Tax Segment C-2 - Employer Tax Compliance

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Tax Segment C-2 - Employer Tax Compliance

Material needed to complete this assignment:

You will need IRS Publication 15, IRS Publication 15-A, IRS Publication 15-B to complete the questions for this segment.

1. Supplemental wages are compensation paid in addition to an employee's regular wages. They DO NOT include payment for

A. Accumulated sick leave.
B. Nondeductible moving expenses.
C. Vacation pay.
D. Travel reimbursements paid at the Federal Government per diem rate.

2. File Form 944, Employer's Annual Federal Tax Return, for the previous calendar year instead of Form 941 if the IRS has notified you in writing to file Form 944 and pay any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 944 if your total tax liability for the year is

A. Less than $2,500.
B. More than $2,500.
C. Less than $5,000.
D. More than $10,000.

3. In addition to any penalties, interest accrues for the due date of the tax on any unpaid balance. If income, social security, or Medicare taxes that must be withheld are not withheld or are not paid, you may

A. Avoid a penalty if you can prove that the payroll clerk is at fault.
B. Be personally liable for the trust fund recovery penalty.
C. Not be liable if you use a reporting agent or third party payroll service.
D. Ask the IRS for an extension to pay your liability.

4. Generally, a worker who performs services for you is your employee if you have the right to

A. Control what will be done.
B. Control how the work will be done.
C. Fire the employee.
D. Only A and B above are correct.

5. Some fringe benefits are not taxable. An example of a taxable fringe benefit is the following.

A. The use of on-premises athletic facilities, if substantially all of the use is by employees, their spouses, and their dependent children.
B. Qualified tuition reduction an educational organization provides to its employees for education.
C. Working condition fringes that are property or services the employee could deduct as a business expense if he or she had paid for it.
D. None of the above.

6. When you have a regular payroll period, withhold income tax for that time period even if your employee does not work the full period. If the wages are unrelated to a specific length of time, count back the number of days from the payment period to

A. The last wage payment made during the same calendar year.
B. The date employment began, if during the same calendar year.
C. January 1st of the same year.
D. The latest of all the above.

7. Employers may participate in the Tip Rate Determination and Education program. The program primarily consists of

A. The Tip Rate Determination Agreement (TRDA).
B. The Tip Reporting Alternative Commitment (TRAC).
C. Gaming Industry Tip Compliance Agreement (GITCA).
D. All of the above.

8. An exemption from social security and Medicare taxes is available to members of a recognized religious sect apposed to insurance. This exemption is available to

A. Members of recognized religious sect.
B. Only if both the employee and the employer are members of the sect.
C. Only if the employer is member of the sect.
D. Only if the the employee is member of the sect.

9. A foreign person is generally treated as an American employer for purposes of paying FICA taxes on wages paid to an employee who is a United States citizen or resident if

A. The foreign person is a member of a domestically controlled group of entities.
B. The employee of the foreign person performs services in connection with a contract between the U.S. Government and any member of the domestically controlled group of entities.
C. The U.S. citizen or resident works for that employer in the United States.
D. Both A and B above.

10. The Making Work Pay credit expires on December 31, 2010. As a result

A. The income tax withholding tables for 2011 are not adjusted for the Make Work Pay credit.
B. There is no longer an optional additional withholding adjustment for pensions.
C. The procedure for withholding on wages of nonresident aliens has been modified.
D. All of the above.

11. To furnish Forms W-2 electronically, you must meet certain disclosure requirements and provide a clear and conspicuous statement of each requirement to your employees. The following would be one of these disclosure requirements.

A. The employee must be informed that he or she will receive a paper Form W-2 if consent is not given to receive it electronically.
B. The employee must be informed of any procedures for updating his or her contact information that enables the employer to provide electronic Forms W-2.
C. The employee must be notified about how to withdraw a consent and the effective date and manner by which the employer will confirm the withdrawn consent.
D. All of the above.

12. Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. This way of filing and paying federal taxes

A. Allows you to spend less time and worry on taxes and more time running your business.
B. Allows you to spend more time and worry on taxes and less time running your business.
C. Is more expensive but faster than paper filing.
D. None of the above.

13. Before you can know how to treat payments that you make to workers for services, you must first know

A. If you have an employee-employer relationship.
B. If the individual working for you is not a common employee.
C. The business relationship that exists between you and the person performing the services.
D. If the individual working for you is not a doctor or a veterinarian.

14. People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, are generally not employees and are considered

A. Common-law employees.
B. Independent contractors.
C. Statutory employees.
D. Statutory nonemployees.

15. To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. Facts that provide evidence of the degree of control and independence fall into

A. Behavioral control category.
B. Financial control category.
C. The type of relationship of the parties.
D. All of the above.

16. If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer must be included in the employee's wages as compensation. For travel expenses to be excludable

A. The new work location must be in the city or general area of the employee's regular work place or post of duty.
B. Travel expenses must qualify as deductible by the employee.
C. The expenses must be for the period the employee is at a permanent location.
D. Any of the above.

17. This a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages.

A. Employee stock options.
B. Cafeteria plans.
C. Accident and health benefits.
D. Retirement planning services.

18. After December 31, 2010, eligible employers meeting contribution requirements and eligibility and participation requirements can establish a simple cafeteria plan. You are an eligible employer if you employ an average of ________ during either of the 2 preceding years.

A. 100 or fewer employees.
B. 50 or fewer employees.
C. 200 or fewer employees.
D. 500 or fewer employees.

19. A cafeteria plan cannot include

A. Accident and health benefits.
B. Group-term life insurance coverage.
C. Educational assistance.
D. Dependent care assistance.

20. Any fringe benefit you provide is taxable and must be included in the recipients pay unless the law specifically excludes it. You must include in a recipient's pay

A. Any amount the law excludes from pay.
B. Any amount the recipient paid for the benefit.
C. The amount by which the value of a fringe benefit is more than the sum of A and B above.
D. The amount by which the value of a fringe benefit is less than the sum of A and B above.

21. If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement.

True False

22. Group-term life insurance includes

A. Insurance that does not provide general death benefits, such as travel insurance or a policy providing only accidental death benefits.
B. Life insurance on the life of your employee's spouse or dependent.
C. Insurance provided under a policy that provides a permanent benefit.
D. None of the above.

23. You can generally exclude the cost of up to _______ of group-term life insurance from the wages of an insured employee.

A. $50,000.
B. $25,000.
C. $100,000.
D. $75,000.

24. Generally, life insurance is not group-term life insurance unless you provide it to at least _________ full-time employee (s) at some time during the year.

A. 1.
B. 5.
C. 10.
D. 100.

25. You can exclude the value of lodging you furnish to an employee from the employee's wages if

A. The lodging is furnished on your business premises.
B. The lodging is furnished for your convenience.
C. The employee accepts it as a condition of employment.
D. All of the above.

26. Under the Commuting Rule, you determine the value of a vehicle you provide to an employee for commuting use by multiplying each one-way commute by ______. This amount must be included in the employee's wages or reimbursed by the employee.

A. $1.50.
B. $2.50.
C. $3.00.
D. $.50.

27. You can use the commuting rule if certain requirements are met. The following is one of these requirements.

A. You provide the vehicle to an employee for use in your trade or business and, for bona fide noncompensatory business reasons, you require the employee to commute in the vehicle.
B. The employee uses the vehicle for personal purposes in addition to commuting and de minimis personal use.
C. You establish a written policy under which you allow the employee to use the vehicle for personal purposes in addition to commuting or de minimis personal use.
D. All of the above.

28. You can choose to define a control employee as any highly compensated employee. A highly compensated employee for 2011 is an employee who

A. Was a 5% owner at any time during the year or the preceding year.
B. Received more than $110,000 in pay for the preceding year.
C. Was also in the top 20% of employees when ranked by pay for the preceding year.
D. Either A or B above.

29. Under the Lease Value Rule, you determine the value of an automobile you provide to an employee by using its annual lease value. Any use of a company-provided vehicle that is not substantiated as business use is included in income.

True False

30. Under the Unsafe Conditions Commuting Rule, the value of commuting transportation you provide to a qualified employee solely because of unsafe conditions is $1.50 for a one-way commute. You can use the unsafe conditions commuting rule for qualified employees if

A. The employee would ordinarily walk or use public transportation for commuting.
B. You have a written policy under which you do not provide the transportation for personal purposes other than commuting because of unsafe conditions.
C. The employee does not use the transportation for personal purposes other than community because of unsafe conditions.
D. All of the above.

31. If you choose to pay your employee's social security and Medicare taxes on taxable fringe benefits without deducting them from his or her pay, you

A. Must exclude the amount on the payments from the employee's income.
B. Must include the amount on the payments in the employee's income.
C. Are not liable for those taxes.
D. Must use withheld federal income tax to pay the social security and Medicare tax.

32. You can treat the value of taxable noncash benefits as paid on a pay period, quarterly, semi-annually, annually, or on another basis, provided that the benefits are treated as paid no less frequently than annually. In addition

A. All benefits treated as paid during the last two months of a calendar year can be deferred until the next year.
B. The special accounting rule can be used for a fringe benefit that is a transfer of tangible or intangible personal property of a kind normally held for investment or a transfer of real property.
C. If you use the special accounting rule, your employee also must use it for the same period you use it.
D. You have to notify the IRS if you use the special accounting rule.

33. Nonpayroll income tax withholding for such items as gambling winnings and Indian gaming profits must be reported on

A. Form 945.
B. Form 941.
C. Form 944.
D. Form 943.

34. You generally must withhold _____ of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). This withholding is referred to as "backup withholding".

A. 10%.
B. 15%.
C. 28%.
D. 50%.

35. If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership

A. Only if you file Form 1065.
B. Whether or not you have a formal partnership agreement.
C. Only if you create a joint-venture between a husband and a wife.
D. Only if you materially participate in the business.

36. Tips your employee receives from customers are generally subject to withholding. Your employee must report cash tips to you by the

A. 1st of the month.
B. 15th of the month.
C. 10th of the month.
D. 20th of the month.

37. Both directly and indirectly tipped employees must report tips to you. No report is required for months when tips are

A. Less than $100.
B. Less than $10.
C. Less than $20.
D. More than $50.

38. If, by the 10th of the month after the month for which you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you

A. No longer have to collect it.
B. Withhold on regular wages and other compensation.
C. Withhold social security and Medicare taxes on tips.
D. Withhold income tax on tips.

39. If there are not enough funds available to withhold on tips, you withhold taxes in which of the following order?

1. Withhold social security and Medicare taxes on tips.

2. Withhold income tax on tips.

3. withhold on regular wages and other compensation.

A. 1, 2, 3.
B. 2, 3, 1.
C. 3, 2, 1.
D. None of the above.

40. You are required to deposit 100% of your tax liability on or before the deposit due date. However, penalties will not be applied for depositing less than 100% if

A. Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited.
B. The deposit shortfall is paid or deposited by the shortfall makeup date.
C. Both A and B above.
D. Any deposit shortfall does exceed $500.

41. You are subject to FUTA tax in 2011 on tax wages you pay employees who are not farm workers or household workers if

A. You paid wages of $1,500 or more in any calendar quarter in 2010 or 2011.
B. You had one or more employees for at least some part of a day in any 20 or more different weeks in 2010 or 20 or more different weeks in 2011.
C. Either A or B above.
D. You paid cash wages of $20,000 or more during any calendar quarter in 2010 or 2011.