Chapter 4

When an employee has a legal name change, what does the IRS suggest the employer see before reporting the new name on Form W-2? A. A corrected social security card B. An amended Form W-4 C. An amended Form I-9 D. A court document

A corrected social security card

the FUTA tax wage base is:

7,000

When a company makes its tax deposits using EFTPS, all of the following methods can be used EXCEPT: A. a check. B. Fedwire. C. EFTPS Direct. D. EFTPS Through a Financial Institution.

A. a check.

Form 843 is used to:

A. request an abatement of assessed interest and penalties.

On Form W-2, which box is matched with its use? A. Box 10--Excess business expense benefits B. Box 12 (Code I)--Nontaxable sick pay C. Box 13--Payouts from nonqualified plans D. Box 2--Federal income tax withheld

D. Box 2--Federal income tax withheld

A company making its federal tax deposits via EFTPS has elected to have its bank initiate the transactions. This method is defined as:

EFTPS-Through a Financial Institution.

Which employers can file Form 944 annually?

Employers with an annual tax liability history of $1,000 or less

A company makes all tax deposits timely. The fourth quarter employment tax return is due no later than:

Feb 10

When a company makes timely tax deposits, its third quarter Form 941 tax return is due no later than:

November 10

A company consistently makes timely tax deposits. The deadline for filing its first quarter tax return, May 10, falls on a Saturday. When is Form 941 due?

On Monday, May 12

A company is a semiweekly depositor. Its paydays are every other Tuesday. When are the company's payroll tax deposits due if they are less than $100,000.00?

On or before the following Friday

During the lookback period, a company reported $90,000.00 in employment taxes. This year, how must the company deposit its payroll taxes?

Semiweekly

941

The basic employment tax return filed by most employers is Form 941, Employer's Quarterly Federal Tax Return. Form 941 provides the IRS with a report of each employer's total taxable wages paid and payroll tax liability, which can be matched against the employer's record of tax deposits and wage and tax information provided to employees on their W-2 forms.

In 2016, employers must pay FUTA tax on how much of each employee's annual wages?

The first $7,000.00

When filing Forms W-2 on paper, the transmittal form provided to the SSA is Form:

W-3.

Purpose of Form W-2c

When errors have been made on a previously filed Form W-2, employers must correct them by filing Form W-2c, Corrected Wage and Tax Statement (see Tax Tables and Forms in the Online Resource Center). When Form W-2c is sent to the SSA it must be accompanied by Form W-3c, Transmittal of Corrected Wage and Tax Statements (see Tax Tables and Forms in the Online Resource Center). Beginning with W-2s filed for 2016, a W-2c will not have to be filed to correct individual errors of up to $100 ($25 if the error is to a tax withholding amount) unless the employee requests it.

based on the company data below, calculate the amount that should be included in the organization's Form 941, Line 5a column 1, "Taxable social security wages," at the end of the second quarter. Assume that no employee's wages are in excess of the social security wage base. May 31 June 15 June 30 ee wag $989,800.00 $956,100.00 $829,200.00 401(k) def $24,745.00 $23,902.50 $20,730.00 125 red $9,000.00 $9,000.00 $9,000.00 FIT $152,968.80 $147,711.60 $127,915.20

add up ee wages-minus 125 reductions (pre-tax) =line 5a column 1

On payday, a monthly depositor accumulates a payroll tax liability of $105,000.00. This amount must be deposited:

by the next business day.

The payroll tax deposit due date falls on a nonbusiness day. A monthly depositor must deposit its payroll tax liability:

by the next business day.

The shortfall make-up deposit must be made for a semiweekly depositor by the:

first Wednesday or Friday on or after the 15th of the next month or due date of the return, whichever is earliest.

Federal unemployment taxes are used to fund:

the administration of the unemployment insurance program.

Paper Forms W-2 must be filed with the SSA by the last day of:

January.

An employee dies in March. In July, the company issues a check to the deceased employee's estate in the amount of $3,486.00 for unused vacation pay. When calculating federal income tax, the company uses the Optional Flat Rate Method for vacation payouts after or upon termination. Calculate the amount that must be withheld for federal income tax.

$0.00 Payments after the death of the employee are exempt from federal income tax withholding. However, they are reported on Form 1099-MISC (Box 3, Other Income).

In 2016, an employer had four employees. Two of the employees worked full-time and earned $42,000 each. The other two worked part-time and earned $5,590 and $3,275, respectively. The company is not eligible to receive any FUTA tax credits. The employer's FUTA tax liability is:

$1,371.90 FUTA: 6% FUTA tax is an employer tax. No FUTA tax is withheld from employees' wages. Rate of 6.0% The FUTA tax rate is 6.0% of the first $7,000 of each employee's annual wages. Credit of 5.4%. Employers in most states can take a 5.4% credit against the gross taxes paid for state unemployment tax. You can get this credit even if your state's rate is lower than 5.4%. To get full credit: you must make timely payments to your state fund by the due date for Form 940 (discussed below), and your state must not be in arrears in repaying advances borrowed from FUTA tax funds. Effective rate of 0.6%. With the credit, your effective FUTA tax rate is 0.6% (6.0% less 5.4% credit). Any credit loss is not computed until the end of the year and affects only your fourth-quarter payment. For the first three quarters, you pay 0.6% FUTA tax for each employee on the first $7,000 in taxable wages.

An employee died in February and had total YTD wages in the amount of $1,975.00. The employee was owed wages of $1,900.00, which were paid on a regular semimonthly payday in March. The employee claimed married with one allowance on Form W-4. Using the Wage-Bracket Method, calculate the amount to be withheld from the payment due for federal income, social security, and Medicare taxes.

$145.35

An employee died in March with total YTD wages of $45,000.00 and was owed $1,000.00 for a bonus (the company uses the Optional Flat Rate Method to tax supplemental wages). Calculate the federal income, social security and Medicare taxes that must be withheld from the bonus payment to the deceased employee's estate if the bonus is paid in June of the year of the employee's death.

$76.50.

At the end of the second quarter, a company has $942,100.00 in taxable social security wages. Calculate the amount that is entered on the organization's Form 941, Line 5a Column 2 (the employee and employer shares of social security tax), for the second quarter.

$942,100.00 x 12.4% = $116,820.40 6.2 ee + 6.2 er= 12.4%

When an employer fails to make all state unemployment insurance contributions by the Form 940 due date, what amount of the credit for making timely state unemployment insurance contributions is lost, if any?

10% is lost

A company will issue a check to a deceased employee's estate in the year of the employee's death for $2,390.00 of unused vacation pay. The employee's year-to-date wages total $8,580.01.

148.18

An employer that pays all of its state unemployment taxes in a timely manner and is not in a credit reduction state may be entitled to a credit on its federal unemployment tax return of:

5.4%

Data on Form 941-X corrects data filed on:

941

Which of the following statements regarding terminated employees is true? A. Employers must provide Form W-2 within 30 days of receiving a written request. B. Employers must provide the employees' Forms W-2 with their final pay. C. Terminated employees must receive their Forms W-2 by December 31 of the year the employment relationship ends. D. Once you've terminated employees, you can never pay them additional wages.

A. Employers must provide Form W-2 within 30 days of receiving a written request.

An employee picked up and deposited a payroll check on Friday. The employee died the next day. What should payroll do, if anything, regarding the reporting and taxing requirements for payments on the check received on the Friday prior to the employee's death? A. Payroll has no additional obligation; the check is reported as issued. B. Reverse the check and tax the earnings for federal income tax only. C. Reverse the check and reissue it with no tax withholdings. D. Reverse the check and tax the earnings for social security and Medicare taxes only.

A. Payroll has no additional obligation; the check is reported as issued.

An employee received his paycheck on Friday and died on Saturday prior to cashing the paycheck. What, if anything, should the payroll department do? A. Reissue the check to the employee's estate/beneficiary. B. Reissue the check without the federal income tax withholding. C. Reissue the check with no tax withholding. D. Nothing, the check was received by the employee.

A. Reissue the check to the employee's estate/beneficiary.

All of the following items are reported on Form W-2 EXCEPT: A. payment for services to an independent contractor. B. contributions to a 401(k) plan. C. withheld federal income tax. D. wages subject to Medicare tax.

A. payment for services to an independent contractor

Amounts reported in Box 1 - Wages, tips, other compensation - on Form W-2 include: A. the value of group-term life insurance coverage in excess of $50,000.00. B. elective deferrals into a Section 125 plan. C. allocated tips. D. elective deferrals into a deferred compensation plan.

A. the value of group-term life insurance coverage in excess of $50,000.00.

manual off checks

An employer that pays employees between regular paydays incurs a deposit liability when the constructive payment/receipt has occurred. If the employer is a semiweekly depositor making an off cycle payment on Tuesday, the deposit of the withheld and employer taxes must be made by Friday.

To determine if an employer is a monthly or semiweekly depositor for 2016, the lookback period is:

July 1, 2014 - June 30, 2015.

When a company has always made timely tax deposits, its first quarter Form 941 is due on or before:

May 10.

How is a company with 538 employees required to file Forms W-2? A. Using paper returns B. Electronically C. Electronically or on paper, whichever it prefers

B. Electronically

Which of the following benefits requires Form W-2 Box 12 reporting of employer contributions? A. 401(k) plan matches B. Health Savings Accounts C. Health Reimbursement Arrangements D. 403(b) plan matches

B. Health Savings Accounts

Employers file Form W-2 with the: A. Department of Labor. B. SSA. C. IRS. D. State unemployment insurance agency.

B. SSA.

What determines the tax liability in the event of an off-cycle check? A. When the employee cashes the check B. When the employee receives the check C. The check date D. The pay period the check is covering

B. When the employee receives the check

An employee's profit sharing bonus is payable in the year following the employee's death. How should the employer tax and report the bonus? A. Withhold federal income tax at the optional flat rate, social security and Medicare taxes; report the bonus amount on Form W-2, Boxes 1, 3, and 5. B. Withhold no taxes and report the bonus amount on Form 1099-MISC, Box 3. C. Withhold no taxes and report the bonus amount on Form 1099-MISC, Box 7. D. Withhold social security and Medicare taxes only and report the bonus amount on Form W-2, Boxes 3 and 5.

B. Withhold no taxes and report the bonus amount on Form 1099-MISC, Box 3.

On payday, a monthly depositor's payroll tax liability of $105,000.00 must be deposited: A. by the 15th day of the next month. B. by the next business day. C. within three business days. D. by the end of the month.

B. by the next business day.

Form 941 is considered to be timely filed EXCEPT when: A. postmarked by the due date. B. delivered to an unapproved delivery service by the due date. C. delivered to the IRS by the due date. D. delivered to an IRS approved private delivery service by the due date.

B. delivered to an unapproved delivery service by the due date.

A monthly depositor becomes a semi-weekly depositor in all of the following situations EXCEPT when the: A. lookback period amount exceeds $200,000.00. B. liability in a deposit period is $50,000.00. C. lookback period amount exceeds $50,000.00. D. liability in a deposit period exceeds $100,000.00.

B. liability in a deposit period is $50,000.00.

Wages reported on Form W-2 include wages: A. earned in the calendar year. B. paid during the calendar year. C. earned in the calendar year but paid in the next year. D. earned in the calendar year but paid in the prior year.

B. paid during the calendar year.

State unemployment taxes are used to fund: A. general operations of the state. B. unemployment benefits. C. specific operations of the state. D. administration of the unemployment insurance programs.

B. unemployment benefits.

All of the following federal taxes are reported on Form 945 EXCEPT: A. backup withholding. B. withholding from wages. C. withholding from pensions. D. withholding from gambling winnings.

B. withholding from wages.

How, if at all, is Form 940 corrected? A. Corrections are not allowed to Form 940 B. By filing an amended Form 940 C. By filing a Form 940-X D. On the subsequent year's Form 940

By filing an amended Form 940

On Tuesday, a semiweekly depositor incurs a payroll tax liability of $80,000.00; on Wednesday, another payroll tax liability of $25,000.00 is incurred. What deposit(s) must be made? A. $105,000.00 on Thursday B. $105,000.00 on the following Wednesday C. $80,000.00 on the next Friday and $25,000 on the next Wednesday D. $105,000.00 on the next Friday

C. $80,000.00 on the next Friday and $25,000 on the next Wednesday

FUTA taxes of more than $500.00 on wages paid in the first quarter must be deposited no later than: A. March 31. B. April 15. C. April 30. D. May 1.

C. April 30.

Which box on the 2016 Form W-2 is correctly matched with its use? A. Box 10--Nonqualified plans B. Box 12 (Code L)--GTL insurance over $50,000.00 C. Box 12 (Code J)--Nontaxable sick pay D. Box 15--Medicare tax withheld

C. Box 12 (Code J)--Nontaxable sick pay

Which form is used when correcting Form 941, Line 2, Wages, tips, and other compensation,? A. Form 843 B. Form 943 C. Form 941-X D. Form 944

C. Form 941-X

Form W-2c is used to correct an: A. employee's previously reported unemployment wages on Form W-2. B. employer's previously reported unemployment wages. C. employee's previously reported information on Form W-2. D. employer's previously reported income tax wages on Form W

C. employee's previously reported information on Form W-2.

On Form W-2, which box is matched with its use? A. Box 7--Allocated tips B. Box 12 (Code I)--Nontaxable sick pay C. Box 12 (Code J)--State agencies that report only Medicare wages D. Box 8--Allocated tips

D. Box 8--Allocated tips

Which of the following organizations are required to file Form 940? A. Employers with wages less than $1,500.00 in all quarters of 2015 and 2016 B. Employers with a single employee in fewer than 20 weeks during 2015 or 2016 C. Religious, educational, or charitable organizations D. Employers with wages greater than $1,500.00 in any quarter of 2015 or 2016

D. Employers with wages greater than $1,500.00 in any quarter of 2015 or 2016

Which government entity(s) uses Form W-2 to track information? A. IRS only B. SSA only C. DOL only D. IRS and SSA

D. IRS and SSA

Without a power of attorney, all of the following employees are authorized to sign Form 941 EXCEPT the company's: A. Principal corporate officer. B. President. C. Vice-president. D. Payroll manager.

D. Payroll manager.

An employee's profit sharing bonus is payable in the year following the employee's death. How should the bonus be taxed and reported? A. Withhold the FIT, social security and Medicare taxes; report the bonus amount only on Form W-2. B. Withhold social security and Medicare taxes only and report the bonus amount only on Form W-2. C. Withhold social security and Medicare taxes and report the taxes on Form W-2 and the bonus amount on Form 1099-MISC. D. Withhold no taxes and report the bonus amount on Form 1099-MISC.

D. Withhold no taxes and report the bonus amount on Form 1099-MISC.

Form 941-X is filed: A. with Form W-3 when paying an amount due. B. with Form 843 when claiming a refund or paying an amount due. C. with Form 843 when paying an amount due only. D. alone when claiming a refund or owing additional taxes.

D. alone when claiming a refund or owing additional taxes.

Form 945 is the: A. quarterly employer's tax return. B. annual employer's tax return. C. annual employer's tax return for agricultural employers. D. annual tax return for nonpayroll federal taxes.

D. annual tax return for nonpayroll federal taxes.

Because an employee had met the company's bonus criteria, an annual bonus was issued on January 10 in the year following the employee's death. Payroll should: A. issue the check, withholding only social security and Medicare taxes, and report all amounts on Form W-2. B. issue the check as usual. C. withhold only social security and Medicare taxes and report all amounts on both Form W-2 and 1099-MISC. D. report the entire payment on Form 1099-MISC, Box 3.

D. report the entire payment on Form 1099-MISC, Box 3.

Form 843 is used to file abatement for all of the following EXCEPT: A. assessed interest. B. overassessments. C. assessed penalties. D. tax overpayments.

D. tax overpayments.

An employee receives a paycheck on Friday and realizes that overtime was not included. The employee contacts payroll, which verifies the shortage and issues the employee an off-cycle payment on Monday. The employer's tax liability on Friday was $200,000.00 and it made the deposit on Monday. The taxes from the off-cycle payment must be deposited by:

D. the following Friday.

If the FUTA tax liability for a quarter is less than $500.00, the taxes must be deposited: A. by the last day of the quarter. B. by the 15th of the month following the end of the quarter. C. by the end of the month following the end of the quarter. D. with the next quarter's liability if the total liability exceeds $500.00.

D. with the next quarter's liability if the total liability exceeds $500.00.

FUTA Tax Deposits

Employers must determine their FUTA tax liability each quarter. In doing so, they can assume they will be entitled to the full 5.4% credit for state unemployment insurance contributions for the first three calendar quarters of the year. Thus, employers calculate their FUTA liability by multiplying their FUTA taxable wages for the quarter by 0.6%: Quarterly FUTA liability = Quarterly taxable wages x 0.006 The amount of the employer's quarterly FUTA liability for the first three quarters of the year determines how the employer deposits the tax owed. In each of the first three quarters, if the employer's liability is more than $500, the entire liability must be deposited by the last day of the month following the end of the quarter. The deposit dates are: First quarter ends March 31 Deposit due April 30 Second quarter ends June 30 Deposit due July 31 Third quarter ends Sept. 30 Deposit due Oct. 31

Annual Deposit Rule

Employers using the annual deposit rule have been notified by the IRS to file the annual Form 944, Employer's Annual Federal Tax Return, instead of Form 941, Employer's Quarterly Federal Tax Return. The IRS designates employers whose filing history shows $1,000 or less in employment taxes each year as Form 944 filers. The IRS plans to notify those who will file Form 944 each February. Form 944 filers file and pay employment taxes once a year (by January 31 for the prior year).

Quarterly "De Minimis" Deposit Rule

Employers with an accumulated tax liability of less than $2,500 for a quarter can deposit the next quarter's liability according to their monthly or semiweekly depositor status or pay it with their Form 941 quarterly return. This safe harbor also applies if the employer's employment tax liability was less than $2,500 for the immediately preceding quarter

Shortfall deposit rule

For monthly depositors, the amount of the shortfall must be deposited or remitted by the due date of the quarterly return for the quarter during which the employment tax liability was incurred. Circular E and the instructions for Form 941 make it clear that this is the only situation in which an employer can pay more than $2,500 with its Form 941. For semiweekly depositors, the shortfall must be deposited by the first Wednesday or Friday occurring on or after the 15th of the month after the month during which the original deposit was required to be made or, if earlier, by the due date of the quarterly employment tax return. Semiweekly depositors cannot send in the shortfall payment with their Form 941. It must be deposited using EFTPS.

A semiweekly depositor that has a payroll tax liability of $50,000.00 from a Monday payroll must deposit the liability by:

Friday

one day deposit

If an employer's accumulated employment tax liability reaches $100,000 on any day during a monthly or semiweekly deposit period, the taxes must be deposited by the close of the next business day. In determining whether the $100,000 threshold is met: monthly depositors consider only those taxes accumulated during the current calendar month, not any previous months; and semiweekly depositors take into account only those taxes accumulated during the current Wednesday-Friday or Saturday-Tuesday semiweekly period.

Federal Deposit frequency

If an employer's four quarterly Forms 941, Employer's Quarterly Federal Tax Return (see Tax Tables and Forms in the Online Resource Center), during the lookback period show a total federal income withholding, social security, and Medicare tax liability of $50,000 or less, the employer is a "monthly depositor" for the upcoming year. If the total liability exceeds $50,000, the employer is a "semiweekly depositor."

Purpose of Form 941-X

If employers have properly repaid overwithheld amounts to employees, they can claim a credit against taxes due by making an adjustment on Form 941-X. For federal income tax repayments, the adjustment can be made on any Form 941-X filed for the same calendar year the error occurred and was discovered. For social security or Medicare tax repayments, the adjustment must be made no later than the due date for Form 941 filed for the quarter during which the error was discovered but no later than 3 years from the due date of the return filed which contained the error. For Forms 941, 943, 944, and 945, the period of limitations due date is April 15 of the year after the close of the tax year. For example, an error in 2013 must be corrected by April 15, 2017.

Copy B of Form W-2 is due to the employee no later than:

January 31.

Form 843 Purpose and Reporting/Filing Requirements

Purpose of Form Use Form 843, Claim for Refund and Request for Abatement, to file a claim for abatement of assessed interest and penalties. For example, use Form 843 to request abatement of an overassessment (or the unpaid portion of an overassessment) if more than the correct amount of interest or penalties has been assessed.

Deposit Schedule

Semiweekly depositors with a tax liability of less than $100,000.00 deposit employment taxes according to the following schedule: Payday Saturday - Tuesday=The following Friday Wednesday - Friday= The following Wed. Semiweekly depositors with a tax liability of $100,000.00 or more must deposit employment taxes by the close of business on the next business day.

Lookback period

To determine the frequency of payroll tax deposits the IRS uses a 12-month period called the lookback period EX: For calendar year 2016, the lookback period is July 1, 2014-June 30, 2015. For calendar year 2017, the lookback period is July 1, 2015-June 30, 2016.

An employer paid the following wages during the first quarter of 2016: Employee 1 - $5,200 Employee 2 - $7,800 Employee 3 - $2,600 Employee 4 - $20,800 Employee 5 -$15,600 Employee 6 -$4,420. Calculate the employer's first quarter FUTA tax liability assuming the company receives all possible FUTA tax credits.

answer 199.32

Based on the following YTD information for an employee, calculate the amount to report on Form W-2 in Box 1. Gross Earnings: $48,500.00 401(k) employee ROTH contribution: $5,000.00 Company 401(k) match: $2,500.00 Salary reduction Section 129 dependent care: $4,500.00 Company store purchase deduction: $4,000.00 Section 125 medical: $370.00 Charitable Contribution: $350.00.

answer: $43,630 48,500- 4,500 (salary reduction dependent care)- 370 (pre-tax 125)= 43,630

When a monthly depositor's liability from a pay day exceeds $100,000.00, it must deposit taxes by the:

next business day and follow the semiweekly schedule thereafter.

A company is a monthly depositor. Its paydays are on Wednesdays. If the payroll tax liability for the month is less than $100,000.00, the company's payroll tax deposit is due:

on or before the 15th day of the following month.

A semiweekly depositor's payday is Friday. If the company's tax liability for a pay period is $60,000.00, the company's payroll tax deposit is due:

on or before the Wednesday following the payday.

A semiweekly depositor's payday is Friday the 10th. The following Wednesday, the company deposits 98% of its accumulated payroll tax liability. The shortfall is due:

on the next Wednesday or Friday after the first of the next month.

If the FUTA tax liability is more than $500.00, when must the FUTA tax be deposited?

quarterly