Tax Workshop 5 - Wages, Salaries and Other Earnings   

1. If you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are taxable.

True False

2. If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value,

A. You must include in your income, as wages, the cost of the permanent benefits minus the amount you paid for them.
B. You must exclude the cost of the permanent benefits.
C. It is not group-term life insurance. 
D. None of the above.

3. Denise worked for 3 months in Russia and earned foreign income. Denise is a United States citizen and, except for the 3 months spent in Russia, resides in Mobile, Alabama. Denise did not receive a Form W-2 or a Form 1099 for her earnings while in Russia. Because Denise resides in the U.S., is a U.S. Citizen, and did not receive any tax reporting forms, she does not have to report any of the income she earned in Russia.

True False

4. Randy Lee is an ordained minister of a tax-exempt church. Randy receives a salary plus a housing allowance for rent and utilities. Which of the following statements is correct?

A. Randy must claim as income on his return all of his salary as subject to income tax and self-employment tax but his housing allowance is subject to income tax only.
B. Randy does not have to report any income received from the church because the church is tax exempt.
C. Randy has to pay both income tax and self-employment tax on his salary, but only self-employment tax for the housing allowance. The housing allowance is not subject to income tax. 
D. Randy only has to to pay the self-employment tax on both his salary and the housing allowance. Neither is subject to income tax.

5. Jack, a U.S. citizen, was a resident of England for all of 2008. He received $100,000 in wages from an English corporation, and paid taxes to England on this income. The entire $100,000 is exempt from U.S. income tax.

True False

6. Sherwood received disability income of $6,000 for 2008. All premiums on the health and accident policy were paid by his employer and included in Sherwood's income. In addition, he received compensatory damages of $10,000 as a result of inadvertent poisoning at a local restaurant. He received no other income this year. How much income must Sherwood include in his 2008 tax return?

A. $16,000.
B. $10,000.
C. $6,000.   
D. $0.

7. Mr. and Mrs. Black received the following income for 2008.

How much income should be reported on their 2008 joint return?

A. $30,000.
B. $32,000.
C. $37,000.   
D. $35,000.

8. Pastor Green received an annual salary of $20,000 as a fulltime minister 2008. The church paid him $1,000 designed as a housing allowance to pay for his utilities. His church owns a parsonage that has a fair rental value of $6,000 in which he lives rent free. Neither the rental allowance nor the rental value of the parsonage is included in his W-2. All amounts are considered provided for services he renders as a licensed pastor. He is not exempt from self-employment tax. Compute the amount of Pastor Green's income that is subject to income tax on his 2008 return.

A. $19,000.
B. $20,000.
C. $27,000. 
D. $26,000.

9. Ted is an ordained minister. He owns his own home and receives a housing allowance that is less than the fair market value of the home. Because he owns his own home, he must include the housing allowance as income for income tax and self-employment tax purposes.

True False

10. Sandy received the following income in 2008:

How much gross income must be reported by Sandy for tax year 2008?

A. $50,022.
B. $53,022.
C. $50,000.   
D. $50,072.

11. If the taxpayer is a minister of a church, his earnings for the services he performs as a minister, whether he is an employee of his church or a self-employed person under the common law rules, are subject to self-employment tax unless he has requested and received an exemption from the IRS, taken a vow of poverty, or is subject to the Social Security laws of a foreign country.

True False

12. The following fringe benefits are non-taxable except:

A. A non-statutory option to buy or sell stock or other property as payment for your services when you receive the option or when you exercise the option.
B. The value of accident or health plan coverage provided to you by your employer.
C. Long-term care coverage contributions made by your employer to provide coverage for long-term care services. 
D. Contributions by your employer to your medical savings account.

13. Taxable disability payments are reported as wages until the recipient reaches minimum retirement age. After minimum retirement age is reached, the payments are reported as pension income.

True False

14. Debby broke her leg this past year and was unable to work for three months. During this time she received $2,500 in sick pay from her employer, that was paid for by her employer. She also received $1,000 from her personally purchased accident policy. How much of these benefits are taxable income to Debby?

A. $-0-.
B. $2,500.
C. $1,000. 
D. $3,500.

15. Reverend Elvin Snider is the ordained minister at Crossroads United Methodist Church. His salary on his W-2 is $20,000. He also receives a $12,000 housing allowance. His housing costs for the year are $4,000. What is Rev. Snider's self-employment income?

A. $34,000.
B. $32,000.
C. $20,000. 
D. None of the above.

16. Fred received the following from his employer during the year:

In addition, his employer contributed $200 per month ($2,400) to a 401(k) plan for Fred. Fred chose not to set aside any of his pay for the retirement plan.

�How much income should Fred report?

A. $34,600.
B. $33,400.
C. $31,000. 
D. $32,200.

17. At their annual budget meeting, the Downtown Church voted to set the salary package to their pastor as follows:

How much of the salary package is includable in the pastor's taxable income?

A. $30,000.
B. $35,000.
C. $40,000. 
D. $45,000.

18. Persons retired on disability before they reach minimum retirement age may elect to report the payments they receive on line 7 as wages or on line 16 of Form 1040 as pension income.

True False

19. The fringe benefit that must be included in wages and reported on Form W-2 is:

A. Health or accident insurance coverage provided by your employer.
B. Contributions by your employer to provide long-term care services.
C. Employer provided parking near the place of business valued at less than $220 per month. 
D. Group-term life insurance coverage in excess of $50,000.

20. An ordained minister cannot exclude the following from gross income.

A. Rental allowance.
B. Fees for marriages, baptisms and funeral.
C. Fair rental value of parsonage. 
D. Actual cost to provide a home.