Deck 4: Fringe Benefits and Voluntary Deductions

Question 1

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

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

Answer 1

C

Question 2

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.)

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

Answer 2

A

Question 3

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

Answer 3

False

Question 4

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.)

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

Question 5

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

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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.)

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

Question 10

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

Question 11

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

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

Question 12

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

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.)

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

Question 14

Fringe benefits and employee satisfaction have no correlation.

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?

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

Question 17

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 18

Specific fringe benefit exclusion rules are found in Publication 15.

Question 19

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

A) $1,930
B) $2,370
C) $1,660
D) $2,700

Question 20

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

Question 21

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.)

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

Question 22

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

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

Question 23

Under the unsafe conditions rule:

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

Question 24

Ronald Ferrer is an employee who drives a 2019 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, $1,450
B) Cents-per-mile, $1,450
C) Lease-value, $600.19
D) Cents-per-mile, $600.19

Question 25

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

Question 26

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

Question 27

Frances McNale is an employee who drives a 2019 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 28

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) 40%
C) 35%
D) 50%

Question 29

Luis Billiot is an employee of Plato Designs and drives a 2019 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) 17.64%
D) 19.40%

Question 30

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 31

Frances McNale is an employee who drives a 2019 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) $743.34
C) $1,020.44
D) $964.24

Question 32

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.)

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

Question 33

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

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

Question 34

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

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

Question 35

Ross is a full-time employee in Lansing, Michigan, 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. Michigan has a 4.25% flat tax.)

A) $365.28
B) $584.45
C) $876.68
D) $693.38

Question 36

Luis Billiot is an employee of Plato Designs and drives a 2019 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) $1,092.27
B) $546.13
C) $875.14
D) $1,252.48

Question 37

Michael McBride is an employee of Reach-it Pharmaceuticals. His company car is a 2019 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) $2,455.27
B) $2,156.87
C) $2,742.77
D) $1,960.27

Question 38

Lakiesha is an employee who drives a 2019 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, $2,610
B) Cents-per-mile, $859.01
C) Cents-per-mile, $2,610
D) Lease-value, $859.01

Question 39

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.)

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

Question 40

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.)

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

Question 41

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.)

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

Question 42

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

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

Question 43

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.)

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

Question 44

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

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

Question 45

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

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

Question 46

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.)

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

Question 47

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

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

Question 48

What is true about long-term disability insurance?

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

Question 49

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

Question 50

What is the purpose of pre-tax deductions?

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

Question 51

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) 150
B) 100
C) 10
D) 50

Question 52

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.)

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

Question 53

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

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

Question 54

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?

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

Question 55

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

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

Question 56

What is a limit on garnishments for nontax liens?

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

Question 57

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.)

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

Question 58

Employer contributions to employee health insurance must be:

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

Question 59

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

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

Question 60

What is the major limitation of a SIMPLE retirement plan?

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

Question 61

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

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

Question 62

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

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

Question 63

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 64

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

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

Question 65

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

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

Question 66

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

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

Question 67

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.)

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

Question 68

________ benefits are fringe benefits with minimal monetary value.

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

Question 69

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.)

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

Question 70

The purpose of fringe benefits is to ________.

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

Question 71

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

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

Question 72

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

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

Question 73

Post-Tax Deductions are amounts ________.

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

Question 74

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

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

Question 75

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

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