purchased the stock for$10 per share in 1967. The stock was valued at $14.50 per share onthe date of the gift. No gift tax was paid on the gift.

Judy is required by Xavier University to visit several highschools in the Cincinnati area to evaluate Xavier Universitystudents who are doing their practice teaching. However, she is notreimbursed for the expenses she incurs in doing this. During thespring semester (January through April 2014), she drove herpersonal automobile 6,800 miles in fulfilling this obligation. Judydrove an additional 6,700 personal miles during 2014. She has beenusing the car since June 30, 2013. Judy uses the standard mileagemethod to calculate her car expenses.

Paul and Judy have given you a file containing the followingreceipts for expenditures during the year:

Prescription medicine and drugs (net of insurancereimbursement)

376 $

Doctor and hospital bills (net of insurance reimbursement)

2,468

Penalty for underpayment of last year's state income tax

Real estate taxes on personal residence

4,762

Interest on home mortgage (paid to Home State Savings &Loan)

8,250

Interest on credit cards (consumer purchases)

595

Cash contribution to St. Matthew's church

3,080

Payroll deductions for Judy's contributions to the UnitedWay

150

Professional dues (Judy)

325

Professional subscriptions (Judy)

245

Fee for preparation of 2013 tax return paid April 12, 2014

500

The Vances filed their 2013 federal, state, and local returns onApril 12, 2014. They paid the following additional 2013 taxes withtheir returns: federal income taxes of $630, state income taxes of$250, and city income taxes of $75.

The Vances made timely estimated federal income tax payments of$1,500 each quarter during 2014. They also made estimated stateincome tax payments of $300 each quarter and estimated city incometax payments of $160 each quarter. The Vances made allfourth-quarter payments on December 31, 2014. They would like toreceive a refund for any overpayments.

Paul and Judy have qualifying insurance for purposes of theAffordable Care Act (ACA).

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ACCT 3200 Lecture Notes - Lecture 3: Job Hunting, Union Dues, Independent Contractor

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