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4 Cards in this Set
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2010 PS Ch 03 Review Question # 13:
For employers to exclude the value of a length of service award from an employee's income, what is the minimum length of service for which the award can be given? |
Five years
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2010 PS Ch 03 Review Question # 14:
With regard to bonuses, what is meant by the "push money exception?" |
When a manufacturer pays a bonus to sales employee working for a retailer to get them to "push" its products, the bonus is not wages because it is being paid by a third party, not the employer (for services performed for the third party), and is not subject to federal income tax withholding or social security, Medicare, and FUTA taxes. The bonus is taxable income to the sales employees, however, and must be reported on their personal income tax return.
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2010 PS Ch 03 Review Question # 15:
What conditions and limitations must be satisfied for employer-provided dependent care assistance to be excluded from an employee's income? |
Exlusion limitation: The excluded amount of dependent care assistance cannot exceed $5,000 in a year or the employee's earned income for the year, whichever is less.
When expenses are incurred: An employee's dependent care expenses are treated as incurred when the care is provided, not when the payments are made to the employee or third party. Written plan: The dependent care assistance program must be be a separate, written plan of the employer and it must be designed solely for the employees' benefit. No discrimination: The program must not discriminate in favor of highly compensated employees. Notification: Eligibile employees must receive reasonable notification of the availability and terms of the program. Annual statement: The employer must give the employee a statement each year by Janusary 31 showing the dependent care assistance provided by the employer during the previous year (Box 10 of Form W-2) |
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2010 PS Ch 03 Review Question # 16:
What is meant by the term "golden parachute" payments? |
When company change ownership, key executives are often provided with "golden parachutes" to soften their landing should they be terminated by the new owner. The tax law defines a "parachute payment" as compensation that is paid to an officer, shareholder, or highly compensated employee only after a change in corporate ownership or control that is at least three times the employee's average compenation during the five most recent tax years.
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