Deck 4: Income Tax Withholding

Question 1

Specific fringe benefit exclusion rules are found in Publication 15.

Answer 1

False

Question 2

What differentiates Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)?
• HSAs expire on an annual basis but FSAs continue perpetually.
• FSAs expire annually but HSAs may be reserved for use late in life.
• Amounts contributed to FSAs may not be rolled over from one year to the next.
• Only HSAs may be deducted from employee on a pre-tax basis.

Answer 2

FSAs expire annually but HSAs may be reserved for use late in life.

Question 3

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

Answer 3

False

Question 4

Which of the following may be included as part of an employee's Section 125 "cafeteria" plan?
• Medical expenses
• Tuition expenses
• Meal expenses
• Moving expenses

Question 5

Fringe benefits are monetary or nonmonetary compensation given to employees in return for their service to the company.

Question 6

Contributions to FSAs in excess of what annual amount are treated as taxable income?
• $1,930
• $2,370
• $1,660
• $2,700

Question 7

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

Question 8

Which of the following is/are hallmarks of fringe benefits? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Employee welfare remains unaffected by the benefit.
• All employees have access to the benefit.
• The ability to receive the benefit relates directly to performance.
• The benefit improves employees' living conditions.

Question 9

Health Savings Accounts may be used as pre-tax deductions for which type of costs? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Child medical expenses
• Gasoline expenses
• Prescription expenses
• Long-term medical care expenses

Question 10

Which of the following must accompany a Health Savings Account (HSA) to be considered part of a cafeteria plan?
• Flexible Savings Agreement
• High-deductible health plan
• Long-term care insurance
• Low-deductible health plan

Question 11

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

Question 12

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

Question 13

Which of the following is an includible medical expense, according to Publication 502? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Ambulance service
• Hearing aids
• Over-the-counter medicines
• Braille books and magazines

Question 14

Which of the following deductions may be taken on a pre-tax basis? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Cafeteria plan
• Retirement plan
• Health insurance
• Garnishments

Question 15

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

Question 16

If a fringe benefit involves a deduction from employee pay, which of the following is true?
• Employers may only offer the benefit to certain classes of employees.
• The amount of the deduction must be listed on the employee's pay advice.
• The fringe benefit must be subject to income tax.
• The employee must enroll in direct deposit for their pay.

Question 17

Fringe benefits and employee satisfaction have no correlation.

Question 18

According to Bureau of Labor Statistics, what percentage of additional compensation is commonly offered as fringe benefits?
• 15-23%
• 21-29%
• 25-33%
• 10-18%

Question 19

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

Question 20

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

Question 21

Which of the following, according to the IRS, is used to determine if a health plan qualifies for pre-tax status? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Cancer and accident policies
• An employer's self-insured plan
• COBRA health coverage
• Retiree health coverage

Question 22

Which of the following is true about excluded fringe benefits? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Excluded fringe benefits are not generally a taxable part of employee pay.
• Excluded fringe benefits are generally not reported on the employee's W-2.
• The cash value of excluded fringe benefits is always taxable.
• They must be part of the employer's cafeteria plan.

Question 23

Under the Affordable Care Act, what are the rules for dependents to be covered under a parent's health plan? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• The dependent must be under the age of 21.
• Dependents under the age of 26 are covered.
• The parent must be an employee covered by a qualified cafeteria plan.
• All employer-sponsored health plans qualify.

Question 24

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?
• 25%
• 40%
• 35%
• 50%

Question 25

What is true about long-term disability insurance?
• It is always included in taxable income.
• It is subject to Medicare taxes.
• It is subject to Social Security taxes.
• It may be deducted on either a pre-or post-tax basis.

Question 26

Under the lease-value rule, how is the taxable income for the employee determined? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Multiply the lease amount by the percent of personal usage of the vehicle.
• Use the annual lease value amount for the vehicle from Publication 15b.
• Subtract the dollar amount of the fuel used.
• Multiply the lease amount by the percent of business usage of the vehicle.

Question 27

Employer contributions to employee health insurance must be:
• Reported in State taxable wages.
• Reported in Box 12 using Code DD.
• Added to Federal taxable wages.
• Reported in Social Security wages.

Question 28

Which fringe benefit valuation rule(s) permit employees to use a company vehicle for personal purposes as a fringe benefit? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Mileage reimbursement rule
• Lease-value rule
• Commuter rule
• Cents-per-mile rule

Question 29

What is the purpose of pre-tax deductions?
• To reduce the financial burden on families
• To reduce the financial burden on employers
• To support proactive health care
• To reduce the amount of tax revenue available

Question 30

If an employer paid for its employees' long-term care insurance premiums, who determines the effect on the employees' gross pay?
• The IRS
• The employer
• The employee
• The state in which the business is located

Question 31

Under the unsafe conditions rule:
• Employees are charged $1.50 for the one-way commute.
• An employee may use a company vehicle for a one-way commute.
• Employees may only use company cars if their normal travel mode is unsafe.
• Employees may leave work at any time.

Question 32

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.
• 150
• 100
• 10
• 50

Question 33

Under what condition is the fringe benefit of a gym membership taxable?
• When the employer has on-site facilities that are open to public use.
• When the employer has on-site facilities that are restricted to employee use.
• Gym memberships are always taxable.
• When the employer offers membership to an off-site club at no additional cost to the employee.

Question 34

Which of the following are post-tax deductions? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Employee contributions to 401(k) plans
• Employee contributions to union dues
• Employee contributions to charitable organizations
• Employee contributions to gym memberships

Question 35

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

Question 36

What method(s) may be used to determine the fair market value of the personal use of a company car? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Appraised value rule
• Replacement value rule
• Commuting rule
• Cents-per-mile rule

Question 37

According to Publication 15b, what is the annual cash value limit for excluded qualified achievement awards?
• $2,000
• $1,400
• $800
• $1,600

Question 38

Award: 10.00 points

Question 39

Which of the following is true about the employee tax treatment of employer-provided snacks and meals?
• Holiday parties and meals provided at special gatherings are always taxable.
• All employer-provided snacks and meals are taxable.
• Snacks and meals provided on a regular basis are not taxable.
• Occasionally provided snacks and meals are not taxable.

Question 40

The primary difference between pre-tax and post-tax deductions is:
• Pre-tax deductions reduce tax liability.
• Post-tax deductions reduce tax obligations.
• Post-tax deductions reduce gross pay.
• Pre-tax deductions include child support.

Question 41

What is the major limitation of a SIMPLE retirement plan?
• SIMPLE plans are subject to all payroll taxes.
• Employee contributions to the plan are limited.
• SIMPLE plan funds must be invested in stock market securities.
• It is limited to firms with 100 or fewer employees.

Question 42

By what date must the value of all noncash benefits be determined for the preceding year?
• March 31
• January 31
• February 28
• December 31

Question 43

Over of U.S. employees report that fringe benefits affect their choice of employers.
• 25%
• 10%
• 40%
• 50%

Question 44

As a general rule, when should the employer deposit money associated with employee benefits?
• When the benefit is made available.
• When other tax deposits are made.
• Immediately upon receipt.
• When the employee demands the benefit.

Question 45

Post-Tax Deductions are amounts .
• are only mandatory deductions like garnishments and union dues
• that the employer chooses to withhold after assessing the employee's tax liability
• that are voluntarily chosen by the employee
• includes both mandatory and voluntary deductions

Question 46

What options do employers have regarding taxable fringe benefits? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes
left with a question mark will be automatically graded as incorrect.)
• Add it to the employee's W-2 in one lump sum.
• Add it as a line item for employees to remit individually.
• Add the value of the fringe benefit to period pay and tax it at that time.
• Add it to a single pay period and tax it at the 25% income tax rate.

Question 47

The reporting of employee benefits occurs on the and the . (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Total compensation report
• Form W-2
• Payroll register
• Form W-4

Question 48

In which type of retirement plan does the company offer employees the ability to earn company stock for the duration of their employment?
• SIMPLE
• ESOP
• SEP
• 401(k)

Question 49

According to Consumer Credit Protection Act, what is a limit on the amount of a garnishment for consumer credit?
• It must be a minimum of 10% of an employee's annual salary.
• It cannot exceed 25% of an employee's disposable income.
• It may be 75% of the employee's disposable income.
• It must be less than 50% of an employee's gross earnings.

Question 50

Retirement fund contributions are generally subject to and taxes.
• Federal withholding; Social Security
• Federal withholding; State withholding
• Federal withholding; Medicare
• Social Security; Medicare

Question 51

Which is the retirement plan used for a tax-favorable IRA set up by or for the employee, where the employer contributes the funds into the account?
• ESOP
• SIMPLE
• IRA
• SEP

Question 52

The purpose of fringe benefits is to .
• entice employee engagement
• defer tax obligations
• avoid cash outlays for employee benefits
• reduce taxable compensation

Question 53

What is the difference between a defined benefit and a defined contribution retirement plan?
• Defined benefit plans limit employee contributions while employed.
• Defined contribution plans allow employees to contribute a set amount toward their retirement plan while employed.
• Defined contribution plans allow employees to determine a specific amount of money they wish to receive upon retirement.
• Defined benefit plans allow employees to set aside money on a tax-exempt basis.

Question 54

Under the , benefits offered only during the last two months of the calendar year may be treated as paid during the following calendar year.
• Benefits valuation rule
• ERISA
• IRS Publication 15
• Special accounting rule

Question 55

Which of the following are examples of defined contribution plans? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• SIMPLE
• IRA
• 403(b)
• Pension

Question 56

Which of the following is an example of a post-tax mandated deduction? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Credit card liens
• Tax liens
• Garnishments
• Charitable contributions

Question 57

What differentiates 401(k) and a 403(b) retirement plans?
• 403(b) plans are subject to all payroll taxes.
• 403(b) plans are offered by non-profit employers.
• 401(k) plans are limited to companies with more than 100 employees.
• 401(k) plans may not be invested in stock-market funds.

Question 58

What is a limit on garnishments for nontax liens?
• It may not exceed 15% of an employee's disposable income.
• It may not exceed 30 times the federal minimum wage.
• An additional 5% may be added for any lien payments in arrears.
• It may be up to 50% of an employee's disposable income.

Question 59

Which of the following is true about 401(k) retirement plans?
• 401(k) plans always reduce income tax liability.
• 401(k) plans are usually subject to FICA taxes.
• 401(k) plans are exempt from all payroll taxes.
• All 401(k) plans are cafeteria plans.

Question 60

The determines when benefit amounts should be withheld from employee pay.
• State in which the business is conducted
• employee
• IRS
• employer

Question 61

is the price that a person would pay for an item in an arm's length transaction.
• Manufacturer's Suggested Retail Price
• Fair Market Value
• De Minimis
• General valuation

Question 62

Employers benefit by offering POPs because they reduce .
• income tax liability
• cash paid to employees
• FICA tax liability
• employee turnover

Question 63

benefits are fringe benefits with minimal monetary value.
• Mandatory
• Minimal
• De normal
• De minimis

Question 64

Publication is the employer's guide to fringe benefits.
• 15-b
• 10-a
• 15-f
• 12-c

Question 65

The IRS permits employees to rollover up to annually in their FSA at the employer's discretion.
• $250
• $750
• $500
• $100

Question 66

The cash value of must be included as compensation on the employee's W-2.
• plaques and trophies
• occasional meals and snacks
• on-site athletic facilities
• gift cards