2016 IRS Circular E Employer’s Tax Guide

Question 1

1. An employer shall keep for at least __________ years all records of employment taxes.

A. 1
B. 2
C. 3
D. 4

Answer 1

1. D 6 Recordkeeping

Question 2

2. How many banking days does a semi-weekly depositor have to deposit withholding taxes?

A. 1
B. at most 2
C. at least 3
D. at least 4

Answer 2

2. C 26 Deposits on Business Days Only

Question 3

3. If a contractor deducted less than the correct amount of tax from any wage payment, the
   contractor _____________.

A. is required by law to inform the employee in writing within five working days
B. may deduct the amount of under collection from later payments to the employee
C. must fill out form 988B and return it to the internal revenue service within 12 working days
D. must make up the difference from the contractor’s own funds within 10 working days

Answer 3

3. B 33 Collecting under withheld taxes from employees

Question 4

4. If, at the end of a quarter, a contractor’s total FUTA tax is $150, the contractor _______________.

A. may add the tax to the amount for deposit for the next quarter
B. must deposit the tax during the first month after the quarter
C. must deposit the tax during the second month after the quarter
D. must deposit the tax during the third month after the quarter

Answer 4

4. A 35 Depositing FUTA Tax

Question 5

5. A contractor employs a full-time college student in his construction business paying him gross wages of $500 per week. The contractor is required to pay/report which federal taxes if this student is in a work-study program established by his college?

A. none
B. Income tax (only)
C. Income tax & FICA (only)
D. Income tax & Federal Unemployment tax (only)

Answer 5

5. C 40 Chart

Question 6

6. An employer is liable for the unemployment tax, if in the current or preceding calendar year_________

A. The employer paid at least $500 in wages in a calendar quarter
B. The employer paid at least $1,000 in wages in a calendar quarter
C. The employer had at least one employee for any portion of a day in 10 different calendar weeks in a year.
D. The employer had at least one employee for any portion of a day in 20 different weeks in a year

Answer 6

6. D 34 General Test

Question 7

7. For federal tax purposes, which of the following is not considered an employee?

A. Agent/Driver delivering food
B. Real Estate agent
C. Traveling sales selling hotel supplies for one company
D. Part-time worker

Answer 7

7. B 11 Who Are Employees?

Question 8

8. If an employer withholds income tax from an employee’s regular wages, the employer may withhold a flat _________ for supplemental wages.

A. 5%
B. 10%
C. 20%
D. 25%

Answer 8

8. D 18 Supplemental Wages – Supplemental wages identified separately
   from regular wages

Question 9

9. When taxes are not deposited when due and the delay is more than 16 days late, a penalty is charged.

A. 5%
B. 10%
C. 15%
D. 20%

Answer 9

9. B 28 Deposit Penalties

Question 10

10. Deposits for FUTA taxes are due by .

A. The 15th day of the month following the end of the quarter
B. By the 5th day of the next month following the quarter
C. By the last day of the first month after the quarter ends
D. At the end of the eighth monthly period

Answer 10

10. C 35 When to Deposit FUTA Taxes

Question 11

11. The maximum credit against the FUTA for payments to state unemployment funds is .
    A. 2.8%
    B. 3.5%
    C. 5.4%
    D. 6.2%

Answer 11

11. C 34 Computing FUTA Tax

Question 12

12. An employee’s gross pay in the first pay period of the year is $675. The employee is single, has 2 withholding allowances, and is paid bi-weekly. The amount of the employee’s income tax withholding is _________.

A. $52
B. $27
C. $70
D. $67

Answer 12

12. B 50 Wage Bracket Method Tables

Question 13

13. For FUTA tax purposes, an employer is any person or organization that has paid wages of _____________ or more in any calendar quarter.
    A. $500
    B. $1,000
    C. $1,500
    D. $2,000

Answer 13

13. C 34 Who Must Pay?

Question 14

14. A household employee in a private home, age 20, is paid $100 a week salary and has worked 25 weeks. Which taxes are required?
    A. Income Taxes and FICA
    B. FICA and Federal unemployment taxes
    C. Federal unemployment taxes and income taxes
    D. None of the above

Answer 14

14. B 38 Chart

Question 15

15. You must use ______ to make all federal tax deposits.
    A. EFT
    B. FICA
    C. Form 940
    D. WBC

Answer 15

15. A 24 How to Deposit

Question 16

16. Given: An employee’s gross weekly payroll for a certain week is shown below. Use the Percentage Method to determine the withholding.

Marital Status Total # Exemptions Hourly Wage Regular Hours Overtime Hours
Married 3 $21.00 35 0

The total amount of Federal Income Tax (only), to be deducted from the gross wages is _____________.
(choose closest answer)

A. $33
B. $40
C. $44
D. $52

Answer 16

16.. A 42-45 Percentage Method

Question 17

17. As of Dec. 31, 2015, an employer has 3 employees; each will be paid a salary as shown below:

Employee #1 — $70,000
Employee #2 — $52,000
Employee #3 — $49,500

The total amount of FICA taxes that the employer will have to deposit will be ___________.

A. $15,484
B. $25,995
C. $12,998
D. $26,239

Answer 17

17. D 23 Social Security and Medicare Taxes
    ($70,000 + 52,000 + 49,500) x 7.65% x 2 = $26,239.50

Question 18

18. According to the Federal Unemployment Tax Act, if a contractor acquires a business from someone else who was an employer liable for FUTA tax, you ______________.

A. may be able to count the wages that employer paid to the employees who continue to work for you when you figure the $7,000 FUTA tax wage base.
B. must pay a tax rate based on the premise that you are a new employer with new employees
C. you may pay taxes based on percentage of days in balance of fiscal year
D. may count the wages that employer paid to up to three employees who continue to work for you when you figure the wage limit

Answer 18

18. A 35 Successor Employer

Question 19

19. The quarterly Federal Tax Form 941 summarizes tax liability for the employer and includes _________

A. liability insurance
B. withheld income taxes and/or FICA
C. workers compensation insurance
D. federal unemployment insurance tax

Answer 19

19. B 29 Filing Form 941 or Form 944

Question 20

20. Which of the following wages would not be subject to Federal Unemployment tax paid by the employer?

A. wages paid to a Canadian who frequently enters the U.S. to work as a carpenter
B. severance pay
C. wages paid to a deceased worker’s estate in the same calendar year as the date of the worker’s death
D. wages paid to the employer’s spouse

Answer 20

20. D 36-40 Chart

Question 21

21. According to Circular E instructions, Copy A of all paper Forms W-2 shall be sent to the Social Security Administration (SSA) by the last day of __________.

A. January
B. February
C. March
D. December

Answer 21

21. B 8 By February 29

Question 22

22. A contractor is filing Form 941 for taxes which were withheld from employees for the first quarter of the year (January, February, and March). All the taxes were deposited when they were due. What is the LATEST date (without penalty) that the contractor can file this return?

A. April 15
B. April 30
C. May 10
D. May 15

Answer 22

22. C 8 May 10 - see note changing for April 30th

Question 23

23. When does Form W-4 (Employee’s Withholding allowance Certificate) expire?

A. January 31
B. February 15
C. when the employee gives the employer a new Form W-4(for example if marital status changes)
D. December 31

Answer 23

23. C 20 Only expires for employees who claimed an exemption from taxes

Question 24

24. Tom is single, is paid $420 per week, and claims 1 allowance. Using the bracket method, how much should be withheld for income tax each paycheck?

A. $52
B. $49
C. $41
D. $37

Answer 24

24. D 46 Wage Bracket Method

Question 25

25. Form 1099-MISC must be used to report payments of ________ or more to persons not treated as employees. A. $500 B. $600 C. $650 D. $700

Answer 25

25. B 4 Information Returns