Payroll Chapter 5 (Exam #3)

Colleges are not required to pay FUTA for part-time student workers.

Charlie Kapoor is a full-time student at Wenonah College and works part-time in the school's maintenance department. Must the college pay a FUTA tax on Kapoor's earnings?

Negative-balance Employers

Employers whose reserve accounts have been charged for more benefits paid out than contributions paid in

b. are usually considered wages whether or not the employer must legally make the payments. However, some states do not consider them wages.

For SUTA wage calculation purposes, dismissal payments: a. are never included. b. are usually considered wages whether or not the employer must legally make the payments. However, some states do not consider them wages. c. are always exempt. d. are treated like tips in all 50 state plus Puerto Rico.

Employer's who are subject to FUTA are required to file Form 940.

For an employer who is subject to FUTA, what is the basic form that must be filed with the federal government?

c. $2,112.60

Geno's Genesis LLC paid wages of $666,900 for the year. Included in the payments was $4,800 to a director who attended quarterly board of director meetings. The amount of wages paid to hourly/salaried employees over $7,000 for each employee equaled $310,000. How much was Geno's FUTA tax for the year? a. $2,141.41 b. $21,126.00 c. $2,112.60 d. cannot be determined from information provided

Pretax Contributions by employers into cafeteria plans are presented on line 4 of the Form 940.

How are pretax contributions by employees into cafeteria plans presented on Form 940?

Taxable wages are computed on the annual return by: 1) Calculating Total Wages, then subtract $7,000, then multiply by 0.6%. 2) Once, the employer earns $7,000, the employer no longer needs to pay FUTA or SUTA

How are taxable wages computed on the Form 940 annual return?

An employer files an amended Form 940 by checking the "amended" box on the Form 940. The new #'s should be on the form. Also, it should be signed and there should be an explanation of the reasons for filing an amended return should be attached.

How does an employer file an amended Form 940?

An employer pays FUTA taxes by using the electronic federal tax payment system. The transaction must be 1 day before the due date of the deposit.

How does an employer pay the FUTA taxes?

Each state can set an initial contribution rate for a new employee.

How is the SUTA tax rate determined for a new employer?

Employer's file wage and contribution reports with their State quarterly.

How often do employers file wage and contribution reports with their states?

c. the FUTA report is an annual tax return filed with the IRS, whereas the SUTA reports are filed periodically with the state.

The primary difference between a FUTA and SUTA periodic report is: a. the FUTA report is quarterly, whereas the SUTA reports are filed annually. b. the SUTA report is filed with the IRS, whereas the FUTA report is filed with the Social Security Administration. c. the FUTA report is an annual tax return filed with the IRS, whereas the SUTA reports are filed periodically with the state. d. there is no difference, they are replicated reports.

b. the status report.

The report that determines the employer's liability for making contributions into the state unemployment fund is a. the Form 940. b. the status report. c. the contribution report. d. the wage information report.

1) Check a box on Form 940, indicating that it is the last return. 2) A name and address of the person who is in charge of the required payroll records must be included 3) If the business is sold or transferred, the name and new address of the acquiring company should be included in the statement

What special steps must be taken when completing Form 940 for a company that has ceased operations during the year?

1) Wages are greater than $1,500 or more during the calendar year 2) Employs 1 or more persons on at least 1 day in each 20 calendar weeks

What two alternative tests are applied to a business in order to judge whether it is an "employer" and therefore subject to the FUTA tax?

An employer pays FUTA taxes when there is a tax liability of $500 or greater.

When does an employer pay the FUTA taxes?

B) end of the month after the quarter

When making a payment of FUTA taxes, the employer must make the payment by the: A) end of the following quarter B) end of the month after the quarter C) 10th of the month after the quarter D) same day of the FICA and FIT deposits E) 15th of the month after the quarter

Form 940 must be filed by January 31st & February 10th if everything is correct.

When must Form 940 be filed?

Wage Information Reports

statements filed by the employer, usually with the quarterly contribution report, which list employee names, social security numbers, taxable wages, taxable tips, state in which worker was employed during the reported quarter, and employer's federal account number.

Credit Reduction State

states that have borrowed federal funds to pay state unemployment benefits and have failed to repay the loans within the allotted time period.

Positive-balance employers

those who have built up a balance in their reserve accounts (contributions paid in less benefits charged).

Pooled-fund laws

unemployment insurance system wherein the cost of unemployment benefits is spread among all employers in a particular state.

Separation Report

report that provides a wage and employment record of the separated employee and the reason for leaving.

d. An employer operates in more than one state.

A Schedule A (attached to a Form 940) is prepared when: a. An employer pays wages of more than $7,000 per employee per year. b. Form 940 is electronically filed with a ten-digit PIN. c. A paid preparer signs the Form 940. d. An employer operates in more than one state.

C) employers only

A federal unemployment tax is levied on: A) government employers only B) no one C) employers only D) both employers and employees E) employees only

d. Form 940.

A variety of SUTA reports need to be filed with respective state governments. Which of the following are not a type of required report: a. Status reports. b. Wage information reports. c. Partial unemployment notices. d. Form 940.

b. caddy fees.

All of the following are considered taxable for unemployment purposes except a. Christmas gifts. b. caddy fees. c. prizes for outstanding work. d. dismissal payments.

E) $500

An employer must pay the quarterly FUTA tax liability if the liability is more than: A) $1 B) $3,000 C) $1,000 D) $100 E) $500

No, they are not covered.

Are Christmas gifts of nominal value taxable under FUTA?

Yes, they are covered.

Are commissions as compensation for covered employment taxable under FUTA?

No, they are not covered.

Are courtesy discounts to employees taxable under FUTA?

Yes, they are covered.

Are dismissal payments taxable under FUTA?

d. the employer may be required to contribute monthly rather than quarterly.

In the case where an employer is delinquent in paying contributions to the state for SUTA: a. experience ratings may be decreased. b. a 100% penalty may be imposed. c. their employees may not be eligible to collect unemployment benefits. d. the employer may be required to contribute monthly rather than quarterly.

b. $20,040

In the current year, an employer's general ledger showed $805,000 of wage expense. Of this amount, $12,000 will be paid on January 5 of the subsequent year. Wages paid in excess of $7,000 per employee in the current year = $459,000. The gross FUTA tax imposed on the employer is: a. $2,040 b. $20,040 c. $48,300 d. $20,760

No, they are not covered.

Is the reimbursement of ordinary and necessary business expenses taxable under FUTA?

a. Contributions paid by employer for health/accident plans for employees.

Line 4 of the Form 940 is where items that are not included as FUTA wages are adjusted out. Which of the following is not an item that is backed out on line 4? a. Contributions paid by employer for health/accident plans for employees. b. Nondiscretionary bonuses. c. Wages over $7,000 per employee per year. d. Value of a group-term life insurance with a face value of $45,000.

c. $0.

Rio Realty made all of its SUTA payments on a timely basis. If they have the following FUTA taxable wages (by quarter) in the current year: $59,000, $67,000, $42,000, $21,000, then the third quarter required FUTA deposit would be: a. $1,008. b. $500. c. $0. d. $252.

True

T or F: Christmas gifts, excluding noncash gifts of nominal value, are taxable wages for unemployment purposes

True

T or F: FUTA and SUTA coverages extend to U.S. Citizens working abroad for American employers.

False

T or F: In the case of a part-time employee, the employer is not liable to pay any of the employee's earnings.

True

T or F: Services performed in the employ of a religious organization that is exempt from federal income tax are also exempt from FUTA coverage.

True

T or F: The Social Security Act ordered every state to set up an employment compensation program.

b. imposes a tax on employers.

The Federal Unemployment Tax Act (FUTA) a. imposes a tax on both employers and employers. b. imposes a tax on employers. c. requires that tax proceeds are used to pay monthly benefits to unemployed workers. d. provides benefits for the self-employed.

c. convey employee's names, SSNs, taxable wages/tips and number of credit weeks earned by each employee during the quarter.

Wage information reports are primarily intended to: a. determine the employer's liability for making contributions. b. indicate which, if any, employees have claimed benefits against the employer's account in that quarter. c. convey employee's names, SSNs, taxable wages/tips and number of credit weeks earned by each employee during the quarter. d. report quarterly contributions to SUTA.

Pay it with a credit card or the employer may remit it.

What are the options for paying an amount due (under $500) with the filing of Form 940?

1) Employer is late in paying FUTA taxes, and is penalized for it. 2) Employer is located in a Title XII State. 3) Employer is located in a state where those payments aren't taxable by FUTA, but are by SUTA.

What are three situations in which an employer could be liable for a net FUTA tax greater than 0.6 percent?

Household employer is greater than $1,000 or more.

What condition would make a household employer a covered employer under FUTA?

c. most organizations exempted under FUTA are also exempted under the respective state's SUTA; however, there are exceptions such as some nonprofits may be covered under SUTA but not FUTA.

Which of the following is an accurate statement regarding SUTA coverage: a. SUTA coverage is not reliant on any of the same tests as FUTA coverage. b. since SUTA does not exist in every state, one cannot make a blanket statement as pertains to SUTA vs. FUTA coverage. c. most organizations exempted under FUTA are also exempted under the respective state's SUTA; however, there are exceptions such as some nonprofits may be covered under SUTA but not FUTA. d. all companies covered under FUTA are automatically covered under the respective state's SUT

B) Experience-rating Plan

Which of the following provides for a reduction in the employer's state unemployment tax rate based on the employer's experience with the risk of unemployment? A) Voluntary Contribution B) Experience-rating Plan C) Title XII advances D) Pooled-fund laws E) None of these choices are correct

c. A union's payment to its striking members.

Which of the following types of payment are exempt from unemployment taxable wage base: a. Noncash Christmas gifts of significant value. b. Bonuses. c. A union's payment to its striking members. d. Standby payments.

A) Retirement Pay

Which of the following types of payments are NOT taxable wages for federal unemployment tax? A) Retirement Pay B) Dismissal Pay C) Payment under a guaranteed annual wage plan D) Cash prizes and awards for doing outstanding work E) Bonuses as remuneration for services

Separation Report

a report that provides a wage and employment record of the separated employee & the reason for leaving.

Reciprocal Arrangments

agreements between states to provide unemployment insurance coverage and payment of benefits to interstate workers.

Dismissal Payments

amounts paid by employers to workers who have been separated from employment; also known as payments in lieu of notice, separation pay, or terminal leave pay.

Interstate Employee

an individual who works in more than one state.

Partial Unemployment

employment by the individual's regular employer on a reduced scale because of lack of work.

Reserve Ratio Formula

experience-rating plan used in most states, based on: Contributions 2 Benefits Paid 4 Average Payroll.

Partial Unemployment Notices

forms completed by the employer and given to partially unemployed workers so that supplemental unemployment benefits may be obtained.

Title XII Advances

funds borrowed from the federal government by states that, due to financial difficulties, cannot pay their unemployment compensation benefits.

Status Report

initial statement filed by new employers with their state unemployment office, which determines their liability to make contributions into the state unemployment compensation fund.

Experience Rating

method by which employer contribution payments may be adjusted because of a favorable employment record; also known as merit rating.

Voluntary Contributions

payments deliberately made by employers to their state funds in order to qualify for a lower unemployment compensation tax rate.

contribution report

quarterly tax return filed with the state by the employer that provides a summary of the wages paid during the period and shows the computation of the tax or contribution.

Constructively Paid

remunerations that are credited to the account of, or set apart for, an employee so that they may be drawn upon at any time, even though they are not actually possessed by the employee.