Flo is a server at a diner in Phoenix and earns a significant portion of her pay through tips from customers. Some of these tips are paid via credit card and others are paid in cash. Flo's employer will:

a.withhold both employment and income taxes on the cash tips but only employment taxes on the tips paid by credit card

b.withhold employment taxes but no income taxes on the tips

c.withhold both employment and income taxes on all tips

d.not withhold any taxes on cash tips but will withhold both employment and income taxes on credit card tips

Jane is a single taxpayer with a current year AGI of $181,000 and current year income tax liability of $39,610. Her AGI in the prior year was $150,400 and prior year tax liability was $32,182. Jane earns her income ratably during the year. In order to avoid penalty, the smallest amount of required annual withholding and estimated payments is:

a.$35,400

b.$32,182

c.$43,571

d.$35,649

e.$39,610

Which of the following amounts paid by an employer to an employee is not subject to withholding?

a.Commissions.

b.Bonus.

c.Salary.

d.Reimbursement of expenses under a non-accountable plan.

e.All of these choices are subject to withholding.

Amy is a single taxpayer. Her income tax liability in the prior year was $5,178. Amy earns $50,000 of income ratably during the current year and her tax liability is $4,372. In order to avoid penalty, Amys smallest amount of required annual withholding and estimated payments is:

a.$3,935

b.$5,178

c.$4,660

d.$5,696

e.$4,372

The process for employee withholding involves:

a.the employee completes most of the Form W-4 and the employer submits the form to the IRS and awaits withholding instructions

b.the employee provides filing status and the employer completes the Form W-4 and submits to the IRS for proper withholding

c.the employee computes the number of allowances on Form W-4 and the employer uses the W-4 information to calculate income tax withholding

d.the employee provides wage information and the employer completes Form W-4 and withholds based on employee instruction

Abbe, age 56, is married and has two dependent children, one age 14, and the other a 21 year-old full-time student. Abbe has one job, and her husband, age 58, is not employed. If she expects to earn wages of $50,000, file jointly, and take the standard deduction, how many allowances should Abbe claim on her Form W-4?

a.4

b.9

c.7

d.5

e.8