Question 1

Oliver has two employees who earned the following amounts during 2019: $$\begin{array} { l r } 
\text { June } & \$ 17,000 \
\text { Eric } & \$ 5,000
\end{array}$$ If Oliver timely pays 5.4 percent for state unemployment tax, what is the amount of his 2019 FUTA after the state tax credit?

Accepted Answer

The FUTA tax rate is 6.0%, but employers receive a credit of up to 5.4% for state unemployment taxes paid, effectively reducing the FUTA tax rate to 0.6%. The FUTA tax applies to the first $7,000 of an employee's earnings. Therefore, for both employees (June and Eric), the calculation is as follows: $7,000 (cap for each employee) * 2 (number of employees) * 0.6% (effective FUTA tax rate after state tax credit) = $84. However, the correct answer is not listed directly, indicating a possible mistake in calculation or interpretation in the provided choices. Given the options, $72 (B) seems to be the closest match, but it does not align with the standard calculation. This suggests a misunderstanding in the question's details or a mistake in the answer choices provided.

Question 2

George has four employees who earned $75,000, $27,000, $2,100, and $6,200 during 2019, respectively. He paid 5.4 percent for state unemployment tax. How much FUTA tax will George owe for the four employees?

Accepted Answer

FUTA tax is 0.6 percent of the first $7,000 of wages paid to each employee. George's four employees earned a total of $110,300 during 2019. The first $7,000 of wages paid to each employee is subject to FUTA tax, so the total amount of wages subject to FUTA tax is $28,000. The FUTA tax rate is 0.6 percent, so George will owe $168 for FUTA tax.

Question 3

The Wash Your Paws Self-Service Dog Wash, a California business, had two employees during the year. Lindsey worked from January through March 15 and earned $2,750. Avery worked for the whole year and earned $20,000. The State of California assesses unemployment tax at the rate of 5.4 percent. Calculate the total FUTA tax after the credit for the state unemployment tax.

Accepted Answer

The answer of The Wash Your Paws Self-Service Dog Wash,...

Question 4

Clay changes jobs in 2019 and decides to roll his $50,000 retirement plan balance from his old employer's plan into an IRA. He instructs the trustee of the retirement plan to transfer the money directly to the IRA he has chosen.
What are the tax consequences of the transfer to Clay? Explain.

Accepted Answer

The answer of Clay changes jobs in 2019 and decides...

Question 5

In order for a pension plan to be considered a "qualified" retirement plan, the plan must satisfy certain minimum vesting requirements.

Accepted Answer

This is true. A qualified retirement plan must satisfy minimum vesting requirements, which determine when employees have a non-forfeitable right to their employer's contributions to the plan. These requirements are established by law and typically vary depending on the type of plan.

Question 6

Sally is an employer with one employee, Sara. Sara earned $12,000 from January 1, 2019 through June 30, 2019, and the state unemployment tax rate is 5.4 percent. Calculate the following amount for Sally.
a.FUTA tax after the state tax credit
b.What form should Sally use to report her FUTA tax liability for 2019?

Accepted Answer

The answer of Sally is an employer with one employee,...

Question 7

Paul earns $55,000 during the current year. His employer contributes $3,000 during the year to a qualified retirement plan on behalf of Paul. The amount of the contribution for the year is based on Paul's desire to have a monthly retirement benefit of $3,500. What type of retirement plan is this?

Accepted Answer

The fact that the contribution is based on Paul's desire for a specific monthly retirement benefit of $3,500 suggests that this is a defined benefit plan. In a defined benefit plan, the employer promises to provide a specific retirement benefit to the employee based on a formula that takes into account factors like years of service, salary, and age. The employee does not contribute to the plan, and all investment and longevity risks are borne by the employer.

Question 8

Johnice's employer contributes $3,000 to a qualified retirement plan in 2019 for Johnice's retirement.
a.Is the $3,000 deductible by Johnice's employer in 2019? Explain.
b.Is the $3,000 income to Johnice in 2019? Explain.
c.Is either the interest or dividend earnings on the $3,000 contribution taxable to Johnice in 2019? Explain.

Accepted Answer

The answer of Johnice's employer contributes $3,000 to a qualified...

Question 9

Ursula, an employee of Ficus Corporation, is 35 years old and plans to retire in 20 years. The corporation has a qualified retirement plan and contributes $2,000 during 2019 for Ursula. In 2019, how should Ursula treat the $2,000 contribution made on her behalf by the corporation?

Accepted Answer

The $2,000 contribution made by the corporation on Ursula's behalf is not included in her gross income for 2019, nor are any earnings on that amount. This is because the contribution is made to a qualified retirement plan, which is not taxed until distributions are made to the employee after retirement.

Question 10

Which of the following statements is true?

Accepted Answer

A direct transfer from one retirement account to another retirement account, also known as a trustee-to-trustee transfer, does not have any current-year tax consequences. Option A is incorrect because a distribution rollover from a retirement plan can also be done through a 60-day rollover, in which the taxpayer receives the funds and then transfers them within 60 days to another retirement account. Option B is incorrect because the trustee does not have to withhold anything in a direct transfer. Option C is incorrect because a taxpayer can choose to only roll over a portion of their IRA. Option D is incorrect because there is no limit to the number of direct transfers a taxpayer can make in a year.

Question 11

Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan?

Accepted Answer

A distribution rollover (not a trustee-to-trustee transfer) from a retirement plan requires the taxpayer to receive the distribution and then transfer the funds to a new plan within 60 days to avoid current taxes and penalties. No withholding is required, but the taxpayer must instruct the trustee of the retirement plan to send the funds directly to them. There is a limit of one rollover per IRA account per year.

Question 12

Under a defined contribution plan, the contribution made on behalf of the employee is determined using a formula dependent on the employee's current compensation.

Accepted Answer

In defined contribution plans, the contribution made on behalf of the employee is determined using a formula dependent on the employee's current compensation.

Question 13

In 2019, Willow Corporation had three employees. Two of the employees worked full-time and earned salaries of $25,000 each. The third employee worked only part-time and earned $4,000. The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000. How much FUTA tax is due from Willow Corporation for 2019, after the credit for state unemployment taxes?

Accepted Answer

First, we need to calculate the state unemployment tax paid by Willow Corporation:
(2 x $25,000 + $4,000) x 5.4% = $2,754
Next, we need to calculate the FUTA tax liability:
(2 x $7,000) x 0.006 = $84
Willow Corporation can take a credit for the state unemployment taxes paid, which is limited to 5.4% of $7,000 per employee or $420 per employee. Therefore, the maximum credit available is $420 x 3 = $1,260. Since the state unemployment tax paid is less than the maximum credit available, the FUTA tax liability is reduced by the full amount of the credit:
$84 - $108 = -$24
The negative result means that Willow Corporation is eligible for a refund of $24. However, since a negative tax liability cannot be reported on Form 940, the FUTA tax liability is effectively zero. Therefore, the best choice is (C) $108.

Question 14

Penny, age 52, takes a distribution of $30,000 from her Traditional IRA account. She plans to deposit it in an IRA with a different bank. Shortly after the distribution she drives her car through the front window of her credit union in a freak accident, and uses the funds to pay for the damages. What income and/or penalties related to the failure to rollover the IRA must she show on her tax return?

Accepted Answer

The answer of Penny, age 52, takes a distribution of...

Quiz 9: Payroll, Estimated Payments and Retirement Plans

Oliver has two employees who earned the following amounts during 2019: $\begin{array} { l r } \text { June } & \$ 17,000 \\\text { Eric } & \$ 5,000\end{array}$ If Oliver timely pays 5.4 percent for state unemployment tax, what is the amount of his 2019 FUTA after the state tax credit?