Finch Construction Company provides its employees who are carpenters w/all the required tools. However, the company believes that this has led to some employees not taking care of the tools and to the mysterious disappearance of some of the tools. the Company is considering requiring all of its employees to provide their own tools. Employee's salaries would be increased by $1,500 to compensate for their addt'l costs.
Write a letter to Finch's managment explaining the tax consequences of this plan to the carpenters.
2007-10-07 13:56:50 · 2 answers · asked by futureCPA 2 in Business & Finance ➔ Taxes ➔ United States
I did say I was a LOST student right? I'm asking for a basic idea here. geesh!
2007-10-07 14:35:16 · update #1
You cannot be a future CPA if you are having others do your homework. Can you even honestly believe that you truly want to be a CPA when you do not even have the desire to put forth your own effort towards answering this question?
2007-10-07 14:29:08 · answer #1 · answered by Mr. Zimmer 3 · 1⤊ 2⤋
regardless of how the $ 1500 is used, it is PAID TO THE EMPLOYEES AS ADDITIONAL COMPENSATION. Therefore it is considered WAGES and subject to income taxes. If the employee uses the money for tools, or other work related expenses, they can deduct that amount specifically used on the form for EMPLOYEE BUSINESS EXPENSES. I believe it is form 2106. If on the other hand, if the employees buy tools and submit the receipt to the employer BEFORE they receive the money, the amount received for the actual tool purchase is considered as REIMBURSEMENT OF EXPENSES, and only the excess of the payment over the actual tool purchase expense is taxable as "other income", reportable on line 21 of form 1040
2007-10-07 14:35:46 · answer #2 · answered by Mike 7 · 5⤊ 1⤋