Employee Welfare

Question 1

What items are considered in self-employed income?

Answer 1

Net business profits, director’s fees.

Question 2

What is the purpose of the Federal Social Security Act?

Answer 2

Provide partial replacement of earnings when a worker retires.

Question 3

What is the employer’s responsibility for the Federal Insurance Contributions Act tax?

Answer 3

1. Pay own share;
2. Withhold employee’s equal share and remit it in a timely fashion;
3. Pay employee’s share if fail to withhold (“double tax”);
4. Furnish employee with written statement of wages paid and contributions withheld;
5. Supply Taxpayer Identification Numbers when filing returns.

Question 4

List the features of self-employed tax.

Answer 4

1. Base rate = that of FICA rate for employer and employee combined;
2. Base rate reduced by any “wages” earned during the year, because of the FICA paid on the wages;
3. Self-employed can deduct 50% of FICA from taxes.

Question 5

List the features of the Federal Insurance Contributions Act.

Answer 5

1. Rates generally the same for employer and employee;
2. Rates change often;
3. Social Security Taxes are paid only up to base amount; there is no limit on the Medicare component.

Question 6

Under the Federal Social Security Act, what is the requirement to be “fully insured?”

Answer 6

One must accrue a minimum of 40 quarters (10 years) of contributions.

Question 7

What does §6672 of title 26 of the Internal Revenue Code cover?

Answer 7

Failure to collect and pay over tax, or attempt to evade or defeat tax.

Question 8

How is the Federal Insurance Contributions Act tax applied to an individual’s compensation?

Answer 8

Tax that applies only to that part of compensation that is deemed “wages.”

Question 9

What benefits are available to “currently insured” workers under the Federal Social Security Act?

Answer 9

1. Limited survivor benefits (usually limited to dependent minors or those caring for dependent minors);
2. Benefits for disabled workers and dependents;
3. Lump-sum death benefits.

Question 10

What does the acronym FICA stand for?

Answer 10

Federal Insurance Contributions Act.

Question 11

Describe the coverage provided by disability benefits.

Answer 11

Covers worker who suffers a severe physical or mental impairment preventing that person from working for a year or more or expected to result in the victim’s death.

Question 12

Describe the coverage provided by Medicare.

Answer 12

Describe the concept of willfulness as it applies to a taxpayer paying tax that is owed.