2010ps Section 08

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: B

Uncollected Medicare tax on tips

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: N

Uncollected Medicare tax on value of group-term life insurance coverage over $50,000

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: A

Uncollected social security tax on tips

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: M

Uncollected social security tax on value of group-term life insurance coverage over $50,000

2010 Payroll Source Review Question Section 8 2. Define the shortfall rule for semiweekly depositors.

Under the "shortfall" rule, employers are not penalized for depositing a small amount less than the entire amount of their deposit obligation. An employer satisfies its deposit obligation if the shortfall is no more than the greater of $100 or 2% of the entire amount due and the shortfall is made up by the appropriate "make-up" date.

2010 Payroll Source Review Question Section 8 17. What is the penalty for late filing of employment tax returns?

Unless an employer has reasonable cause and is not guilty of willful neglect, late filing of Form 941 or other employment tax returns results in an "addition to tax," the amount of which depends on how late the return is filed. The amount is: 5% of the amount of tax required to be shown on the return (after accounting for deposits and credits) for each month or fraction of a month that the return is late, to a maximum of 25% (15% per month to a maximum of 75% of the unpaid tax if the late filing is fraudulent).

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: C

Value of group-term life insurance over $50,000

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: D

Section 401(k) elective deferrals

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: E

Section 403(b) elective deferrals

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: F

Section 408(k)(6) elective deferrals

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: G

Section 457(b) elective deferrals

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: H

Section 501(c)(18)(D) elective deferrals

2010 Payroll Source Problems Section 8 8. Better Build PC electronically filed all of its information returns-500 Forms W-2-on time with the SSA, but it did not file its 50 Forms 1099-MISC with the IRS until August 10. What is the penalty for late filing?

$2500

2010 Payroll Source Problems Section 8 9. An employer is required to file information returns electronically, but instead mailed 380 paper Forms W-2 on time with the correct information. How many returns are subject to the failure-to-file penalty?

131

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: T

Adoption benefits

2010 Payroll Source Review Question Section 8 13. What are the requirements for filing Form 941 by employers that are going out of business?

An employer that will no longer be in business and will not be paying wages subject to federal income withholding, social security, and Medicare taxes should do the following: • check the box on Line 16 when completing its last Form 941 indicating that it will not file any returns in the future; • enter the date that final wages were paid; • attach a statement showing the address where the employer's records will be kept, the name of the person keeping the records, and, if the business has been sold or transferred, the name and address of the new owner and the date of the sale or transfer; • file the Form 941 by the end of the first month after the end of the quarter during which the employer stopped paying wages; and • file Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consolidations, if the employer is no longer in business as the result of a statutory merger or consolidation, or if it qualifies as a predecessor or successor after an acquisition.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: P

Excludable moving expense reimbursements paid to employees

2010 Payroll Source True or False Question Section 8 19. Allocated tips should be included in Box 1 of Form W-2.

F. Allocated tips should not be included in Box 1, 5, or 7 of Form W-2, but they should be included in Box 8.

2010 Payroll Source True or False Question Section 8 3. The shortfall rule allows an employer to deposit 95% of its payroll tax liability without a penalty.

F. At least 98% of the tax liability (or the liability - $100, if that is less) must be deposited to avoid a late payment penalty.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: Y

Deferrals under a Section 409A nonqualified deferred compensation plan

2010 Payroll Source Review Question Section 8 3. What are the rules regarding the timeliness of mailed payroll tax deposits?

Deposits that are mailed through the U.S. Postal Service are considered timely if postmarked at least two days before the due date. However, deposits of $20,000 or more made by a semiweekly depositor must be received by the deposit due date. This rule also applies to private delivery services if they have qualified under IRS rules as "designated"

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: BB

Designated Roth contributions to Section 403(b) plan

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: AA

Designated Roth contributions to a Section 401(k) plan

2010 Payroll Source Review Question Section 8 7. What is the purpose of Form 941-M?

Employers that fail to withhold or deposit taxes or file returns on time may be required by the IRS to report employment taxes monthly on Form 941-M rather than quarterly.

2010 Payroll Source Review Question Section 8 14. On Form 941, how does the employer treat fractional cents that cause differences in calculating the employer's and employees' social security and Medicare taxes?

Enter on Line 7a the difference between the total security and Medicare taxes on Line 5d and the amount actually withheld from employees' wages and paid by the employer that is due to rounding to the nearest penny.

2010 Payroll Source True or False Question Section 8 12. Payroll tax deposits that are mailed through the U.S. Postal Service are considered timely if postmarked at least one day before the due date.

F. Deposits by U.S. mail are considered timely if postmarked at least two days before the due date, although deposits of $20,000 or more made by semiweekly depositors must be received by the deposit due date.

2010 Payroll Source True or False Question Section 8 1. Employers that deposited more than $50,000 in withheld income and employment taxes in 2008 face a 10% penalty if they do not make their tax deposits through EFTPS for liabilities incurred on or after January 1, 2010.

F. Employees with less than $200,000 in total tax deposits in 2008 do not have to use EFTPS in 2010 unless they were required to use it in 2009.

2010 Payroll Source True or False Question Section 8 9. The Form 941 payroll tax deposit look back period for calendar year 2010 is January 1, 2009 - June 30, 2009.

F. For calendar year 2010, the payroll tax deposit look back period is July 1, 2008 - June 30, 2009.

2010 Payroll Source True or False Question Section 8 6. An EIN is obtained from the Social Security Administration using Form SS-4.

F. Form SS-4 is filed with the IRS, not the SSA.

2010 Payroll Source True or False Question Section 8 24. All paper Forms 1099 must be sent to the SSA with the appropriate transmittal form by February 28 of the year following the year in which payments were made.

F. Forms 1099 must be sent to the IRS Service Center listed on the 1099 series instructions.

2010 Payroll Source True or False Question Section 8 20. Employers wishing to use substitute W-2 forms should send a sample to the IRS for approval prior to use.

F. In general, employers wishing to use substitute W-2 forms should not send a sample to the IRS or SSA for approval prior to use.

2010 Payroll Source True or False Question Section 8 2. New employers deposit their payroll tax liability as a semiweekly depositor.

F. New employers are classified as monthly depositors.

2010 Payroll Source True or False Question Section 8 23. Nonprofit organizations engaged in a trade or business are exempt from the 1099 reporting requirements.

F. Nonprofit organizations engaged in a trade or business are not exempt from Form 1099 reporting requirements.

2010 Payroll Source True or False Question Section 8 15. If a monthly depositor has a total tax liability for a quarter of less than $2,500, the employer must pay it with Form 941.

F. The employer has the option to either deposit the amount or pay it with Form 941.

2010 Payroll Source True or False Question Section 8 10. An employer has accumulated payroll taxes on Form 941 of $42,000 during the 2010 look back period. The employer is a semiweekly depositor for 2010.

F. The employer is a monthly depositor for 2010 because its total payroll tax liability for the 2010lookback period is less than $50,000.

2010 Payroll Source True or False Question Section 8 7. If a semiweekly period overlaps quarters and you have two paydays--one in each quarter--you can choose which quarter to include the wages for purposes of making payroll tax deposits.

F. This scenario creates 2 separate deposit obligations that must be satisfied by the same day.

2010 Payroll Source True or False Question Section 8 17. When receiving under collected taxes from employees, any over collection of taxes from one employee may be used to offset an under collection from another.

F. When recovering under collections from employees, each employee must be treated separately, so an over collection of taxes from one employee cannot be used to offset an under collection from another.

2010 Payroll Source Review Question Section 8 4. What is Form 8109 and what is it used for?

Form 8109 is a Federal Tax Deposit Coupon, and it is used to deposit withheld federal income and employment taxes (among other taxes) with a financial institution that is authorized to accept federal tax deposits.

2010 Payroll Source Review Question Section 8 16. What form is used to record nonpayroll withheld taxes?

Form 945,Annual Return of Withheld Federal Income Tax.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: W

Health savings account contributions

2010 Payroll Source Review Question Section 8 6. What must be done with an undeliverable Form W-2c?

If a Form W-2c cannot be delivered to an employee after a reasonable effort to do so have been made, the employer must keep the form for four years.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: Z

Income under Section 409A on a nonqualified deferred compensation plan

2010 Payroll Source Review Question Section 8 5. What is the 100% penalty?

Individuals who are responsible for collecting, accounting for, and paying over withheld income and employment taxes and who willfully fail to do so are subject to an additional penalty equal to the total amount of the taxes owed. This is known as the "Trust Fund Recovery Penalty" or the "100% penalty."

2010 Payroll Source Review Question Section 8 10. Ken's Bike Shop began operating on March 5, 2010 and files Forms 941 for the remainder of 2010. What is Ken's Form 941 look back period for 2011?

March 5, 2010 through June 30, 2010.

2010 Payroll Source Review Question Section 8 11. Employer Mark starts business on July 6, 2010. As a new employer, Mark is classified as a monthly depositor. On Friday, July 9, Mark pays wages and accumulates a tax liability of $55,000. On Friday, July 16, Mark again accumulates taxes of $55,000 after his second payday. How much is Mark's deposit obligation? When must it be paid?

Mark's deposit obligation as of July 16 is $110,000. It must be deposited by the close of the next banking day (Monday, July 19). Mark becomes a semiweekly depositor for the rest of 2010 and all of 2011.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: R

Medical savings account contributions

2010 Payroll Source Review Question Section 8 1. What are the general deposit requirements for monthly, semiweekly and one-day depositors?

Monthly depositors must deposit their accumulated tax liability for each calendar month by the 15th of the following month. Semiweekly depositors must deposit their payroll tax liability for wages paid on Wednesday, Thursday and Friday by the following Wednesday. The payroll tax liability for wages paid on Saturday, Sunday, Monday, and Tuesday must be paid by the following Friday. If an employer's accumulated payroll tax liability reaches $100,000 on any day during a monthly or semiweekly deposit period, the liability must be deposited by the close of the next banking day.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: V

Nonstatutory stock options

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: Q

Nontaxable combat pay

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: L

Nontaxable part of employee business expense reimbursements

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: S

SIMPLE retirement account contributions

2010 Payroll Source Review Question Section 8 15. What is Schedule B used for?

Schedule B records an employer's payroll tax liability, not its deposits. Semiweekly depositors at any time during a quarter must file a Schedule B with Form 941.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: J

Sick pay not included as income

2010 Payroll Source True or False Question Section 8 11. If an employer accumulates taxes of $100,000 or more on any one day during a deposit period, it must deposit the liability by the next banking day.

T

2010 Payroll Source True or False Question Section 8 13. Government employers that withhold federal income tax and only the Medicare portion of FICA taxes must report these taxes on Form 941.

T

2010 Payroll Source True or False Question Section 8 14. If an employer sells or transfers its business, a separate Form 941 must be filed by both the previous and current owners for the quarter in which the sale took place.

T

2010 Payroll Source True or False Question Section 8 16. Copy A of all paper W-2 Forms and Form W-3 must be filed with the SSA by the last day of February of the year following the calendar year for which wages are reported.

T

2010 Payroll Source True or False Question Section 8 18. Where there has been a merger or consolidation of two employers and one survives, the surviving corporation is considered to be the same employer as the acquired company and therefore must provide Forms W-2 to all the employees of the acquired company.

T

2010 Payroll Source True or False Question Section 8 21. Dollar amounts should be entered on Form W-2 without commas or dollar signs.

T

2010 Payroll Source True or False Question Section 8 22. Form W-3 is used only by employers that file paper Copies A of Form W-2 with the SSA.

T

2010 Payroll Source True or False Question Section 8 25. Businesses that must file 250 or more Forms 1099-MISC are required to file them electronically.

T

2010 Payroll Source True or False Question Section 8 4. New employers that must make a deposit before being assigned an EIN must make their deposit with the IRS service center where they will file their returns.

T

2010 Payroll Source True or False Question Section 8 5. Employers are entitled to a 10-day filing extension for Form 941 if they have deposited all payroll taxes when due throughout the quarter.

T

2010 Payroll Source True or False Question Section 8 8. A new EIN is necessary if a new corporation emerges from a consolidation that does not qualify as a reorganization.

T

2010 Payroll Source Review Question Section 8 8. What steps must be taken to obtain an EIN by phone?

Take the following steps to obtain an EIN by phone: • complete Form SS-4 before calling; • call 800-829-4933; • provide the requested information from Form SS-4; and • if requested by the IRS representative, mail or fax Form SS-4 within 24 hours to the Tele TIN unit at the address provided by the representative.

2010 Payroll Source Problems Section 8 Box 12 of W-2, Code: K

Tax on excess golden parachute payments

2010 Payroll Source Review Question Section 8 19. Which amounts on Forms 941, W-2, and W-3 does the SSA compare to make sure employers are taxing and reporting wages correctly?

The amounts compared by the SSA include: • social security wages, • social security tips, • Medicare wages and tips, and • advance earned income credit payments.

2010 Payroll Source Review Question Section 8 12. Outline the penalties for failing to make payroll tax deposits on time.

The following are the penalties for not making payroll tax deposits on time: • 2% of the undeposited amount if it is deposited within 5 days of the due date; • 5% of the undeposited amount if it is deposited within 6-15 days of the due date; • 10% of the undeposited amount if it is deposited more than 15 days after the due date; or • 15% of the undeposited amount if it is not paid within 10 days after the employer receives its first IRS delinquency notice or on the same day that a notice and demand for payment is received.

2010 Payroll Source Review Question Section 8 20. What are the penalties for failure to file information returns on time and with correct information?

The general penalties for failure to file information returns on time and with correct information are as follows: • $15 per return if the failure to file or provide correct information is corrected within 30 days after the due date, with a maximum penalty of $75,000 a year ($25,000 for small businesses); • $30 per return if the failure to file or provide correct information is corrected more than 30 days after the due date but before August 1 of the same year the return is due, with a maximum penalty of $150,000 a year ($50,000 for small businesses); and • $50 per return if the failure to file or provide correct information is not corrected by August 1, with a maximum penalty of $250,000 ($100,000 for small businesses).

2010 Payroll Source Review Question Section 8 9. What is the look back period for determining an employer's Form 941 payroll tax depositor status?

The look back period is the 12-month period running from July 1 of the second previous year through June 30 of the previous year.

2010 Payroll Source Review Question Section 8 18. What is the purpose of backup withholding?

The purpose of backup withholding is to ensure that income tax is paid on income reported on Form 1099.

2010 Payroll Source Problems Section 8 7. Blare Textiles electronically files all of its information returns-l,400 Forms W-2-on time with the SSA, 30 of which contain incorrect information. Corrections were made on May 10. a. How many returns are subject to penalty? b. What is the penalty?

a. 20 b. $600

2010 Payroll Source Problems Section 8 6. World Wide Express electronically files all of its information returns-2,600 Forms W-2-On time with the SSA, 40 of which contain incorrect information. Corrections were made on May 30. a. How many returns are subject to penalty? b. What is the penalty?

a. 27 b. $810.00

2010 Payroll Source Multiple Choice Question Section 8 21. On Form W-2, what box is used to report wages, tips, and other compensation? a. Box 1 b. Box 10 c. Box 12 d. Box 14

a. Box 1

2010 Payroll Source Multiple Choice Question Section 8 23. What code is entered in Box 12 of Form W-2 when the value of group-term life insurance over $50,000 is reported? a. Code C b. Code D c. Code E d. Code F

a. Code C

2010 Payroll Source Multiple Choice Question Section 8 9. What form is completed by new employers when requesting an EIN? a. Form SS-4 b. Form SS-5 c. Form SS-8 d. Form W-9

a. Form SS-4

2010 Payroll Source Multiple Choice Question Section 8 3. Where does the employer send Form 1099-MISC? a. IRS b. SSA c. USCIS d. Wage and Hour Division

a. IRS

2010 Payroll Source Multiple Choice Question Section 8 13. XYZ Corporation, a semiweekly depositor, has a payroll tax liability of $65,000 on the first Thursday in December 2010. When must the liability be deposited? a. The following Wednesday b. The following Friday c. The 15th of the following month d. With the quarterly Form 941

a. The following Wednesday

2010 Payroll Source Multiple Choice Question Section 8 15. Adjustments for fractional cents are reported on what line of Form 941? a. 8 b. 7a c. 4 d. 9

b. 7a

2010 Payroll Source Multiple Choice Question Section 8 25. What is the transmittal form that accompanies each Form 1099 series if the forms are filed on paper? a. Form W-3 b. Form 1096 c. Form 8109 d. Form 1099-R

b. Form 1096

2010 Payroll Source Multiple Choice Question Section 8 17. What form must be filed to report and explain corrections to amounts previously reported on Form 941? a. Form 941-M b. Form 941-X c. Form 843 d. An amended Form 941

b. Form 941-X

2010 Payroll Source Multiple Choice Question Section 8 11. How frequently are new employers that anticipate having an annual tax liability of more than $1,000 required to make withheld federal income and employment tax deposits? a. Semiweekly b. Monthly c. The next banking day d. Quarterly

b. Monthly

2010 Payroll Source Multiple Choice Question Section 8 14. Northwestern Shipping Corp. accumulates payroll tax liability on the Friday before Labor Day of $131,640. When is the deposit due? a. The Friday before Labor Day b. The following Tuesday c. The following Wednesday d. The following Friday

b. The following Tuesday

2010 Payroll Source Multiple Choice Question Section 8 7. When must a semiweekly depositor with a Friday payday deposit its employment tax liability? a. The following Tuesday b. The following Wednesday c. The following Thursday d. The following Friday

b. The following Wednesday

2010 Payroll Source Multiple Choice Question Section 8 8. What are the due dates for Form W-2? a. To employees and SSA by Jan. 31 b. To employees by Jan. 31 and to SSA by the last day of February (March 31 if filed electronically) c. To employees and IRS by Feb. 28 d. To employees by Jan. 31 and to IRS by Feb. 28

b. To employees by Jan 31 and to SSA by the last day of February (March 31 if filed electronically)

2010 Payroll Source Multiple Choice Question Section 8 22. Employer-provided dependent care assistance must be reported in Boxes 1, 3, and 5 of Form W-2 when the assistance exceeds what amount? a. $2,000 b. $3,000 c. $5,000 d. $7,500

c. $5,000

2010 Payroll Source Multiple Choice Question Section 8 24. What is the threshold amount for requiring reporting of service payments to individuals who are not employees on Form 1099-MISC? a. $10 b. $400 c. $600 d. $550

c. $600

2010 Payroll Source Multiple Choice Question Section 8 5. If a monthly depositor accumulates $100,000 in tax liability on any day during a month, how does this affect the employer's depositor status? a. Remains monthly b. Becomes semiweekly for the rest of the year c. Becomes semiweekly for the rest of the current year and all of next year d. Becomes a one-day depositor for the rest of the year

c. Becomes semiweekly for the rest of the current year and all of next year

2010 Payroll Source Multiple Choice Question Section 8 19. To satisfy federal, state, and local taxing agency requirements, which copies of the Form W-2 must the employee receive by January 31? a. Copies A, B, & C b. Copies B, C, & 1 c. Copies B, C, & 2 d. Copies B, 1, & 2

c. Copies B, C, & 2

2010 Payroll Source Multiple Choice Question Section 8 1. When depositing withheld income and employment taxes, what form must be used by a paper depositor? a. Form 941-X b. Form SS-4 c. Form 8109 d. Form 945

c. Form 8109

2010 Payroll Source Multiple Choice Question Section 8 6. What is the Form 941 tax deposit look back period for calendar year 2010? a. July 1, 2007 - June 30, 2008 b. Jan. 1, 2007 - Dec. 31, 2007 c. July 1, 2008 - June 30, 2009 d. Jan. 1, 2009 - Dec. 31, 2009

c. July 1, 2008 June 30, 2009

2010 Payroll Source Multiple Choice Question Section 8 12. On May 31, a monthly depositor's payroll tax liability is $15,000. When is the deposit due? a. June 7 b. June 1 c. June 15 d. June 30

c. June 15

2010 Payroll Source Multiple Choice Question Section 8 20. When an employee leaves employment before the end of the calendar year and requests Form W-2 in writing, how long does the employer have to send it? a. 10 days from the request b. 15 days from the request c. 20 days from the request d. 30 days from the request

d. 30 days from the request

2010 Payroll Source Multiple Choice Question Section 8 4. Distributions from retirement plans and payments of matured annuity, endowment, and life insurance contracts must be reported on what form? a. Form W-2P b. FormW-2 c. FormW-3 d. Form 1099-R

d. Form 1099-R

2010 Payroll Source Multiple Choice Question Section 8 18. What form is used to request a credit for overpaid taxes? a. Form 941 b. Form 843 c. Form 940 d. Form 941-X

d. Form 941-X

2010 Payroll Source Multiple Choice Question Section 8 10. What form is used to report backup withholding? a. Form 941 b. Form 942 c. Form 943 d. From 945

d. Form 945

2010 Payroll Source Multiple Choice Question Section 8 2. When an employer has been unable, after a reasonable effort, to deliver an employee's copies of Form W-2, how long must it keep those copies or be able to reproduce the electronic file containing the employee's W-2 information? a. Five years b. Three years c. Two years d. Four years

d. Four years

2010 Payroll Source Multiple Choice Question Section 8 16. If an employer over withholds federal income tax from its employees' wages and discovers the error after filing Form 941 for the quarter during which the error was made, which option is not available to the employer? a. The employer may reimburse the employee for the over withheld amount b. The employer may reduce future withheld taxes during the same calendar year that the error occurred c. The employer may apply the over withheld amount to the next calendar quarter in the same year that the error occurred d. The employer may apply the over withheld amount to the following year to reduce the amount withheld in the new year

d. The employer may apply the over withheld amount to the following year to reduce the amount withheld in the new year.