1. Dan; a calendar year, accrual basis taxpayer; owns and operates a pool company. On December 2, 2020, he sent a final invoice to a customer for her pool remodel. The total invoice was $5,000. On December 18, 2020, the customer called and informed Dan that she would not pay the invoice because the pool did not meet the specifications outlined in the contract. Dan worked with the customer and the disagreement was finally resolved on January 18, 2021 for a final payment of $3,500. When and how much income must Dan report for tax purposes?

		$3,500 in 2021
		$3,500 in 2020
		$5,000 in 2021
		$5,000 in 2020 and a reduction of $1,500 to 2021 income

10 points

QUESTION 2

1. Which of the following is true with respect to self-employed (independent contractors) individuals?

		Individual contractors are not required to be covered by the employer's 401-k plan
		Independent contractors must deduct their expenses as miscellaneous itemized deductions
		Employers are required to pay FUTA taxes on independent contractors
		Employers are required to pay FICA taxes on independent contractors

10 points

QUESTION 3

1. Michelle; a calendar year, cash basis taxpayer; owns and operates a consulting business as a single-member LLC. On December 31, 2020, she received $25,000 in checks from customers. She did not deposit the checks until January 2, 2021. One customer asked Michelle not to cash his $2,000 check, which is included in the $25,000 total, until January 7, 2021 because funds were not currently available. How much income from these checks must be recognized in 2020?

		$23,000
		$0
		$2,000
		$25,000