Final answer:
Employees used to deduct unreimbursed business expenses before calculating AGI, while self-employed individuals can deduct their business expenses after establishing AGI. The correct answer to the question is (c) Before, After, indicating the timing of deductions relative to AGI for employees and self-employed individuals.
Step-by-step explanation:
The question relates to the tax treatment of business expenses for different types of earners. The correct answer to the question is (c) Before, After. This means that employees can deduct their unreimbursed business expenses before calculating their adjusted gross income (AGI), but due to changes in tax laws, notably the Tax Cuts and Jobs Act of 2017, many miscellaneous itemized deductions, including unreimbursed employee expenses, have been suspended from 2018 to 2025 for employees. On the other hand, self-employed individuals can deduct their business expenses when calculating their taxable income, which is after AGI has been established.
Self-employed individuals pay corporate income tax on profits if their business is incorporated, individual income tax on their salary and profits, and payroll tax on their self-employment earnings. Deductions from an employee's wages include income tax, social security contributions, and insurances. Employer's taxes based on the employee's wages include their contributions to the social security system and insurances. The relationship between taxable income, AGI, deductions, and exemptions are crucial for understanding how the amount of tax owed is calculated.