Homework SourseThis one too I need help LO25 Finc 025 Finch Construction 44
This one too, I need help.
LO.2,5 Finc 0.2,5 Finch Construction 44. nstruction Company provides the carpenters it employs wi the required tools. However, the company believes that this practice has led to some employees not taking care of the tools and to the mystcrilos ance of some tools. The company provide their own tools. Each employee\'s salary would be increased Is considering requiring all of its employees to by $1,500 to compensate for the additional cost. Write a letter to Finch\'s management explaining the tax consequences of this plan to the carpenters. Finch\'s address is 300 FHab Drive, Vermillion, SD 57069Solution
Name of the letter write
Address
January 28, 2018
Finch Construction Company
300 Harbor Drive
Vermillion, SD 57069
Dear Management,
You have sought my help to determine whether giving tool compensation as wages to employees will results in additional tax in the hand o employees. As per my analysis, In short, employees would experience a net decrease in after-tax income.
If the employee’s salary is increased for purchase of tools, ase the necessary tools, the employee must include $1,500 in salary in its taxable income. Cost of the tools in many cases will not be deductible, or less than the actual cost will be deductible. Employee can take either of itemized or standard deduction. If the employee takes the standard deduction, no deduction for the tool expenses is allowed. If the taxpayer does itemize deductions, the need to reduce deduction 2% of his AGI.When the miscellaneous itemized deductions does exceed 2% of AGI, less than the entire expenses are deductible because of the 2% factor.
Instead of this, employee can purchase the tools, but account to company for their cost, and obtain reimbursement. Under this plan, company can directly offset the reimbursement with the expense, in arriving at adjusted gross income.
Please contact me if you would like to discuss this further.
Sincerely,
(Name)
