R8-M3 Federal Laws and Regulations

Question 1

what are features of FICA? federal insurance contributions act

Answer 1

• employers are responsible for paying the tax and withholding the employee’s contribution
• in 2023, employee are liable to make FICA contributions 6.2% of net taxable wages of up to $160,200 and Medicare contributions of 1.45% of entire gross wages. total is 7.65%. 7.65% employee and 7.65% employer
• self-employed are responsible for total of 15.3% if net profits exceed $400/year
• if employers voluntarily pay employee’s portion and does not seek reimbursement from employees, the payment is deductible for employers and taxable income to employee
• penalties apply if employers failed to make timely FICA deposits or who fail to supply their FEIN
• gross wages include all EARNED income. Unearned income such as gifts, interest, dividends are not wages
• Only employer can deduct FICA as ordinary business expense. self-employed persons can deduct 1/2 of the self-employment tax

Question 2

what are features of FUTA? federal unemployment compensation act

Answer 2

• establishes a state-run system of insurance to provide income to workers who have lost their jobs
• excludes self-employed
• who must participate? most employers who have quarterly payrolls of at least $1,500 or who employ at least one person for 20 weeks in a year
• funding: employer only. 6% of the first $7000 per year of compensation for each employee
• employer can deduct as ordinary expense because employer pays it. Hence, employee cannot deduct
• payments are not limited to the amount that has been paid by employers

Question 3

what are workers’ compensation’s features?

Answer 3

• laws are administered at the state level
• strict liability to employer within the scope of employment even negligence but not intentional
• benefits are not limited but not receive in full “wages”. employee CANNOT sue employer but can sue 3rd party (3rd who sold a defective machine to employer)
• employer can deduct as ordinary business expense
• funding by employer only
• there are exceptions for agricultural workers, domestic workers, casual workers (temporary office workers), public employees, and independent contractors are NOT eligible for the benefits

Question 4

what are affordable care act’s features?

Answer 4

• purpose: improve access to health care in the US by providing workers with access to affordable health care coverage through plan provider by employer, health insurance marketplace, government-sponsored program (Medicare or Medicaid), and direct purchase from insurance company
• Both employers and employees are required to participate
• large employers with 50 or more employees (include tax-exempt org and govt entities) must offer health care coverage for employees and their independents (child reach age 26) or pay penalty
• funding like FICA. both employers and employees contribute to the plan
• penalties:
  + type 1(does not offer minimum essential coverage 95% of full time employees): at least 1 full time employee receives the premium tax credit for purchasing coverage thru marketplace, penalty is $2,880/each employees
  + type 2(offer minimum essential coverage 95% of full time employees, but coverage is bad): at least 1 full time employee receives the premium tax credit for purchasing coverage thru marketplace, penalty is $4,320/each employees
• NONE of the penalties is deductible

Question 5

what are the 4 majors federal social security benefits?

Answer 5

1. OASI old age and survivors insurance
2. DI disability insurance
3. Medicare
4. SSI supplemental security income