1.A company must withhold federal income taxes from payments made to independent contractors in which of the following cases?

a.When the contractor has not provided a taxpayer identification number and the contract is $600 or more.

b.When the contractor is a corporation.

c.When the contractor is paid $400.

d.When there is a signed contract between the parties.

e.All of these choices are correct.

2.For which of the following payments is the employer required to withhold federal income taxes?

a.Tipped employee's monthly tips of $120

b.Deceased person's wages paid to the estate

c.Minister of Presbyterian church

d.Advances made to sales personnel for traveling expenses

e.All of these choices are correct.

3.Beech refuses to state her marital status on Form W-4 which she gave to you, the payroll manager, when she was hired. You should:

a.inform Beech that she will have to write the IRS and give her reasons for refusing to state her marital status.

b.advise Beech to write "It is no business of yours." in the margin of her Form W-4.

c.tell Beech that you will have to withhold income taxes according to the withholding table for a single employee with no allowances.

d.tell Beech that it is OK since you know that she was recently divorced and is reluctant to talk about it.

e.tell Beech that you will have to withhold income taxes as if she were married and had claimed one allowance.

4.An employer must file an information return under all of the following conditionsexcept:

a.to report $1,000 of compensation paid to an individual who is not an employee.

b.to report commissions of $500 paid to a self-employed salesman.

c.to report dividends totaling $600 paid to an individual during the calendar year.

d.to report the wages totaling $600 paid to an independent contractor during the calendar year.

e.An information return must be filed under each of these conditions.

5.Which of the following forms is used to report rents paid over $600 to landlords?

a.Form 8027

b.Form 1099-R

c.Form 1099-MISC

d.Form 1099-G

e.Form 1099-INT

6.Which of the following cannot be included in a cafeteria plan?

a.Self-insured medical reimbursement plan

b.Group-term life insurance (first $50,000 of coverage)

c.Educational assistance

d.Health insurance

e.Dependent care assistance (first $5,000)

7.Under the federal income tax withholding law, which of the following isnotdefined as anemployee?

a.General manager, age 66

b.Secretary employed by a not-for-profit corporation

c.Governor of the state of Florida

d.Payroll clerk hired one week ago

e.Partner who draws compensation for services rendered the partnership

8.To curb the practice of employees filing false Forms W-4, the IRS requires that an employer submit to the agency a copy of each Form W-4:

a.on which a recently divorced employee claims 5 withholding allowances and authorizes an additional $10 to be withheld each week.

b.on which an employee, usually earning $180 each week at the time Form W-4 was filed, now claims to be exempt from withholding.

c.on which an employee claims to be single but has 9 withholding allowances.

d.on which a married employee claims no withholding allowances.

e.the IRS has requested in writing.

9.Mary Matthews made $950 during a biweekly pay period only social security (fully taxable) and federal income taxes attach to her pay. Matthews contributes $100 each biweekly pay to her company's 401k. Determine Matthews take home pay if she is married and claims 2 allowances.

10.Determine the income tax to withhold from the biweekly wages of the following employees (wage-bracket):

If your answer is zero, please enter "0".

Karen Overton (single, 0 allowances), $900 wages $

Nancy Haller (married, 4 allowances), $1,000 wages $

Alan Glasgow (married, 1 allowance), $980 wages $

Joseph Kerr (single, 4 allowances), $720 wages $

Ginni Lorenz (single, 1 allowance), $580 wages $

11.Which of the following statementscorrectlydescribes the withholding of federal income taxes and social security taxes on tips?

a.Tips amounting to $10 or more in a calendar month must be reported by tipped employees to their employers.

b.Employers do not withhold FICA taxes on the tipped employees' reported tip income.

c.When employees report taxable tips in connection with employment in which they also receive regular wages, the amount of tax to be withheld on the tips is computed as if the tips were a supplemental wage payment.

d.The withholding of federal income taxes on employees' reported tip income is made from the amount of tips reported by employees.

e.None of these statements are correct.

12.Arch gives you an amended Form W-4 dated March 8, 20-- on which he claims two additional withholding allowances. He asks you to refund the excess taxes that were deducted from January 1 to March 8 when Arch claimed only one withholding allowance. You should:

a.inform Arch that you will appoint a committee to study his request.

b.tell Arch that you will spread out a refund of the overwithheld taxes equally over the next six pays.

c.tell Arch to write the IRS immediately and ask for a refund of the overwithheld taxes.

d.repay the overwithheld taxes on Arch's next payday.

e.inform Arch that you are unable to repay the overwithheld taxes that were withheld before March 8 and that the adjustment will have to be made when he files his annual income tax return.

13.A personal allowance:

a.is indexed for inflation every calendar quarter.

b.for one person is a different amount for a single versus a married taxpayer.

c.amounted to $2,000 in 20--.

d.may be claimed at the same time with each employer for whom an employee is working during the year.

e.may be claimed to reduce the amount of withholdings from the employee's earnings.

14.Which of the following noncash fringe benefits does not represent taxable income subject to federal income tax withholding?

a.Employer-paid membership to a country club

b.Sick pay

c.Flight on employer-provided airline

d.Personal use of company car

e.All of these choices are taxable.

15.Carson Smart is paid $1,200 every two weeks plus a taxable lodging allowance of $100. He is a participant in the company 401(k) plan and has $150 deducted from his pay for his contribution to the plan. He is married with two allowances. How much would be deducted from his pay for federal income tax?

16.All of the following are properly defined as wages subject to the withholding of federal income taxesexcept:

a.a year-end bonus.

b.vacation pay.

c.dismissal payment.

d.kitchen appliances given by manufacturer in lieu of cash wages.

e.payments made under workers' compensation law.

17.Which of the following forms is used to report the amount of distributions from pension and retirement plans?

a.Form 1099-PEN

b.Form 1099-R

c.Form W-2c

d.Form W-3p

e.Form W-4

18.Which of the following statements isfalseregarding an employee's contribution into a 401(k) tax deferred retirement account?

a.The employee may be in a lower tax bracket when the retirement income is taxed.

b.Upon retirement, payments are then subject to federal income tax.

c.Upon retirement, the employee will receive their contributions back in the form of regular payments.

d.The employee's contributions are not subject to FICA tax.

e.None of these statements are correct.

19.Use the appropriate table to determine the amount to withhold for federal income tax from each of the following biweekly wages (biweekly withholding allowance = $161.50):

Patrick Patrone (single, 2 allowances), $925 wages $

Carson Leno (married, 4 allowances), $1,195 wages $

Carli Lintz (single, 0 allowances), $700 wages $

Gene Hartz (single, 1 allowance), $2,700 wages $

Mollie Parmer (married, 2 allowances), $3,600 wages $

20.Calculate the amount to withhold from the following employees using the biweekly table of the percentage method.

Kenneth Karcher (single, 1 allowance = $161.50), $895 wages $

Mary Kenny (married, 2 allowances = $323.00), $1,900 wages $

Thomas Carney (single, 0 allowances), $1,460 wages $

21.Edward Dorsey is a part-time employee, and during the biweekly pay period he earned $395. In addition, he is being paid a bonus of $300 along with his regular pay. If Dorsey is single and claims two withholding allowances, how much would be deducted from his pay for FIT?

Hint: There are two ways to determine his deductiondo not use tables for percentage method.

a. Wage-bracket table $

b. Percentage method $