Payroll Tax Chapter 4, Chapter 5: Unemployment Compensation Taxes
3. Under the federal income tax withholding law, a definition of employee excludes partners. a. True b. False
ANSWER: True
34. Form W-3 is filed with the Social Security Administration when transmitting information returns on Forms W-2. a. True b. False
ANSWER: True
35. If you, an employer, are filing 550 Forms W-2, you must use electronic filing rather than paper Forms W-2. a. True b. False
ANSWER: True
True
4. Under the Interstate Reciprocal Coverage Arrangement, the services of a worker can be covered in the state of the election of the employer as long as one of three factors exists. What are those three conditions? (a) the employee performs any work (b) the employee maintains a residence, or (c) the employer maintains the place of business. T/F
Fault
5. The location of the employee's residence is the primary factor to be considered in determining coverage of an employee who works in more than one state. ................. T/F
Fault
6. A bonus paid as remuneration for services is not considered taxable wages for unemployment tax purposes even if the employee has not exceeded the taxable wage base. .....T/F
Fault
7. In the case of an employee who changes jobs during the year, only the first employer must pay FUTA tax on that employee's earnings. .........T/F
True
8. The maximum credit that can be applied to the FUTA tax because of SUTA contributions is 5.4%. T/F.
Fault
9. If an employer pays a SUTA tax of 2.0%, the total credit that can be claimed against the FUTA tax is 2.0%. .......T/F
True
9. What are two situations in which an employer could be liable for a net FUTA tax greater than 0.6 percent? There two situation when the employer may pay more than 0.6% FUTA tax: a. If an employer is late in paying their state contributions b. If the employer is in a state had financial problems and had to borrow money from the Federal Government to pay state unemployment benefits. T/F
24. On August 2, Hunt filed an amended Form W-4 to show a decrease in the number of allowances claimed. Hunt's employer must put the new withholding allowance certificate into effect before the next weekly payday on August 4. a. True b. False
ANSWER: False
25. A person holding two jobs may have additional income tax withheld by increasing the number of withholding allowances claimed. a. True b. False
ANSWER: False
27. An employer is required to submit a copy of the employee's Form W-4 to the IRS if the employee has claimed 15 or more withholding allowances. a. True b. False
ANSWER: False
29. Of the two main methods of withholding, only the wage-bracket method distinguishes unmarried persons from married persons. a. True b. False
ANSWER: False
30. The standard deduction varies according to whether the wage-bracket method or the percentage method is used. a. True b. False
ANSWER: False
31. When you pay supplemental wages at the same time as regular wages, the method of calculating the withholding is the same for vacation payments as for semiannual bonuses. a. True b. False
ANSWER: False
32. In calculating a "gross-up" amount of a bonus payment, an employer does not use the OASDI or HI tax rates in the formula. a. True b. False
ANSWER: False
36. For state income tax purposes, all states treat 401(k) plan payroll deductions as nontaxable. a. True b. False
ANSWER: False
4. The amount of federal income taxes to be withheld is determined after subtracting from the employee's gross wages any local and state taxes. a. True b. False
ANSWER: False
6. Noncash fringe benefits that are provided employees are treated as nontaxable income and thus are excluded from federal income tax withholding. a. True b. False
ANSWER: False
7. All taxable noncash fringe benefits received during the year can only be added to the employees' taxable pay on the last payday of the year. a. True b. False
ANSWER: False
1. Before any federal income taxes may be withheld, there must be, or must have been, an employer-employee relationship. a. True b. False
ANSWER: True
10. The withholding of federal income and FICA taxes from a tipped employee is made from the employee's wages that are under the employer's control. a. True b. False
ANSWER: True
13. The payments to a cook employed by a college fraternity are excluded from federal income tax withholding. a. True b. False
ANSWER: True
16. Persons eligible for deductible IRA contributions may put aside a specified amount of their compensation without paying federal income taxes on that amount. a. True b. False
ANSWER: True
17. The IRA format of the SIMPLE plan allows employees to make tax-free contributions of up to $12,500 a. True b. False
ANSWER: True
18. In the IRA form of the Simple Retirement Account, employers must match the employee's contribution, dollar-for- dollar, up to 3% of the employee's compensation. a. True b. False
ANSWER: True
21. If married employees do not claim their marital status on Form W-4, the employer must withhold according to the withholding tables for single employees. a. True b. False
ANSWER: True
26. An employee submits an invalid Form W-4 to the employer and does not replace it with a valid form. The employer should withhold federal income taxes at the rate for a single person claiming no exemptions. a. True b. False
ANSWER: True
28. By completing Form W-4P, a person can elect to have no income tax withheld from the annuity amounts the person receives. a. True b. False
ANSWER: True
33. Employees must be given Form W-2 on or before January 31 following the close of the calendar year. a. True b. False
ANSWER: True
5. Under the federal income tax withholding law, income taxes are not withheld from the value of meals that employers furnish workers on the employers' premises for the employers' convenience. a. True b. False
ANSWER: True
8. Cash tips of $20 or more received by a tipped employee in a calendar month are treated as remuneration subject to federal income tax withholding. a. True b. False
ANSWER: True
9. A waiter receives cash tips amounting to $120 in a month. The waiter must report the amount of the cash tips to the employer by the 10th of the month following the month they receive the tips. a. True b. False
ANSWER: True
37. Under the federal income tax withholding law, which of the following is not defined as an employee? a. Partner who draws compensation for services rendered the partnership b. General manager, age 66 c. Payroll clerk hired one week ago d. Governor of the state of Florida e. Secretary employed by a not-for-profit corporation
ANSWER: a
46. To curb the practice of employees filing false Forms W-4, the IRS requires that an employer submit to the agency a copy of each Form W-4: a. the IRS has requested in writing. b. on which an employee, usually earning $180 each week at the time Form W-4 was filed, now claims to be exempt from withholding. c. on which an employee claims to be single but has 9 withholding allowances. d. on which a married employee claims no withholding allowances. e. on which a recently divorced employee claims 5 withholding allowances and authorizes an additional $10 to be withheld each week.
ANSWER: a
39. For which of the following payments is the employer required to withhold federal income taxes? a. Advances made to sales personnel for traveling expenses b. Tipped employee's monthly tips of $120 c. Deceased person's wages paid to the estate d. Minister of Presbyterian church e. All of the above
ANSWER: b
43. A personal allowance: a. amounted to $2,000 in 2017. b. may be claimed to exempt a portion of the employee's earnings from withholding. c. is indexed for inflation every calendar quarter. d. may be claimed at the same time with each employer for whom an employee is working during the year. e. for one person is a different amount for a single versus a married taxpayer.
ANSWER: b
47. Which of the following forms is used to report the amount of distributions from pension and retirement plans? a. Form W-2c b. Form 1099-R c. Form 1099-PEN d. Form W-3p e. Form W-4
ANSWER: b
40. Which of the following statements correctly describes the withholding of federal income taxes and social security taxes on tips? a. Tips amounting to $10 or more in a calendar month must be reported by tipped employees to their employers. b. The withholding of federal income taxes on employees' reported tip income is made from the amount of tips reported by employees. c. When employees report taxable tips in connection with employment in which they also receive regular wages, the amount of tax to be withheld on the tips is computed as if the tips were a supplemental wage payment. d. Employers do not withhold FICA taxes on the tipped employees' reported tip income. e. None of the above statements is correct.
ANSWER: c
a. 2.10% 2.10 percentage of taxable wages must be paid in the aggregate to the federal and state governments.
An employer, because of a favorable experience rating, is permitted to pay a state contribution at a reduced rate of 1.5 percent. What percentage of taxable wages must be paid in the aggregate to the federal and state governments? a.2.10% b.2.00% c.1.80% d.0.60%
b. Complete a new Form 940, check the "Amended" box, and include an explanation for the refiling.
How does an employer file an amended Form 940? a. Revised the original Form 940 and include an explanation for the refiling. b. Complete a new Form 940, check the "Amended" box, and include an explanation for the refiling. c. Revise the original Form 940 and write "Amended" at the top. d. Complete a new Form 940 and include an explanation for the refiling.
a. Each state sets an initial contribution rate of not less than 1% for a specific period of time
How is the SUTA tax rate determined for a new employer? a. Each state sets an initial contribution rate of not less than 1% for a specific period of time b. All states must set a 2.95% rate for the employer's first year of business c. Each state sets a minimum 5% contribution rate for the employer's first year of business d. The federal government requires states to impose a specific rate based on the employers total full time employee base
Quarterly Employer file wage ad contribution reports with their states quarterly, that is Four Time a Year, or at the end of every three months. The reports must be filed on or before the last day of every quarter-end month.
How often do employers file wage and contribution reports with their states?
True
If an employer receives an additional credit against the FUTA tax because the state experience rate is less than 5.4 percent, the additional credit is not subject to the 90 percent FUTA credit limitation for late SUTA payments. The credit reduction applies only to actual SUTA tax payments made after January 31, 2019. T/F True
Washington
In 2017 Which state had the highest taxable wage base for the SUTA tax? Arkansas, Massachusetts, Washington, Wisconsin
Arkansas
In 2017, Which state had the widest range of SUTA tax rates for employers? Arkansas, Massachusetts, Washington, Wisconsin
Massachusetts
In 2017, Which state paid the highest weekly maximum benefit (excluding dependency allowances) to qualified unemployed workers? Arkansas, Massachusetts, Washington, Wisconsin
Arkansas, Massachusetts, Washington
In 2017, ______ had the widest range of SUTA tax rates for employers; and ______ paid the highest weekly maximum benefit (excluding dependency allowances) to qualified unemployed workers. _____ had the highest taxable wage base for the SUTA tax. Arkansas, Massachusetts, Washington, Wisconsin.
True
In order for an Employer to obtain the maximum credit of 5.4 percent against the federal tax, the employer must make the state contributions on or before the due date for filing the annual return under FUTA (Form 940). T/F
Fault
14. If a business has ceased operations during the year, as long as the payments of the FUTA taxes have been made, a Form 940 does not need to be completed for that year.......... T/F
True
16. In certain circumstances, a FUTA tax payment can be remitted with Form 940. T/F
Fault
17. All of the states allow employers to make voluntary contributions into their state unemployment fund so that a lower tax contribution rate would be assigned. T/F
Fault
18. Employers have to pay a FUTA tax on only the first $3,500 of each part-time employee's earnings (1/2 of the full $7,000 limit). T/F
True
19. Only employers who paid state unemployment taxes in more than one state or paid wages in a credit reduction state are required to complete Schedule A of Form 940. T/F
True
2. Educational assistance payments to workers are considered nontaxable wages for unemployment purposes. ............ T/F
True
20. Form 940 can also be used to file an amended return. T/F
Fault
3. For the purpose of the FUTA tax, members of partnerships are considered employees. ........T/F
True
1. The federal unemployment tax is imposed on employers, and thus, is not deducted from employees' wages. T/F
Falt
10. E-pay or a major debit or credit card can be used to pay the required FUTA deposits during the year. T/F
True
11. Employer contributions made to employees' 401(k) plans that are included in total payments on Form 940 are also then deducted as exempt payments. T/F
Fault
12. The payments of FUTA taxes are included with the payments of FICA and FIT taxes and are paid as one lump sum. ..T/F
Fault
13. If an employer's FUTA tax liability for the 1st quarter is $935, no payment is required for the 1st quarter. T/F
True
15. If all wages were excluded from SUTA taxes, but were subject to FUTA, the FUTA tax rate would be 6.0%
Fault
4. FUTA coverage does not include service of any nature performed outside the United States by a citizen of the United States for an American employer. ......................... T/F
True
For FUTA, if an employee has more than one employer during the year, the taxable wage base (same state) or bases (different states) applies separately to each employer: T/F
1. Commissions as compensation for covered employment.
Which of the following types of payments are taxable under FUTA? 1. Commissions as compensation for covered employment. 2. Christmas gifts of nominal value. 3. Courtesy discounts to employees. 4. Reimbursement of ordinary and necessary business expenses. 5. Dismissal payments.
22. The special withholding allowance may be claimed only by those employees who do not itemize deductions on their income tax returns. a. True b. False
ANSWER: False
23. Gere became the father of triplets on June 20. He must file an amended Form W-4 on or before June 30. a. True b. False
ANSWER: False
11. An employer must withhold federal income taxes on both the tips reported by tipped employees and the tips that the employer allocates to the employees. a. True b. False
ANSWER: False
12. There is no limit to the amount of educational assistance that is exempt from federal income tax withholdings. a. True b. False
ANSWER: False
14. There is no limit to the amount that an employer can contribute in an employee's SIMPLE retirement account. a. True b. False
ANSWER: False
15. In the case of a 401(k) plan, employees age 50 or over can shelter an extra $10,000 of their wages from federal income tax. a. True b. False
ANSWER: False
19. Evers, who works for two employers, is entitled to three personal allowances. Evers must claim the three allowances with each of the two employers during the entire calendar year. a. True b. False
ANSWER: False
2. Since not-for-profit corporations are exempt from federal income taxes, they are not defined as employers under the federal income tax withholding law. a. True b. False
ANSWER: False
20. After completion of Form W-4, an employer must copy the employee's social security card and place it in the employee's employment file. a. True b. False
ANSWER: False
45. Arch gives you an amended Form W-4 dated March 10, 2017 on which he claims two additional withholding allowances. He asks you to refund the excess taxes that were deducted from January 1 to March 10 when Arch claimed only one withholding allowance. You should: a. repay the overwithheld taxes on Arch's next payday. b. tell Arch that you will spread out a refund of the overwithheld taxes equally over the next six pays. c. inform Arch that you are unable to repay the overwithheld taxes that were withheld before March 10 and that the adjustment will have to be made when he files his annual income tax return. d. tell Arch to write the IRS immediately and ask for a refund of the overwithheld taxes. e. inform Arch that you will appoint a committee to study his request.
ANSWER: c
49. Which of the following forms is used to report rents paid over $600 to landlords? a. Form 1099-R b. Form 1099-INT c. Form 1099-MISC d. Form 1099-G e. Form 8027
ANSWER: c
44. Beech refuses to state her marital status on Form W-4 which she gave to you, the payroll manager, when she was hired. You should: a. tell Beech that it is OK since you know that she was recently divorced and is reluctant to talk about it. b. inform Beech that she will have to write the IRS and give her reasons for refusing to state her marital status. c. tell Beech that you will have to withhold income taxes as if she were married and had claimed one allowance. d. tell Beech that you will have to withhold income taxes according to the withholding table for a single employee with no allowances. e. advise Beech to write "It is no business of yours." in the margin of her Form W-4.
ANSWER: d
48. An employer must file an information return under all of the following conditions except: a. to report $1,000 of compensation paid to an individual who is not an employee. b. to report the wages totaling $600 paid to an independent contractor during the calendar year. c. to report dividends totaling $600 paid to an individual during the calendar year. d. to report commissions of $500 paid to a self-employed salesman. e. An information return must be filed under each of the above conditions.
ANSWER: d
50. A company must withhold federal income taxes from payments made to independent contractors in which of the following cases? a. When there is a signed contract between the parties. b. When the contractor is paid $400. c. When the contractor is a corporation. d. When the contractor has not provided a taxpayer identification number and the contract is $600 or more. e. All of the above.
ANSWER: d
38. Which of the following noncash fringe benefits does not represent taxable income subject to federal income tax withholding? a. Flight on employer-provided airline b. Personal use of company car c. Sick pay d. Employer-paid membership to a country club e. All of the above are taxable.
ANSWER: e
41. All of the following are properly defined as wages subject to the withholding of federal income taxes except: a. year-end bonus. b. kitchen appliances given by manufacturer in lieu of cash wages. c. dismissal payment. d. vacation pay. e. payments made under worker's compensation law. ANSWER: e POINTS: 1 42. Which of the following cannot be included in a cafeteria plan? a. Health insurance b. Group-term life insurance (first $50,000 of coverage) c. Dependent care assistance (first $5,000) d. Self-insured medical reimbursement plan e. Educational assistance
ANSWER: e
42. Which of the following cannot be included in a cafeteria plan? a. Health insurance b. Group-term life insurance (first $50,000 of coverage) c. Dependent care assistance (first $5,000) d. Self-insured medical reimbursement plan e. Educational assistance
ANSWER: e