Question 1

Which of the following forms is used by an employer to report quarterly wages and federal payroll tax withholdings and deposits?

Accepted Answer

Form 941 is used by an employer to report quarterly wages and federal payroll tax withholdings and deposits. Form 940 is used to report federal unemployment tax payments, Form 1099 is used to report non-employee compensation, and Form W-2 is used to report employee wages and taxes withheld for the entire year.

Question 2

Mark the correct answer. Self-employment taxes:

Accepted Answer

Self-employment taxes consist of a Medicare tax and a Social Security tax, which are calculated based on net earnings from self-employment. They are separate from any taxes on wages earned as an employee. There is a minimum threshold of $400 in self-employment earnings to be subject to these taxes. Unearned income such as interest and dividends are taxed separately.

Question 3

Dividends paid to a shareholder by a corporation should be reported on which of the following forms?

Accepted Answer

Dividends paid to a shareholder by a corporation should be reported on Form 1099-DIV. This form is used by brokers and mutual funds to report dividends and other distributions to taxpayers and the IRS.

Question 4

Which one of the following payroll tax deposit schedules is not a rule that applies for a class of employers?

Accepted Answer

The eight-day deposit rule does not exist as a rule for payroll tax deposit schedules. Employers are generally required to follow either the monthly, semi-weekly, next-day, or yearly deposit schedules, depending on the amount of their tax liability and other specific criteria.

Question 5

In 2014, 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 $3,000. 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 2014, after the credit for state unemployment taxes?

Accepted Answer

To calculate FUTA tax, we need to know the taxable wages for each employee. For the two full-time employees, the taxable wages are the first $7,000 of their salaries, which is $14,000 total. For the part-time employee, the taxable wages are $3,000.

The FUTA tax rate for 2014 is 6.0%, but there is a credit of up to 5.4% for state unemployment taxes paid. Since Willow Corporation paid the full 5.4% for each employee, their credit is the maximum allowed. Therefore, the net FUTA tax rate is 0.6%.

The FUTA tax due is calculated as follows:

($14,000 + $3,000) x 0.6% = $102

So the answer is B, $102.

Question 6

Redford's salary was $124,000 in 2014. What would his total combined FICA tax (OASDI & Medicare) withheld from his salary be for the year?

Accepted Answer

In 2014, the OASDI tax rate was 6.2% on earnings up to $117,000, and the Medicare tax rate was 1.45% on all earnings. Therefore, OASDI tax = 6.2% of $117,000 = $7,254, and Medicare tax = 1.45% of $124,000 = $1,798. Total FICA tax = $7,254 + $1,798 = $9,052.

Question 7

In 2014, 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 $3,000. The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000. How much unemployment tax was paid to the state from Willow Corporation for 2014?

Accepted Answer

The total wages paid by Willow Corporation were ($25,000 * 2) + $3,000 = $53,000.
The state unemployment tax rate is 5.4%, and the taxable wage base is $7,000 per employee.
For each of the two full-time employees, the taxable wages are capped at $7,000, so the unemployment tax for each of them is 5.4% * $7,000 = $378.
For the part-time employee, the taxable wages are $3,000, so the unemployment tax for that employee is 5.4% * $3,000 = $162.
Adding up the unemployment tax payments for all three employees, we get a total of $378 + $378 + $162 = $918. Therefore, the correct answer is C.

Question 8

The Pear Corporation pays its employees every 2 weeks. During the look-back period, in each pay period the total withholding and FICA tax (employees' and employer's share) amounted to $750. How often must the Pear Corporation deposit payroll taxes?

Accepted Answer

The answer of The Pear Corporation pays its employees every...

Question 9

Oliver has two employees who earned the following amounts during 2014: If Oliver timely pays 5.4 percent for state unemployment tax, what is the amount of his 2014 FUTA after the state tax credit?

Accepted Answer

The answer of Oliver has two employees who earned the...

Question 10

Which one of the following forms must an employer provide to his employee by January 31 of the following year?

Accepted Answer

An employer must provide a W-2 form to his employee by January 31 of the following year. The W-2 form reports the employee's wages and tax withholdings for the previous year, which the employee will use to file their individual income tax return. The other forms listed are not provided to employees, but rather are used by employers to report payroll taxes to the IRS.

Question 11

A taxpayer would be required to pay Social Security and Medicare taxes for a domestic employee in all but one of the following situations. In which situation would this not be required?

Accepted Answer

According to the IRS, domestic employees who earn less than $2,200 a year (in 2020) are exempt from Social Security and Medicare taxes. Therefore, a baby-sitter who earns $1,300 a year would not require the taxpayer to pay Social Security and Medicare taxes.

Question 12

Form 1099-DIV is an information return used to show the payment of:

Accepted Answer

Form 1099-DIV is used to report dividends received by an individual, estate or trust from standard corporate stocks and mutual funds.

Question 13

Which of the following statements is true with regard to the reimbursement of employee business expenses?

Accepted Answer

The answer of Which of the following statements is true...

Question 14

Which of the following types of income is subject to the self-employment tax?

Accepted Answer

Income from a sole proprietor's law practice is subject to the self-employment tax because the income is considered earned from self-employment. The other options listed are not subject to the self-employment tax.

Question 15

Elwin worked at three jobs during 2014. He earned $30,000, $27,000, and $9,000, respectively, from the jobs. What amount can Elwin apply as a credit against his 2014 income tax liability for overpayment of FICA taxes?

Accepted Answer

Elwin's total income is $30,000 + $27,000 + $9,000 = $66,000. The maximum amount of wages subject to FICA taxes in 2014 was $117,000. Therefore, Elwin's FICA taxes were calculated on $66,000. The FICA tax rate in 2014 was 7.65%. Therefore, Elwin's FICA taxes were $66,000 x 7.65% = $5,079. Elwin's total FICA taxes withheld were $5,079. The maximum amount of FICA taxes that Elwin could have withheld is $117,000 x 7.65% = $8,944.50. Therefore, Elwin overpaid his FICA taxes by $8,944.50 - $5,079 = $3,865.50. However, the maximum amount of FICA taxes that Elwin can apply as a credit against his 2014 income tax liability is $3,865.50 x 100% = $3,865.50.

Question 16

Which of the following statements about the FICA tax is not true?

Accepted Answer

Self-employed individuals are required to pay self-employment taxes, which include both the employer and employee portions of the FICA tax. They cannot choose to pay only FICA taxes.

Question 17

Which of the following forms should be used by a company to report a payment of $1,500 to a computer consultant who is not an employee of the company?

Accepted Answer

Form 1099-MISC is used to report payments of $600 or more made to non-employees, including independent contractors or consultants. Therefore, it is the appropriate form to report the payment of $1,500 to the computer consultant. Form 1099-INT is used to report interest income, Form W-4 is used by an employee to indicate their withholding preferences, and Form W-2 is used to report an employee's wages and withholding information. Form 1099-DIV is used to report dividend income.

Question 18

Which of the following items may be subject to the self-employment tax?

Accepted Answer

Only a partner's distributive share of partnership income is subject to the self-employment tax. Dividend income, capital gains, and interest income are not subject to the self-employment tax.

Question 19

George has four employees who earned $75,000, $27,000, $2,100, and $6,200 during 2014, 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.

Question 20

The FUTA tax is paid by:

Accepted Answer

The FUTA tax, or Federal Unemployment Tax Act tax, is paid solely by employers. This tax is used to fund state unemployment agencies and help provide unemployment benefits to eligible workers. The FUTA tax rate is 6% of the first $7,000 in wages paid to each employee per year, with a credit available if the employer also pays state unemployment taxes.

Quiz 9: Withholding, Estimated Payments, and Payroll Taxes