R6 - M3 - Federal Laws and Regulations

Question 1

What are some of the factors business must consider when determining someone an employee or an independent contractor?

Answer 1

First, they must consider if they control how the worker does the work. If they do not, then they are probably a contractor. For example, if you hire UPS to deliver a package, you don’t control how they do it, you just want your package.

Second, the business needs to determine if they provide the tools needed for the person to do their job, or if they have their own tools.

Third, how are they paid? Are they paid by the hour or salary, or are they paid by the job? If by the job, they are probably a contractor.

Fourth, how long is the duration of the job? Is it based on when the job is complete, or ongoing?

Lastly, are business paying benefits to the person?

Question 2

What is FICA (Federal Insurance Contributions Act)? Who needs to contribute?

Answer 2

This provides workers and their dependents benefits in the case of death, disability, or retirement.

Pretty much everyone, all full time and part time employees.

Self employed people with net profits over 400.

Very few are exempt, certain government workers, and ministers.

Question 3

Does the employer or the employee need to pay FICA? How is this money paid to the government?

Answer 3

The employer pays 50% and the employee pays 50%. First the employer pays 100% to the government, and then they collect 50% from the employee from their paycheck as reimbursement.

Some employers can pay 100% and pay for their employees, but I don’t know if anyone does that. If the employer does not pay the government, that is the employer problem not the employee.

If the employer does not pay, then there are penalties. Self employed people pay both halves of the FICA amount.

Question 4

What is the employee’s responsibility for FICA? On how much net taxable wages do they have to pay FICA on?

Answer 4

FICA contributions of 6.2% of their net taxable wages of up to 160,200.

Medicare contributions of 1.45% of their entire gross wages. .9% of additional Medicare tax is needed if you exceed 160,200.

Gross wages include, earned income, salary, bonuses, and commissions. Excluded are, gifts, interest, dividends, etc.

Question 5

Are people who sit on a companies board of directors considered self employed?

Answer 5

Yes

Question 6

What are subject to FICA tax on self employment employees?

Answer 6

Just gross profits not gross wages. Employees are subject to gross wages.

Question 7

Is FICA taxes paid deductible for employers? What about employees and self employed?

Answer 7

The FICA taxes the employer paid, are deductible as a business expense.

The FICA taxes the employee paid, are not deductible to the employee.

Self employed pay the employer and employee portion. So they can only deduct on half of those expenses and not the other half.

Question 8

How is Medicaid different from Medicare?

Answer 8

Medicaid is a state run program, and Medicaid provides medical benefits.

Question 9

Is unearned income subject to FICA tax?

Answer 9

No

Question 10

What is the Federal Unemployment Tax Act (FUTA)?

Answer 10

This is a federal program but it is run by each state. This is basically providing income to employees who have lost their job through no fault of their own.

Question 11

Who participates in FUTA?

Answer 11

Most employers, employees and self employed do not participate in this.

For an employer to qualify, they have to have quarterly payrolls of at least 1,500, or who employ at least one person in the year for 20 weeks in the year.

Question 12

How are these funded, what is the calculation for FUTA?

Answer 12

6% on the first 7000 of compensation per each employee.

Employers can get a credit, but I don’t really get how that works.

Question 13

Who gets the FUTA deduction? The employee or the employer?

Answer 13

The employer gets the deduction as a business expense. but the employee gets no deduction just like FICA.

Question 14

If an employee gets let go, are they limited to how much FUTA they get by how much they contributed?

Answer 14

No

Question 15

What is workers comp, how does it work?

Answer 15

Workers comp is when someone gets hurt on the job, even if you were negligent you can still get workers comp payments. The injury just had to occur on the job.

Even if you were grossly negligent, the employee is still liable.

Now if you intentionally hurt yourself, then you cannot get these payments. Drinking, self inflicted, fighting.

Question 16

What type of employers have to participate in workers comp?

Answer 16

Most employers have to participate but there are some exceptions.

If you are, an agricultural worker, domestic worker, casual worker, public employee, independent contractors, etc.

Some states even allow employers who only have up to three or four employees opt out of workers comp.

Question 17

How is workers comp funded? By employee or employer?

Answer 17

By employer, they pay for the workers comp insurance to cover themselves incase of an employee accident.

Not all states, but most states, the workers comp coverage is required.

Question 18

What happens if a state doesn’t require workers comp insurance, and an employer does not buy it. What are the pros and cons?

Answer 18

Pros is you don’t have to pay for it, but that is it.

Cons, the employee can now sue you for any damages, and you have to pay for those. You are still liable to the employee, but workers comp insurance prevents employers from getting sued by the employee.

Question 19

Can the employer deduct this?

Answer 19

Yes, just the employer.

Question 20

What is the affordable care act? What are the ways you can get health insurance?

Answer 20

This is an act that makes finding affordable health insurance easier in the united states.

You can get it through the following ways:

A plan provided by the employer

A plan purchased through the health insurance marketplace

Coverage under a government provided insurance program. Medicare and Medicaid.

Direct purchase of the employee from an insurance company.

Question 21

Who has to participate in the affordable care act?

Answer 21

Certain employers must participate, or they have to pay a penalty.

An individual must obtain health care coverage for themselves, spouse, and tax dependents.

Question 22

Who has to fund the affordable care act?

Answer 22

Both the employer and the employee will pay a portion of the health insurance premiums.

Question 23

Which employers have to participate in the affordable care act?

Answer 23

Employers with 50 or more full time employees are called (ALE’s) and they have to participate.

IF you are an ALE, you have to at least offer health coverage for the employee and their dependents. The employee does not have to take it, but it has to be at least offered.

ALE’s include - tax exempt organizations or government entities.

Question 24

What percentage of insurance premiums taken out of the employees household income is considered affordable?

Answer 24

If the employee’s contribution to the plan does not exceed 9.5% then it is considered affordable.

Question 25

What happens to the employer’s that do not comply with the affordable care act? What about employees?

Answer 25

Employers will pay a penalty, employees will not.

Question 26

Is the employee required to have health insurance.

Answer 26

ACA requires that all Americans have health insurance.

You can get it through your employer, or if they are not big enough, then you can get it through the health insurance marketplace. Or if you are unemployed, you can get it through the health insurance marketplace.

No penalty for not having, but used to have a penalty.

Question 27

What are the benefits of the ACA?

Answer 27

Makes sure everyone has insurance, and makes it illegal for an insurer to;

deny coverage to individuals with preexisting conditions or charge more for their coverage.

Question 28

Are the insurance premiums deductible for the employer?

Answer 28

The premiums the employer paid is deductible, but the penalties are not.

Question 29

What are the two types of penalties for employers that don’t comply with ACA?

Answer 29

Penalty Type 1 - They do not offer a minimum coverage to at least 95% of their full time employees and dependents. Or, at least one full time employee receives the premium tax credit for purchasing coverage through the health insurance marketplace.

Penalty Type 2 -

• Coverage is not affordable
• Minimum coverage the employers offers does not provide minimum value.
• You did not get offered health insurance so you have to get one through the marketplace.

Question 30

What is the premium tax credit?

Answer 30

This helps low income people get a refundable credit on their tax return for purchasing health insurance through the market place.

Low income are people who are earning 1-4x of the federal poverty level.

Question 31

How do you qualify for the premium tax credit?

Answer 31

You have to meet these requirements:

Has household income that falls under a certain range

Does not file under married filling separately.

Cannot be a dependent on someone else’s return.

Cannot get the health insurance through employer, and do not qualify for Medicare and Medicaid.

Question 32

What is the foreign corrupt practices act?

Answer 32

Prevents bribes from foreign government officials in getting business.

So you go to France and it is acceptable for bribes there. Even though it is legal in France, you cannot take a bribe since you are a US company and have to listen to the rules of the US.

Bribe can be money, property, etc.

Question 33

What is the foreign corrupt practices act penalties?

Answer 33

Civil fines up to twice the amount of the benefit.

Criminal fines - imprisonment of up to five years.