275 for each questions and please read carefully beofre answer the question below.
question 1
Mary is an individual taxpayer, working as Self-Employed, with yearly gross income of $100,000 and taxable income of $80,000 (after business expense deductions). Mary is single with no dependents. Mary is concerned about the high amount of self-employement taxes paid and is considering working as an employee to save in taxes.
Requirement: Mary wants to know how much taxes she would save, if any, by working as an employee.
Question 2
A client has asked you to include business (or individual) deductions for items they do not have backup documentation for:
Requirement:
Is it reasonable to compare the deductions to prior year returns?
What is your interpretation of sections 10.21 and 10.22 of Circular 230 related to this issue?
Is there a certain amount or type of deductions you feel ethically requires a preparer to see valid backup?
question 3
An Individual working independently received his/her compensation in cash, no forms 1099 or W2 were issued. The total cash payments received was $80,000 but the individual wants to report $40,000 in the tax return.
Requirement: would you agree to report less income, considering no forms 1099 or W2 were issued? your response should include the reason and criteria used.
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