Payroll Accounting 2015 Bieg 25th Edition Test Bank
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F 1. 5–2
T 2. 5–1
F 3. 5–2
F 4. 5–2
CHAPTER 5
True-False Questions
Unemployment taxes (FUTA and SUTA) do not have to be paid by an employer who has only part-time employees.
The Social Security Act ordered every state to set up an unemployment compensation program.
Partnerships do not have to pay unemployment taxes on the wages of their employees.
Once a company attains the status of employer for FUTA purposes, that status continues for four calendar years.
T 5. 5–3 A traveling salesperson who solicits and transmits to the principal orders for merchandise for resale is considered an employee under FUTA.
T 6. 5–4 Services performed by a child under the age of 21 for a parent–employer are excluded from FUTA coverage.
T 7. 5–4
T 8. 5–3
T 9. 5–3
Services performed in the employ of a religious organization that is exempt from federal income tax are also exempt from FUTA coverage.
Directors of corporations who only attend and participate in board of directors’ meetings are not covered as employees under FUTA.
Insurance agents paid solely on a commission basis are not considered employees under FUTA.
F 10. 5–4 If an employee works in more than one state, the employer must pay a separate SUTA tax to each of those states in which the employee earns wages.
F 11. 5–7 For FUTA purposes, the cash value of remuneration paid in any medium other than cash is not considered taxable wages.
F 12. 5–7
T 13. 5–7
Advance payments for work done in the future are not taxable wages for FUTA purposes.
FUTA and SUTA coverages extend to U.S. citizens working abroad for American employers.
F 14. 5–7 In the case of a part-time employee, the employer pays a FUTA tax on only the first $3,500 of earnings (one-half the regular limit).
T 15. 5–7
F 16. 5–8
Christmas gifts, excluding noncash gifts of nominal value, are taxable wages for unemployment purposes.
Retirement pay is taxable wages for FUTA purposes.
T 17. 5–8
T 18. 5–9
F 19. 5–9
F 20. 5–9
T 21.
5–9
F 22. 5–11
T 23. 5–11
F 24.
5–12
F 25. 5–14
Educational assistance payments made to workers to improve skills required of their jobs are nontaxable for unemployment purposes.
If an employee has more than one employer during the current year, the taxable wage base applies separately to each of those employers, unless one employer has transferred the business to the second.
Every employer is entitled to a 5.4 percent credit against the gross FUTA tax of 6.0 percent
For FUTA purposes, an employer must pay a higher FUTA tax rate on executives than on nonsupervisory personnel.
In order to obtain the maximum credit allowed against the federal unemployment tax, the employer must have paid its SUTA contributions by the due date of Form 940.
Even if a state repays its Title XII advances, all employers in that state are subject to a credit reduction in the year of the advance.
If an employer is subject to a credit reduction because of Title XII advances, the penalty for the entire year will be paid only with the deposit for the last quarter of the year.
There is a uniform rate of unemployment benefits payable by all states.
If an employer pays unemployment taxes to two states, it will have the same SUTA tax rate in both states.
F 26. 5–14 Currently, none of the states imposes an unemployment tax on employees.
T 27. 5–17 In some states, employers may obtain reduced unemployment compensation rates by making voluntary contributions to the state fund.
F 28. 5–18 “Dumping” is legal in all but a few states.
F 29. 5–20 On Form 940, even if the total FUTA tax is more than $500, there is no listing of quarterly federal unemployment tax liabilities.
F 30. 5–22
T 31. 5–22
T 32. 5–24
Form 940 must be mailed to the IRS by January 15.
The mailing of Form 940 is considered timely if it is postmarked on or before the due date.
If an employer’s quarterly tax liability is $525, it must be paid on or before the last day of the month following the end of the quarter.
F 33. 5–24 FUTA tax deposits cannot be paid electronically.
F 34. 5–22
Schedule A of Form 940 only has to be completed by employers who are subject to the Title XII credit reduction.
F 35. 5–24 If a company is liable for a credit reduction (due to Title XII advance), this extra tax must be paid along with each of the required deposits made during the year.
T 36. 5–24 An employer can use a credit card to pay the balance with Form 940 (under $500).
F 37. 5–24 An employer can use a credit card to pay the quarterly deposit of FUTA taxes during the year.
T 38. 5–25 Even if the duties of depositing the FUTA taxes and filing Form 940 have been outsourced, the employer is still the responsible party.
F 39. 5–25 Unlike Form 941, there is no penalty for the late filing of Form 940.
T 40. 5–26 In most states, the contribution reports and the wage information reports are filed quarterly.
Multiple-Choice Questions
c 1. 5–2 A federal unemployment tax is levied on:
a. employees only.
b. both employers and employees.
c. employers only.
d. government employers only.
e. no one.
e 2. 5–2 For FUTA purposes, an employer can be any one of the following except:
a. an individual.
b. a partnership.
c. a trust.
d. a corporation.
e. All of the above can be employers.
d 3. 5–3 Included under the definition of employees for FUTA purposes are:
a. independent contractors.
b. insurance agents paid solely on commission.
c. student nurses.
d. officers of a corporation.
e. members of partnerships.
c 4. 5–5
Which of the following is not a factor considered in determining coverage of interstate employees?
a. Location of base of operations
b. Place where work is localized
c. Location of company’s payroll department
d. Location of employee’s residence
e. Location of place from which operations are controlled
d 5. 5–6 An aspect of the interstate reciprocal arrangement concerns:
a. the status of Americans working overseas.
b. the taxability of dismissal payments.
c. the determination of an employer’s experience rating.
d. the transfer of an employee from one state to another during the year.
e. none of the above.
a 6. 5–7
Which of the following payments are taxable payments for federal unemployment tax?
a. Christmas gifts, excluding noncash gifts of nominal value
b. Caddy fees
c. Courtesy discounts to employees and their families
d. Workers’ compensation payments
e. Value of meals and lodging furnished employees for the convenience of the employer
a 7. 5–8
Which of the following types of payments are not taxable wages for federal unemployment tax?
a. Retirement pay
b. Cash prizes and awards for doing outstanding work
c. Dismissal pay
d. Bonuses as remuneration for services
e. Payment under a guaranteed annual wage plan
b 8. 5–9 If the employer is tardy in paying the state contributions, the credit against the federal tax is limited to what percent of the late payments that would have been allowed as a credit if the contributions had been paid on time?
a. 6.2%
b. 90%
c. 5.13%
d. 20%
e. 0%
d 9. 5–10
Which of the following provides for a reduction in the employer’s state unemployment tax rate based on the employer’s experience with the risk of unemployment?
a. Voluntary contribution
b. Title XII advances
c. Pooled-fund laws
d. Experience-rating plan
e. None of the above
d 10. 5–11
In order to avoid a credit reduction for Title XII advances, a state must repay the loans by:
a. the end of the year of the loans.
b. the end of the year the credit reduction is scheduled to take effect.
c. the end of the third year after the year of the loans.
d. November 10 of the year the credit reduction is scheduled to take effect.
e. June 30 of the year after the loans.
b 11. 5–17
Voluntary contributions to a state’s unemployment department are:
a. allowed in all states.
b. designed to increase an employer’s reserve account in order to lower the employer’s contribution rate.
c. capable of being paid at any time with no time limit.
d. returned to the employer at the end of the following year.
e. sent directly to the IRS.
b 12. 5–22
The person who is not an authorized signer of Form 940 is:
a. the individual, if a sole proprietorship.
b. the accountant from the company’s independent auditing firm.
c. the president, if a corporation.
d. a fiduciary, if a trust.
e. All of the above are authorized signers.
c 13. 5–22
If the employer has made timely deposits that pay the FUTA tax liability in full, the filing of Form 940 can be delayed until:
a. December 31.
b. February 15.
c. February 10.
d. February 1.
e. March 31.
a 14. 5–24
When making a payment of FUTA taxes, the employer must make the deposit by the:
a. end of the month after the quarter.
b. 15th of the month after the quarter.
c. 10th of the month after the quarter.
d. end of the following quarter.
e. same day of the FICA and FIT deposits.
b 15. 5–24
An employer must pay the quarterly FUTA tax liability if the liability is more than:
a. $3,000.
b. $500.
c. $1,000.
d. $1.
e. $100.
Problem-Solving
NOTE: In the following problems, use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages.
1. Niemann Company has a SUTA tax rate of 7.1%. The taxable payroll for the year for FUTA and SUTA is $82,600.
(a) The amount of FUTA tax for the year is ($82,600 × 0.006) $495.60
(b) The amount of SUTA tax for the year is ($82,600 × 0.071) $5,864.60
2. Stys Company’s payroll for the year is $1,210,930. Of this amount, $510,710 is for wages paid in excess of $7,000 to each individual employee. The SUTA tax rate for the company is 3.2% on the first $7,000 of each employee’s earnings.
(a) The amount of FUTA tax for the year is [($1,210,930 – $510,710) × 0.006] $4,201.32
(b) The amount of SUTA tax for the year is [($1,210,930 – $510,710) × 0.032] .......................................................................................... $22,407.04
3. Michael Mirer worked for Dawson Company for six months this year and earned $11,200. The other six months, he earned $6,900 working for McBride Company (a separate company). The amount of FUTA taxes to be paid on Mirer’s wages by the two companies is:
(a) Dawson Company ($7,000 × 0.006)............................................... $42.00
(b) McBride Company ($6,900 × 0.006)............................................... $41.40
4. John Gercke is an employee of The Woolson Company. During the first part of the year, he earned $6,800 while working in State A. For the remainder of the year, the company transferred him to State B where he earned $16,500. The Woolson Company’s tax rate in State A is 4.2%, and in State B it is 3.15% on the first $7,000. Assuming that reciprocal arrangements exist between the two states, determine the SUTA tax that the company paid to:
(a) State A ($6,800 × 0.042) ................................................................ $285.60
(b) State B [($7,000 – $6,800) × 0.0315] ............................................. $6.30
5. Aaron Norman earned $24,900 for the year from Marcus Company. The company is subject to a SUTA tax of 4.7% on the first $9,900 of earnings. Determine:
(a) the employer’s FUTA tax on Norman’s earnings ($7,000 × 0.006) $42.00
(b) the employer’s SUTA tax on Norman’s earnings ($9,900 × 0.047) $465.30
6. Ted Carman worked for Rivertide Country Club and earned $28,500 during the year. He also worked part time for Harrison Furniture Company and earned $12,400 during the year. The SUTA tax rate for Rivertide Country Club is 4.2% on the first $8,000, and the rate for Harrison Furniture Company is 5.1% on the first $8,000. Calculate the FUTA and SUTA taxes paid by the employers on Carman’s earnings.
7. Queno Company had FUTA taxable wages of $510,900 during the year. Determine its:
× 0.006)....................................................
8. Faruga Company had FUTA taxable payrolls for the four quarters of 2015 of $28,400; $19,600; $16,500; and $8,900, respectively. The company was located in a state that was subject to a FUTA credit reduction of 0.3%. What was the amount of Faruga’s first required deposit of FUTA taxes? [$28,400 + $19,600 + $16,500 + $8,900 = $73,400 × 0.006 = $440.40 + ($73,400 × 0.003)]
9. Hunter Company had a FUTA taxable payroll of $192,700 for the year. Since the company is located in a state that has a 0.3% FUTA credit reduction due to unpaid loans, determine Hunter’s FUTA tax liability for the year [$192,700 × (0.6% + 0.3%)]
10. In the first quarter of the year, Henry Gibson earned $3,000 in wages and reported $2,400 in tips to his employer. How much would the employer’s FUTA tax be for the first quarter on Gibson? ($5,400 × 0.006).....................................................................................................
11. In Part 5 of Form 940, Peterson Company reported FUTA tax liabilities as follows:
First quarter: $397.50
Second quarter: $209.10
Third quarter: $274.50
Fourth quarter: $262.20
List the amounts and the dates of each required FUTA tax payment:
amount $606.60 ($397.50 + $209.10) date 7/31/year 1
amount $536.70 ($274.50 + $262.20) date 1/31/year 2
amount $ date amount $ date
12. Sparks Company’s SUTA rate for next year is 3.25% because its reserve ratio falls into the state’s 10% to less than 12% category [(contributions – benefits paid) average payroll = $414,867 $3,521,790 = 11.78%]
If the next bracket (12% to less than 14%) would give the company a lower tax rate of 3.05%, what would be the least amount of the voluntary contribution needed to qualify the company for the 3.05% SUTA tax rate? (12% × $3,521,790 = $422,614.80; $422,614.80 – $414,867.00)
13. Complete Part 2 of Form 940 based on the following information:
Source: Internal Revenue Service.
14. If the employer in Problem 13 is located in Wisconsin which has a FUTA credit reduction of 0.6%, what would be the amount of the credit reduction? (0.006 × $467,950)…….$2,807.70
15. Continuing with Problem 14, complete Part 5 of Form 940 given the breakdown of FUTA taxable wages for the year to be:
Source: Internal Revenue Service. *($8,950
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