CH 4 Payroll Accounting and Taxation
Which of the following cannot be included in a cafeteria plan? a.Group-term life insurance (first $50,000 of coverage) b.Health insurance c.Dependent care assistance (first $5,000) d.Educational assistance e.Self-insured medical reimbursement plan
Educational assistance
(T/F) A sole proprietor with two employees is exempt from the requirements of the federal income tax withholding law.
FALSE
(T/F) A worker with three employers should always claim at least one withholding allowance with each employer.
FALSE
Employers preparing information returns must file which of the following forms to transmit each type of information return: a. A summary form 1099 b. Form 941 c. Form 1096 d. Form 1099-MISC
Form 1096
Which of the following forms is used to report rents paid over $600 to landlords? a.Form 1099-G b.Form 1099-INT c.Form 1099-MISC d.Form 1099-R e.Form 8027
Form 1099-MISC
Which of the following forms is used to report the amount of distributions from pension and retirement plans? a.Form W-3p b.Form W-2c c.Form 1099-R d.Form 1099-PEN e.Form W-4
Form 1099-R
Employees who are exempt from the withholding of federal income taxes are required to submit to their employer ____________ showing the exempt status.
Form W-4
1. ________ include items such as vacation pay, bonuses, commissions, exercised nonqualified stock options, and dismissal pay. Supplemental wages Withholding wages Biweekly wages Nontaxable wages
Supplemental wages
(T/F) Contributions made by the employer into employees' health savings accounts are excluded from the employee's taxable income.
TRUE
Supplemental wages can be paid along with regular wages or paid separately from regular wages. True False
True
The gross amount for supplemental wages is calculated by dividing the intended payment by the difference between 1.0 and the total of the applicable tax rate percentages. True False
True
Commencing in June, Alan Oldt is eligible to receive monthly payments from a pension fund. Oldt may elect to have no income tax withheld from his pension fund payments by indicating this on form _________.
W-4P
Form W-2 refers to ________. Employer's Annual Federal Tax Return Wage and Tax Statement Annual Income Tax Return Transmittal of Wage and Tax Statemen
Wage and Tax Statement
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 a corporation. c.When the contractor has not provided a taxpayer identification number and the contract is $600 or more. d.When the contractor is paid $400. e.All of these choices are correct.
When the contractor has not provided a taxpayer identification number and the contract is $600 or more.
In which of these situations are employer contributions into employees' health savings accounts excluded from the employees' taxable income? a. Only if they earn more than $69,000 per year b. When the employees have high-deductible health insurance c. When the employee has no maximum out-of-pocket medical care expense d. All of these choices are correct.
When the employees have high-deductible health insurance
Both the percentage method and the wage-bracket method of withholding have each of the following characteristics except a. a table of allowances values is used b. unmarried persons are distinguished from married persons c. the standard deduction is taken into account
a table of allowances values is used
Which of the following fringe benefits is taxable? a. membership in a country club b. use of on-premise athletic facility c. job-placement assistance
membership in a country club
Mattola Company is giving each of its employees a holiday bonus of $100 on December 13, 20-- (a nonpayday). The company wants each employee's check to be $100. The supplemental tax percent is used. Nobody has capped for OASDI prior to the bonus check. a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes) You may need to add one penny to the gross so that net bonus is exactly $100.00. Round your calculations and final answers to the nearest cent. $ b. What would the net amount of each bonus check be if the company did not gross-up the bonus? Round your intermediary calculations to the nearest cent. $
$148.05 (1-0.22-0.028-0.062-0.0145) = 0.6755 100/.6755=148.04 148.04+.01=148.05 ***Double Check Your answer checking if Deductions subtracts to 100*** b) Answer is $67.55 148.04*.6755=$67.55
Eaton Enterprises uses the wage-bracket method to determine federal income tax withholding on its employees. Find the amount to withhold from the wages paid each employee. Enter all amounts as positive numbers. If an amount is zero, enter "0". Round interim and final answers to two decimal places. Jim Singer, Single, claim 4, $2,610 semimonthly
$212.84 (Use percentage Method) Wages $2,610 Ttl allow $700 (4*175) Amount subject to withholding 1,910 (2610-700) Percentage Bracket $1,803 - $3,667: 189.30 plus .22 excess of 1803 $1910-$1803= 107 $107*.22=$23.84 Fixed amount$189.30 ($189+$23.84)= $212.84
The penalty for filing W-2s with mismatched names and social security numbers is: a. $100 per form. b. $150 per form. c. $25 per form. d. $250 per form.
$250 per form.
Form 944 is used by employers who owe $________ or less in employment taxes for the year. It is filed _______ a year.
$2500 once
Emma earns an annual salary of $84,400 and is paid biweekly. Her W-4 shows "Married with 2." What is her FIT withholding? $358.75 $385.57 $281.38 $375.58
$281.38
Rhonda Gramm is single, and her wages are paid weekly. Under the percentage method, the amount of Gramm's one weekly withholding allowance is $_________ . Howard Heinz, married, claims two withholding allowances, and his wages are paid semimonthly. The total amount of his semimonthly withholding allowances amounts to $________.
$80.80 $175.00
Lake Community College gives its faculty the option of receiving the balance of their contract at the end of the semester on May 17, 20--. The faculty can receive one lump-sum payment instead of receiving the remaining seven biweekly pays over the summer. Use the data given below to complete the Payroll Register on May 17. No employee has reached the OASDI ceiling, and all employees are taking the lump-sum payment. The state withholding rate is 2.0% of total earnings; the city withholding rate is 1.0% of total earnings. The biweekly wage bracket is used for federal income taxes. Kinnery, Thomas,Single, Claim 1, Biweekly $2,000.00
(a)Lump-Sum $14000 (7*2000) (b)OASDI $868 (14000*.062) HI $203 (14000*.0145) FICA=868+203=1071 (c)FIT $1491 (2000 biweekly wage bracket= 213 213*7 pays= 1491) (d)SIT $280 (14000*.02) (e)CIT $140 (14000*.01)
The names of the employees of Cox Security Systems and their regular salaries are shown in the following payroll register. Note that Hall and Short are paid monthly on the last payday, while all others are paid weekly. In addition to the regular salaries, the company pays an annual bonus based on the amount of earnings for the year. For the current year, the bonus amounts to 8% of the annual salary paid to each employee. The bonus is to be paid along with the regular salaries on December 27, 20--, but the amount of the bonus and the amount of the regular salary will be shown separately on each employee's earnings statement. Assume that all employees received their regular salary during the entire year. Prepare the payroll for the pay period ending December 27, 20--, showing the following for each employee: Use the wage-bracket method to withhold federal income tax from the regular salaries. Withhold a flat 22% on the annual bonus. Total salaries and bonuses are subject to a 2% state income tax and a 1% city income tax. Hall, Michael, Married, Claim 5, $3,500.00 monthly
(a)Supplemental $3360 (3500* 12= 42000 yrly salary)(42000*.08) (b)Total $6860 (3500+3360) (c) OASDI $425.32 (6860*.062) HI $99.47 (6860*.0145) 425.32+99.47=524.79 (d)FIT $815.20 (3500 Monthly wage bracket= 76 3360*.22=739.20 76+79.20=815.20) (e)SIT $137.20 (6860*.02) (f)CIT $68.60 (6860*.01) (g)NET $5314.21 (Total(b)-Deductions(c,d,e,f))
(T/F) The number of withholding allowances claimed by an employee is set forth on Form W-2.
FALSE
(T/F) To correct errors on previously filed Forms W-2, an employer must file Form W-3.
FALSE
Employees' names can be close to what is indicated on their social security cards. True False
False
Employers must give employees their Form W-2s on or before March 31 following close of the calendar year. True False
False
The IRS informs an employer which of the two methods, percentage or wage-bracket, that he/she may utilize to calculate FIT withholding. This is based on number of employees and industry sector. True False
False
The percentage method of calculating federal income tax withholding does not distinguish between married and unmarried persons, but this method provides the full benefit of the allowances claimed by the employee on Form W-4, for the calculation of the federal income tax withholding. True False
False
The penalties imposed on employees for filing false informatioEmployers preparing information rterm-10eturns must file which of the following forms to transmit each type of information return: a. A summary form 1099 b. Form 941 c. Form 1096 d. Form 1099-MISC TERM IMAGE Form 1096 DEFINITIONn on Form W-4 are: a. Fines of up toterm-10 $3,000 b. Fines of up to $3,000 or imprisonment for up to three years or both c. Fines of up to $1,000 or imprisonment for up to one year or both d. Imprisonment for up to three years
Fines of up to $1,000 or imprisonment for up to one year or both
The personal allowance amount is ____________ from the employee's income in computing taxable income. In 2018, the amount of a personal allowance was $_________.
deducted $4,150
A personal allowance: a.may be claimed to reduce the amount of withholdings from the employee's earnings. b.amounted to $2,000 in 20--. c.for one person is a different amount for a single versus a married taxpayer. d.is indexed for inflation every calendar quarter. e.may be claimed at the same time with each employer for whom an employee is working during the year.
may be claimed to reduce the amount of withholdings from the employee's earnings.
If an employee files an amended W-4, the employer must make the W-4 effective no later than the a. first pay in the next quarter b. next payday c. start of the first payroll period ending on or after the 30th day from the W-4 receipt date
start of the first payroll period ending on or after the 30th day from the W-4 receipt date
The withholding on vacation wage payments is a.) taxed as though it were a regular payment for the periods occurring during the vacation period b.) a flat 15% c.) tax-free d.) a flat 22% e.) based on the total amount of the wage payment plus the vacation pay
taxed as though it were a regular payment for the periods occurring during the vacation period
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 a married employee claims no withholding allowances. d.on which an employee claims to be single but has 9 withholding allowances. e.on which a recently divorced employee claims 5 withholding allowances and authorizes an additional $10 to be withheld each week.
the IRS has requested in writing
Employers must submit Forms W-4 to the IRS for a. those requested in writing by the IRS b. those claiming more than 10 allowances c. those requesting additional amounts to be withheld
those requested in writing by the IRS
The maximum contribution that an employer can make to an employee's SIMPLE account must match the employee's contribution up to a maximum of _____% of the employee's pay.
3
Julie Whiteweiler made $930 this week. Only social security (fully taxable) and federal income taxes attach to her pay. Whiteweiler contributes $100 each week to her company's 401(k) plan and has $25 put into her health savings account (nonqualified) each week. Her employer matches this $25 each week. Determine Whiteweiler's take-home pay if she is single and claims 2 allowances (use the wage-bracket method). Gross pay$ HSA contributions$ 2401(k) deductions$ OASDI$ HI tax$ FIT$ Net pay$
Gross pay$930 (Stated) HSA contributions$-25 (Stated) 2401(k) deductions$-100 (Stated) OASDI$-57.66 (930*.062) HI tax$-13.49 (930*.0145) FIT$-67 (Wage bracket off of gross pay minus the 401(k) deduction= 830) -67 Net pay$666.85
The formula used to "gross-up" supplemental payments in order to cover the taxes on the supplemental payments is: a. Intended Payment/1 - Applicable Tax Rates b. Intended Payment/Applicable Tax Rates c. Applicable Tax Rates/Intended Payment d.1 - Applicable Tax Rates/Intended Payment
Intended Payment/1 - Applicable Tax Rates
How is the amount of a fringe benefit that is taxable to an employee determined? a. It includes the amounts the employer pays for medical and dental insurance. b. It is the amount by which the fair market value of the fringe benefit exceeds what the employee paid, minus any amount the law excludes. c. It is the amount by which the fair market value of the fringe benefit exceeds what the employee paid, plus any amount the law excludes. d. None of these choices are correct.
It is the amount by which the fair market value of the fringe benefit exceeds what the employee paid, plus any amount the law excludes.
Calculate the amount to withhold from the following employees using the biweekly table of the percentage method. Kenneth Karcher (single, 1 allow), $895 wages$ Mary Kenny (married, 2 allow), $1,900 wages$ Thomas Carney (single, 0 allow), $1,460 wages$
Kenneth Karcher= 63.04 (895-161.50=733.50 733.50-519= 214.50 214.50*.12=25.74 25.74+37.30= 63.04) falls under: Over $519- under $1664 withhold $37.30 + 12% excess $519 Mary Kenny= 119.84 (1900-323= 1577 1577+1200= 377 377* .12= 45.24 45.24+74.60= 119.84) falls under: Over $1,200- under $3,490 withhold $74.60 + 12% excess $1,200 Thomas Carney= 150.22 1460-0=1460 1460-519= 941 941*.12= 112.92 112.92+37.30= 150.22 falls under: Over $519- under $1664 withhold $37.30 + 12% excess $519
Orrin D'Amato, single, participates in his firm's pension retirement plan. This year, his modified adjusted gross income will be about $75,000. How much of his compensation may D'Amato contribute to an IRA this year without paying federal income taxes on the contribution? a. 15 percent b. 20 percent c. 10 percent d. None
None
The special period rule allows employers to use _____________ ___ as the cutoff date for valuing non-cash fringe benefits
October 31
Use the appropriate table to determine the amount to withhold for federal income tax from each of the following biweekly wages (biweekly withholding allowance = $161.50): Patrick Patrone (single, 2 Claim), $925 wages$ Carson Leno (married, 4 Claim), $1,195 wages$ Carli Lintz (single, 0 Claim), $700 wages$ Gene Hartz (single, 1 Claim), $2,700 wages$ Mollie Parmer (married, 2 Claim), $3,600 wages$
Patrick patrone= 47 Stated via Wage bracket Carson Leno= 71 Stated via Wage bracket 3) Carli lintz= 59 Stated via Wage bracket 4) Gene hartz= $367.09 (2,700 - $161.50 = $2,538.50 $2538.50 - $1664= 874.50 874.50* 0.22= 192.39 192.39+174.70=367.09) The amount for Federal income tax is falls under: Over $1,664- under $3,385 withhold $174.70 + 22 % excess $1,664 5) Mollie Parmer= 531.54 $3,600 - $161.50 - $161.50 = 3277 3277- 1200= 2077 2077*.12= 249.24 249.24+74.60= +74.60= 323.84 falls under: Over $1,200- under $3,490 withhold $74.60 + 12% excess $1,200
(T/F) Employee's payroll deductions into their 401(K) plans are generally made on a pretax basis and reduce the amount of gross pay that is subject to federal income tax withholding.
TRUE
(T/F) Employees who are receiving over $1 million dollars in supplemental wages for the year will have a 37% withholding rate apply to the supplemental payments in excess of $1 million dollars.
TRUE
(T/F) Form W-3 is filed with the Social Security Administration by employers as a transmittal of the information contained on Forms W-2.
TRUE
(T/F) Withholding allowance certificates must be retained by employers for as long as the certificates are in effect and for four years thereafter.
TRUE
Which of the following kinds of wage payments is non-exempted from the withholding of federal income taxes: a. Monthly salary received by Rev. Cole Carpenter. b. Payments under a workers' compensation law for sickness or injury. c. Weekly wages paid to the housekeeper in a college fraternity. d. Weekly advance to a sales representative for traveling expenses to be incurred. e. Three weeks' vacation pay.
Three weeks' vacation pay.
For which of the following payments is the employer required to withhold federal income taxes? a.Deceased person's wages paid to the estate b.Tipped employee's monthly tips of $120 c.Minister of Presbyterian church d.Advances made to sales personnel for traveling expenses e.All of these choices are correct.
Tipped employee's monthly tips of $120
George Clausen (age 48) is employed by Kline Company and is paid a salary of $43,160. He has just decided to join the company's Simple Retirement Account (IRA form) and has a few questions. Answer the following for Clausen: Round your answer to the nearest cent. a. What is the maximum that he can contribute into this retirement fund? $ b. What would be the company's contribution? $ c. What would be his weekly take-home pay if he contributes the maximum allowed retirement contribution (married, 2 allowances, wage-bracket method, and a 2.3% state income tax on total wages)? $ d. What would be his weekly take-home pay without the retirement contribution deduction? $
a. $13000. (Total take home for IRA is 13000) b.$1294.80 ($43,160* .03) c. $477.41 (-Weekly Pay 43160/52=830 -Weekly Retirement Contribution 13000/52=250 -Weekly Wages 580- FICA (830*.062=51.46 830*.0145=12.01 FICA=63.50) -Federal IncomeTax 20(Wage Bracket of 580) -State Income Tax 830*.023%=19.09 d. $702.41 -Weekly Pay 43160/52=830 -FICA (830*.062=51.46 830*.0145=12.01 FICA=63.50) Federal IncomeTax 45(Wage Bracket of 830) -State Income Tax 830*.023%=19.09
All of the following persons are classified as employees under the federal income tax withholding law with the exception of a. a partner b. an officer of the federal government c. the president of a corporation
a. a partner
Edward Dorsey is a part-time employee, and during the biweekly pay period he earned $395. In addition, he is being paid a bonus of $300 along with his regular pay. If Dorsey is single and claims two withholding allowances, how much would be deducted from his pay for FIT, based on the two methods outlined below? a.Wage-bracket table$ b.Percentage method$
a.23 (300+395= 695) 695 between 689-709 single biweekly= 23 via wage bracket b. 8 (300+395= 695 695-323= 372 372+146= 80 80*.10= 8 8+0=8) falls under: Over $146- under $519 withhold $0 + 10% excess $146
A publisher is preparing information returns to report the royalties paid to authors (nonemployees) during the prior calendar year. The proper information return to be completed is a. Form 1099-DIV b. Form 1099-MISC c. Form W-3
b. Form 1099-MISC