Taxable moving expenses calculation Module 4 Lesson 2 Flashcards
To Gross up Taxable moving exp
Step 1. 100% - 29.65% (22% + 6.2% + 1.45%) = 70.35% opt flat rate %, soc, & medicare, not subject to state
Step 2. $12,934.78 (total expenses,) / 70.35% = $18,386.33
all moving related expenses are taxable
Keep an eye for gross to net only gross ups if indicated
Optional Flat Rate 22%
CALCULATE: supplemental wages are other compensation + nonaccountable plan reimbursement by accounts payable.
$3,502.88 Commission + Sales contest prize (including grossed up value) + Auto allowance
$100.00 AP Reimbursement
$3,602.88 Total supplemental wages
The withholding on this amount is: $3,602.88 x 22% = $792.63
REIMBURSEMENT TAXED AT SUPPLEMENTAL 22% FOR FIT ONLY
AP REIMBURSEMENTS Then reduce from net pay also. Do not include in gross or other t axes
the following conditions are required to qualify an expatriate for the foreign earned income or housing cost exclusions EXCEPT:
IRC Section 911 states foreign earned income and housing cost exclusions require an employee to have foreign earned income, a foreign tax home, and the employee must meet either a bona fide residence or physical presence test. Highly compensated employees are eligible for the foreign earned income or housing cost exclusion only if they qualify otherwise.
For a nonqualified deferred compensation plan to exclude deferrals from income, distributions can be allowed:
when the employee’s disability lasts for a continuous period of at least 12 months.
When an employer compensates an employee with stock, when is the compensation taxable?
When an employer compensates an employee with company stock for services rendered, the fair market value of the stock when transferred to the employee without restrictions is wages subject to federal income tax withholding and social security, Medicare, and FUTA taxes.
FLSA requires documents, such as an employee’s demographic information and collective bargaining agreements, to be retained for at least three years.
Which of the following documents must be retained for a maximum of three years?
Collective bargaining agreements - Correct
Billing records
Employee’s work time schedules
Wage rate tables
Boxes 3,10, 11, 13
Box 11 is used to report distributions or deferrals into a nonqualified deferred compensation plan. Box 10 is used to report dependent care benefits. Box 3 is used to report social security wages. Box 13 contains check boxes for retirement plans, statutory employees, and third-party sick pay.
Foreign citizens working in the U.S. who are generally taxed by their U.S. employer on their worldwide income is a characteristic of:
resident aliens.
nonimmigrants.
nonresident aliens.
expatriates.
resident aliens.
Resident aliens and U.S. citizens are generally taxed on their worldwide income. Nonresident aliens are only taxed on their U.S. source income. The taxation of nonimmigrants depends on their resident or nonresident alien status. Expatriates’ taxation depends on their status – U.S. citizen, resident alien, or nonresident alien.
Managers delegate to their subordinates all of the following items EXCEPT:
accountability.
responsibility.
authority.
discipline.
accountability.
Delegating managers can assign responsibility, discipline, and authority but must retain accountability for themselves.
Federal min wage
$7.25
Regular Rate of Pay - only when shift diff
The steps for calculating Barbara’s premium pay for overtime are:
Step 1. Regular pay = Hours worked x Pay rate
Step 2. Regular pay ÷ Hours worked = Regular rate of pay
Step 3. Regular rate of pay x .5 = Overtime premium rate
Step 4. Overtime premium rate x Overtime hours = Premium pay for overtime
Overtime is calculated for weeks where time worked exceeds 40 hours. Sick pay is not counted toward time worked.
2024 SS LImit?
The 2024 social security tax rate is 6.2% of the first $168,600.00 in social security wages.
Tipped Employees
Under the FLSA, the minimum hourly rate an employer can pay a tipped employee is $2.13 per hour as long as the employee’s cash wages and tips are equal to or greater than $7.25 times the hours worked in the workweek.
Schedule R (Form 941) is used
to allocate the aggregate information reported on Form 941 by an agent to each client
Schedule 941 D is used
used to report discrepancies caused by acquisitions, statutory mergers, or consolidations.
Schedule B (Form 941) records
an employer’s payroll tax liability by day, not the deposits.
401k, tax less 401 k amount
Reduce the gross wages by the 401(k) deferral before calculating income tax, but do not reduce the wages by the 401(k) when calculating social security and Medicare taxes.
Counseling by Managers
is used when a corporate reorganization occurs.
Counseling is used by managers who want to help an employee resolve a personal or attitude problem that is adversely affecting job performance.
Tax Levy
The employer must continue to use the table for the year during which the levy notice was received unless the employee chooses to submit a new Statement of Dependents and Filing Status (Part 3 of Form 668-W) and asks the employer to recompute the exempt amount.
For more information, refer to Module 3, Lesson 1
Fraudulently under-depositing payroll taxes may incur an additional penalty of:
75%
An employer must include noncash taxable fringe benefits in an employee’s income by:
End of year
941X is used to
correcting Form 941, Line 2, Wages, tips, and other compensation, file Form:
Form 843 is used to
request a refund of an assessment
Form 943 is used
by agricultural employers.
Form 944 can be used
be used by employers with an annual tax liability of $1,000 or less.
Which payment should NOT be included on Form 945?
Withholding reported on Form W-2
Fraudsters often acquire a valid account number that
1) opened by an organization in good credit standing, 2) absent from the check verifier’s negative account list, and 3) registered on the positive account list.
Check fraud can be committed in all of the following manners EXCEPT:
being included on the check verifier’s negative account list.
CCPA MAX CHILD SUPPORT
50% OF DISPOSABLE EARNINGS IF SUPOORTING ANOTHER SPOUSE OR DEPENDENT
If not 60% of disp earnings if no supoorting others
Amounts increase to 55% & to 65% if 12 weeks arrears.
Amount deducted would be this % or the amount of order whichever is less
Credit garnishments lesser of
25% of disposable earnings or the amount of disposable earnings exceed 30 times weekly the minimum wage $7.25
The company will deduct the lesser of 25% of the employee’s disposable pay or the amount that the disposable pay exceeds 60 times (30 x 2 weeks) the minimum wage.
25 % of the employee’s disposable pay is:
$550.00 x 25% = $137.50
The employee’s disposable pay minus 60 times the minimum wage is:
$550.00 - $435.00 = $115.00
The maximum amount that can be deducted is $115.00.
When would an employee have negative net pay?
An employee’s total deductions may exceed gross wages, which results in negative net pay.
Aggregate method
When calculating federal income tax from supplemental wages when the employee’s year-to-date supplemental wages are $1,000,000.00 or less, using the Aggregate Method, add the supplemental wages to the employee’s regular wages, and calculate the FITW with the Wage Bracket table using the employee’s filing status and information provided on Form W-4
Under the FLSA, an employee’s work time ends when the employee:
Under the FLSA, an employee’s work time ends when the employee ceases performing principal activities.
Section 218
An agreement between a state and the federal Department of Health and Human Services is known as a §218 agreement. This agreement was required to cover the state’s employees under social security and Medicare programs.
An employee is on indefinite assignment in the Armed Forces Reserve and receives $800.00 in differential military pay from the employer. The pay is reported on:
Form W-2, in box 1 only.
Under IRS rules, an employer’s differential military pay to an employee is subject only to income tax when the employee is on an indefinite assignment with the state National Guard or Armed Forces Reserve.
FUTA taxes over $500.00 must be deposited:
d. quarterly.
FMV Parking Exempt amount is
$315 for parking & $315 for transit fare benefits separately
Form W-2c filed on paper must be accompanied by Form:
W-3c.
Form W-3c is used to transmit Forms W-2c correcting previously reported wages, taxes, and other information. When 250 or more Forms W-2c are submitted, they must be submitted electronically.
.09% additional medicate tax applies to
wages exceeding $200k
Social sec limit is
$168,600
Which of the following regulations is governed by both the state and the federal governments?
Exempt/nonexempt status is governed by both the state and the federal governments.
State law override FLSA with
State Wage and Hour laws may impose requirements beyond those found in the FLSA. For example, a state may require wages to be paid in a certain frequency, require payments to a terminated employee within a certain period of time, and an employer provide employees with meal and break periods after working a certain number of hours.
The latest an employer can transfer an employee’s 401(k) deferral into the trust fund without penalty is:
15 days after the month in which it occurred
An example of a statutory nonemployee is a:
person engaged in directly selling consumer products in the home.
Statutory nonemployees fall into two categories
qualified real estate agents and direct sellers.
The balance sheet equation is:
Assets = Liabilities + Owner’s Equity.
Tipped employees
Must have a regular rate of pay = to $7.25 or greater
FLSA excludes from the regular rate of pay are:
Pay for time not worked, such as holiday pay
Contributions to benefit plans, such as retirement contributions
Reimbursement of business expenses
The commission ($90.00) is a nondiscretionary bonus and is included in the employee’s regular rate of pay.
Once an employer receives an IRS lock-in letter, when is the employer required to implement the filing status and withholding instructions?
45 or 60 days after the date on the lock-in letter
Additional ot PREMIUM PAY DIFFERENCE FROM REG RATE AT THE END
To calculate the additional overtime premium pay, subtract the employee’s overtime premium paid in the prior month without sales commission from the overtime premium pay calculated with the sales commission.
Step 1. Pay for time worked: 42 hours × $13.00 = $546.00
Step 2. Previous overtime premium pay: $13.00 × 0.5 × 2 hours = $13.00
Step 3. One week sales commission: ($15,000.00 × 5%) × 25% = $187.50
Step 4. Total pay with commission: $546.00 + $187.50 = $733.50
Step 5. Regular rate of pay: $733.50 ÷ 42 hours = $17.46
Step 6. Overtime premium rate: $17.46 × 0.5 = $8.73
Step 7. Adjusted overtime premium: $8.73 × 2 hour(s) = $17.46
Step 8. Additional overtime premium pay: $17.46 - $13.00 = $4.46
For more information, refer to Module 2, Lesson 2
Under the FLSA, which of the following statements regarding overtime requirements is true?
Police officers can accrue up to 480 hours of compensatory time off in lieu of receiving overtime pay.
Under the FLSA, highly compensated employees are classified as exempt EXCEPT when:
paid a weekly salary less than $684.00.
When a retiree does not submit Form W-4P, federal income tax withholding is based on:
single with no adjustments in Steps 2 - 4.
Under the FLSA, police officers’ overtime pay is calculated based on the:
c. work period.
Under the FLSA white collar exemption rules, an exempt professional employee will meet all of the following requirements EXCEPT:
having authority to hire and fire employees.
employee benefits.
FLSA regulations do not allow board, lodging, medical insurance, life insurance, contributions to retirement plans and other fringe benefits to be included in the calculation of a highly compensated employee’s annual earnings when determining the employee’s exempt status.
A programmer’s duties include coding, filing, and installing updated bulletins from a software vendor. Because the bulletins require specialized training, the employee is an exempt employee. Which category best classifies the employee’s status?
Computer Professional
For fire protection activities, government organizations may exclude sleep time from compensable time in all of the following circumstances EXCEPT:
The employee receives at least 2 hours of uninterrupted sleep.
The minimum salary requirement does not apply to exempt professional employees who are:
medical interns or residents.
Which of the following workers is an independent contractor?
An engineer employing assistants to complete a project
A company does not have the right to control an independent contractor’s work.
Both state and federal governments regulate:
child labor.
HSA
4,150 SINGLE Family 8,300 combined. if on medicare not eligible
HSA BOX?
12; CODE W COMBINED
Optional Flat Rate Method is:
22% if supplemental wages are less than $1mil; then 37% after 1 mil. Depends on company if they include OT as supplemental wage
If an existing creditor garnishment then
another can’t overlap. Reduce garnish amount once all taxes have been taken out
prorated allocation method to allocate withholding for multiple child support orders
An employer receives a child support order for an employee on September 8, 2023, demanding $200.00 be withheld each pay period. The employer determines that the maximum amount that can be withheld from the employee’s pay under this state’s law is $310.00. Another child support withholding order is received on February 17, 2024, demanding $700.00. The employee works in a state that uses the prorated allocation method to allocate withholding for multiple child support orders.
The correct answer is: $68.88.
Thus, the first order receives 22.22% ($200.00/$900.00) of $310.00 (the maximum that can be withheld), or $68.88
For more information, refer to Module 3, Lesson 1
How much must be paid on the SECOND support order?
The correct answer is: $241.12.
Thus, $68.88 was paid on the first order ($310.00 x 22.22%) leaving remaining funds of $241.12 ($310.00 x 77.78%) to be made on the second order ($310.00 - $68.88 = $241.12).
For more information, refer to Module 3, Lesson 1
GTL Employee dependent care coverage
Since the employee’s dependent coverage exceeds $2,000.00, the entire amount (less after-tax contributions) is taxable. Dependent coverage that is $2,000.00 or less is excludable from income as a de minimis benefit.
Awards : Employers can exempt
$400 per indiv on length of service award for taxes
Tuition reimbursement exlcusion 2024 Limit
Up to $5,250 is excluded from taxable income
STD Subject to Federal tax: Module 4, Lesson 4
Non job related:
Remember, only the portion of the pay relative to the employer’s contribution is taxable. The formula for calculating the employee’s weekly amount is:
Taxable sick pay =
Employee’s sick pay x
Employer-paid premiums for last 3 years / divided by
Total premiums for last 3 years
Taxable sick pay = $1,800.00 x $22,000.00
$55,000.00
= $1,800.00 x 40.0%
= $720.00
STD Social Security & Medicare taxed up to
6 ,months after 6 months no tax
Before figuring the taxes, determine how many full calendar months it has been since the employee’s last day of work. For the first 6 calendar months, multiply the sick pay by the social security tax rate. After 6 calendar months, the wages are not subject to social security tax.
Non deferred compensation plan box
Box 12 code Z, only when distributed otherwise w2 box 1 and box 12 code z is zero
FSA Rules: Dependent
Under the dependent care FSA rules, an employee may be reimbursed for qualified expenses up to the amount of the employee’s year-to-date salary reduction for the dependent care plan. So if $630 til date of claim, then covers $630 if no other claims reduced
FSA Rules: Self Medical
Under a medical FSA benefit program, an employee’s total coverage less any previous reimbursements must be available for eligible reimbursements at all times.
The correct answer is: $780.00.
The full claim ($1,140.00) cannot be paid, because it exceeds the employee’s annual premium ($15.00 x 52 weeks per year = $780.00). Since the employee has not submitted any previous claims during the plan year, the employer must reimburse the employee the full annual premium: $780.00.
Calculating SS & Med include
401k and gtl excess, does not include sec 125 plans and accountable business travel expenses
If federal tax levy in place already
It stays federal tax levy, child support order, then creditor garnishment
Federal Tax Levy:
To know amount subject to levy, calculate Net pay: gross less all tax including ss & medicare, less deductions etc. then use that amount look up tax levy form bracket to find exempt amount of out that. the difference will be subject to fed tax levy
Disposable pay:
Gross
less of taxes only; Net pay is all deductions
Payments after the year of death
Are subject to no taxes
Payments made in same year but after death
Are subject to med & ss, the fed will go on 1099 for the receiver
Fedeal tax, soc and other tax documents from IRS
Must hold onto 4 year
If last check was in 2023
:have to hold documents from 4 years from W4 / 941 so 2028. April 15 2028
Non Accountable Plan: Don’t include what in “other compensation” BUT add when calculating supplemental tax:
non accountable plans (Reimbursement for car insurance and maintenance) pd by AP, add it only separate with total compensation, then when calculating supplemental tax. because its in total compensation it will calculate with SS & Med. Then reduce back out net pay since paid by AP
Module 5: Can elect Catch up if 50yrs or older by Dec 31 end of year for that entire year of
Limit would be 23000+7500 catch up. Add total salary plus bonuses, total compensation less max to get wages subject to federal income tax. 401K does not reduce SS & Med. that is still based on total compensation
Non qualified deferred plans if not paid out don’t report in
Box 1
Non qualified deferred plans if paid or not paid out DO report in
Box 3 if the SS limit is not hit. Read question carefully if asking for non deferred 2024 amount only subject to taxes
Non qualified deferred plans if paid or not paid out DO report in
in Box 5 for Medicare; which amouinti s it asking for, remember there is no medicare limit
nonqualified deferred compensation plan contributions that will be reported on Form W-2 in Box 11
ANYTHING REPORTED IN BOX 1,3 ,5 That were earning in the prior year but paid in current year
Suspended for now so answer is 0: but the amount that will be reported on Form W-2 in Box 12 with Code Y is all in the account for the year.
If the plan meets the requirements of IRC Section 409A, the amount to report on Form W-2 in Box 12 with Code Y is the total of the contributions (employer and employee) and earnings credited to the nonqualified deferred compensation plan during the year.
the amount that will be reported on Form W-2 in Box 12 with Code Z.
Income under a nonqualified deferred compensation plan that fails to satisfy Section 409A. This amount is also included in Box 1 and is subject to an additional 20% tax plus interest. Ex. taking a 401k withdrawal early
If change in # of dependents then
can make changes to fsa etc
When an FLMA Unpaid absense occurs
When an FMLA unpaid absence occurs in two cafeteria plan years, the employee must pay 2024’s $150.00 premium before going on unpaid FMLA and 2025’s $300.00 premium after returning from unpaid FMLA to have the health insurance premium paid pre-tax. The regulations do not allow an employer to require the employee to make this choice.
Gross FIT Compensation:
The amount of Grant’s gross compensation subject to federal income tax withholding includes:
$6,687.50 Base pay (Sal / periods)
- $401.25 401(k) contribution (6% of base pay)
- $100.00 Contributions to Section 125 flexible spending account
+ $0.81 Gayle’s group-term life insurance coverage (Dependent only)
$6,187.06
Gross ss & med compensation
The amount of Grant’s gross compensation subject to social security and Medicare taxation includes: (Took out 401k)
$6,687.50 Base pay
+ $27.91 Excess group-term life insurance (for both Grant & Gayle)
- $100.00 Contribution to Section 125 flexible spending account
$6,615.41 Total social security/Medicare taxable wages
Gross FIT Compensation:
Less 401; sec 125, add excess GTL only for dependent
In Net pay:
Excess GTL is added but reduced so zero
A nonexempt salaried employee is paid $2,000.00 per month and normally works a 40-hour workweek. However, in this workweek the employee works 45 hours. Under the FLSA, calculate the employee’s gross pay for the week?
determine the regular rate of pay, multiply the employee’s monthly salary by 12 months and divide by 2,080 hours (the total number of hours worked in a year when the employee works 40 hours per week). The resulting hourly rate is used to calculate the overtime premium pay for all hours worked over 40 in the workweek.
Employers may use any of the following methods to withhold federal income tax from supplemental wages totaling $60,000 EXCEPT:
mandatory flat rate
Aggregate Method:
Add bonus and wages then use tOTAL TO LOOK UP ON TAX FORMS AS AREGULAR FIT WITHHOLDING
The National Medical Support Notice consists of two parts that are given to the:
employer and the health plan administrator.
An employee earns $1,000.00 semimonthly. Deductions include $235.00 for taxes and $300.00 in child support. Calculate the amount that can be deducted for a creditor garnishment.
If an employee has an involuntary deduction with a higher priority deduction than the CCPA limit for creditor garnishments, nothing will be withheld for the creditor garnishment.
f an employer receives more than one child support withholding order for an employee and the total amount exceeds the CCPA limit, the orders are allocated based on the:
employee’s work state rules.
Under National Medical Support Notice rules, a plan administrator must tell the state child support agency whether coverage is available for a child within:
40 business days.
If an employer is unable to withhold the entire amount specified on a child support withholding order, the:
untaken amount goes into arrears.
The total value of dependent care assistance benefits is reported on Form W-2 in:
bOX 10
Loans to employees from employer
Under IRS rules, when an employee has loans provided by the employer in excess of $10,000.00, the employer must impute interest into the employee’s income if the interest rate the employee pays is less than the applicable federal interest rate. The included income is subject to income, social security, and Medicare taxes but is not subject to income tax withholding.
Parking is exempt up to
$315
Repayment of wages from a prior year:
requires completion of Forms W-2c and 941-X.
Employers may provide non-taxable qualified transportation fringe benefits for:
transit passes for public buses not to exceed $315.00 per month.
2024 Cents per mile
67 cents; However, the cents-per-mile method cannot be used when the value of the vehicle exceeds the luxury vehicle value ($62,000.00 in 2024).
For more information, refer to Module 4, Lesson 4
In January, an employee received a nonqualified stock option to buy up to 500 shares of stock at $20.00 per share. In April, when the company stock was trading at $30.00, the employee exercised the option and purchased 500 shares of stock. The payroll department must:
withhold federal income, social security, and Medicare taxes on Difference $5,000.00 and report $5,000.00 in taxable compensation on Form W-2.
If an employee is owed back wages, the employer must report the amount allocated to earlier years to:
Social Security Administration (SSA) only.
An employee goes out on the company disability plan on March 5 and returns on December 17. Social security and Medicare taxes should be withheld until what date?
September 30th; Where the employer’s sick pay plan is self-insured and the employer makes the payments, the employer must pay social security and Medicare taxes for all payments made within six calendar months after the end of the last month during which the employee worked for the employer.
For more information, refer to Module 4, Lesson 4
If company pays GTL excess per $1000
Employees covers the difference
An employee drove a company car 6,000 miles for business, 4,500 miles for commuting, and 4,000 miles for personal use. The car is valued at $64,250.00. What are the tax implications of the employee’s use of the car?
The employer must withhold social security and Medicare taxes on the value of the personal use of the vehicle.
An employee, injured on the job two months ago, receives $100.00 from the state workers’ compensation fund and $250.00 of supplemental workers’ compensation from the employer each month. How much of the monthly $350.00 is subject to federal income tax withholding?
Workers’ compensation payments paid under the state law are excluded from an employee’s income for income, social security, and Medicare taxes. If an employer supplements the workers’ comp payment by paying an additional amount to what the state pays, the amount the employer pays is subject to income, social security, and Medicare taxes.
Workers’ compensation paid under the state law are excluded from an employee’s income for income, social security, and Medicare taxes.
Watch for trick questions
Nonqualified deferred compensation plans generally contain all of the following options EXCEPT:
they provide equal benefits for all employees.
Generally, employers use nonqualified deferred compensation plans to compensate certain high-level executives because they are not restricted by the nondiscrimination requirements that apply to qualified plans or the contribution and benefit limitations found in qualified plans.
An employee will turn age 50 in March and works for an employer that allows catch-up contributions to its 403(b) plan. What is the maximum employee-elected deferral that is eligible to be contributed to the 403(b) plan in 2024?
$30,500.00
An employee’s contribution to a Roth 401(k) plan is reported as Box 1 income when the:
contribution to the plan is made.
Under IRS rules, an employee’s contribution to a Roth 401(k) plan is reported as income in Box 1 of Form W-2 when the contribution to the plan is made.
For a nonqualified deferred compensation plan to exclude deferrals from income, distributions can be allowed:
when there is a change in control of the corporation.
IRC Section 409A allows distributions when there is a change in control of the corporation. Distributions when the employee receives a golden parachute payment, when the employee reaches age 65, and when the employee reaches normal retirement age require immediate inclusion of the plan’s value in the employee’s income.
The Employee Retirement Income Security Act of 1974 (ERISA) sets the minimum standards for:
qualified pension plans.
The Employee Retirement Income Security Act of 1974 (ERISA) sets the minimum standards for qualified pension plans. Adoption assistance, transit plans, and nonqualified retirement plans are not subject to the ERISA requirements.
What is the 2024 annual compensation limit for defined benefit and contribution plans?
$345,000.00
Tax-sheltered annuities are offered in a:
403(b) plan.
For a nonqualified deferred compensation plan to exclude deferrals from income, distributions can be allowed:
six months after separation for key employees of publicly-held companies.
Which of the following statements is true about §125 plans?
Employer contributions taken as cash are taxable compensation.
A company’s cafeteria plan allows for $350.00 in employer contributions per month for a choice of benefits. The $350.00 represents:
nontaxable compensation if not chosen as a cash benefit.
All of the following factors define a key employee in cafeteria plan nondiscrimination testing EXCEPT:
any employee with compensation exceeding $120,000.
When determining the key employees for a cafeteria plan’s nondiscrimination testing, include corporate officers whose prior year earnings were more than $220,000.00, 5% owners, and 1% owners whose prior year earnings were more than $155,000.00.
Why must an employee pay and substantiate the initial expenses to a dependent care provider if the employer adopts a payment card program to reimburse dependent care expenses?
Reimbursements can only be distributed after expenses are incurrred.
A cafeteria plan may be funded by any of the following EXCEPT:
benefit exchange dollars.
IRS rules allow Section 125 cafeteria plans and other flexible benefit plans providing qualified benefits to be funded with flex dollars or flex credits, salary reductions, or after-tax employee contributions.
All the following benefits can be offered in an IRC §125 plan EXCEPT:
educational assistance.
Qualified benefits permitted in an IRC §125 plan include accident and health plans, group-term life insurance, health savings accounts (HSA), elective vacation days, elective contributions to a qualified cash or deferred arrangement (401(k) only), cash, and adoption assistance. Educational assistance plans are not permitted in an IRC §125 plan.
All of the following qualified benefits can be offered under a Sec. 125 plan EXCEPT:
working condition fringes.
IRC Section 125 allows cafeteria plans the ability to provide nontaxable benefits, such as Health Savings Accounts, dependent care assistance, and long-term disability insurance coverage. In most cases, benefits that are excluded from income under other IRC provisions, such as working condition fringe benefits, cannot be provided in a Section 125 Cafeteria Plan.
Semiweekly depositors with a tax liability of less than $100,000.00 deposit employment taxes according to the following schedule:
Payday Tax Deposit Deadline
Saturday - Tuesday The following Friday
Wednesday - Friday The following Wednesday
Semiweekly depositors with a tax liability of $100,000.00 or more, must deposit employment taxes by the close of business on the next business day.
Form 941, Line 3 was:
The federal income tax withheld from employees’ wages and other compensation
Form 941, Line 5a column 1
“Taxable social security wages”
The employee and employer shares of social security tax equals:
12.4%
Form 941, Line 5a Column 2
the employee and employer shares of social security tax
Form W-2, Box 1.
“Wages, tips, other compensation.”
W-2, Box 3,
“Social security wages.” MAX $168,600.00
Form W-2, Box 5,
“Medicare wages and tips.”
Form W-2, Box 11
“Nonqualified plans.” Report in Box 11 the total amount of distributions from nonqualified plans when there are no contributions to the nonqualified plan during the year.
Select the correct code for reporting taxable cost of GTL insurance over $50,000.00 in Box 12.
Code C
Form 940
quarter’s FUTA tax deposit, Total payments to all employees” using Form 940, Part 2: Line 3. All Pay , even GTL excess
Form 940 to determine the first quarter’s FUTA tax deposit, calculate the amount that should be included in the company’s “Payments exempt from FUTA tax” using Form 940, Part 2: Line 4.
Remember, excess group-term life (GTL) is a payment exempt from FUTA taxation.
Form 940 to determine the first quarter’s FUTA tax deposit, calculate the amount that should be included in the company’s “Total payments made to each employee in excess of $7,000.00” using Form 940, Part 2, Line 5.
Calculate each employee pay then subtract $7,000 if over $7k
If wages paid after death to an estate
Remember, wages paid after the death of the employee are exempt from federal income tax withholding. However, they are reported on Form 1099-MISC (Box 3, Other Income) but is subject to ss & med
Calculate the amount that should be included in the company’s Form 940, Part 2, Line 8, “FUTA tax before adjustments” for the first quarter.
Remember, the effective FUTA tax rate is 0.6% (or 0.006) for the first quarter. If credit reduction increases the effective FUTA tax rate, it is taken into account during the 4th quarter.
Education and awards are not subject to
Federal Taxes, ss or med tax nor included in gross wages w2 box 1.
W2 Box 1 included
Wages, bonus, stock, employees portion of 3rd party sick pay if portion coverage by employee less sec 125 and dependent care
Third party sick pay
soc & medicare of employer coverage
In Box 10, show total pre-tax dependent care salary deductions,
Box 12 Code J
is Third party sick not subject to tax
Box 12 Code V
is nonstatutory stock, included in box 1, 3, 5
On W2 Box 1 Include all of Isaac’s compensation subject to federal income tax. FIT wages include regular wages, bonuses, nonqualified deferred compensation payout, personal use of a company car, excess per diem, and excess group-term life.
Less 401k
Do not record nonqualified derred payout in ss & med
Code D Box 12
is used for 401(k) plan contributions in Box 12 on Form W-2. Box 13 retirement plan should also be checked
Code L Box 12
is used for the nontaxable portion of an employee’s business expenses on Form W-2, Box 12.
Per diem in excess, GTL in excess, personal allowance is subject to Boxes
1,3,5
Nonqualified plans are not subject to
Box 3, 5
941 Line 3
In Line 3, enter the amount of income tax withheld from employees’ wages, tips, taxable fringe benefits, and other compensation.
Remember that federal income tax withheld from third-party sick pay is reported on the payer’s Form 941 not the employer’s Form 941.
941 Amount subject to SS
Total wages
- Section 125 pretax salary reductions
+ Taxable group term life
Taxable social security wages
Pay Attention to detail questions and headers
Schedule B 941
Record employee and employer tax liability portion. 12.4 SS, 2.9% Med
If an exempt, salary employees has a week vacation left figure:
Annual salary then divide by 52 weeks to get weekly amount of vacation
Wages paid to the estate of a deceased employee in the year of death are exempt from
federal income tax withholding. but pays ss and med. reported in box 3 and 4 for SS and Box 5 and 6 for Med
W2s issued late to SSA after Jan 31st, penalties: it is per return. Same for 1095C due by feb 28,
If filed within 30 days of the due date, the penalty is $60.00 per return if corrected by March 2nd
If filed more than 30 days after the due date but by mAR 3rd ND BEFORE August 1, 2025, the penalty is $130.00 per return
If filed after August 1, 2025, the penalty is $330.00 per return
PTI will not be penalized for both filing late and in an incorrect format, as the IRS only assesses one information return penalty to each form.
one penalty $60 per, $130 per, $330 per
Can PTI’s penalty be reduced by the de minimis exception?
No, the information returns must be filed by the due dates (Forms W-2 by January 31, 2025, and Forms 1095-C by February 28, 2025) to qualify for the de minimis exception.
Form 944, Employer’s Annual Federal Tax Return,
is an annual employment tax return for employers with a history of annual tax liabilities of less than $1,000.00.
Box 10
is used to report dependent care benefits.
is used to report dependent care benefits.
is used to report nonqualified plans deferrals or distributions.
Box 15
is used to report the state and state tax ID
Which box on the 2024 Form W-2 is correctly matched with its use?
Box 12 (Code N) - Uncollected Medicare tax on GTL insurance coverage
Electronic filing of IRS Forms 1042-S, 1099, W2-G, and 8027 is accomplished by using:
the FIRE system. Filing Information Returns Electronically (FIRE) system
Forms 940 and 941 can be filed electronically using the
IRS Modernized e-File (MeF) System
Form 1095-C can be filed electronically using the
AIR system
On Tuesday, a semiweekly depositor incurs a payroll tax liability of $80,000.00; on Wednesday, another payroll tax liability of $25,000.00 is incurred. What deposit(s) MUST be made?
c. $80,000.00 on the next Friday and $25,000 on the next Wednesday
A monthly depositor’s tax liability for the month is $105,000.00 after the month’s last pay day. When must this liability be deposited and future deposits be made?
The deposit must be made by the next business day, and future deposits for the year must be made under the semiweekly schedule.
Which payment should NOT be included on Form 945?
Withholding reported on Form W-2. Withholding reported on Form W-2 must be reported on Form 941.
When initiating a tax deposit through its bank, a company uses EFTPS-Through a Financial Institution (EFTPS Credit). When initiating a tax deposit with the IRS, a company uses EFTPS-Direct (EFTPS Debit). The Federal Tax Collection Service (FTCS) deposit method uses the Federal Reserve wire transfer methodology.
which of the following organizations are required to file Form 940?
. Employers with wages greater than $1,500.00 in any quarter of 2023 or 2024
Government agencies and tax exempt charitable organizations do not file Form 940.
The value of group-term life insurance coverage over $50,000, payments under a deferred compensation plan (except elective deferrals), and payments made under a §125 flexible benefit plan (cafeteria plan) are all excludable
from FUTA tax.
All of the following employee payments are exempt from FUTA tax EXCEPT:
discretionary bonuses.
Voiding a check issued in error in a prior year after all returns were filed requires all of the following procedures EXCEPT:
a refund to the employee.
For third-party designees
Written tax return information is available upon request
Form 941 is used by all employers even governmental employers only withholding Medicare tax.
The FLSA requires supplemental records such as timesheets, billing records, etc. to be retained for
two years from their last date of entry.
The Internal Revenue Code requires employees’ Forms W-4 be kept by the employer for at least
four years after the due date of the tax return for which the records relate.
In order for the safe harbor shortfall rule to apply,
98% of the total deposit must be made timely. dON’T MATTER I F ONE DATE LATE DEPOSIT ON 941 OR 940
What is the order of accounts that are listed on a typical balance sheet?
assets, liabilities, equity
In a chart of accounts, the most important identifier is the:
account number.
System-generated audit trails may be limited due to:
system resources.
When PTI’s payroll department delivers optimal customer service, which of the following factors demonstrates reliability?
Timely and accurate payments to the employees
A payroll department demonstrates reliability when the department provides what was promised timely, dependably, and accurately.
The five principles of optimal customer service are:
reliability, responsiveness, assurance, empathy, and tangibles
What method of calculation will Accurate Payroll use to determine the amount reported on Form W-2, Box 12, Code DD?
Premium charged method
Accurate Payroll has separate contracts with Good Insurance to provide health and dental insurance to its employees
What method of calculation will Timely Reporting use to determine the amount reported on Form W-2, Box 12, Code DD?
COBRA applicable premium method
Timely Reporting self-insures health and dental insurance for its employees
What amount will be reported on the employee’s 2024 Form W-2 in Box 12 with Code DD, Cost of employer-sponsored health coverage?
Both employee and employer cost. calculate for the year
Cobra apllication Premium Charge method
If self insurer one company divide the employer monthly health coverage by 1.02 then multiply by 12 months
What amount will be reported on the employee’s 2024 Form W-2 in Box 12 with Code DD, Cost of employer-sponsored health coverage? An employee of Timely Reporting has health and dental coverage for the entire twelve months during 2024. Timely charges those individuals eligible for COBRA health and dental insurance continuation the amounts below.
Monthly health coverage COBRA = $596.70
Training to improve subordinates’ skills and knowledge of payroll practices is part of what management skill?
Training, hiring, and delegating are components of staffing
An employee changed her United Way deduction. For two pay periods, the amount deducted was correct. Then, for the following period the amount doubled. When she called the payroll department, the payroll coordinator told her that the situation would be corrected and gave her the option of having the amount added to her next paycheck or receiving a special check for the amount. Which customer service principle is being displayed here?
Empathy
Once the scope has been established, the next key planning question is: How much time is needed? The remaining steps are: define tasks; analyze resources; and evaluate costs.
Coaching helps improve the knowledge and skills employees need to perform their jobs,
The IRS safe-harbor regulations provide that health insurance is affordable when the employee’s cost does not exceed 8.39% of the following amounts EXCEPT:
. in Box 3 of Form W-2.
Which of the following is NOT a qualifying event for COBRA coverage?
Termination of a covered employee due to gross misconduct
Contributions to Health Savings Accounts may be made by:
employer and employee.
The following situations are maximum periods of health insurance continuation coverage under COBRA EXCEPT:
b. 24 months for long-term disability
Under IRS rules, health plans are required to offer continuation of health coverage when the coverage is lost under COBRA for a period of 18, 29, or 36 months depending on the qualifying event.
Employer health plan contributions are excluded from employment taxes (social security, Medicare, and FUTA) if the:
payments are made under a plan.
Catch-up contributions to a Health Savings Account can begin in the year the employee reaches age:
55
Which type of health plan provides a choice of a higher level of benefits and lower out-of-pocket costs if the plan’s participant uses providers who are in the network?
PPO - Preferred Provider Organizations
The maximum base housing amount for an expatriate in 2024 is:
$20,240.00
The foreign base housing amount is what percentage of the foreign earned income exclusion?
16% . OF $126,500 = $20,240
A nonresident alien wishing to claim an exemption from income tax on wages paid by the employer based on a home country income tax treaty must provide the employer with:
Form W-4
Form 2555
Form 8233
Form I-9
Form 8233
The amount an employer adds to the wages of a nonresident alien is subject to:
a. federal income tax withholding only.
The foreign earned income exclusion is allowed under IRC Section:
sECTION irc 911
Payments from a qualified pension plan are reported on form
1099-R
Employers that unlawfully terminate employees because of a student loan garnishment may be ordered to reinstate the employee with back pay and to pay punitive damages and attorneys’ fees.
On payday, an internal auditor unexpectedly hand delivers paychecks to each employee. The PRIMARY purpose for this procedure is to:
check for phantom employees.
When is Form 1042-S required to be provided to the IRS?
March 15
If a company’s accumulated payroll taxes are greater than $50,000.00 but less than $100,000.00, the deposit is due semiweekly by Wednesday or Friday
If an employer’s total tax liability for the lookback period is $75,000, when must tax liability of less than $100,000.00 be deposited?: By Wednesday or Friday under the semiweekly rules
Under the FLSA white collar exemption rules, an exempt executive employee must meet all of the following requirements EXCEPT:
having advanced knowledge in a field of science.
FUTA taxes are employer liabilities and are not withheld from employee wages.
.06%
A cafeteria plan may be funded by any of the following EXCEPT:
benefit exchange dollars.
How often is the lookback period reviewed to determine the employer’s depositor status for federal tax liabilities?
Annually
What must be specified at the time of the employee’s election to defer into a nonqualified plan?
The time and form of distributions
All of the following characteristics describe Health Reimbursement Arrangements (HRA) EXCEPT:
paid solely by the employee.
Workers’ compensation payments required by state law are not subject to income, social security, and Medicare taxes.
According to Kotter, leadership is characterized as:
direction, alignment, motivation, change.
What is the most that a fringe benefit can be valued and still be considered de minimus?
There is no maximum dollar value
Under National Medical Support Notice rules, a plan administrator must tell the state child support agency whether coverage is available for a child within:
d) 40 business days.
An employer who fails to comply with the COBRA continuation coverage requirements for one qualified beneficiary may be subject to a noncompliance penalty per day in the amount of:
a. $100.00 for each beneficiary.
FUTA taxes over $500.00 must be deposited:
d. quarterly.
A charitable contribution is substantiated with which two documents?
Pay Statement, W2 and a pledge card
When an employer compensates an employee with stock, the wages are taxable for:
Evrything including FUTA
dISPOSASBLE EARNINGS ARE:
gROSS LESS TAXES ONLY
Generally, an employee can receive distributions from a 403(b) account without incurring penalty when the employee attains:
Age 59 1/2
Form W-4S allows the third-party sick pay provider to withhold federal income tax based on:
a flat amount.
An employee earns $1,000.00 semimonthly. Deductions include $235.00 for taxes and $300.00 in child support. Calculate the amount that can be deducted for a creditor garnishment.
nOTHING IF A CHILD SUPPORT ORDER IS IN PLACWE
a chronological record of daily transactions
The journal is the place that financial transactions are first recorded. The journal generally records transactions by date
An employer provides identity protection services to its employees. Which of the following statements is correct?
Identity protection services are not taxable
Under the concentration test, a cafeteria plan is not discriminatory if benefits provided to key employees do not exceed:
25%
Form 941, Schedule B is used to record:
b. daily liabilities within the quarter.
Tax related documents, such as the tax returns and amount and date of an employee’s wage payments,
4 YRS
What fluctuates for employees paid on a fluctuating workweek?
hOURS WORKED ONLY
What information should NOT be part of an employee’s individualized benefit cost statement?
Projected charitable contributions to be made by the employer during the year
If an employer receives more than one child support withholding order for an employee and the total amount exceeds the CCPA limit, the orders are allocated based on the:
employee’s work state rules.
The general rule in the public sector for hours worked to compensatory time is:
One-to-one-and-a-half
According to Kotter, management is characterized as:
planning, organizing, controlling, order.
A company contributes $350.00 each month to a qualified §125 plan for medical insurance. In addition, $100.00 is contributed to a dependent care flexible spending account. How are these amounts taxed?
$450.00 is not taxable income.
When a company makes timely tax deposits, its third quarter Form 941 tax return is due no later than:
The due date for Form 941 is the last day of the month after the end of the quarter. However, employers who have deposited all taxes timely during the quarter are given an automatic 10 day extension to file Form 941.
Checking inputs or outputs against predetermined constraints is called:
System edit
The maximum holding period for §401(k) plan contributions is:
the 15th business day of the following month the deferral occurred.
1095-C
Can be filed using the AIR system
1099S Can be filed using
the FIRE System
940 / 941 can be filed using the
Modernized e file system
An individual with an expressive communication style is described as one who:
enjoys speculating on possibilities before getting down to the facts.
An employee earns $50,000.00 annually, is paid biweekly, and defers $650.00 each payroll to a 403(b) plan. Calculate any federal taxes to be withheld from the 403(b) contribution from the first payroll of the year.
4030B plans are subject to med and SS
For income tax purposes, most states use a two-pronged definition for residence which includes:
Where the employee is domiciled or spends more than a certain number of days each year
All of the following items are taxable compensation EXCEPT:
employer contributions to health plans.
An employee has elected to have $200.00 per month contributed to a medical flexible spending account. At the end of the plan year’s grace period, $100.00 remains in the account. What happens to the $100.00?
The employer can use the amount to offset any administrative expenses in connection with the program. (IF PLAN IS AMNEDED THEN YOU CAN ROLL OVER UP TO $610)
Which box on the 2024 Form W-2 is correctly matched with its use?
Box 3 - Social security wages
On Form W-2, Box 3 is used to report social security wages. Box 12 Code B is used to report uncollected Medicare tax on tips. Box 8 is used to report allocated tips. Box 4 is used to report social security tax withheld.
Which of the following items is an expense?
Company cost of employee benefit programs
Police officers can accrue up to 480 hours of compensatory time off, for working 320 hours, in lieu of receiving overtime pay.
Under the matching principle, expenses are recognized in the month they occur, not when they are paid by accruing and reversing when paid.
Under the GAAP matching principle, expenses are matched to the period they were incurred by: using accruals and reversals
The failure to deposit employment taxes timely subjects an organization to penalties for late deposit. If the deposit is made within five days of the due date the penalty will be 2% of the amount deposited late.
Which of the following statements is true about §125 plans?
The benefit menu may include both cash and qualified nontaxable benefits.
Taxes over $100k must be deposited by next
business day
An individual with an assertive communication style is described as one who:
prefers facts over speculation and prefers detailed advanced planning.
An expatriate employee may qualify for the foreign earned income exclusion under:
either the physical presence test or the bona fide residence test.
Which of the following items can periodic pension recipients specify on Form W-4P to determine their federal income tax withholding?
Dependents and other adjustments
When performing the ADP test, which of the following amounts must be calculated?
Actual deferral percentage for highly compensated employees & non highly
Both federal and state wage and hour laws govern minimum wage, overtime, and an employee’s exempt status.
Which of the following actions is perhaps the MOST important communication skill?
Listening
If a third party sick-pay provider is filing Forms W-2 with respect to the sick pay under the name and EIN of the third party, Form 8922 is filed by the:
Employer
When filing brankruptcy
Child support does not get wiped out
For tex levy
Can not go by w4s, must have 668W filled, when stopping it it is 668 D
How, if at all, are payments made to employees during absence from work due to illness under their employer’s sick pay/disability plan treated for social security and Medicare taxation? (required)
a. Social security and Medicare taxable for the first 6 calendar months
b. Not subject to social security or Medicare tax
c. Social security and Medicare taxable after the first 3 months
d. Social security and Medicare taxable the entire time
Answer A; After 6 months it becomes LTD which has no ss and med tax
. Under the FLSA, all the following payments are included in the regular rate of pay, EXCEPT: (required)
a. Remuneration paid to employees
b. Salaries, commisions, and bonuses
c. Holiday pay
d. Room and board provided by the employer
C
Q3. To use the optional flat rate, how must supplemental wage payments made at the same time as regular wage paymetn be treated? (required)
a. The supplemental wages must be identified separately
b. The supplemental wages must be combined with the wage payment when calculating taxes
c. The supplemental wages must be combined with the wages paid for the last preceding payroll period or with the wages to be wages to be paid for the current payroll period
d. Supplemental payments can never be paid with regular wage payments
A
