2010 Payroll Source Ch03 Review 7-9

Front 1

If an employee receives a bonus of $2,000 when her year-to-date earnings are $50,000, and the employer pays the taxes, are the taxes considered taxable income? What method is used to determine the amount of taxes the employer will pay?

Back 1

Yes. The method allowed by the IRS is called "grossing-up."

Front 2

During cutbacks or reductions in force (RIFs), employers sometimes provide outplacement services for employees who will be terminated. Under what circumstances is the value of these services not taxable income to the employee?

Back 2

Outplacement services are not included in employees' income under the following circumstances:
*The employer derives a substantial business benefit from providing the compensation (e.g., a positive corporate image, an attractive benefit that encourages new hires).
* The employees do not have the choice of accepting cash rather than the outplacement services (e.g., a higher severance payment if the services are refused)
* The employees would be able to deduct the cost of the outplacement services as a business expense on their personal tax returns.

Front 3

Who is a control employee for purposes of using the commuting method of valuation of personal use of a company car?

Back 3

In the private sector, a control employee is an employee who:

*is a corporate officer earning at least $95,000 in 2010 (indexed annually);
*is a director;
*earns at least $195,000 in 2010 (indexed annually);or
*is a 1% owner

In the public sector, a control employee is an employee who:

*is an elected official; or
*earns more than a federal employee at Executive Level V ($145,700 in 2010).