Achievement Test Chapter 4

1. A sole proprietor with two employees is exempt from the requirements of the federal income tax withholding law.

2.  Not-for-profit corporations that are exempt from federal income taxes do not withhold federal income taxes from their employee’s pay.

3.  Cash tips of $20 dollars or more in a month must be reported to the employer by the tipped employee by the end of the following month.

4.  Employees who regularly receive cash tips of $20 dollars or more in a calendar month are subject to federal income tax withholding on the tips.

5. Employees who are receiving over $1 million dollars in supplemental wages for the year will have a 37% withholding rate apply to the supplemental payments in excess of $1 million dollars.

6.  Employee’s payroll deductions into their 401(K) plans are generally made on a pretax basis and reduce the amount of gross pay that is subject to federal income tax withholding.

7.  An employee who is first paid wages in 2020 and fails to furnish a Form W-4 will be treated as if they were single or married filing separately with standard withholding.

8.  Withholding certificates must be retained by employers for as long as the certificates are in effect and for four years thereafter.

9.  Unmarried persons are distinguished from married persons under both the percentage method and the wage-bracket method of withholding.

10.  Vacation pay is to be paid at the same time as a regular wage payment. In this case, the vacation pay must be combined with the regular wage payment and federal income taxes calculated on the amount of the total payment.

11.In the IRA form of a simple retirement account, employer’s can contribute as much as they want into the employee’s simple retirement account, even though the employee’s contribution is limited to $13,500.

12 . The Wage and Tax Statement must be furnished to an employee on or before February 28 following the close of the calendar year.

13.  If an employee who left the company requests a W-2 before the end of the year, it must be furnished within 30 days of the request or the final wage payment (whichever is later).

14. The maximum contribution that an employee (age 40) can make into a 401(k) plan that is not taxed for federal income tax withholding purposes is $25,000.

15.  Form W-3 is filed with the Social Security Administration by employers as a transmittal of the information contained on Forms W-2.

16. Employers cannot send Forms W-2 to employees electronically.

17.  To correct errors on previously filed Forms W-2, an employer must file Form W-3.

18.  Contributions made by the employer into employees’ health savings accounts are excluded from the employee’s taxable income.

19.   The number of withholding allowances claimed by an employee is set forth on Form W-2.

20. An employee filed a Form W-4 and claimed 22 withholding allowances. The employer should withhold 22% of the worker’s gross earnings for federal income taxes until the form W-4 is approved by the IRS.

21.  Which of the following fringe benefits is taxable?

1. job-placement assistance
2. .reduced tuition for education
3. membership in a country club
4. use of on-premise athletic facility
5. qualified employee discounts

22. All of the following persons are classified as employees under the federal income tax withholding law with the exception of

1. an officer of the federal government
2. the president of a corporation
3. a partner
4. an elected official in the state government
5. a first-line supervisor

23.  If an employee files an amended W-4, the employer must make the W-4 effective no later than the

1. 10th day from the W-4 receipt date
2. next payday
3. first pay in the next year
4. first pay in the next quarter
5. start of the first payroll period ending on or after the 30th day from the W-4 receipt date

24.  Ron Case, married filing jointly, failed to complete and file Form W-4 with his employer. The employer should

1. withhold federal income taxes as if Case were single and claimed no other adjustments
2. withhold federal income taxes at a rate of 22% of Case’s wages
3. withhold federal income taxes as if Case were married filing jointly and claimed no other adjustments
4. refuse to pay Case until his Form W-4 is filed
5. take none of the above actions

25. Employers must submit Forms W-4 to the IRS for

1. those requested in writing by the IRS
2. those requesting additional amounts to be withheld
3. all Forms W-4
4. all Forms W-4 claiming exemption
5. those claiming deductions

26.  The withholding on vacation wage payments is

1. a flat 22%
2. tax-free
3. a flat 15%
4. based on the total amount of the wage payment plus the vacation pay
5. taxed as though it were a regular payment for the periods occurring during the vacation period

27. A publisher is preparing information returns to report the royalties paid to authors (nonemployees) during the prior calendar year. The proper information return to be completed is

1. Form W-2
2. Form 1099-MISC
3. Form 1099-DIV
4. Form W-3
5. Any of these forms are correct.

28.  Which of the following forms is not completed by the employer?

1. W-3
2. Form 1099-MISC
3. W-4
4. Form 941
5. W-2

29. Wolf Company is giving a net bonus check of $500 to all of its employees. If each of the payments are subject to FIT (22% supplemental rate) and FICA taxes, but no state taxes, the gross amount of each bonus check would be

1. $663.75
2. $656.00
3. $710.73
4. $662.75
5. None of these choices are correct.

30  Both the percentage method and the wage-bracket method of withholding have each of the following characteristics except

1. a table of allowances values is used
2. employees are given the full benefit of the allowances they claim
3. unmarried persons are distinguished from married persons
4. tables and wage-bracket charts are used to determine the amount withheld
5. the standard deduction is taken into account