Chapter 3

Question 1

Who is covered under social security?

Answer 1

1. If the individual is an “employee,” defined by the common-law relationship of employer and employee.
2. If the service the individual renders is “employment” as defined by FICA tax law.
3. If the compensation the individual receives is “taxable wages,” as defined by FICA tax law.

Question 2

Who is an employer?

Answer 2

An employer is an individual who employs one or more persons for the performances of services in the United States.

Question 3

What is an independent contractor defined by FICA?

Answer 3

A person who follows an independent trade, business, or profession where they offer their services to the public.

Question 4

What are taxable wages?

Answer 4

1. Actual money received by the employees, whether called wages or salaries.
2. Cash value of meals and lodging provided for the convenience of the employees.
3. Bonuses and commissions paid by the employer with respect to employment.

Question 5

Are tips considered taxable wages?

Answer 5

Tips of more than $20 in a month are considered taxable wages.

Question 6

What is form 4070?

Answer 6

Form 4070 is the employee’s report of tips to employer.

Question 7

How are FICA taxes of tips withheld?

Answer 7

The employer is required to withhold the FICA taxes from the employees’ payable wages from the first payment after the tips were reported.

Question 8

Wh