Payroll Accounting

For calculating the OASDI taxes, the maximum self-employment taxable income of any individual is $_____ (2012). For HI taxes, the _____ self-employment income is taxable.

-$110,100 -total

military government employees coverage

-basic pay: full FICA taxes -excess of basic pay: not subject to FICA tax -temp. service with national guard; difference in oay covered by civilian employer: subject to FICA tax

federal government employees coverage

-hired after 1983: full coverage -hired prior to 1984: only Medicare applies

Who does not have to file Form 941?

-seasonal employers -small employers -employers of farm workers -household employers

state and local government employees coverage

-work done after 7/1/1991 and not in public retirement plan: full coverage -hired after 3/31/1986 and covered by a public retirement plan: Medicare only

Two electronic methods of deposit are...

1. EFTPS (direct) 2. EFTPS (through a financial institution

requirments of an individual to be covered under FICA

1. If the individual is an "employee" according to the common law. 2. If the service the individual renders is "employment" according to FICA tax law. 3. If the compensation the individual receives is "taxable wages" according to FICA tax law.

Criminal penalties exist for people involved in situations such as...

1. Knowlingly and willfully using a SSN obtained w/ false info. 2. Using someone else's SSN 3. Altering a SS card 4. Buying or selling a card claimed to be issued by the secretary 5. possessing a card or counterfeit card with the intent to sell or alter it

Exempt employees from FICA include...

1. Pastors/ministers (form with the IRS) 2. medical interns 3. student nurses 4. inmates of US penal institutions 5. those serving temporarily in case of emergency (storm, flood, etc.)

Every employer who is required to withhold income taxes from wages or who is liable for SS taxes must file...

1. a quarterly or an annually tax and info return (Form 941 or 944) 2. an annual return of withheld federal income taxes (Form 945)

Wages include...

1. actual money received by employees 2. cash value of meals and lodging provided for the convenience of the employees 3. bonuses and commissions paid by the employer with respect to employment

independent contractors under common law, but are still covered by FICA

1. agent drivers and commission drivers 2. full-time life insurance salespersons 3. full-time traveling or city salespersons for one firm or person 4. an individual who works at home on materals or goods that you supply

Self-employed persons determine their net earnings by finding the sum of.....

1. gross income 2. individual's distributive share

Making entries on the FICA return form 1. dollar signs and decial points _______ 2. zero value line item _____ 3. negative amounts ________

1. not used 2. leave blank 3. use "minus" sign

When can wages paid by the prior employer be counted towards OASDI wage base by a successor employer?

1. the successor has aquired all the property used in the prior employer's business. 2. the affected employees were employed immediately before and continued working right after the transfer of the business. 3. wages were paid by the prior employer during the calendar year of acquisition.

Household employees do not include people who...

1. work for you in your business 2. follow an independent trade, business, or profession in which they offer services to the general public 3. are under the age of 18 unless their principal occupation is household employment

work performed for a parent by a child under the age of ____ is exempt from FICA

18

The Self-Employment Contributions Act (SECA) extended coverage under the social security system of the self-employed in ______.

1951

payments for non-job related educational expenses up to $______ are exempt from FICA taxes.

5,250

The first ___ months of sick pay an employee receives is considered wages and is subject to FICA tax.

6

What are the electronic programs used for filing Form 941?

941 e-file programs 941 online filing programs electronic 941 filing for reporting agents

Qualified terminated employees must be given the option of continued coverage (up to 15 months) under the company's group health insurance plan.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

What must the employers enter on all returns, forms, and correspondence sent to the District Director of Internal Revenue that relate to the taxes imposed under FICA?

Employer Identification Number (EIN)

T/F Employers pay or withhold payroll taxes on payments made to independent contractors.

Fales. They do NOT pay or withhold payroll taxes

Employers Annual Federal Tax Return

Form 944

Form associated with EFTPS that an employer must complete in order to enroll in the program

Form 9779 EFTPS Business and Enrollment Form

What does an alien file if they are not eligible for a social security number?

Form W-7 Application for IRS Individual Taxpayer Identification Number (ITIN)

OASDI tax formula:

IF: cumulative wages + current wage payment < OASDI wage base THEN: compute the tax on the entire wage payment IF: cumulative wages + current wage payment > OASDI wage base THEN compute the tax on the part of the current wage payment that brings the cumulative wages up to the taxable wage limit

What month of the year does the IRS notify employers whether they will be a monthly or a semiweekly depositor for the next calendar year?

November

No Deposits

Recorded accumulated employment taxes of less than $2,500 for the whole calendar quarter

One-Day Rule

Reported $100,000 or more in undeposited taxes on any day during a deposit period

Monthly Depositor

Reported $50,000 or less during a lookback period

Semiweekly Depositor

Reported more that $50,000 in a lookback period

1. The amount of any shortfall (under deposit) does not exceed the greater of $100 or 2% of the amount of employment taxes required to be deposited. 2. The employer deposits the shortfall on or before the shortfall makeup date.

Safe Harbor Rule

sole proprietors report their self-employment income by transferring certain data from _______ to __________.

Schedule C (Form 1040) to Schedule SE (Form 1040)

SECA uses an individual's ____________ as the basis for levying taxes and for determining the amount of income to credit toward OASDI insurance benefits or HI coverage.

Self-Employment Income

Under the Social Security Act, every employee and every self-employed person must have a _________.

Social Security Number (SSN) Filed with Form SS-5

T/F If the owner of a business sells or otherwise transfers a business, the new owner must file an application for a new identification number.

TRUE

refers to the expenses that an employer pays for an employee's education, such as tuition, fees, and payments for books, supplies, and equipment.

educational assistance

A _________ consists os four quarters beginning July 1 of the second preceding year and ending June 30 of the prior year.

lookback period

In order for household employees to be covered under FICA they must.....

make $1,800 or more in cash wages from any one employer within a year.

When are you supposed to file Form 941?

on or before the last day of the month following the close of the calendar quarter for which the return applies

Employee and Employer HI rate and wage base:

rate-1.45% wage base-NONE

Employee OASDI rate and wage base:

rate-4.20% wage base-$110,100

Employer OASDI rate and wage base:

rate-6.20% wage base-$110,100

the excess of the amount of employment taxes required to be deposited over the amount deposited on or before the last date prescribed for the deposit

shortfall

Once the OASDI __________ has been reached, all payments made to the employee during the remainder of the year are not taxable.

taxable wage base