Fundamental Payroll Certification Ii

Front 1

Qualified plans

Back 1

qualified if it complies with the provisions of section 401 of the internal revenue code

Includes profit-sharing plans, defined contribution plans, defined benefit plans and 401K plan.

Front 2

What are the four categories of statutory employees?

Back 2

1. HOMEWORKERS

2.Agent-Drivers or commission-drivers

3. LIFE INSURANCE SALESPERSON

4. Traveling or City Salesperson

Hint 2

HALT

Front 3

What are the 2 categories of statutory nonemployees?

Back 3

1. Qualified real estate agents

2. Direct Sellers

Front 4

What is the ABC test used to determine?

Back 4

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

Front 5

Full time life insurance salespersons paid solely by commission are exempt from what taxes?

Back 5

FUTA TAX ONLY

Front 6

What form is used to determine the employement status of an individual for federal income and employment tax purposes?

Back 6

FORM SS-8

Front 7

Name of the program Employers can use to verify the employment authorization status of new hires with US Citizenship and Immigration Services?

Back 7

The E-Verify Program is used to authorize employment status of new hires.

Front 8

How long must an Employer retain Form I-9?

Back 8

3 years from the date of hire or 1 year from
the date of termination, whichever is greater.

Front 9

What is the Reasonable Basis Test?

Back 9

Even though a worker meets the definition of an employee under the common law test, an employer may treat a worker as an independent contractor exempt from federal payroll tax laws if it has a "reasonable basis" for doing so, as determined by section 530 of the Revenue Act of 1978.

Front 10

The Backup Withholding Rate for Independent Contractor payments in excess of 600.00 in 2014

Back 10

28%

Front 11

List 4 primary government agencies that set guidelines or rules for determining worker status

Back 11

IRS

U.S. DEPARTMENT OF LABOR'S WAGE & HOUR DIVISION

STATE EMPLOYMENT COMMISSIONS

STATE WAGE & HOUR AGENCIES.

Front 12

IRS Worker Misclassification Penalties:

For non-withholding

Back 12

the penalty is 1.5% of the wages paid

Front 13

IRS Worker Misclassification Penalties:

Failure to file an information return

Back 13

is 3% of the wages paid

Front 14

IRS Worker Misclassification Penalties:

For not withholding SS and Medicare

Back 14

the penalty is 20% of the employee's share

Front 15

IRS Worker Misclassification Penalties:

For failure to file returns

Back 15

penalty is 40%

Front 16

What does IRCA mean?

Back 16

Immigration Reform and Control Act

Front 17

What factors are not considered when IRS makes determinations on worker misclassification?

Back 17

If employee is Part Time or Full Time, location of work, and hours of work.

Front 18

The responsibility for determining the employment status of a person rest with whom?

Back 18

Employer

Front 19

Which Document Proves Both the Right to Work and Identity?

Back 19

Passport

Front 20

What is the ABC test used to determine?

Back 20

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

Front 21

What are the 3 parts to the ABC test?

Back 21

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

Front 22

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

Back 22

True

Front 23

Employers who claim Section 530 status for their workers because a significant segment of their industry classifies workers the same way must show at least 50% of the industry are independent contractors

Back 23

FALSE - Employers must show the IRS that more than 25% of its industry treated workers as independent contractors

Front 24

Employees who fall into statutory employee categories must have the following requirement :

Back 24

Agree with employer all services are to be performed by worker

Must not make a substantial investment in business equipment

Must be part of a continuing relationship with the employer.

Front 25

Supplemental Wages

Back 25

Supplemental wages are wage payments to an employee that are not regular wages. They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan

Front 26

Engaged to be waiting

Back 26

If the employee restricts an employees behavior and does not permit any personal business or activities to be conducted while waiting to begin work, the employee is considered to be engaged to be waiting , these hours would be included in the employees time worked when figuring overtime hours

Front 27

Waiting to be engaged

Back 27

The law does not require you to include the time spent oncall if the employee is not physically at the employers premises but is merely asked to stay by the phone and is allowed to conduct personal business ,in this situation the employee is waiting to be engaged, time spent waiting to be engaged would not be included in calculating overtime pay

Front 28

2 Year Record Retention - FLSA Supplemental

Back 28

Timecards

Wage rate tables

Work time schedules

Order, shipping and billing records

Records of additions to our deductions from wages

Front 29

All of the following are reasons payroll keeps records except:

A. compliance with laws

B. Demonstrate accuracy of paychecks.

C. Demonstrate security of payroll

D. Periodic reporting

Back 29

C. Records are used to determine compliance, calculate pay and produce reports

Front 30

What must be kept in a master file?

Back 30

Back (Definition)

Front 31

Following types of records can be combined with payroll data in an integrated system except:

A. Personnel

B. Benefits

C. Purchasing

D. Human resources

Back 31

C. Integrated databases include payroll, benefits and other human resources data

Front 32

Employees Withholding Allowance Certificate

Back 32

Form W-4. Employees provide their marital status and withholding allowances when they fill out this form.

Front 33

The amount of federal income tax withheld from employees paycheck is determined by prescribed formulas these formulas take into account:

Back 33

Employees wages

Pay period frequency

Marital status

Withholding allowances

Front 34

4 Year Record Retention - IRS/SSA

Back 34

Back (Definition)

Front 35

3 Year Record Retention - FLSA/IRCA

Back 35

Back (Definition)

Front 36

3 Year Record Retention - FMLA

Back 36

Back (Definition)

Front 37

W-4:

Death of spouse

Back 37

Does not affect withholding marital status until the next year

Front 38

Employers do not have to compensate employees for attending meetings when all of the following for conditions apply:

Back 38

1. Attendance is outside the employees normal working hours.

2. Attendance is voluntary

3. The event is not directly job-related

4. The employee performs know a productive work during this period

Front 39

W-4:

Notify employees by 12/1

Back 39

Employer should notify employee by December 1 that they need to file an amended form W-4 if they're filing status on number of allowances has changed

Front 40

W-4:

When you must change withholding

Back 40

You must reflect the change in withholding no later than the first payroll Ending on or after the 30th day after you received the amended form W-4

Front 41

Invalid Form W-4

Back 41

Invalid when there is any alteration, addition, or deletion till language or format of the form also invalid if the employee indicates in any way that it is false.

Do not use an invalid W-4 form to calculate withholding, withhold as if the employee were single and claiming zero allowances

Front 42

W-4:

Exempt

Back 42

Employees may be exempt if they had no taxes due last year and then are expected to be due this year.

Front 43

W-4:

Who is exempt?

Back 43

Unless employees are claimed as a dependent, those who are less than the standard deduction in ordinarily claim to be exempt from withholding. Although earning less than the standard deduction does not guarantee that an employee qualifies for an exemption.

Front 44

W-4:

Dependents

Back 44

In total income exceeds $1000 and includes more than 350 per year, an employee who is being claimed as a dependent by their parents or someone else cannot claim exemption from withholding. Unearned income includes interest earned on a savings account, dividends, capital games, or other investment income

Front 45

W-4

Exempt employees must refile each year

Back 45

Employees who want to continue their exempt status each year must file a new form W-4 with their employer by February 15 of each year. If no valid form W-4 is filed by the deadline, you must withhold based on the last valid W-4 in your file, if there is none, then you must withhold as if they were single with no allowances

Front 46

W-4: Employers Responsibilities

Not responsible to verify the accuracy of an employee's marital status or withholding allowances; responsible for:

Back 46

Ensuring that form W-4 is complete

Withholding as claimed

Requesting that employees change form W-4 when appropriate

Record Keeping

Submitting Form W-4 to the IRS

Lock-in Letters

Checking forms claiming exempt status

Front 47

Requesting that employees change form W-4 when appropriate

Back 47

IRS regulations say that employers should remind their employees by December 1 to submit revised forms W-4 if your marital status number of allowances has changed

Front 48

W-4: Record Keeping

Back 48

Keep all forms W-4 on file for at least four years for the last tax return filed using information from the form W-4. Note the last tax return filed using using information from the W-4 is the employees personal income tax return (form 1040 that is filed on April 15)

Front 49

Major Payroll tasks:

Back 49

compliance with federal state and local regulations

Timely and accurate issuance of paychecks

Periodic reporting

Record retention

Control and security

Front 50

W-4: submitting forms W forward to the IRS

Back 50

You are not required to send forms W-4 to the IRS unless IRS specifically request the form.

Front 51

W-4: Lock In Letters

Back 51

If the IRS sends the employer a lock in the letter specifying an employees marital status and or withholding allowances, the employer must change the employees W-4 form status for the first payroll period beginning after 60 days have passed from the date on the IRS letter. This gives the employee time to try to convince the IRS that the employee is entitled to the marital status and or allowances on the form W-4

Front 52

W-4 Form:

Checking forms claiming exempt status

Back 52

Ensure the employee understands the rules for being exempt. An employee who submits a false form W-4 may be subject to a $500 penalty

Front 53

Deducting income taxed from pension income (form W-4P)

Back 53

Recipients of distributions such as qualified pension plans, profit sharing plans and other qualified deferred compensation can decline to have taxes withheld by filing form W-4P. Recipients also file form W-4P to specify the number of withholding allowances and any additional amount you want withheld. If they do not file form W-4P, you must figure withholding as if the recipient were claiming married with three allowances

Front 54

Federal income tax that is withheld from an employees regular wages is determined by formula that uses all of the following items except:

A. Employees taxable wages

B. Pay period

C. A flat rate

D. Marital status

Back 54

C. Only when paying a supplemental wage can an employer use the optional flat rate method to calculate federal income tax

Front 55

When does an employee first complete form W-4?

A. When first hired

B. When they need to have federal income tax withheld

C. When the employee is married

D. When the employee is divorce

Back 55

A.

Front 56

When must an employee amend their W-4?

A. After receiving a pay increase

B. After receiving overtime pay

C. After becoming divorced

D. After their spouse quits working

Back 56

C. An employee must file a new form W-4 when a change in status occurs that requires additional withholding.

Front 57

Which events require an employee to fill an amended form W-4 within 10 days?

A. Legally separated from his or her spouse who was claimed as an allowance.

B. Employees spouse quits job to stay home with the new baby

C. Death of a spouse

D. Adoption of a child

Back 57

A. When allowances increase( such as when a child is adopted or a spouse stops working) less tax is withheld; an employee can fill out a new form W-4 any time,however when allowances decrease the employee must fill out a new form W-4 within 10 days. In case of the death of a spouse, marital status and allowances are not affected until the next year. However it is not the employers responsibility to track or require these changes.

Front 58

What conditions can an employee claim exemption from withholding on form W-4?

A. Receiving overtime pay

B. Had no tax liability last year and expects no tax liability this year

C. Anticipates receiving a bonus

D. An employee takes her first job

Back 58

B.

Front 59

Employee claims exempt from withholding on his form W-4. To continue this exempt status for the next year a new form W-4:

A. Must be filed by December 31

B. Must be filed by February 15 of the following year

C. Is not necessary

D. Is illegal unless Henry has more than 10 allowances

Back 59

B

Front 60

What must be kept in a master file?

Back 60

.

Front 61

Record Retention:

EEOC

Back 61

EEOC Regulations require that employers keep all personnel or employment records for one year. If an employee is involuntarily terminated, his/her personnel records must be retained for one year from the date of termination.

Front 62

Record Retention:

ADEA

Back 62

Under ADEA recordkeeping requirements, employers must also keep all payroll records for three years. Additionally, employers must keep on file any employee benefit plan (such as pension and insurance plans) and any written seniority or merit system for the full period the plan or system is in effect and for at least one year after its termination.

Front 63

FLSA: Child Labor Restrictions

Back 63

14 and under- bid in from working, other than on family farms.

14 and 15- are not allowed to work more than three hours per day or 18 hours per week while school is in session. During school sessions, the minor can only work between the hours of 7 AM and 7 PM. When school is not in session, the minor may not work more than eight hours per day or 40 hours per week and only between the hours of 7 AM and 9PM.

Front 64

Media

Back 64

Records may be maintained in any legible retrievable form, electronic storage, microfilm microfiche, hard copy. There is no federal requirement to maintain a paper copy of these records.

Front 65

Updating the master file?

Back 65

They are no federal requirements for how often the file must be updated. You may want to consider updating the files more often than once per month.

Front 66

Record Retention:

5 Years - OSHA

Back 66

Log of all occupational illness and accidents

Other OSHA records

Front 67

FLSA: Child Labor Restrictions

Back 67

14 and 15-year-olds may not work in hazardous jobs.

Minors under 16 years of age can perform certain work in retail, service and gasoline service Stabley Schmidts, that may not work in a job defined by the US department of labor as hazardous, manufacturing, or mining.

Actors or performers and news paper carriers under the age of 14 are exempt from child labor restrictions.

Miners 16 and 17 years of age are only limited to not working and hazardous jobs. Employers may be fine up to 11,000 for each violation of the child labor laws and up to 50,000 for violations that lead to the death or serious injury of a minor

Front 68

Income Withholding for Support form:

Back 68

Form used for income withholding in tribal, interstate and intrastate cases as well as all child support orders which are initially issued in the state on or after January 1, 1994 and all child support orders which are initially issued or modified in the state for January 1, 1994 if arrearages occur.

Front 69

Phantom Employee

Back 69

Is "hired" and set up in the payroll system. This phantom employee is then paid normally no excess hours or overtime to make the employee stand out on an edit report.

Front 70

Additional Medicare tax withholding

Back 70

In addition to withholding Medicare tax at 1.45%, you must withhold a .9% additional Medicare tax from wages you pay to an employee in excess of $200,000 in a calendar year. You are required to begin withholding additional Medicare tax in the period in which she pay wages if excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. this tax is only imposed on the employee. There is no employer share of additional Medicare tax.

Front 71

Correcting Form 941 or Form 944:

Back 71

If you discover an error on a previously filed form 941 or 944, make the correction using form 941X ,adjusted employers quarterly federal tax return or claim for refund on form 944X, adjusted employers annual federal tax return. forms 941X and 944X are used by employers to claim refunds or abatements of employment taxes rather than 843 claim for refund and request for abatement.

Front 72

File by January 31

Back 72

Form 1099

Form W-2

Form 941

Form 944

Form 940

Form 945

Front 73

Form 941 - Employers Quarterly Tax return

Back 73

File form 941 for the 4th quarter of the previous calendar year and deposit any unde posited income, social security and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the fourth quarter is less then 2500.

*If you timely deposited all taxes when you do, you have 10 additional calendar days from January 31 to file their appropriate return.

Front 74

Form 944 - Employers annual federal tax return

Back 74

File form 944 for the previous calendar year instead of form 941 if that I RS has notify you in writing to file form 944 and pay any undeposited income, Social Security and Medicare taxes. you may pay these taxes with 4944 if your total tax liability for the year is less then 2500.

*If you timely deposited all taxes when you do, you have 10 additional calendar days from January 31 to file their appropriate return.

Front 75

Form 945 - Annual Return of Withheld Federal Income Tax

Back 75

Use Form 945 to report withheld federal income tax from nonpayroll payments. Nonpayroll payments include:

Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans), and annuities;

Military retirement;

Gambling winnings;

Indian gaming profits;

Voluntary withholding on certain government

payments; and

Backup withholding.

Front 76

By February 15

Back 76

Ask for a new form W-4 from each employee who claimed exemption from income tax withholding last year

Front 77

On February 16

Back 77

Claiming exemption from withholding expires. Begin withholding taxes for any employee who previously claimed exemption but has not given you a new form W-4 for the current year. If the employee does not give you new form withhold tax base on the last valid form W-4 you have for the employee that does not claim exemption from withholding if one does not exist withhold as if he or she is single with zero withholding allowances. If the employee furnishes a new form W-4 claiming exemption after February 15 you may apply the exemption to the future wages but do not refund taxes withheld while the exempt status was not in place.

Front 78

File by February 28

Back 78

Paper Form 1099

Paper Form W-2

Paper Form W-3

Paper Form 8027

Front 79

File By March 31

Back 79

File Electronic Form:

1099, 8027 with IRS

File Electronic Form:

W-2 with SSA

Front 80

By April 30, July 31, October 31 and January 31

Back 80

Deposit FUTA Tax due if is it more than 500

File Form 941 and deposit any undeposited income, Social Security and Medicare taxes.

Front 81

Before December 1

Back 81

New forms W-4. Remind employees to submit a new form W-4 if their marital status or withholding allowances have changed or will change for the next year

Front 82

What are supplemental wages?

Back 82

Supplemental wages are wage payments to an employee that are not regular wages. They include, but are not limited to, bonuses, commissions, overtime pay, payments for accumulated sick leave, severance pay, awards, prizes, back pay, retroactive pay increases, and payments for nondeductible moving expenses. Other payments subject to the supplemental wage rules include taxable fringe benefits and expense allowances paid under a nonaccountable plan. How you withhold on supplemental wages depends on whether the supplemental payment is identified as a separate payment from regular wages.

Front 83

Withholding on supplemental wages when an employee receives more than $1 million of supplemental wages from you during the calendar year.

Back 83

If a supplemental wage payment, together with other supplemental wage payments made to the employee during the calendar year, exceeds $1 million, the excess is subject to withholding at 39.6% (or the highest rate of income tax for the year). Withhold using the 39.6% rate without regard to the employee's Form W-4. In determining supplemental wages paid to the employee during the year, include payments from all businesses under common control.

Front 84

Employer obligations for temporary agency

Back 84

Responsibility is to temp agency for a fee, agency hires, screens, trains, pays. Temp agency responsible for withholding and remitting taxes not employer.

Front 85

Employer obligations for leased employee

Back 85

Employer pays fee and sets pay level, supervises, hires and fires. Leasing company is responsible for withholding and remaining taxes not the employer

Front 86

Verification of social security numbers:

Back 86

SSNVS- Social security number verification service

E- Verify

Front 87

Independent Contractors:

Back 87

Need to provide a TIN and a W9

Taxes withholding not required

Receive a 1099 MISC

Front 88

Completing I-9

Back 88

Employee completes section 1

Within 3 days employer completes section 2

Retention: 3 years or 1 after termination

Front 89

Classification is based on responsibilities, not titles. T or F

Back 89

True

Front 90

Tips & Tip Credit

Back 90

Tips are subject to taxation if $20 a month

If employee makes $30 a month in tips, employers may pay less than the minimum wage $2.13 and apply a tip credit of $5.12.

$2.13 wage + $5.12 tip credit = $7.25.

Must be allowed by state law

Front 91

Form SS-8

Back 91

Determination of work or status for purposes of federal employment taxes and income tax withholding

Front 92

Minimum wage requirements

Back 92

Federal - $7.25 per hour, employees under age 20 can be paid $4.25 per hour in their first 90 calendar days on the job.

State - most state set their own minimum-wage higher than $7.25 per hour. If the employer is covered by both state and federal law and the two are not the same, then the employer is required to pay the higher minimum-wage based on the state in which the employee works.

Front 93

Shift premiums/shift differentials

Back 93

Additional compensation based on schedules

Must be considered in regular rate of pay

Employer determines terms

Front 94

Shift premiums/shift differentials

Back 94

Additional compensation based on schedules

Must be considered in regular rate of pay

Employer determines terms

Front 95

Paid time off

Back 95

Employers are not required to pay sick, holiday or vacation

Does not need to be included in regular pay calculation

If worked employer does not need to pay a premium

Companies determine PTO policies

Front 96

Shift premiums/shift differentials

Back 96

Additional compensation based on schedules

Must be considered in regular rate of pay

Employer determines terms

Front 97

Paid time off

Back 97

Employers are not required to pay sick, holiday or vacation

Does not need to be included in regular pay calculation

If worked employer does not need to pay a premium

Companies determine PTO policies

Front 98

Bonuses

Back 98

Supplemental wages taxed at 25%

May be considered in regular rate of pay calculation

Incentive payments to increase productivity

Front 99

Regular Rates - Included

Back 99

Base pay for hours worked, non-discretionary bonuses, fair market value of non-cash items, shift premiums, production bonuses, cost-of-living adjustments, retroactive pay,all payments not excluded by law

Front 100

Regular Rates - Excluded

Back 100

Reimbursed expenses, overtime in excess of FLSA requirement, employer benefit plan contributions, PTO pay for one worked hours, special occasion gifts, discretionary bonuses, stock options.

Front 101

Fire protection and law-enforcement

Back 101

No OT premiums due until employees exceed ratio 171 hours to 28 days

For fire protection, ratio is 212 hours to 28 days

Front 102

Defining time worked:

Included

Back 102

Call back show up:

case-by-case basis, happens when an employee is called back after end of the day, or they show up and there is no work available.

Waiting to work:

Employee is engaged to work and performs no personal activity.

Front 103

Defining time worked:

Included

Back 103

Call back show up:

case-by-case basis, happens when an employee is called back after end of the day, or they show up and there is no work available.

Waiting to work:

Employee is engaged to work and performs no personal activity.

Front 104

Defining time worked:

Not included

Back 104

On call:

Employee is on call but not on premises.

Preparing to work:

Employee is arranging their desk, signing on to work, etc.

Front 105

Defining time worked:

Travel Time

Back 105

Home to work – not compensable

Home to work in different state – compensable, may exclude usual travel time

Travel as hard of daily duties – compensable

Travel away – must be overnight. Paid if during work hours, not paid if passenger and not during work hours.

Front 106

Defining time worked:

Seminars/meetings

Back 106

Employer not obligated to compensate employee if all four conditions apply:

1. attendance is outside normal work hours

2. Attendance is voluntary

3. Not directly job-related

4. No productive work is performed

Front 107

Invalid W-4

Back 107

Alterations, flat dollar amount and percentages are invalid

Front 108

W4P

Back 108

Withholding certificate for pension or annuity payments

Default is married with three exemptions

Additional amount is allowed

Front 109

Employers restricts employees behavior and does not permit any personal business or activities to be conducted while:

A. Preparing for a week

B. Engage to be waiting

C. Waiting to be engaged

D. Employee commences their principal activities

Back 109

B

Front 110

FMLA applies to all private and public employers with 25 or more employees. T or F

Back 110

False

Front 111

FMLA- Family and medical leave act

What is it?

Back 111

FMLA guarantees employees up to 12 weeks of unpaid leave within a 12 month period. eligible employees can have up to total 26 weeks in a 12 month.

Front 112

FMLA- Family and medical leave act

What is it?

Back 112

FMLA guarantees employees up to 12 weeks of unpaid leave within a 12 month period. eligible employees can have up to total 26 weeks in a 12 month.

Front 113

FMLA- Family and medical leave act

Who's eligible?

Back 113

Applies to all private and public employers with 50 or more employees, including part-timers and employees on leave or suspension, but not laid off employees. The definition of employee is the same as that under the fair labor standards act. An employee at a facility with less than 50 employees May still be eligible for the leave benefits, if the employer has at least 50 employees working within a 75 mile radius.

*Must have been employed by the employer for at least 12 months.

*Must have worked at least 1250 hours within the previous 12 month period..

Front 114

FMLA- Family and medical leave act

What is it?

Back 114

FMLA guarantees employees up to 12 weeks of unpaid leave within a 12 month period. eligible employees can have up to total 26 weeks in a 12 month.

Front 115

FMLA- Family and medical leave act

Who's eligible?

Back 115

Applies to all private and public employers with 50 or more employees, including part-timers and employees on leave or suspension, but not laid off employees. The definition of employee is the same as that under the fair labor standards act. An employee at a facility with less than 50 employees May still be eligible for the leave benefits, if the employer has at least 50 employees working within a 75 mile radius.

*Must have been employed by the employer for at least 12 months.

*Must have worked at least 1250 hours within the previous 12 month period..

Front 116

FMLA- Family and medical leave act

What kind of leave does it cover?

Back 116

*Newborn, newly adopted or foster child

*Child, spouse or parent with serious medical condition

*Employee with serious medical condition

*Military member or active or pending duty

Front 117

Employees who are covered by the fair labor standards act minimum wage and overtime requirements are called:

Back 117

Non exempt

Front 118

Those who are not covered by the fair labor standard acts minimum wage and overtime requirements are called:

Back 118

Exempt employees

Front 119

Components governed under FLSA

Back 119

*guarantees employees a minimum wage

*Requires employers to pay an overtime premium

*Limit when miners can work

*Provides equal pay protection

Front 120

Record Retention

Two Years

Back 120

Supplemental - Time Cards, wage rate tables, work time schedules, records of additions to or deductions from wages

Front 121

Batch Processing

Back 121

Data is coded and collected

Computer center processes the data with similar jobs to be processed

Generally no axis to view as processing

Less expensive than real-time

But not as timely as real time

Front 122

Real Time Processing

Back 122

Online system

Calculations and results are automatic

Immediate availability

View and interact with the processing

Front 123

What may cause reporting issues when a payment is voided in a subsequent quarter?

A. Claim for refund from the IRS or other tax authorizes may need to be filed; W-2c may need to be issued.

B. Make possible correction to state unemployment insurance reporting and taxation; Correct entries to the accounting records.

C. A & B

D. None of the above

Back 123

C

Front 124

Batch processing is always inactive.

True or False

Back 124

False

Front 125

Payroll compliance means the ability to do the following:

A) Deal with federal, state and local taxation.

B) Deal with withholding, depositing and reporting requirements on a timely basis.

C) Pay employees as the FLSA and state wage and hour rules require.

D) All of the above.

Back 125

D

Front 126

What is Zero Balance Account?

A) Special payroll checking account.

B) Reconciliation between the payroll register and the general ledger account.

C) When all payroll checks have cleared the account, the account balance should be zero.

D) None of the above.

Back 126

C

Front 127

Once data is entered in the system, it will calculate, update records and return results to the user so it’s available immediately is known as:

A) Batch processing.

B) Online real-time processing.

C) Journal entry.

D) System edits.

Back 127

B

Front 128

Payroll bank accounts should be reconciled how often for outstanding and stale dated checks?

A) Quarterly.

B) Daily.

C) Monthly.

D) Weekly.

Back 128

C. Monthly

Front 129

Prenotification is mandatory. True or False

Back 129

False

Front 130

An open check number may signify that a manual check has:

A) Been returned to the Payroll Department.

B) Not been recorded or an employee as not cashed the check.

C) Been stored under lock and key.

D) Been recorded or an employee has cashed the check.

Back 130

B.

Front 131

What are benefit advantages for employees paid by Payroll cards?

A) Cost savings, Independence, Prestige

B) Freedom, Convenience, Time, Safety

C) A & B

D) All of the above

Back 131

C. A & B

Front 132

What information is required to set up direct deposit?

A) Bank statement

B) Type of account (Checking or Savings)

C) Account and Bank Routing number

D) B & C

Back 132

D. B & C

Front 133

What are the two most common withholding methods used for calculating withholding on regular wages?

A) Percentage & Wage Bracket Methods.

B) Optional & Wage Bracket Methods.

C) Mandatory Flat Rate & Optional Methods.

D) Aggregate & Percentage Methods.

Back 133

A) Percentage & Wage Bracket Methods.

Front 134

Wage attachments take precedence over voluntary deductions. True or False

Back 134

True

Front 135

What publication that give exempt amounts is provided with form 668-W?

A) 596

B) 15

C) 1494

D) 521

Back 135

C. 1494

Front 136

Wages paid after death is subject to federal income tax withholding?

True or False

Back 136

False

Front 137

Wages in excess of $200,000 are subject to what Medicare tax rate? (Pg. 3-12)

A) 1.45%

B) 2.35%

C) 7.45%

D) 6.20%

Back 137

B. 2.35%

Front 138

The maximum amount of an employee’s compensation subject to child support withholding is governed by:

A) IRS

B) DOL

C) FLSA

D) CCPA

Back 138

D. CCPA

Front 139

What are disposable earnings?

A) Net pay.

B) Gross – less required deductions.

C) Employee earnings (bonuses, lump sum payments but not including tips).

D) B & C.

Back 139

D. B & C

Front 140

When grossing up, the taxes paid by the employer are included in the employee’s taxable income.

True or False

Back 140

True

Front 141

What are the federal limits for withholding garnishments?

A) 25% of the debtor’s disposable pay.

B) 15% of the debtor’s disposable pay.

C) The amount by which the employee’s disposable pay for the week exceeds 30 times the federal minimum wage.

D) A & C

Back 141

D. A & C

Front 142

Employers are required to withhold social security tax from its employees and pay the employer’s portion amount up to the maximum each year, regardless if the employee’s previous earnings are from another employer.

True or False

Back 142

True

Front 143

A computerized payroll system can help the department accomplish the following tasks:

Back 143

-complying with federal/state/local regulations and company policies

-timely and accurate issuance of pay checks/direct deposit

-periodic reporting

-Record retention

-maintaining control and security

Front 144

Employee self-service

Back 144

The ability to update data

Ability to view and print pay statements and W-2 forms

Front 145

Interfaces

Back 145

Refers to the point where two distinct data processing elements meet. It can be a connector between two pieces of hardware, between two software systems, or between hardware and software. Went to systems are in your face, the systems are organize so they can talk to each other

Front 146

Control Procedures

Back 146

Edits

Balancing and reconciliation

Documentation

Apply Department Procedures

Data Auditing and Validating

Batch Controls

Correction Procedures

Accumulator Totals

Upgrading/Updating the Payroll System

Apply Departmental Procedures

Front 147

Control Procedures

Back 147

Edits

Balancing and reconciliation

Documentation

Apply Department Procedures

Data Auditing and Validating

Batch Controls

Correction Procedures

Accumulator Totals

Upgrading/Updating the Payroll System

Apply Departmental Procedures

Front 148

The integrity of the data can be verified by:

A. Balancing and reconciliations

B. System edits

C. Validity checks

Back 148

A. Balancing and reconciliations ensure that amounts in the system are correct.

Front 149

Checking inputs or outputs against predetermined constraints is called:

A. internal control

B. validity edit

C. system safeguard

D. parallel test

Back 149

B. One way to check for errors is to build validity edits into the system. The system automatically checks to make certain all the inputs and outputs are within normally accepted ranges. If not, operator is alerted.

Front 150

Payroll tax liability accounts should be reconciled at least weekly.

True or False

Back 150

False. Reconciliations of liability accounts should occur at least monthly.

Front 151

Payroll documentation accomplishes all of the following except:

A. Provide uniformity

B. Simplify training

C. Ensure procedures are followed

D. Provide a reference tool

Back 151

C. Payroll management is entrusted with ensuring procedures are followed.

Front 152

Every month, all of the following records are reconciled except:

A. Payroll liability accounts

B. Master record of payments

C. Payroll Bank checking account

D. validity edits

Back 152

D. Monthly account reconciliations help validate the integrity of the information and your payroll system

Front 153

When system generated totals do not agree to batch control totals, what must occur?

A. Continue processing

B. Finding the cause and correcting the error

C. Delay finding the error until more time is available.

D. Document the difference and continue processing

Back 153

B. When the system is not in balance, it must be corrected before proceeding.

Front 154

Direct Deposit Reversal Procedures:

Back 154

An employee may be paid and air, which means a reversal may need to be made which will simply retrieve the funds from the account where the deposit was initially made and return such funds to your corporate account. A single item reversal is always for the exact amount of the initial deposit and must be executed within five days from the original payment date (settlement date)

Front 155

Impact of federal banking holidays:

Back 155

If direct deposit falls on a banking holiday, the employers policy will dictate when employees will be paid. If the policy requires payment prior to the normal payday, ACH processing will occur one day earlier.

Front 156

Knowledge of pay frequency/method governance

Back 156

State laws govern the method of payment.each states requirements must be reviewed if a change in payment method is being considered.each state requires employers to pay employees within a certain timeframe.States also limit the time. Between the end of the pay period and pay day. Most states do not allow employers more than 10 days between the end of the pay period and payday.

Front 157

Knowledge of Escheat laws:

Back 157

Most states dictate how long the employer must hold unclaimed wages if an employee does not cash your paycheck. Typically, the unclaimed amounts must be submitted to a state agency for further retention.State law and company procedures will dictate how and when unclaimed wages are recorded and then transferred to the appropriate state agency.

Front 158

Three pieces of information needed for direct deposit:

Back 158

Employees bank routing number

Type of account

Account number

Front 159

Chronological sequence for events associated with direct deposit:

Back 159

Company collects employee information

Company creates ACH file

Originating financial institution transmits data

Settlement through ACH

Employee receives deposit and his or her bank account

Front 160

Regulate Payments made by direct deposit:

Back 160

The consumer financial protection in euros regulation D allows the use of electronic funds transfer.

NACHA provides the operational rules for EFT.

State laws facilitate the payment process.

Front 161

Knowledge of allowed pay vehicles: Checks

Back 161

Many firms pay employees from a special payroll checking account. This facilitates reconciliation between the payroll register, the payroll checking account and the general ledger account. When all payroll checks have cleared the account, the account balance should be zero, that's the name of these types of accounts-zero balance account.

Those responsible for entering payroll data are not responsible for canceling voiding checks.

Procedure for keeping track of used check numbers should be implemented. Open check numbers must be reconciled. And open number may signify that a manual check has not been recorded or in employee has not cashed the check.

Harrell checks should be stored under lock and key. Proper segregation of duties for the handling of checks should be in place and approved by her internal auditing department. Such steps can help guard against theft, fraud, or other misappropriations.

Front 162

Knowledge of allowed pay vehicles: Direct Deposit

Back 162

Direct deposit or EEFT allows employers to deposit employees pay electronically in their bank account. There is no paper or check signing equipment to safeguard and no checks to get lost. Direct deposit is more advantageous to employers then employees. One of the drawbacks for the employer is the loss of the float time on payroll funds.

Front 163

Knowledge of allowed pay vehicles: Pay cards

Back 163

Terrell cards are prepaid, host-based, stored value cards that can act as a tool to facilitate direct deposit payroll for employees, whether or not they have a current banking relationship.

Front 164

ACH Process:

Back 164

Employee authorization

Company set up

ACH file (Automatic Clearing House)

ODFI - originating depository financial institution

Post on us - new ACH file sent

RDFI - receiving depository financial institution

Posting to account - Descriptive Statement

Front 165

Knowledge of pre-notification process

Back 165

The first cycle of the direct deposit can be processed with a zero amount to verify that the bank code and financial institution account are accurate and that the bank is a member of the ACH. The receiving depository financial institution should notify the originating depository financial institution, which will notify the employer any discrepancies before the direct deposit is lie. Pre-notifications are optional.

Front 166

Knowledge of pre-notification process

Back 166

The first cycle of the direct deposit can be processed with a zero amount to verify that the bank code and financial institution account are accurate and that the bank is a member of the ACH. The receiving depository financial institution should notify the originating depository financial institution, which will notify the employer any discrepancies before the direct deposit is lie. Pre-notifications are optional.

Front 167

Knowledge of transit routing numbers:

Back 167

Verify that there are nine digits and the routing number.The entire routing number can be verified against a listing of financial institutions, which can be obtained from the originating depository financial institution.

Front 168

Knowledge of direct deposit authorization

Back 168

The direct deposit process is regulated by the consumer financial protection Bureau regulation E, NACHA's ACH operating rules and state laws.

When an employee authorizes a direct deposit, they are authorizing a credit to their bank account. Most companies direct deposit authorization forms also include authorization to debit the account when an over payment has been made.

Front 169

Direct deposit reversal timing:

Back 169

You do not need employee authorization to correct a mistake. No debit authorization from employees are necessary for single entry reversals made in the exact amount of the original payment that are executed within the five banking days timeframe for corrections.

Front 170

Knowledge of stopping payment of checks:

Back 170

Voiding the payment in the payroll system is not sufficient to meet all organizational requirements and may cause reporting issues when a payment is avoided in a subsequent quarter. Avoided payment may require:

- W-2c to be issued

- A claim for refund from the IRS or other tax authorities

- correction to state unemployment insurance reporting and taxation

- correcting entries to the accounting records

Front 171

Payroll compliance means:

Back 171

Ability to deal with federal, state and local taxation, withholding, depositing and reporting requirements on a timely basis. Compliance requires ensuring employees are paid as the FLSA and state wage and hour rules require.

Front 172

Computerized systems help with these tasks:

Back 172

Compliance with regulations and policies

Timely and accurate paychecks or direct deposit

Periodic reporting

Record retention

Control and security

Front 173

Knowledge of batch totals:

Back 173

Batching the data into groups of similar data, developing totals of the data to be entered and then comparing the totals of the data entered into the system to the previously developed totals is one method of batch controls. This method ensures that the amounts that are anticipated to be entered have been entered. However it does not ensure that the data have been correctly entered into the system.

Front 174

Integrated system

Back 174

Ideal processing environment, has all data elements and a graded in a single database and available to all users at any time.

Reduces data integrity issues, since information is entered and maintained in one location.

Eliminates timing issues, since information is always assessible

Eliminates interfacing

Front 175

Correction Processes:

Back 175

If system generated totals from the data do not agree with either batch Controls or other controls, procedures must be in place to determine the error, it's cause and how it should be corrected. Once erroneous data has been identified, it must be corrected. This will require developing batch of controls for the data correction entries.

Front 176

Online processing

Back 176

And online real-time system, as the data are entered into the computer, the system does calculations, updates records and returns the results to the user so they are available immediately. The operator has direct online computer communication with the data as the program is being run.

Front 177

System data edits:

Back 177

Edit functions can be installed in the payroll system to check for errors and sometimes correct them. Such validity edits verify that the system is operating normally by alerting you went inputs or outputs are outside accepted ranges.

Alert for terminated employees with paychecks

Alert for new hires so that you can verify their salary and hours

An error message is no paycheck is generated for an active employee

A special edit to identify compensation over a specified amount or payment generated for inactive employee

alert for overtime hours or hours under standard time

Alert when the rate of pay is changed

Front 178

Knowledge of system security

Back 178

Your dad a security system should offer the following three things:

File security against unauthorized access

Password protection so only authorized personnel can gain access to protected information

Regular back up of data and off-site storage of data

Front 179

Purpose to reconcile

Back 179

Interface and integrated systems require extensive reconciliations to ensure the data shared between the systems is accurate

Front 180

Purpose of physical pay out

Back 180

For better protection against having phantom employees, conduct a surprise physical pay off or pay out at least once a year, preferably more often

Front 181

Ability to validate test results

Back 181

Reviewing a sample of the data for appropriateness and identify data problems that fall within the parameters of the system edits but are not actually valid

Front 182

Constructive Receipt

Back 182

Wages are considered paid when the employee actually receives the paycheck or when it is constructively received. A paycheck that has been set aside for employee is considered constructively received at that time.

Front 183

Taxable Income

Back 183

Backpage awards

Bonuses

Commissions

Company vehicle for personal use

Severance pay

vacation pay

Employer paid Transit passes and transportation in commuter Highway vehicle in excess of $130 a month

Employer paid parking greater then 250 a month

Gifts, gift cards, prizes and other awards

Fringe benefits unless specifically excluded

Group legal services

Group term life insurance over 50,000

Overtime pay

regular wages

Tips

Non-accountable reimbursed business expenses

Non-cash fringe benefits, unless excluded by internal revenue code

Sick pay and disability benefits

Nonqualified moving expenses

Front 184

Nontaxable compensation

Back 184

Dependent child care assistance up to $5000 under a section 129 plan

Company vehicle for business use only

De minimis fringes

Disability benefits employee contributions

Educational assistance for job related courses no limit

Group term life insurance premiums $50,000 or less

Medical, dental, health plans employer contributions

No additional cost Fringe benefits

Qualified employee discounts on employer goods and services

Qualified moving expenses

Qualified transportation fringe benefits

Reimbursed business expenses if accounted for in a timely manner

Working condition fringe benefits which would be deductible if paid by employee

Non-job related education assistance up to $5250

Long term care insurance

Workers compensation benefits

Health savings accounts

Front 185

Repayment Wages- overpayment and repayment in the same calendar year.

Back 185

Employee overpaid and repayment occurs in the same year, The repayment requested is the employees net overpayment. Employer can claim a refund from the IRS for the federal income, Social Security and Medicare taxes withheld from the employees hey and employers Social Security and Medicare taxes. The overpayment and repayment can be netted together on form W-2

Front 186

Repayment Wages- overpayment and repayment occurs in a calendar year subsequent to when the payment was made in error

Back 186

The repayment requested is that employees rolls over payment less Social Security and Medicare taxes. The employer can claim a refund from that I RS for the employees withheld Social Security and Medicare taxes and the employers Social Security and Medicare taxes. The overpayment and repayment cannot be netted together for work hoarding on form W-2. The employee will deduct the repayment on the subsequent years federal income tax return to obtain a refund of their federal income tax

Front 187

Tips

Back 187

Considered supplemental wages.

If employee receives and reports $20 or more in tips and a calendar month, federal income, Social Security and Medicare taxes must be withheld from the tips as well as cash wages. Employer must also pay the employers portion of the Social Security and Medicare taxes and pay federal unemployment tax on the tip amount.

Withholding can be done at the optional flat rate of 25% or the tips can be added to the employees wages when calculating federal income tax withholding. For income tax purposes an employer may choose to treat tips as regular wages.

Front 188

Factors affecting withholding:

Back 188

Marital status

Withholding allowances

Pay frequency

Regular or supplemental wages

Pre-tax deductions

Front 189

Withholding methods

Back 189

Most common:

Wage bracket method

Percentage method

For supplemental wages, an optional flat tax rate of 25% can be used and under some circumstances a mandatory 39.6% rate must be used

Front 190

Wage bracket method

Back 190

When calculating manually, the quickest and easiest method is the wage bracket tables from. IRS circular E.

When employees have wages in excess of the last wage bracket, use the percentage method.

Front 191

Percentage method

Back 191

Commonly used in computerized payroll systems.

There are no limits on the amount of wages to which the percentage method can be applied.

The amounts shown in the percentage method tables are net wages after the deduction for total withholding allowances.

To use the percentage method, you first must reduce the employees taxable wages by the number of allowances.

Front 192

Supplemental wages

Back 192

Include any payment of wages by an employer that is not regular wages.

Wages that very from payroll. To payroll. Based on factors other than the amount of time worked, such as commissions and bonuses, are supplemental wages if they are paid in addition to regular wages.

If you pay supplemental wages such as bonuses, commissions, and overtime pay, along with regular wages but do not specify the amount of each, withhold income tax as if the total were a single payment for the payroll.

Front 193

If you pay supplemental wages separately or combined them with regular wages but specify the amount for each and your payroll records you have two choices:

Back 193

Use optional flat rate method at 25% or

Use the aggregate method

Front 194

Optional flat rate method

Back 194

Multiply the amount of the supplemental compensation by 25% and withhold that some

Front 195

Aggregate method

Back 195

Add the supplemental wages to the regular wages,

then figure the income tax as if the total were a single sum

Subtract the tax already withheld from the regular wages

Withhold the remaining tax from the supplemental wages

Front 196

Mandatory flat rate method at 39.6%

Back 196

When year to date supplemental wages reach $1 million, the supplemental tax rate required for supplemental wage payments in excess of $1 million is 39.6%.

The aggregate method cannot be used when supplemental wage payments are in excess of $1 million. In this situation, withholding is based on the 39.6% rate.

Front 197

When to use aggregate method

Back 197

If the supplemental wages are sizable for example in the case of commissions or bonuses

If there is no income tax withheld from the employees regular wages during the current or preceding years, you misuse the aggregate method, except when the employees year to date supplemental wages exceed $1 million. In that case, the mandatory flat 39.6 rate must be used.

Front 198

Optional flat rate and mandatory flat rate

Back 198

Do not consider marital status or allowances from the employees W-4

Front 199

Rounding Federal Income tax withholding to the nearest whole dollar

Back 199

Amounts ending in 0.50 to 0.99 round up and 0.01 to 0.49 round down.

53.04 becomes 53 and 353.60 becomes 354.

Front 200

Aggregate Method

Back 200

1. Calculate taxes on the combined wages (regular wages and supplemental wages)

2. Calculate taxes on regular wages only

3. Subtract step two from step one – the remaining is considered supplemental wage tax amount.

Front 201

Medicare Wages

Back 201

When an employee's Medicare wages reached $200,000 the employee is subject to an additional Medicare tax of .9% for a total tax rate of 2.35% this only applies to the employee not the employer, the employers rate will remain at 1.45%

Front 202

Employer Loan Repayments

Back 202

The agreed repayment is a voluntary deduction and must be prioritized with other voluntary deductions by the employer.

Front 203

Involuntary deductions

Back 203

Are called wage attachments. Wage attachments are honored in the following priorities:

Child-support orders

Chapter 7 bankruptcy orders

Other federal agency garnishments

Federal tax levies

State tax levies

Creditor garnishments

Student loan garnishment

Front 204

Form 668 – W, notice of Levy on wages, salary and other income:

Back 204

Take-home pay minus exempt amount documented and publication 1494.

Deductions in effect prior to levy are okay

No new voluntary deductions allowed

In voluntary deductions mandated by company as condition of employment are okay, example the company becomes unionized and union dues are now due, this involuntary deduction would be okay

Do not stop withholding until form 668 – D release of levy is received

Front 205

Amount exempt from a federal levy is based on:

Back 205

Filing status

Number of exemptions claimed on part three of form 668 – W, divided by the number of payroll periods in the year.

Front 206

Child Support: Withholding

Back 206

Custodial parent can request the court to order immediate automatic withholding, even if the support payments are not past due.

All support orders require immediate withholding unless specifically waived by court order or by the written consent of both parents.

All orders that are in arrears will cause immediate withholding.

Front 207

Child Supports: Limits

Back 207

Order will state the amount to be deducted for child support.

The maximum amount of an employees compensation that is subject to child support withholding is governed by the consumer credit protection act (CCPA)

The maximum percentage that can be withheld is based on an employees disposable earnings (Gross earnings minus federal/state/local taxes).

Front 208

Child Supports: Limits

Back 208

Order will state the amount to be deducted for child support.

The maximum amount of an employees compensation that is subject to child support withholding is governed by the consumer credit protection act (CCPA)

The maximum percentage that can be withheld is based on an employees disposable earnings (Gross earnings minus federal/state/local taxes).

Front 209

Child Support: Maximum Withholding

Back 209

-if the employee supports a second family, the amount withheld cannot exceed 50% of the employees disposable earnings (55% if support is in arrears)

-if the employee does not support a second family, the amount withheld cannot exceed 60% of the employees disposable earnings(65% if support is in arrears)

The maximum withholding allowed under a states law may be lower, but cannot be higher than the federal limits.

Front 210

Disposable earnings

Back 210

Disposable earnings equal all of an employee's earnings including bonus and other lump salary sum payments but not including tips after deducting taxes.

Required deductions including federal, state and local taxes.

Front 211

Even though each state sets their own child support laws, they are limited by the federal laws in the following areas:

Back 211

-A state can allow the employer to deduct an administrative fee, in addition to the child support withholding, to offset the cost of maintaining the child support program.

-Federal law requires the payment to be made within seven days of withholding the child support from the employees wages. State laws may require the payment to be made sooner.

-Federal law requires the first withholding to be made with the first pay period 14 business days after the child support order is mail. State laws may require the first withholding to occur sooner

Front 212

Uniform interstate family support act (UIFSA)

Back 212

Clarifies the rules for processing out of state wage orders.

Front 213

Uniform interstate family support act (UIFSA)

Back 213

Clarifies the rules for processing out of state wage orders.

Front 214

Uniform interstate family support act (UIFSA) orders tells us:

Back 214

The duration and specific amount of periodic payments

The person or agency to receive payments

Medical support, stated as a specific amount or in order to provide coverage

The amount of periodic payments of arrears and interest on arrears, stated as sum certain

Front 215

When administering the child support order, the rules from the employees work state are used when:

Back 215

Withholding the employers fee for processing an income withholding order.

Determining the maximum amount permitted to be withheld from the obligor's income.

Determining the time period within which they employer must implement the withholding order and forward the child support.

There are orders for more then one obligee.

Front 216

Rejecting income withholding orders

Back 216

Since the IWO is a standard, OMB approved approved federal form sent to employers to withhold child support, there are very few changes that are acceptable. One of the reasons an employer can reject an income withholding order and return it to the sender is if the form is altered or contains invalid information.

Front 217

Acceptable changes to income withholding orders:

Back 217

The following may be changed on the form:

Font

Pagination

Supplemental and or state specific information, such as state codes, maybe added

Front 218

Complying with more than one withholding order

Back 218

If an employee receives more than one child support withholding order state law decides how they must be handled.

If the orders are from different states, the law in the state where the employee works generally applies.

Front 219

When an employee is over paid and the repayment occurs in the same year, the repayment requested is the employees:

Back 219

Net overpayment

Front 220

Examples of voluntary deductions

Back 220

Contributions to United Way or other charities

Retirement programs

Credit union payments

Direct mortgage payments

Health insurance premiums (outside of section 125 plans)

Purchase of stock in the employers company

Repayment of loans/advances from the employer

Union dues/fees

Front 221

Charitable contributions thru payroll deductions need the following to substantiate:

Back 221

- A document by the employer showing the amount withheld from the taxpayers wages; this document could be form W-2 or the pay statement

- A document prepared by the charity, such as a pledge card. The taxpayer must have this document in their possession before filing personal income tax return.

Front 222

Limits for child support

Back 222

The maximum percentage that can be withheld is based on in employees disposable earnings.

Employee supports second family - amount withheld cannot exceed 50% of the employees disposable earnings (55% if in arrears)

Employee does not support second family - amount withheld cannot exceed 60% of the employee's disposable earnings (65% if support is in arrears)

Front 223

What is the easiest method to calculate federal income tax withholding on regular wages?

Back 223

Wage-bracket

Front 224

Multiple child support withholding orders:

Back 224

-State law governs the handling of multiple orders.

-Multiple state orders default to the state where the employee works.

Front 225

States resolve multiple order challenges in three ways:

Back 225

Allocate the available funds to each order on a percentage basis

Allocate available funds equally to all orders

Prioritize based on receipt of orders -current support orders calculated before arrearages.

Front 226

Standardized child support withholding order

Back 226

Developed by the federal office of child support enforcement with the assistance of the American payroll association.

Used when notifying employers how to handle any child support withholding order.

Form list current child support obligations, amount in arrears and amounts due for medical support. It allows employers to make payments using a schedule that is consistent with their existing pay cycles.

Form also indicates to whom checks are payable and the Payees address.

Front 227

eIWO - electronic Income Withholding Order

Back 227

Provides organizations the ability to receive and respond to withholding orders in an electronic format. Organizations receive a:

A flat file that can be input directly into the payroll process or

PDF format, which reduces the time between when the order is issued and when the employer receives it.

Front 228

Centralized support collections

Back 228

All states except South Carolina have implemented procedures allowing employers to send the child support payments they withhold from workers to A state disbursement unit within their state.

Basically one unit to disburse payments.

Front 229

Creditor garnishments

Back 229

Involves a court order to attach the employees earnings in order to pay off a debt which the employee incurred.

Front 230

Consumer credit protection act

Back 230

Limits the amount of disposable earnings that can be garnished by creditors in a week.

Front 231

Consumer credit protection act

Back 231

Limits the amount of disposable earnings that can be garnished by creditors in a week.

Front 232

The withholding required by a garnishment cannot exceed the lesser of:

Back 232

25% of the employees disposable pay

The amount by which the employees disposable pay for the week exceeds 30 times the federal minimum wage.

Front 233

Higher education act

Back 233

Allows garnishment of employees wages to repay delinquent student loans.

Front 234

Higher education act

Back 234

Allows garnishment of employees wages to repay delinquent student loans.

Front 235

Student loan garnishments are subject to the following restrictions:

Back 235

-If garnishment is issued by state guarantee agency, no more then 15% of an employee's disposable earnings may be garnished unless the employee consents in writing to a higher percentage.

- employees may not be discharged or discriminated against because of a garnishment.

-employees must receive at least 30 days notice before withholding begins and must be given a chance to work out a repayment schedule with the agency guaranteeing the loan to avoid garnishment.

Front 236

Student loan garnishment:

Employers responsibilities

Back 236

Department of education will send a wage garnishment order directing that employer to remit a portion of the debtor's wages. Employer will also be required to certify certain payment information.

Front 237

Maximum amount that should be withheld under a DCIA garnishment order is the lesser of:

Back 237

- The amount indicated in the order ( up to 15% of the debtor's disposable pay)

- The amount by which the debtors disposable pay exceeds 30 times the minimum wage.

Front 238

What does an employer use to calculate the amount to withhold for and IRS tax levy?

A. disposable pay

B. Net pay

C. Take home pay

D. Taxable wages

Back 238

C. Take home pay

Front 239

When does an employer stop deducting of federal tax levy from an employees wages?

A. The amount of the levy is reached.

B. The IRS issues Form 668-D

C. The employee asks that the levy deduction be stopped.

Back 239

B.

Front 240

What does an employer use to calculate the amount to withhold for a child support withholding order?

A. Disposable Pay

B. Net pay

C. Take home pay

D. Taxable wages

Back 240

A.

Front 241

What does an employer use to calculate the amount to withhold for a creditor garnishment?

Back 241

Disposable pay

Front 242

The federal minimum wage is used when figuring the amount to withhold for a creditor garnishment?

Back 242

True

Front 243

Which of the following to ductions require an employee's authorization before it can be deducted from the employees check?

A. Garnishments

B. Levies

C. Child support payments

D. repayment of employer loans

Back 243

D., it's a voluntary deduction you need employees permission.

Front 244

Bankruptcy Orders

Back 244

One the employer receives an order from the trustee under a court approved plan, the employer must stop withholding on any garnishments against the employee except for child support orders.

Front 245

State Income Tax

Back 245

-calculated by applying the wage bracket or percentage method to that employees taxable wages.

-some states calculate taxes as a flat percentage of the employees wages.

-others use a percentage of the employees withheld federal income tax

Each state has different requirements that must be followed and each state in which the employer operates should be contacted to determine that states requirements.

Front 246

Local Income Taxes

Back 246

More varied than state income taxes.

Cities, counties, school districts and other governmental authorities may have the authority to enact a tax on income that employers are required to withhold, pay and report.

Each local taxing authority has different requirements that must be followed, each locality and which the employer operates should be contacted to determine its requirements.

Front 247

State disability Taxes

Back 247

Calculated at a fixed percentage of the employees wages up to a maximum wage.

Employers are required to retain records, file reports and deduct the appropriate taxes if they do not withhold the disability tax, the employer becomes responsible for paying the tax.

Front 248

State unemployment insurance tax withholding

Back 248

Three states have provisions for withholding state unemployment tax:

Alaska, New Jersey and Pennsylvania

The amount withheld is a flat percentage of wages up to the state unemployment wage base in Alaska and New Jersey.

All Pennsylvania wages are subject to withholding of state unemployment tax.

Front 249

State unemployment insurance tax withholding

Back 249

Three states have provisions for withholding state unemployment tax:

Alaska, New Jersey and Pennsylvania

The amount withheld is a flat percentage of wages up to the state unemployment wage base in Alaska and New Jersey.

All Pennsylvania wages are subject to withholding of state unemployment tax.

Front 250

Deceased employees

Back 250

-accrued wages, vacation pay and other compensation paid after the date of death are taxable.

-For federal income tax it is not the employee who is subject to the tax but whoever receives the payment is taxed. Because of this requirement, wages paid after death are not subject to federal income tax withholding.

Front 251

State unemployment insurance tax withholding

Back 251

Three states have provisions for withholding state unemployment tax:

Alaska, New Jersey and Pennsylvania

The amount withheld is a flat percentage of wages up to the state unemployment wage base in Alaska and New Jersey.

All Pennsylvania wages are subject to withholding of state unemployment tax.

Front 252

Deceased employees

Back 252

-accrued wages, vacation pay and other compensation paid after the date of death are taxable.

-For federal income tax it is not the employee who is subject to the tax but whoever receives the payment is taxed. Because of this requirement, wages paid after death are not subject to federal income tax withholding.

Front 253

If the amounts due the deceased employee are paid during the same year the employee dies:

Back 253

- social Security tax and Medicare tax must be withheld and the amounts paid must be reported as wages in boxes 3 (social Security wages) and box 5 (medicare wages) on the W-2 Form.

- social Security and Medicare tax withholding is reported in box 4 (social Security tax) and 6 (medicare tax). The amount is not reported as federal income taxable wages and box one but must be reported on form 1099-Misc in box 3 (other income), using the name and tax payer identification number of the deceased employees estate or beneficiary.

Front 254

If the amounts are paid after the year of death:

Back 254

No Social Security or Medicare tax is withheld or paid and no reporting is done on form W – 2. The amount is reported on form 1099 – MISC in box 3, using the name and tax payer identification number of the deceased employees estate or beneficiary

Front 255

If an employee dies and a final payment is made, the employer continues to withhold taxes as if the employee was still alive? T or F

Back 255

False Federal income tax is not withheld from wages paid after employees death as wages subject to federal income tax are paid to the employees estate or beneficiary and reported on form 1099-MISC.

Front 256

For a payment after the employees death but in the year of the death, what taxes, will be withheld?

A. Federal income tax only

B. Social Security and Medicare taxes only

C. Federal income, Social Security and Medicare taxes

D. No taxes will be withheld.

Back 256

B. Social Security act requires withholding Social Security and Medicare taxes from wages paid in the year of an employee's death. These wages are paid to the employees estate or beneficiary and reported on form W-2.

Front 257

For a payment after the employees death in the year after the death, what taxes will be withheld?

A. Federal income tax only

B. Social Security and Medicare taxes only

C. Federal income, Social Security and Medicare taxes

D. No taxes will be withheld.

Back 257

D. Social Security act requires that Social Security and Medicare taxes not be withheld from wages paid in the year after an employee's death. These wages are paid to the employees estate or beneficiary and are not reported on form W-2

Front 258

Gross Up

Back 258

When the employer wants to pay the employees taxes you start with the net you want the employee to receive and then calculate the gross that includes the tax withholding amounts. This is known as a gross up.

Front 259

Gross Up

Back 259

When the employer wants to pay the employees taxes you start with the net you want the employee to receive and then calculate the gross that includes the tax withholding amounts. This is known as a gross up.

Front 260

Why Gross Up?

Back 260

Examples:

- sales person receives $100 bonus. The sales manager wants the sales person to receive hundred dollars in cash after withholding taxes, so the gross bonus will be more than $100.

- The employer decides to pay the employees taxes on taxable relocation expenses

- The value of excess group term life insurance for a terminated employee is calculated but Social Security tax or Medicare tax was not withheld, gross is required.

-The employer fails to withhold taxes from the employees wages at the time of payment, gross up is required.

Front 261

Fringe Benefits

Fair market value of non-cash compensation

Back 261

The fair market value of a fringe benefit is the amount the employee would have paid a third-party to buy or lease the fringe benefit

Front 262

When determining the value of the benefit, keep the following two statements in mind:

Back 262

The employees perceived value of the benefit is not relevant

The amount the employer paid for the benefit is not a determining factor

Front 263

Imputed Income

Back 263

Imputed income represents the value of the taxable benefits employees receive from the employer and must be included in the employees income.

Employers are required to impute income to employees for each taxable non-cash benefit received by the employee.

Imputing income reduces employees net pay by increasing taxes. The employee does not receive additional pay in the form of cash. An example of imputed income is taxable group term life insurance.

Front 264

Imputing should occur as frequently as possible.

Back 264

Imputing only at year end could reduce the employees income drastically and result in a little or no net pay.

Imputing group term life insurance could occur monthly since the employees imputed income is based on a calculation that uses a monthly rate.

Front 265

Special Rules for non-cash fringe benefits:

Back 265

-benefits must be recognized as income at least once a year, by December 31, but may be recognized more frequently, such as monthly or quarterly.

Front 266

Withhold and deposit taxes on non-cash Fringe benefits:

Back 266

The recognition of fringe benefits as taxable income requires that all applicable income and employment taxes be withheld and deposited.

Front 267

Withhold and deposit taxes on non-cash Fringe benefits:

Back 267

The recognition of fringe benefits as taxable income requires that all applicable income and employment taxes be withheld and deposited.

Front 268

Withholding tax on fringe benefits:

Back 268

Employers must either collect the tax from the employee or pay the tax on behalf of the employee.

If the employer pays the taxes due on fringe benefits on behalf of the employee, those taxes paid become additional income.

When the employer pays taxes on behalf of the employee, the taxes may be treated as an account receivable. Repayment must be made no later than April 1 of the following year.

Front 269

Non-reportable fringe benefits:

Back 269

IRC section 132 defines benefits that are excluded from taxable earnings.

- these benefits are not reported on the employee's form W-2.

Front 270

Non-reportable fringe benefits:

Back 270

IRC section 132 defines benefits that are excluded from taxable earnings.

- these benefits are not reported on the employee's form W-2.

Front 271

Nonreportable Fringe Benefits:

De Minimis Fringe Benefits

Back 271

De Minimis fringe benefits are so small in value that it is unreasonable or administratively impractical for the employer to account for them. They are not included in it employees taxable compensation.

Front 272

Non-reportable fringe benefits:

Back 272

IRC section 132 defines benefits that are excluded from taxable earnings.

- these benefits are not reported on the employee's form W-2.

Front 273

Nonreportable Fringe Benefits:

De Minimis Fringe Benefits

Back 273

De Minimis fringe benefits are so small in value that it is unreasonable or administratively impractical for the employer to account for them. They are not included in it employees taxable compensation.

Front 274

Examples of De Minimis Fringe Benefits:

Back 274

-Occasional typing of a personal letter by a company administrative assistant

-vocational personal use of photocopy machine ( as long as it is less than 15% of the total use of the machine)

-occasional parties for employees

-occasional tickets to the theater or sporting events

-occasional supper money for working overtime

-traditional holiday gifts like a turkey or a ham

-coffee or donuts furnished by the employer

-use of company telephone for personal calls

Remember: if you keep track of any of these items they could become taxable. In addition, cash, gift cards, gift certificates or cash equivalents are always taxable.

Front 275

No-Additional-Cost Services

Back 275

Employees can take advantage of employer services with no tax consequences when the services are sold to customers as part of that employers regular lines of business in which the employee works. As long as the employer does not incur any substantial cost and providing this service to employees, it need not be included in the employees taxable compensation.

Examples-

Free or reduced price standby travels to employees of an airline

Free telephone service to employees of a telephone company

Front 276

Two most common withholding methods used for calculating withholding on regular wages?

Back 276

Percentage and wage bracket

Front 277

Wage attachments take precedence over voluntary deductions? true or false

Back 277

True

Front 278

What publication that give exempt amounts is provided with form 668 – W?

Back 278

1494

Front 279

Wages paid after death is subject to federal income tax withholding? True or false

Back 279

False

Front 280

Wages in excess of $200,000 are subject to what Medicare tax rate?

Back 280

2.35%

Front 281

The maximum amount of an employees compensation subject to child support withholding is governed by:

Back 281

CCPA - consumer credit protection act

Front 282

When grossing up, the taxes paid by the employer are included in the employees taxable income? True or false

Back 282

True

Front 283

When grossing up, the taxes paid by the employer are included in the employees taxable income? True or false

Back 283

True

Front 284

What are the federal limits for withholding garnishments?

Back 284

25% of the debtors disposable pay

Front 285

Employers are required to withhold social security tax from its employees and pay the employers portion amount up to the maximum each year, regardless if the employees previous earnings are from another employee? True or false

Back 285

True

Front 286

Qualified employee discount

Back 286

To be qualified, The property and services must be offered for sale two customers in the ordinary course of an employer's line of business.

-The discount on property is not greater than the gross profit earned on the property at the price normally sold to customers

-The discount on services is not greater than 20% of the retail price

Front 287

Working condition fringes:

Back 287

Work related items, when paid for by the employee, may be deducted from the employees individual tax return as a business expense. When these items are provided by the employer, they represent non-taxable compensation.

Front 288

Working condition fringes:

Back 288

Work related items, when paid for by the employee, may be deducted from the employees individual tax return as a business expense. When these items are provided by the employer, they represent non-taxable compensation.

Front 289

Examples of working condition fringes:

Back 289

Business use of a company car or plane

Subscriptions to business periodicals

Fees to join professional organizations

Attendance at a job related seminar

Goods used by employees for product testing

Cell phone provided primarily for business purposes

Front 290

Use of athletic facilities:

Back 290

Athletic facilities intended for employees and their families may be excluded from income. The facility must be located on the employers premises although not necessarily at the place of business. Facility must also be operated by the employer. If the facility is made available to the public, the exclusion does not apply.

Front 291

Qualified transportation Fringe benefits:

Back 291

Qualify transportation fringe benefits may be excluded from the income of an employee up to certain limits.

Employers may offer a choice of transportation, I transit pass, qualified parking or cash. If cash, it is taxable.

Front 292

Qualified transportation Fringe benefits:

Back 292

Qualify transportation fringe benefits may be excluded from the income of an employee up to certain limits.

Employers may offer a choice of transportation, I transit pass, qualified parking or cash. If cash, it is taxable.

Front 293

Qualified transportation fringes include the following:

Transportation in a commuter Highway vehicle

Back 293

-transportation in a commuter Highway vehicle (van pooling)

Up to $130 per month, may be excluded from the employees income for transportation in a commuter highway vehicle provided by the employer for travel between the employees residence and place of work. A commuter highway vehicle is defined as:

A highway vehicle that seats at least six adults not including the driver.

Has at least 80% of its mileage used in transporting employees between their residence at their place of work and at least 50% of the adult seating capacity is occupied, not including the driver.

Front 294

Qualified transportation Fringe benefits:

Back 294

Qualify transportation fringe benefits may be excluded from the income of an employee up to certain limits.

Employers may offer a choice of transportation, I transit pass, qualified parking or cash. If cash, it is taxable.

Front 295

Qualified transportation fringes include the following:

Transportation in a commuter Highway vehicle

Back 295

-transportation in a commuter Highway vehicle (van pooling)

Up to $130 per month, may be excluded from the employees income for transportation in a commuter highway vehicle provided by the employer for travel between the employees residence and place of work. A commuter highway vehicle is defined as:

A highway vehicle that seats at least six adults not including the driver.

Has at least 80% of its mileage used in transporting employees between their residence at their place of work and at least 50% of the adult seating capacity is occupied, not including the driver.

Front 296

Qualified transportation fringes include the following:

Transit Passes

Back 296

Up to $130 per month may be excluded from the employees income and the employer provides the employee with a transit pass.

A transit pass is any pass, token, fare card, voucher or similar item providing the employee transportation to and or from work.

Front 297

Qualified transportation fringes include the following:

Qualified Parking

Back 297

Parking provided by an employer to an employee on or near the premises of the employer or at or near a location from which the employee commutes to work on mass transit or in a commuter highway vehicle may be excluded from the employees gross income up to $250 per month. The amount to apply against the exclusion is what the employee would pay in a fair market value, arms length transaction to obtain the parking. Employers may discriminate in favor of highly compensated employees when providing qualified parking

Front 298

Qualified transportation fringes include the following:

Bicycle Commuters

Back 298

A qualified bicycle commuting reimbursement can be made to an employee's for reasonable expenses incurred by an employee who regularly uses a bicycle to commute to and from work. The maximum qualified bicycle commuting reimbursement is $20 a month. A qualified month is the month in which the employee does not receive any other qualified transportation fringe benefit and regularly uses a bicycle for a substantial portion of travel between his or her residence and place of work..

Front 299

Employer provided retirement advice:

Back 299

Qualified retirement planning services, retirement advice and information but not tax preparation, accounting, legal or brokerage services, may be provided to an employee and his or her spouse by an employermaintaining a qualified plan, 401(k) plan, 403B annunity, SEP or SIMPLE plan but not a 457 plan. This exclusion does not apply to highly compensated individuals unless the services are available on substantially the same terms to other employees.

Front 300

Qualified moving expense reimbursements

Back 300

And employers reimbursement or payment of employees moving expenses is in excludable fringe benefit when the expenses meet the qualified moving expense requirements.

The expenses are qualified moving expenses when:

- The expenses would be deductible by the employee if he or she had directly paid or incurred the expenses

- The employee did not deduct the expenses in a prior year.

Front 301

The following rules must be met for moving expenses to be qualified:

Back 301

- The distance from the employees new workplace to his or her old residence must be at least 50 miles farther than the distance from the employees old workplace to his or her old residence.

- The employee must work full-time in the general location of their new principal place of work for at least 39 weeks during the 12 months immediately following the move. Note: The time test is waived if the employee dies, loses his or her job due to a disability, transfers for the employers benefit, or is laid off or discharged for reason other than willful misconduct.)

- The reimbursements should be made under rules similar to those relating to an accountable business expense reimbursement plan.

Front 302

The following rules must be met for moving expenses to be qualified:

Back 302

- The distance from the employees new workplace to his or her old residence must be at least 50 miles farther than the distance from the employees old workplace to his or her old residence.

- The employee must work full-time in the general location of their new principal place of work for at least 39 weeks during the 12 months immediately following the move. Note: The time test is waived if the employee dies, loses his or her job due to a disability, transfers for the employers benefit, or is laid off or discharged for reason other than willful misconduct.)

- The reimbursements should be made under rules similar to those relating to an accountable business expense reimbursement plan.

Front 303

Deductible moving expenses that are defined in IRC section 217 and are excluded from income when reimbursed with no dollar limitation are:

Back 303

- expenses incurred moving household goods and personal effects from the employees old residence to the new residence.

- expenses incurred by the employee and his or her family for traveling from the old residence to the new residence. If reimbursing mileage during a move, the rate cannot exceed $0.235 cents per mile without incurring taxation. These expenses include lodging but not meals

Front 304

Any reimbursed or an employer paid moving expenses not meeting the qualified moving expense reimbursement requirements are included in the employees income and are subject to employment taxes and income tax withholding. They must be reported:

Back 304

Not Qualified:

Form W-2 - boxes 1, 3 and 5 but not Box 12.

Qualified paid directly to a 3rd Party:

Not reportable on Form W-2

Qualified moving expenses paid directly to employee:

Form W-2, box 12, Code P

Front 305

Moving household goods

Back 305

Not taxable

Front 306

Moving household goods

Back 306

Not taxable

Front 307

Traveling to a new job site

Back 307

Not taxable

Front 308

Moving household goods

Back 308

Not taxable

Front 309

Traveling to a new job site

Back 309

Not taxable

Front 310

Meals on route to the new location

Back 310

Taxable

Front 311

Moving household goods

Back 311

Not taxable

Front 312

Traveling to a new job site

Back 312

Not taxable

Front 313

Meals on route to the new location

Back 313

Taxable

Front 314

Expenses related to purchase, sale or lease of primary residence

Back 314

Taxable

Front 315

Moving household goods

Back 315

Not taxable

Front 316

Traveling to a new job site

Back 316

Not taxable

Front 317

Meals on route to the new location

Back 317

Taxable

Front 318

Expenses related to purchase, sale or lease of primary residence

Back 318

Taxable

Front 319

Expenses

Real estate taxes

Back 319

Taxable

Front 320

Prizes and awards

Back 320

Taxable

Front 321

Non discretionary bonuses included

Back 321

In regular rate of pay

Front 322

Length of service and safety awards may be excluded from income if the award follows certain guidelines:

Back 322

-For nonqualified plans, employees can receive an award costing the employer $400 in a calendar year.

-for qualified plans, all awards made to a single employee cannot cost the employer more than $1600 in a calendar year, with the average cost of all individual awards to all employees not exceeding $400.

-A qualified plan is a written plan that does not favor highly compensated employees. If awards exceed the limitations above, the excess amount is considered taxable income.

-awards Mus the tangible property and must be presented in a meaningful ceremony.

Front 323

Length of service and safety awards may be excluded from income if the award follows certain guidelines:

Back 323

-For nonqualified plans, employees can receive an award costing the employer $400 in a calendar year.

-for qualified plans, all awards made to a single employee cannot cost the employer more than $1600 in a calendar year, with the average cost of all individual awards to all employees not exceeding $400.

-A qualified plan is a written plan that does not favor highly compensated employees. If awards exceed the limitations above, the excess amount is considered taxable income.

-awards Mus the tangible property and must be presented in a meaningful ceremony.

Front 324

Other qualifications for length of service awards include the following:

Back 324

-awards must not be given during the first five years of employment with the employer.

-Awards can be made only at five year intervals.

Front 325

Length of service and safety awards may be excluded from income if the award follows certain guidelines:

Back 325

-For nonqualified plans, employees can receive an award costing the employer $400 in a calendar year.

-for qualified plans, all awards made to a single employee cannot cost the employer more than $1600 in a calendar year, with the average cost of all individual awards to all employees not exceeding $400.

-A qualified plan is a written plan that does not favor highly compensated employees. If awards exceed the limitations above, the excess amount is considered taxable income.

-awards Mus the tangible property and must be presented in a meaningful ceremony.

Front 326

Other qualifications for length of service awards include the following:

Back 326

-awards must not be given during the first five years of employment with the employer.

-Awards can be made only at five year intervals.

Front 327

Other qualifications for safety awards include the following:

Back 327

-No more than 10% of all employees may receive safety awards.

-No management, professional, administrative or clerical employees may receive safety awards.

-The employee must work full-time with at least one year of service.

Front 328

Length of service and safety awards may be excluded from income if the award follows certain guidelines:

Back 328

-For nonqualified plans, employees can receive an award costing the employer $400 in a calendar year.

-for qualified plans, all awards made to a single employee cannot cost the employer more than $1600 in a calendar year, with the average cost of all individual awards to all employees not exceeding $400.

-A qualified plan is a written plan that does not favor highly compensated employees. If awards exceed the limitations above, the excess amount is considered taxable income.

-awards Mus the tangible property and must be presented in a meaningful ceremony.

Front 329

Other qualifications for length of service awards include the following:

Back 329

-awards must not be given during the first five years of employment with the employer.

-Awards can be made only at five year intervals.

Front 330

Other qualifications for safety awards include the following:

Back 330

-No more than 10% of all employees may receive safety awards.

-No management, professional, administrative or clerical employees may receive safety awards.

-The employee must work full-time with at least one year of service.

Front 331

An employer provides an employee $175 each month in bus tokens so she can commute to work. How much of this expense is non-taxable?

Back 331

$130

Front 332

Length of service and safety awards may be excluded from income if the award follows certain guidelines:

Back 332

-For nonqualified plans, employees can receive an award costing the employer $400 in a calendar year.

-for qualified plans, all awards made to a single employee cannot cost the employer more than $1600 in a calendar year, with the average cost of all individual awards to all employees not exceeding $400.

-A qualified plan is a written plan that does not favor highly compensated employees. If awards exceed the limitations above, the excess amount is considered taxable income.

-awards Mus the tangible property and must be presented in a meaningful ceremony.

Front 333

Other qualifications for length of service awards include the following:

Back 333

-awards must not be given during the first five years of employment with the employer.

-Awards can be made only at five year intervals.

Front 334

Other qualifications for safety awards include the following:

Back 334

-No more than 10% of all employees may receive safety awards.

-No management, professional, administrative or clerical employees may receive safety awards.

-The employee must work full-time with at least one year of service.

Front 335

An employer provides an employee $175 each month in bus tokens so she can commute to work. How much of this expense is non-taxable?

Back 335

$130

Front 336

Employees parking garage is two blocks away from his downtown office. It cost 265 per month to rent a stall there, but the employee doesn't mind because it's convenient and his employer reimburses himfor 100% of the cost. How much of his monthly parking is taxable

Back 336

$15

Front 337

Business use of a company owned vehicle is a:

Back 337

Working condition fringe benefit and is not taxable.

Personal use of the vehicle is taxable compensation.

Front 338

Accounting for company vehicle use: need for documentation

Back 338

Employee records should include

Business miles driven

Date of trip

Purpose of trip

Expenses incurred

Front 339

Accounting for company vehicle use: income tax withholding optional

Back 339

Employer can elect not to withhold federal income tax on personal use of a company vehicle. Employers must notify the employees by January 31 of each year or 30 days after the employee is assigned a vehicle if they choose not to withhold

Front 340

Accounting for company vehicle use: income tax withholding optional

Back 340

Employer can elect not to withhold federal income tax on personal use of a company vehicle. Employers must notify the employees by January 31 of each year or 30 days after the employee is assigned a vehicle if they choose not to withhold

-if federal income tax is not withheld the employee may be under withheld for personal income tax and could face penalties and interest charges

Front 341

Company vehicles: Personal Usage, social security and Medicare

Back 341

Social Security and Medicare tax must be withheld.

If employee terminates before withholding requirements are met, the employer must pay the Social Security tax and Medicare tax.

Front 342

Company vehicles: Personal Usage, social security and Medicare

Back 342

Social Security and Medicare tax must be withheld.

If employee terminates before withholding requirements are met, the employer must pay the Social Security tax and Medicare tax.

Front 343

Company vehicles: Report the value

Back 343

Even though choosing not to withhold federal income tax, the employer must add the value of personal use to the compensation reported on the employees form W-2.

Employees may pay federal income tax on the amount when filing their personal income tax returns.

The value of personal use of a company vehicle is required to be reported only once a year, quarterly reporting suggested.

personal usage provided in November and December may be reported as paid in the next year

Front 344

Annual Lease Value Method

Back 344

Also called fair market valuation method.

Determine how much it would cost to lease a comparable car on the same terms.

-first step is to determine the fair market value of the vehicle on the first day the employee uses the vehicle.

- use the table to find the annual lease value or a LV

- divide the personal miles driven by the total driven

- multiply the fair market value by the personal miles driven

Front 345

Annual lease value method

Back 345

If the fair market value is greater than $59,999, the annual lease value is equal to 25% of the fair market value +500

Front 346

Excess group term life insurance: tax considerations

Back 346

Exempt from federal income tax withholding, however the amount is taxable on the employees individual tax return and must be reported on form W-2.

The value of dependent group term life insurance that is taxable is subject to federal income tax withholding.

Must withhold social security and Medicare tax from the value of the employees excess group term life insurance coverage and the Dependents group term life coverage provided by the employer. Even if the employee pays for this benefit using pretax dollars through a cafeteria plan. Employers are required to withhold and report Social Security and Medicare tax only once a year. More frequent withholding and reporting, such as every pay period is recommended.

Exempt from federal unemployment tax (FUTA)

but must be reported on Form 940.

Front 347

Value of excess group term life insurance is an example of imputed income.

Back 347

Imputed income is the amount that a company pays on behalf of an employee but the individual does not actually receive in real dollars.