2010 Payroll Source Ch01

Front 1

2010 Ch-01 Review Question #01:

List the factors used under the common law test in determining whether a business has the right to control the financial aspects of a worker's activities.

Back 1

• Whether the worker has made a significant financial investment in performing the work
• Whether the worker has business expenses that are unreimbursed
• Whether the worker makes his or her services available to the general market
• Whether the worker is paid on a regularly recurring basis or by the job

Front 2

2010 Ch-01 Review Question #02:

What are the four categories of statutory employees?

Back 2

• Agent-drivers or commission-drivers
• Full-time life insurance salespersons
• Homeworkers
• Traveling or city salespersons

Front 3

2010 Ch-01 Review Question #03:

What are the two categories of statutory nonemployees?

Back 3

• Qualified real estate agents
• Direct sellers

Front 4

2010 Ch-01 Review Question #04:

Compare a temporary help agency employee and a leased employee.

Back 4

Temporary workers are hired, screened, and trained by the temporary help agency to provide services for clients. They are employees of the temporary help agency, which sets their wages and has the sole right to hire and fire. The agency is also responsible for all payroll taxes.

Leased employees are hired, trained, and qualified by a leasing company, which provides workers for a client company. The client pays a fee to the leasing company to cover the cost of payroll, benefits, etc.

Front 5

2010 Ch-01 Review Question #05:

When leasing an employee or using a temporary help agency, aside from looking at the cost, what should you know about the overall company that you are dealing with to avoid having to pay any withholding or employment taxes?

Back 5

Employers should make sure they are dealing with a financially secure and reputable company before entering into a contract, since the temporary help agency or leasing company's financial failure could lead to the client company becoming liable for any withholding or employment taxes that remain unpaid.

Front 6

2010 Ch-01 Review Question #06:

What are the three parts of the ABC test, and what is the test used to determine?

Back 6

A)
• The worker is free from control or direction in performing the work both by agreement and in reality (Absence of control).
• The work is performed outside the usual course of the company's business or away from any of the employer's facilities (Business-unusual and/or away).
• The worker is customarily engaged in an independent trade, occupation, or business (Customarily independent contractor).

B)
The ABC test is used by many states to determine a worker's employment status under state unemployment insurance laws.

Front 7

2010 Ch-01 Review Question #07:

What is Form I-9 used for?

Back 7

Form I-9 is used to verify that an individual has the legal right to work in the United States. The Immigration Reform and Control Act of 1986 makes it illegal for an employer to hire an unauthorized worker.

Front 8

2010 Ch-01 Review Question #08:

When a client company hires leased employees, who is responsible for withholding and/or paying federal income, social security, Medicare, and FUTA taxes?

Back 8

Although the client company may have the right to hire and fire the workers, set wage levels, and supervise their work, the workers are generally employees ofthe leasing company, which is responsible for withholding federal income tax and social security and Medicare taxes, as well as paying the employer's share of social security, Medicare, and FUTA taxes.

Front 9

2010 Ch-01 Review Question #09:

What factors do the courts and the Department of Labor consider when making an employment status determination under the FLSA?

Back 9

• how much control the employer has over how the work is performed;
• whether the worker has the chance to make a profit or risks a loss based on how skillfully the work is performed;
• whether the worker invests in tools or materials required to perform the work or hires helpers;
• whether the work requires a special skill;
• how permanent the working relationship is; and
• whether the work performed is an integral part of the employer's business operation.

Front 10

2010 Ch-01 Review Question #10:

Why would many employers rather use workers who are not employees to perform services for them?

Back 10

Employers would rather use workers who are not employees to perform services for them because employers must withhold income and employment taxes from employees' wages, and match the withheld employment taxes with their own funds. Employers also must pay federal and state unemployment taxes based on their employees' wages. If a worker is an employee, most companies have their own list of benefits and other entitlements that are provided to employees but not to independent contractors.

Front 11

2010 Ch-01 Review Question #11:

What does a social security card prove in terms of an employee's work authorization status under IRCA?

Back 11

A social security card without employment restrictions is proof of an employee's authorization to work in the U.S., but not proof of identity.

Front 12

2010 Ch-01 Review Question #12:

Which factors are considered not to be important by the IRS in making a worker classification determination because of changes in the workplace over the years?

Back 12

Factors that the IRS does not consider important in making worker classification determinations include part-time or full-time work, the location of the work, and hours of work.

Front 13

2010 Ch-01 Review Question #13:

What information must be reported by an employer for each new hire under the federal new hire reporting requirement?

Back 13

The employer must report each new hire's name, address, and social security number, as well as the employer's name, address, and federal employer identification number.

Front 14

2010 Ch-01 Review Question #14:

When must employers report newly hired employees under the federal new hire reporting requirement?

Back 14

In general, employers must report new hires within 20 calendar days of the date of hire. Employers that report magnetically or electronically must send 2 transmissions per calendar month which are 12-16 days apart.

Front 15

2010 Ch-01 Review Question #15:

What is the name of the program employers can use to verify the employment authorization status of new hires with U.S. Citizenship and Immigration Services?

Back 15

The name of the program offered by U.S. Citizenship and Immigration Services that employers can use to verify the employment authorization status of new hires is the E-Verify Program.

Front 16

2010 Ch-01 True or False #01:

If the employer has the right to control what work will be done and how that work will be done, an employer-employee relationship exists.

Back 16

True

Front 17

2010 Ch-01 True or False #02:

Full-time life insurance salespersons are always considered statutory employees and are never subject to FUTA tax.

Back 17

False

Front 18

2010 Ch-01 True or False #03:

Workers hired through a temporary help agency are not employees of the client company.

Back 18

True

Front 19

2010 Ch-01 True or False #04:

Telemarketers working under the direction of a company are usually independent contractors.

Back 19

False

Front 20

2010 Ch-01 True or False #05:

An accountant who provides bookkeeping and payroll services to several local businesses and works at her own office is an independent contractor.

Back 20

True

Front 21

2010 Ch-01 True or False #06:

The responsibility for determining the employment status of an individual who performs services rests with the employer.

Back 21

True

Front 22

2010 Ch-01 True or False #07:

If an independent contractor timely provides the employer with a correct Taxpayer Identification Number, there will be no backup withholding.

Back 22

True

Front 23

2010 Ch-01 True or False #08:

If an employer uses the E-Verify Program, a new hire does not have to enter their SSN in Section 1 of Form I-9.

Back 23

False

Front 24

2010 Ch-01 True or False #09:

Managers and executives are excluded from the employer-employee relationship for tax purposes.

Back 24

False

Front 25

2010 Ch-01 True or False #10:

Length of employment makes no difference in determining employment status.

Back 25

True

Front 26

2010 Ch-01 True or False #11:

Technical services specialists are specifically excluded from the "reasonable basis" test

Back 26

True

Front 27

2010 Ch-01 True or False #12:

Under the ABC test, one ofthe determining factors is whether the worker in question is free from control or direction in performing the work both by agreement and in reality.

Back 27

True

Front 28

2010 Ch-01 True or False #13:

Part-time employees are not covered under the federal payroll tax laws even if they meet the common law test for employment status.

Back 28

False

Front 29

2010 Ch-01 True or False #14:

"Reciprocity agreements" require employers to withhold state income tax only for their employees' states of residence.

Back 29

True

Front 30

2010 Ch-01 True or False #15:

Employers can demand specific documents to prove an employee's eligibility to work in the U.S.

Back 30

False

Front 31

2010 Ch-01 True or False #16:

Employers who claim Section 530 status for their workers because a significant segment of their industry classifies similar workers the same way must show that at least 50% of the industry treats these workers as independent contractors.

Back 31

False

Front 32

2010 Ch-01 True or False #17:

An employer that changes its classification of a worker from independent contractor to employee may still claim Section 530 protection for the period before the change in treatment.

Back 32

True

Front 33

2010 Ch-01 True or False #18:

An IRS agent conducting an employment tax audit must give the employer written notice of the availability of the Section 530 protections.

Back 33

True

Front 34

2010 Ch-01 True or False #19:

Under the federal new hire reporting requirements, multistate employers must report a new hire to the state in which the employee works.

Back 34

False

Multistate emloyers can designate one state in which they have employees as the state to which they will report all new hires.

Front 35

2010 Ch-01 True or False #20:

If an employee resignes after working for an employer for five years, the employer must retain the employee's Form I-9 for three years after the employee's last day of employment.

Back 35

False

Front 36

2010 Ch-01 Multiple Choice #01:

Which of the following forms may be completed and submitted to the IRS to determine the employement status of an individual for federal income and employement tax purposes?

a. Form SS-4
b. Form SS-5
c. Form SS-8
d. Form W-9

Back 36

c. Form SS-8

Front 37

2010 Ch-01 Multiple Choice #02:

Which of the following forms muste be submitted to an independent contractor (who is paid at least $600) after the end of the year for services performed during that year?

a. Form W-2
b. Form 1099-MISC
c. Form 1096
d. Form SS-9

Back 37

b. Form 1099-MISC

Front 38

2010 Ch-01 Multiple Choice #03:

All of the following types of evidence support an employer's treatment of a worker as an independent contractor under "reasonable basis" test EXCEPT:

a. Place of work
b. Court decisions
c. Private letter rulings
d. Past IRS employment audits

Back 38

a. Place of work

Front 39

2010 Ch-01 Multiple Choice #04:

All of the following criteria would be typical of an independent contractor EXCEPT:

a. Works off site
b. Paid by the hour
c. Furnishes own tools
d. Sets own work hours

Back 39

b. Paid by the hour

Front 40

1.2-1

What are the tests used to classify workers as employees or independent contractors

Back 40

- The Common Law Test (IRS relies on this)
- Reasonable Basis Test

Front 41

1.2-1

Common Law Test Factors

Back 41

-Right to control

Front 42

1.2-1

Common Law key control factors

Back 42

-Behavior Control
-Financial Control
-Type of relationships

Front 43

1.2-1

Behavior Control

Back 43

-Level of instruction the business gives the worker
-Level of training provided to the worker

Front 44

1.2-1

Financial Control

Back 44

-Whether the worker has unreimbursed business expense
-Whether the worker has a substantial investment in the work
-Whether the worker's service are available to the public
-How the worker is paid
-Whether the worker can realize a profit or incur a loss

Front 45

1.2-1

Type of relationship

Back 45

-Whether there is a written agreement
-Whether employee-type benefits are provided
-The terms of the relationship
-Whether the worker's services are an important aspect of the business regular operations

Front 46

1.2-2

Reasonable basis test

Back 46

-Section 530 of the Revenue Act of 1978
-Consistent treatment is a must

Front 47

1.2-2

What does reasonable basis consist of

Back 47

-Court decisions, published IRS rulings, IRS technical advice sent to the employer or a private letter ruling
-a past IRS audit of the employer
-a longstanding, recognized practice in a significant segment of the employer's industry

Front 48

1.3-1

Definition of Statutory Employee

Back 48

Statutory employees are workers who, while they are not employees under the comon law, are treated as employee for certain employment tax purposes

Front 49

1.3-1

Statutory Employees are subject to what taxes

Back 49

-Employees side
---social security withholding
---medicare withholding

-Employer side:
---Social Security
---Medicare
---FUTA (some times)

Front 50

13-1

What are the categories of statutory employees

Back 50

-Agent Drivers or commission drivers
-Full time life insurance salesperson
-Homeworkers
-Traveling or city salespersons

Front 51

1.3-2

What are the tax treatment of statutory non-employee

Back 51

None

Front 52

1.3-2

What are the categories of statutory non-employee

Back 52

-Qualified real estate agents
-Direct sellers

Front 53

1.6-4

What is the ABC test

Back 53

-A: Abscense of control
-B: Business is unusual and/or away
-C: Customarily independent contractor

Front 54

1.6-5

Which states have disability insurance withholdings

Back 54

-California
-Hawaii
-New Jersey
-New York
-Rhode Island
-Puerto Rico

Front 55

2010 Ch-01 Multiple Choice #05:

Each of the following individuals would be classified as an employee EXCEPT:

a. Controller of a company
b. College professor
c. Attorney (solo practictioner)
d. City polic officer

Back 55

c. Attorney (solo practictioner)

Front 56

2010 Ch-01 Multiple Choice #06:

all of the following workers are statutory employees EXCEPT:

a. Full-time life insurance salespersons
b. Qualified real estate agents
c. Homeworkers
d. Traveling or city salespersons

Back 56

b. Qualified real estate agents

Front 57

2010 Ch-01 Multiple Choice #07:

Full-time life insurance salesperson paid solely by commission are exempt from:

a. Social security and medicare taxes
b. Social security tax only
c. FUTA tax
d. Social security, Medicare, and FUTA tax

Back 57

c. FUTA tax

Front 58

2010 Ch-01 Multiple Choice #08:

If an employer fails to withhold social security and Medicare taxes from a worker it misclassifies as an independent contractor and does not file a Form W-2 or a Form 1099 for that worker, what penalty may the IRS impose?

a. 10% of the employee's share of the social security and medicare taxes
b. 20% of the employee's share of the social security and medicare taxes
c. 40% of the employee's share of the social security and medicare taxes
d. 100% of the employee's share of the social security and medicare taxes

Back 58

c. 40% of the employee's share of the social security and medicare taxes

Front 59

2010 Ch-01 Multiple Choice #09:

How long must an employer retain a Form I-9 for a terminated employee who worked for the employer for more than four years?

a. 1 year after termination
b. 3 year after termination
c. 7 year after termination
d. Does not have to keep terminated employees' I-9 forms

Back 59

a. 1 year after termination


***3 years after hire or 1 year after termination

Front 60

2010 Ch-01 Multiple Choice #10:

Which of the following situations describe one of the genral requirements that must be met for workers to be considered statutory employees?

a. They have continued relationship with the employer
b. They have substantial investment in the business equipment
c. They are licensed real estate agents
d. Most of their compensation is related to sales

Back 60

a. They have a continuing relationship with the employer

Front 61

2010 Ch-01 Multiple Choice #11:

Each of the following goals is a reason why states might require employers to report newly hired employees EXCEPT:

a. to detect welfare fraud
b. to detect unemployment compensation fraud
c. to locate individuals who have not claimed state lottery winnings
d. to locate noncustodial parents subject to a child support whithholding order

Back 61

c. to locate individuals who have not claimed state lottery winnings

Front 62

2010 Ch-01 Multiple Choice #12:

Which of the following individuals are statutory nonemployees?

a. homeworker
b. full-time life insurance salespersons
c. newspaper deliverers
d. traveling salespersons

Back 62

c. newspaper deliverers