Question 1

In 2018, 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 2018, after the credit for state unemployment taxes?

Accepted Answer

The answer of In 2018, Willow Corporation had three employees.Two...

Question 2

Which of the following statements is true?

Accepted Answer

A direct transfer from one retirement account to another is not considered a distribution, therefore there are no current-year tax consequences. Choices A, B, C, and D are false.

Question 3

Clay changes jobs in 2018 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 2018 and decides...

Question 4

Sally is an employer with one employee, Sara.Sara earned $12,000 from January 1, 2018 through June 30, 2018, 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 2018?

Accepted Answer

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

Question 5

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...

Question 6

Ralph has a $130,000 IRA with Red Investments.For personal reasons, he decides to move his funds to Blue Investments.He requests that his funds be distributed to him on August 20, 2018.
a.What amount will Ralph receive from Red Investment?
b.What is the last day Ralph can deposit the funds from Red Investments and avoid taxation in the current year?
c.If the funds were distributed from a qualified retirement plan (not an IRA), how much would Ralph receive?
d.Assuming the funds were distributed from a qualified retirement plan, not an IRA, how much will Ralph have to contribute to Blue Investments to avoid taxable income and any penalties?

Accepted Answer

The answer of Ralph has a $130,000 IRA with Red...

Question 7

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 a defined contribution plan, the contributions made on behalf of the employee are determined by a formula based on their compensation. This is different from a defined benefit plan where the benefits are determined based on a formula dependent on factors such as years of service and salary history.

Question 8

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 2018 for Ursula.In 2018, how should Ursula treat the $2,000 contribution made on her behalf by the corporation?

Accepted Answer

The contribution made by the corporation on Ursula's behalf is not considered taxable income to Ursula in the year it is made. Therefore, Ursula is not required to include the $2,000 contribution or any earnings from it in her 2018 gross income. However, these amounts will be taxable when Ursula receives them as distributions from the retirement plan in the future.

Question 9

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 from a retirement plan requires the taxpayer to take possession of the funds and transfer them to another qualified plan within 60 days to avoid taxes and penalties. Withholding may be required, and there is a limit of one distribution rollover per year. The taxpayer must also ensure that the funds are transferred to the new plan trustees, rather than directly received by the taxpayer. Therefore, only option D is correct.

Question 10

George has four employees who earned $75,000, $27,000, $2,100, and $6,200 during 2018, 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% of the first $7,000 of wages paid to each employee. George's four employees earned a total of $75,000 + $27,000 + $2,100 + $6,200 = $110,300. 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 $7,000 x 4 = $28,000. The FUTA tax rate is 0.6%, so George's FUTA tax liability is $28,000 x 0.006 = $168. The correct answer is A: $133.80.

Question 11

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 12

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 desired monthly retirement benefit suggests that this is a defined benefit plan, where the retirement benefit is predetermined based on a formula that takes into account factors such as years of service and average salary. The fact that Paul's employer is contributing to the plan on his behalf also suggests that it is a qualified retirement plan that meets certain requirements under the Internal Revenue Code.

Question 13

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. In order for a retirement plan to be considered qualified, it must meet minimum vesting requirements set by law. This ensures that employees have a legal right to the benefits that have accumulated in their retirement account.

Question 14

Oliver has two employees who earned the following amounts during 2018: $$\begin{array} { l r } 
\text { June } & \$ 17,000 \
\text { Eric } & \$ 5,000
\end{array}$$ If Oliver timely pays 5.4 percent for state unemployment tax, what is the amount of his 2018 FUTA after the state tax credit?

Accepted Answer

The FUTA tax rate is 6.0% on the first $7,000 of wages per employee. With a 5.4% state tax credit, the effective FUTA rate is 0.6%. For June, the FUTA is $7,000 * 0.6% = $42. For Eric, the FUTA is $5,000 * 0.6% = $30. Total FUTA is $42 + $30 = $72.

Question 15

Johnice's employer contributes $3,000 to a qualified retirement plan in 2018 for Johnice's retirement.
a.Is the $3,000 deductible by Johnice's employer in 2018? Explain.
b.Is the $3,000 income to Johnice in 2018? Explain.
c.Is either the interest or dividend earnings on the $3,000 contribution taxable to Johnice in 2018? Explain.

Accepted Answer

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

Quiz 9: Payroll, Estimated Payments, and Retirement Plans