Question

1.Annie is self-employed and has $49,900 in income from her business. She also has investments that generated dividends of $3,200 and interest of $2,600. What is Annie’s self-employment tax for the year?

2.

Kelly is a self-employed tax attorney whose practice primarily involves tax planning. During the year, she attended a three-day seminar regarding new changes to the tax law. She incurred the following expenses:

Lodging	$	475
Meals		84
Course registration		425
Transportation		225

Required:

1. How much can Kelly deduct? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2. Kelly believes that obtaining a CPA license would improve her skills as a tax attorney. She enrolls as a part-time student at a local college to take CPA review courses. During the current year, she spends $1,875 for tuition and $375 for books. How much of these expenses can Kelly deduct?

Answer 1

1)

self-employment tax = income x 92.35% x (12.4% for social security + 2.9% for Medicare taxes)

= $49900 x 92.35% x 15.3%

= $7050.64

2)

Ans a                         
Particular Amt                      
Lodging $475                      
Meals (84*50%) 42                      

Course registration 425                      
Transportation 225                      
Total Deductions $1,167                      
Ans b                          
If a normal position is seen there will be no deductions for educational expenses          
Education expenses are deducted under two circumstances:                  
1) Improves or maintains skills required by the taxpayer in his/her employment          
2) Meets the express requirement of an employer                  
But it is not deducted if educations which she is obtaining for a new trade or business      
Now CPA qualifies as a new profession which is related but new so expenses are not deductible  
In only extreme circumstances CPA would not be considered as new profession as she is already a tax attorney
If this is the case than only she will be eligible for tutions fees deduction but not for other expenses