Deck 4: Fringe Benefits and Voluntary Deductions

Question 1

Fringe benefits and employee satisfaction have no correlation.

Answer 1

False

Question 2

Health Savings Accounts may be used as pre-tax deductions for which type of costs? (Select all that apply.)

A) Child medical expenses
B) Gasoline expenses
C) Long-term medical care expenses
D) Prescription expenses

Answer 2

A, C, D

Question 3

Charitable contributions are an example of post-tax voluntary deductions.

Answer 3

True

Question 4

Which of the following deductions may be taken on a pre-tax basis? (Select all that apply.)

A) Cafeteria plan
B) Garnishments
C) Health insurance
D) Retirement plan

Question 5

According to Bureau of Labor Statistics, what percentage additional compensation is offered in fringe benefits?

A) 10-18%
B) 15-23%
C) 21-29%
D) 25-33%

Question 6

Premiums for insurance purchased through qualified cafeteria plans may be deducted from an employee's pay on a pre-tax basis.

Question 7

Which of the following must accompany a Health Savings Account (HSA) to be considered part of a cafeteria plan?

A) Long-term care insurance
B) High-deductible health plan
C) Low-deductible health plan
D) Flexible Savings Agreement

Question 8

If a fringe benefit involves a deduction from employee pay, which of the following is true?

A) Employers may only offer the benefit to certain classes of employees.
B) The employee must enroll in direct deposit for their pay.
C) The fringe benefit must be subject to income tax.
D) The amount of the deduction must be listed on the employee's pay advice.

Question 9

Specific fringe benefit exclusion rules are found in Publication 15.

Question 10

The most common way to determine the value of fringe benefits is the general valuation rule.

Question 11

Fringe benefits are part of an employee's cash compensation package.

Question 12

Under the special accounting rule, benefits provided in the last quarter of the year may be reported during the following year.

Question 13

Fringe benefits are given to employees in return for their service to the company.

Question 14

Which of the following is/are hallmarks of fringe benefits? (Select all that apply.)

A) The benefit improves employees' living conditions.
B) The ability to receive the benefit relates directly to performance.
C) All employees have access to the benefit.
D) Employee welfare remains unaffected by the benefit.

Question 15

What differentiates Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)?

A) Amounts contributed to FSAs may not be rolled over from one year to the next.
B) HSAs expire on an annual basis but FSAs continue perpetually.
C) FSAs expire annually but HSAs may be reserved for use late in life.
D) Only HSAs may be deducted from employee on a pre-tax basis.

Question 16

All employee contributions to qualified Premium-Only Plans (POP) and Flexible Spending Arrangements (FSA) are deducted on a pre-tax basis.

Question 17

Which of the following is an includible medical expense, according to Publication 502? (Select all that apply.)

A) Ambulance service
B) Over-the-counter medicines
C) Hearing aids
D) Braille books and magazines

Question 18

Contributions to FSAs in excess of what annual amount are treated as taxable income?

A) $1,600
B) $1,900
C) $2,300
D) $2,600

Question 19

Which of the following may be included as part of an employee's Section 125 "cafeteria" plan?

A) Medical expenses
B) Tuition expenses
C) Meal expenses
D) Moving expenses

Question 20

Certain fringe benefits that are not part of a cafeteria plan may be reported on the employee's Form W-2 as income.

Question 21

What is the primary difference between the lease-value rule and the commuter rule as they pertain to the valuation of a company car fringe benefit?

A) The lease-value rule must be used for IRS reporting.
B) The commuter rule considers all mileage driven as personal.
C) The lease-value rule is only for internal company use.
D) The commuter rule forbids personal use of the company vehicle.

Question 22

Which of the following is true about excluded fringe benefits? (Select all that apply.)

A) They must be part of the employer's cafeteria plan.
B) The cash value of excluded fringe benefits is always taxable.
C) Excluded fringe benefits are not generally a taxable part of employee pay.
D) Excluded fringe benefits are generally not reported on the employee's W-2.

Question 23

Luis Billiot is an employee of Plato Designs and drives a 2017 Toyota Camry as a company car. The fair-market value of the car is $25,499 and the lease value is $6,850, according to Publication 15-b. The car has been available for 300 days during the year and Luis has driven 5,500 of the 28,350 miles for personal use. He pays for his own fuel. What is the percentage of miles driven for personal use, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) 82.19%
B) 14.50%
C) 19.40%
D) 17.64%

Question 24

Under what condition is the fringe benefit of a gym membership taxable?

A) When the employer has on-site facilities that are restricted to employee use.
B) When the employer offers membership to an off-site club at no additional cost to the employee.
C) When the employer has on-site facilities that are open to public use.
D) Gym memberships are always taxable.

Question 25

Frances McNale is an employee who drives a 2017 Ford C-Max with a fair-market value of $29,500. The lease value is $7,750, according to Publication 15-b. The car was available for 150 days during the year, and she reported that 6,500 of the 27,850 miles were driven for personal purposes. The company pays for all fuel and is charged back to Frances at $0.055 per mile. What is the amount of the company-car fringe benefit that will appear on Frances's W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) $1,100.84
B) $1,020.44
C) $743.34
D) $964.24

Question 26

Luis Billiot is an employee of Plato Designs and drives a 2017 Toyota Camry as a company car. The fair-market value of the car is $25,499 and the lease value is $6,850, according to Publication 15-b. The car has been available for 300 days during the year and Luis has driven 5,500 of 28,350 miles for personal use. He pays for his own fuel. What is the amount of the company-car fringe benefit that will appear on Luis's W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) $1,252.48
B) $1,092.27
C) $875.14
D) $546.13

Question 27

According to Publication 15b, what is the annual cash value limit for excluded prizes and awards?

A) $800
B) $1,400
C) $1,600
D) $2,000

Question 28

Tanesha works part-time for a governmental agency and is given a car for work-related and commute purposes. During the last calendar year, she worked 150 days and had a commute of 35 miles each direction. What is the amount of the company-car fringe benefit that will appear on her W-2? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) $15,750.00
B) $3,937.50
C) $7,875.00
D) $5,906.25

Question 29

Under the unsafe conditions rule:

A) An employee may use a company vehicle for a one-way commute.
B) Employees may only use company cars if their normal travel mode is unsafe.
C) Employees may leave work at any time.
D) Employees are charged $1.50 for the one-way commute.

Question 30

Ronald Ferrer is an employee who drives a 2017 Chevrolet Malibu as a company car. The fair-market value of the car is $23,175. He has been given the choice to have his fringe benefit reported on his W-2 either using the lease-value rule or the cents-per mile rule. According to Publication 15-b, the lease value is $6,350. He has driven 2,500 miles for personal use and 23,500 miles in total during the year. The car has been available for use on 250 days during the year. Ronald's employer pays for all fuel. What method and valuation will yield the lowest fringe-benefit amount for Ronald? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) Lease-value, $1,337.50
B) Cents-per-mile, $1,337.50
C) Lease-value, $600.19
D) Cents-per-mile, $600.19

Question 31

According to the Consumer Credit Protection Act, what is the maximum percentage of an employee's disposable earnings that may be withheld as part of a consumer credit garnishment?

A) 25%
B) 35%
C) 50%
D) 40%

Question 32

Hattie Bowers is a government employee who is provided a car for commuting and other work-related purposes only. In the last calendar year, her commute is 8 miles each way and she worked 220 days. What is the amount of the company-car fringe benefit that will appear on her W-2? (Do not round intermediate calculations.)

A) $2,140.00
B) $2,640.00
C) $4,680.00
D) $5,280.00

Question 33

What method(s) may be used to determine the fair market value of the personal use of a company car? (Select all that apply.)

A) Appraised value rule
B) Commuting rule
C) Cents-per-mile rule
D) Replacement value rule

Question 34

Which fringe benefit valuation rule(s) permit employees to use a company vehicle for personal purposes as a fringe benefit? (Select all that apply.)

A) Lease-value rule
B) Cents-per-mile rule
C) Commuter rule
D) Mileage reimbursement rule

Question 35

Lakiesha is an employee who drives a 2017 Buick Verano as a company car. The fair-market value of the car is $28,545. She has been given the choice to have her fringe benefit reported on her W-2 either using the lease-value rule or the cents-per mile rule. According to Publication 15-b, the lease value is $7,750. She has driven 4,500 miles for personal use and 31,250 miles in total during the year. The car has been available for use on 200 days during the year. Lakiesha's employer pays for all fuel. What method and valuation will yield the lowest fringe-benefit amount for Lakiesha? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) Lease-value, $859.01
B) Cents-per-mile, $859.01
C) Lease value, $2,407.50
D) Cents-per-mile, $2,407.50

Question 36

Under the lease-value rule, how is the taxable income for the employee determined? (Select all that apply.)

A) Use the annual lease value amount for the vehicle from Publication 15b.
B) Multiply the lease amount by the percent of business usage of the vehicle.
C) Subtract the dollar amount of the fuel used.
D) Multiple the lease amount by the percent of personal usage of the vehicle.

Question 37

Frances McNale is an employee who drives a 2017 Ford C-Max with a fair-market value of $29,500. The lease value is $7,750, according to Publication 15-b. If the car was available for 150 days during the year, what is the prorated annual lease percentage, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) 35.63%
B) 39.82%
C) 41.10%
D) 42.39%

Question 38

Ross is a full-time employee in Provo, Utah, who earns $42,000 annually, paid semimonthly. His federal income tax is $155.00. What is the maximum amount that may be withheld from his pay for a child-support garnishment, assuming he is not in arrears? (Do not round intermediate calculations, only round final answer to two decimal points. Utah has a 5% flat tax.)

A) $365.28
B) $686.81
C) $584.45
D) $876.68

Question 39

Which of the following is true about the employee tax treatment of employer-provided snacks and meals?

A) Occasionally provided snacks and meals are not taxable.
B) Snacks and meals provided on a regular basis are not taxable.
C) Holiday parties and meals provided at special gatherings are always taxable.
D) All employer-provided snacks and meals are taxable.

Question 40

Michael McBride is an employee of Reach-it Pharmaceuticals. His company car is a 2017 Lexus GS 200t with a fair-market value of $50,000 and a lease value of $13,250, according to Publication 15-b. During the year, Michael drove 45,000 miles, of which 9,000 were for personal use. The car was available for use on 270 of the days during the year. All gasoline was provided by the employer and is charged back to Michael at $0.055 per mile. What is the amount of the company-car fringe benefit that will appear on Michael's W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

A) $2,742.77
B) $2,455.27
C) $2,156.87
D) $1,960.27

Question 41

By what date must the value of all noncash benefits be determined for the preceding year?

A) December 31
B) January 31
C) February 28
D) March 31

Question 42

Which of the following is true about 401(k) retirement plans?

A) All 401(k) plans are cafeteria plans.
B) 401(k) plans are exempt from all payroll taxes.
C) 401(k) plans always reduce income tax liability.
D) 401(k) plans are usually subject to FICA taxes.

Question 43

What is the term for a tax-favorable IRA is set up by or for the employee, and the employer contributes the funds into the account?

A) IRA
B) SIMPLE
C) ESOP
D) SEP

Question 44

What differentiates 401(k) and a 403(b) retirement plans?

A) 401(k) plans are limited to companies with more than 100 employees.
B) 403(b) plans are subject to all payroll taxes.
C) 401(k) plans may not be invested in stock-market funds.
D) 403(b) plans are offered by non-profit employers.

Question 45

Which of the following are post-tax deductions? (Select all that apply.)

A) Employee contributions to gym memberships
B) Employee contributions to 401(k) plans
C) Employee contributions to charitable organizations
D) Employee contributions to union dues

Question 46

In which type of retirement plan does the company offer employees the ability to earn company stock for the duration of their employment?

A) SEP
B) SIMPLE
C) ESOP
D) 401(k)

Question 47

What is the major limitation of a SIMPLE retirement plan?

A) It is limited to firms with 100 or fewer employees.
B) Employee contributions to the plan are limited.
C) SIMPLE plans are subject to all payroll taxes.
D) SIMPLE plan funds must be invested in stock market securities.

Question 48

Employer contributions to employee health insurance must be:

A) Added to Federal taxable wages.
B) Reported in Social Security wages.
C) Reported in State taxable wages.
D) Reported in Box 12, Code DD.

Question 49

What is true about long-term disability insurance?

A) It is always included in taxable income.
B) It is subject to Social Security taxes.
C) It is subject to Medicare taxes.
D) It may be deducted on either a pre-or post-tax basis.

Question 50

Under the Affordable Care Act, what are the rules for dependents to be covered under a parent's health plan? (Select all that apply.)

A) The dependent must be under the age of 21.
B) The parent must be an employee covered by a qualified cafeteria plan.
C) Dependents under the age of 26 are covered.
D) All employer-sponsored health plans qualify.

Question 51

Which of the following is an example of a post-tax mandated deduction? (Select all that apply.)

A) Charitable contributions
B) Garnishments
C) Credit card liens
D) Tax liens

Question 52

What is the purpose of pre-tax deductions?

A) To reduce the amount of tax revenue available
B) To reduce the financial burden on families
C) To reduce the financial burden on employers
D) To support proactive health care

Question 53

Which of the following, according to the IRS, is used to determine if a health plan qualifies for pre-tax status? (Select all that apply.)

A) An employer's self-insured plan
B) COBRA health coverage
C) Cancer and accident policies
D) Retiree health coverage

Question 54

What is the difference between a defined benefit and a defined contribution retirement plan?

A) Defined contribution plans allow employees to contribute a set amount toward their retirement plan while employed.
B) Defined contribution plans allow employees to determine a specific amount of money they wish to receive upon retirement.
C) Defined benefit plans limit employee contributions while employed.
D) Defined benefit plans allow employees to set aside money on a tax-exempt basis.

Question 55

If an employer paid for its employees' long-term care insurance premiums, who determines the effect on the employees' gross pay?

A) The IRS
B) The state in which the business is located
C) The employee
D) The employer

Question 56

According to the Affordable Health Care Act, employers with ________ or more employees are required to file an informational return with the IRS and a detailed summary to the employees.

A) 10
B) 50
C) 100
D) 150

Question 57

According to Consumer Credit Protection Act, what is a limit on the amount of a garnishment for consumer credit?

A) It must be less than 50% of an employee's gross earnings.
B) It may be 75% of the employee's disposable income.
C) It must be a minimum of 10% of an employee's annual salary.
D) It cannot exceed 25% of an employee's disposable income.

Question 58

What is a limit on garnishments for nontax liens?

A) It may not exceed 15% of an employee's disposable income.
B) It may be up to 50% of an employee's disposable income.
C) An additional 5% may be added for any lien payments in arrears.
D) It may not exceed 30 times the federal minimum wage.

Question 59

The primary difference between pre-tax and post-tax deductions is:

A) Post-tax deductions reduce tax obligations.
B) Pre-tax deductions include child support.
C) Pre-tax deductions reduce tax liability.
D) Post-tax deductions reduce gross pay.

Question 60

Which of the following are examples of defined contribution plans? (Select all that apply.)

A) IRA
B) Pension
C) SIMPLE
D) 403(b)

Question 61

The purpose of fringe benefits is to ________.

A) reduce taxable compensation
B) entice employee engagement
C) avoid cash outlays for employee benefits
D) defer tax obligations

Question 62

Under the ________, benefits offered only during the last two months of the year may be treated as paid during the following calendar year.

A) Special accounting rule
B) IRS Publication 15
C) ERISA
D) Benefits valuation rule

Question 63

Over ________ of U.S. employees report that fringe benefits affect their choice of employers.

A) 10%
B) 25%
C) 40%
D) 50%

Question 64

The cash value of ________ must be included as compensation on the employee's W-2.

A) occasional meals and snacks
B) gift cards
C) on-site athletic facilities
D) plaques and trophies

Question 65

________ is the price that a person would pay for an item in an arm's length transaction.

A) General valuation
B) Manufacturer's Suggested Retail Price
C) De Minimis
D) Fair Market Value

Question 66

Retirement fund contributions are generally subject to ________ and ________ taxes.

A) Federal withholding; State withholding
B) Federal withholding; Social Security
C) Social Security; Medicare
D) Federal withholding; Medicare

Question 67

Post-Tax Deductions are amounts ________.

A) that are voluntarily chosen by the employee
B) that the employer chooses to withhold after assessing the employee's tax liability
C) includes both mandatory and voluntary deductions
D) are only mandatory deductions like garnishments and union dues

Question 68

As a general rule, when should the employer deposit money associated with employee benefits?

A) When the employee demands the benefit.
B) When the benefit is made available.
C) Immediately upon receipt.
D) When other tax deposits are made.

Question 69

What options do employers have regarding taxable fringe benefits? (Select all that apply.)

A) Add it to the employee's W-2 in one lump sum.
B) Add it to a single pay period and tax it at the 25% income tax rate.
C) Add the value of the fringe benefit to period pay and tax it at that time.
D) Add it as a line item for employees to remit individually.

Question 70

The reporting of employee benefits occurs on the ________ and the ________. (Select all that apply.)

A) Form W-2
B) Payroll register
C) Total compensation report
D) Form W-4

Question 71

________ benefits are fringe benefits with minimal value.

A) Minimal
B) De minimis
C) De normal
D) Mandatory

Question 72

Publication ________ is the employer's guide to fringe benefits.

A) 10-a
B) 15-f
C) 15-b
D) 12-c

Question 73

Employers benefit by offering POPs because they reduce ________.

A) income tax liability
B) cash paid to employees
C) FICA tax liability
D) employee turnover

Question 74

The ________ determines when benefit amounts should be withheld from employee pay.

A) employee
B) employer
C) IRS
D) State in which the business is conducted

Question 75

The IRS permits employees to rollover up to ________ in their FSA at the employer's discretion.

A) $100
B) $250
C) $500
D) $750