Deck 9: Withholding, Estimated Payments, and Payroll Taxes

Question 1

If an individual taxpayer's quarterly estimated tax payments equal or exceed 70 percent of the tax due for the current year, the taxpayer will not be subject to the penalty for underpayment of estimated tax.

Answer 1

False

Question 2

The original copy of all W-2 Forms and Form W-3 must be filed with the Social Security Administration by February 28 of the year following the calendar year in which the wages were paid, regardless of the tax year of the employer.

Answer 2

True

Question 3

If an employee does not complete a Form W-4, the employer must withhold tax as if the employee were single with no exemptions.

Answer 3

True

Question 4

When required, gambling winnings are reported by the gambling establishment on Form 1099-MISC.

Question 5

Dividend income is not subject to the self-employment tax.

Question 6

If a husband and wife both work, they must divide their withholding allowances equally on their W-4 Forms.

Question 7

A nondeductible penalty is imposed on underpayments of estimated taxes.

Question 8

Employees with self-employment income who also have W-2 wage income may be able to avoid making estimated tax payments by filing a Form W-4 and increasing the amount of their withholding.

Question 9

Gambling winnings must be reported to the IRS, but withholding of taxes on winnings is never required.

Question 10

Taxpayers with large amounts of deductions may claim extra withholding allowances on their Form W-4s.

Question 11

Reimbursements of moving expenses are always subject to withholding.

Question 12

If taxpayers fail to provide their bank with an identification number, they are subject to backup withholding on interest payments.

Question 13

If an individual taxpayer discovers that his or her original estimate for estimated tax payments was inaccurate, the taxpayer should continue to make payments based on the original estimate and pay any additional amount or request any refund when the tax return is filed.

Question 14

Employers must provide employees with their Form W-2s by February 15th of the year following the calendar year of payment of the wages.

Question 15

When taxpayers overpay FICA taxes, the excess taxes may be claimed as a credit against their tax liability.

Question 16

An individual who expects to receive more than $500 of income from sources other than wages meets the requirements for having to file quarterly estimated tax payments.

Question 17

The two most common methods of determining federal income tax withholding are the percentage method and the wage bracket method.

Question 18

Individual quarterly estimated tax payments are filed with Form 1040-ES.

Question 19

Employer deposits of withheld taxes may be made to any bank.

Question 20

In 2014, the maximum amount of wages subject to the Social Security portion of the FICA tax is $117,000.

Question 21

What percentage of gross food and beverage sales is used in determining the amount of tips that an employer must report as allocated to employees?

A)8 percent
B)10 percent
C)12 percent
D)15 percent
E)None of the above

Question 22

For 2014, the Social Security portion of the FICA tax is imposed at a rate of:

A)6.2 percent for the employee and 7.65 percent for the employer.
B)6.2 percent for only the employer.
C)6.2 percent for only the employee.
D)6.2 percent for the employee and 6.2 percent for the employer.
E)None of the above.

Question 23

Mark the incorrect answer. In completing W-4s, employees may claim extra allowances:

A)If they are paying alimony.
B)If they have tax credits.
C)If they expect to have large amounts of itemized deductions.
D)If they have high levels of interest and dividend income.

Question 24

The FUTA tax is a voluntary unemployment tax which an employer may or may not wish to contribute towards.

Question 25

For 2014, the maximum base for the Social Security portion of the FICA tax is:

A)$135,000
B)$117,000
C)$87,900
D)$84,000
E)None of the above

Question 26

For 2014, the maximum base amount for computing the Medicare portion of the self-employment tax is $135,000.

Question 27

A credit against the FUTA tax is available for state unemployment tax paid by the employer.

Question 28

Household employers are not required to pay FICA taxes on part-time household employees.

Question 29

Mark the incorrect answer. Estimated income tax payments:

A)Need not be filed if the estimated tax, after subtracting withholding, can reasonably be expected to be more than $1,000.
B)If inadequate, may result in nondeductible penalties.
C)May be based on the amount of the tax liability for the prior year.
D)Are made in four installments on April 15, June 15, and September 15 of the tax year and on January 15 of the following year.

Question 30

Gordon is 60 years old and Mary is 55 years old. They are married with three dependent children over age 17, and Gordon has one job. Assuming that Mary is unemployed, how many allowances should Gordon claim on his Form W-4, assuming no extra allowances for deductions or adjustments?

A)Five
B)Six
C)Seven
D)Eight
E)Nine

Question 31

The FUTA tax for 2014 is based on 6.2 percent of each employee's wages up to $10,000.

Question 32

For purposes of the new additional 0.9% Medicare surtax on earned income, a single taxpayer having earned income of more than $200,000 is generally subject to the tax.

Question 33

Mark the correct answer. FICA taxes are:

A)7.65 percent of all earned income with no limitations.
B)7.65 percent of earned income up to $150,000.
C)Paid by the employee and by the employer.
D)Not subject to cost of living adjustments each year.

Question 34

Household employers are not required to pay FICA taxes on cash payments of less than $1,900 paid to any household employee in a calendar year.

Question 35

In determining an employee's FICA tax to be withheld, the maximum amount of wages subject to FICA must be reduced by the taxpayer's self-employment earnings.

Question 36

Steve is a single man who lives by himself. He has one job as a computer tech. How many withholding allowances can he claim?

A)2
B)3
C)5
D)10
E)He can claim any number of withholding allowances that he believes will leave him with proper withholding.

Question 37

Elwin worked at three jobs during 2014. He earned $30,000, $27,000, and $9,000, respectively, from the jobs. What is the total amount of FICA tax that would have been withheld from Elwin's wages?

A)$4,054.80
B)$4,092.00
C)$5,003.10
D)$5,049.00
E)None of the above

Question 38

Which of the following taxpayers are not required to make estimated payments?

A)A car mechanic who is self-employed and earns $50,000 a year.
B)A wealthy individual whose earnings are from corporate dividends.
C)An employee who works at a local department store with appropriate withholding and no other income.
D)All of the above must make estimated payments.

Question 39

Payors are not required to use backup withholding if:

A)The taxpayer did not give the payor his or her taxpayer identification number.
B)The taxpayer certifies that he or she is not subject to backup withholding.
C)The IRS informs the payor that the taxpayer gave an incorrect identification number.
D)The IRS informs the payor to start withholding because the taxpayer has not reported the income on his or her tax return.

Question 40

Which of the following amounts paid by an employer to an employee is not subject to withholding?

A)Commissions
B)Travel expense reimbursements from an accountable plan
C)Salary
D)Bonus
E)All of the above are subject to withholding

Question 41

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

A)Form 940
B)Form 941
C)Form 1099
D)Form W-2
E)None of the above

Question 42

Mark the correct answer. Self-employment taxes:

A)Consist of a Medicare tax and a Social Security tax.
B)Are not affected by wages the taxpayer earns as an employee.
C)Apply to taxpayers with less than $400 in self-employment earnings.
D)Are calculated based on unearned income such as interest and dividends as well as net earnings from self-employment.

Question 43

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

A)1099-INT
B)1099-DIV
C)1099-MISC
D)1099-R
E)None of the above

Question 44

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

A)One-day deposit rule
B)Eight-day deposit rule
C)Semi-weekly deposit rule
D)Monthly deposit rule
E)Yearly deposit rule

Question 45

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?

A)$0
B)$102
C)$168
D)$918
E)None of the above

Question 46

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?

A)$8,951
B)$9,052
C)$9,486
D)$10,000
E)None of the above is correct

Question 47

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?

A)$136
B)$168
C)$918
D)$1,134
E)None of the above

Question 48

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?

A)Annually
B)Monthly
C)Quarterly
D)Daily
E)None of the above

Question 49

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?

A)$0
B)$72
C)$112
D)$176
E)None of the above

Question 50

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

A)W-3
B)W-2
C)W-4
D)941
E)1040

Question 51

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?

A)A nanny who earns $22,000 a year
B)A baby-sitter who earns $1,300 a year
C)A cook who is paid $35,000 a year
D)A cleaning lady who is paid $8,000 a year
E)The taxpayer would not have to pay Social Security and Medicare taxes in any of the above situations

Question 52

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

A)Distributions from a partnership.
B)Interest.
C)Dividends.
D)Unemployment compensation.
E)None of the above.

Question 53

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

A)Reimbursements of ordinary and necessary expenses are subject to federal income tax withholding.
B)Excess reimbursements of ordinary and necessary expenses are never subject to withholding.
C)Reimbursements received by an employee under a plan which contains a requirement to return excess amounts, and the employee does so, are automatically excluded from the definition of wages subject to withholding.
D)Provided that reimbursements are received by an employee under a plan which requires the employee to substantiate the expenses to his employer, the amounts are automatically excluded from the definition of wages subject to withholding, without regard to whether the employee actually substantiates the expenditures.
E)All of the above are true statements.

Question 54

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

A)Interest income
B)Gain on sale of real estate
C)Income from a sole proprietor's law practice
D)Dividends from stock
E)None of the above

Question 55

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?

A)$0
B)$91.80
C)$45.90
D)$37.20
E)None of the above

Question 56

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

A)The FICA tax is composed of two parts, Social Security and Medicare.
B)Self-employed individuals may elect to pay either FICA taxes or self-employment taxes.
C)FICA taxes are paid by both the employees and their employers.
D)The income amount subject to FICA tax has increased significantly over the years.
E)Wages subject to FICA tax that are received by a self-employed individual reduce the individual's maximum self-employment tax base.

Question 57

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?

A)Form 1099-INT
B)Form W-4
C)Form W-2
D)Form 1099-DIV
E)Form 1099-MISC

Question 58

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

A)A partner's distributive share of partnership income
B)Dividend income
C)Capital gains
D)Interest income
E)None of the above

Question 59

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?

A)$133.80
B)$882.40
C)$321.60
D)$224.00
E)$163.70

Question 60

The FUTA tax is paid by:

A)Employees only.
B)Employers only.
C)Employers and employees.
D)Neither employers nor employees.
E)The federal government.

Question 61

Emily is a self-employed attorney during 2014.
a.​Assuming that Emily earns $20,000 from her practice, calculate the total amount of her self-employment tax liability for 2014.
b.​Assuming that Emily earns $135,000 from her practice, calculate the total amount of her self-employment tax liability for 2014.

Question 62

Mary is self-employed for 2014. Mary estimates her required annual estimated tax payment for 2014 to be $4,000. Mary had a $500 overpayment of last year's taxes which she will apply against her first quarter estimated payment.
a.How much should Mary pay with her first quarter estimated tax voucher?
b.When is the payment due?

Question 63

Provide answers to the following questions:
a. What form does an employer use to report wages to an employee?
b. When must the employer give this form to the employee?
c. What form does an employer use to report wages to the Social Security Administration?
d. When must the employer file the form with the Social Security Administration?

Question 64

In 2014, Lew earned wages of $386,724.
a. What is the amount of Social Security tax withheld from his salary?
b. What is the amount of Medicare tax withheld from his salary?

Question 65

Ellen uses the head of household filing status and has a dependent daughter. Ellen has self-employment income of $310,000 as an architect and $10,000 of self-employment losses from a jewelry making business.
a. What is Ellen's 0.9% additional Medicare tax for 2014?
b. Is Ellen allowed to deduct a portion of this with her other Medicare taxes as an adjustment for AGI on the front page of her income tax return?

Question 66

Janet is single and claims two allowances on her Form W-4. Her salary is $1,800 per month.
a.Use the percentage method to calculate the amount of Janet's withholding for a monthly pay period.
b.Use the withholding tables to determine the amount of Janet's withholding for a monthly pay period.

Question 67

Peter and Joan are married and Joan has self-employment income of $240,000. Peter is retired. How much additional 0.9% Medicare surtax will Peter and Joan owe with their 2014 income tax return? ​

A)$360
B)$2,160
C)$0
D)They will receive a $90 refund

Question 68

For 2014, Randy, an unmarried taxpayer, has wages of $45,000. He has a significant amount of income from dividends and interest and therefore expects to have a federal income tax liability of $18,000. His total federal income tax withholding for the year is $9,500. Randy had $100,000 of adjusted gross income and a federal tax liability of $11,000 on his 2013 return. To avoid a penalty for underpayment of estimated taxes, what is the minimum amount of total estimated tax that Randy must pay in 2014? Assume the payments are made on a timely basis.

Question 69

Tom had net earnings of $80,000 from the plant nursery he owns. What is his liability for FICA taxes on his earnings?

Question 70

For each of the following payments, indicate the form (Form W-2, W-4, W-2G, 1099-B, 1099-DIV, 1099-INT, 1099-MISC, or 1099-R) that should be used to report the payment.
a.Dividends from a mutual fund
b.Las Vegas gambling winnings
c.Interest paid by a bank
d.Payment of salary and commissions to an employee
e.Distribution from an IRA account

Question 71

Marty earned $5,000 in interest income from the Honey Springs Bank. She failed to notify the bank that she was not subject to backup withholding.
a. If Marty's taxable income puts her in the 25 percent bracket, how much would Honey Springs Bank withhold on the $5,000 of interest earnings?
b. If Marty's taxable income puts her in the 15 percent bracket, how much would Honey Springs Bank withhold on the $5,000 of interest earnings?

Question 72

The Foemina Corporation has two employees, Nancy and Penny.
a.If Nancy earns wages of $17,000 for 2014, calculate the total amount of the FICA tax that must be paid:by Nancyby Foemina CorporationTotal
b.If Penny earns wages of $120,000 for 2014, calculate the total amount of the FICA tax that must be paid:by Pennyby Foemina CorporationTotal

Question 73

Melody and Todd are married and have employee wages of $250,000 each in 2014. They have no other income. How much additional 0.9% Medicare surtax will Melody and Todd have to pay or receive as a refund when they file their 2014 income tax return? ​

A)$1,350 will be due with their return in addition to amounts withheld.
B)$1,350 will be refunded with their return.
C)$900 will be refunded with their return.
D)$3,600 will be due with their return in addition to amounts withheld.

Question 74

Mike is a single taxpayer. For the payroll period of November 2014, he is paid wages of $3,400, monthly. Mike claims three allowances on his Form W-4.
a.Use the percentage method to calculate the amount of Mike's withholding for a monthly pay period.
b.Use the withholding tables to determine the amount of Mike's withholding for the same period.

Question 75

The Wash Your Paws Self-Service Dog Wash, a California business, had two employees during the year. Lindsey worked from January through March 15 and earned $2,750. Avery worked for the whole year and earned $20,000. The State of California assesses unemployment tax at the rate of 5.4 percent. Calculate the total FUTA tax after the credit for the state unemployment tax.

Question 76

Sally is an employer with one employee, Sara. Sara earned $12,000 from January 1, 2014 through June 30, 2014, and the state unemployment tax rate is 5.4 percent. Calculate the following amount for Sally.
a.FUTA tax after the state tax credit
b.What form should Sally use to report her FUTA tax liability for 2014?

Question 77

Lucinda is a self-employed veterinarian in 2014. Her Schedule C net earnings are $86,000 for the year. Calculate the total amount of Lucinda's self-employment tax liability for 2014.

Question 78

Richard is employed by a major defense contractor and earns $156,000 in 2014. Calculate:
a. The amount of Social Security tax withheld from his income
b. The amount of Medicare tax withheld from his income
c. The amount of FUTA withheld from his income

Question 79

Mark has two jobs during 2014. One employer withheld and paid FICA taxes on $70,200 of Mark's salary and the other employer withheld and paid FICA taxes on $47,400 in salary paid to Mark. Calculate the amount of Mark's credit for the overpayment of FICA taxes that he should claim on his 2014 Form 1040.

Question 80

Karen is single with no dependents and earns $18,000 a year. She gives her employer a Form W-4 on which she claims 17 allowances. What is her employer required to do about the Form W-4? Explain.