Chapter 1 - Payroll
Fundamentals Comprehensive
Questions (Frequently Most
Tested) with Verified Answers
Common Law Test - Questions - Answer: 1) How independent is the employee?
2) How much control can be exercised over the worker?
Common Law Test - Employee - Answer: - Required to comply with employer's instructions about when,
where, and how to work
- Works exclusively for the employer
- Hired by the employer
- Subject to dismissal; can quit without liability
- Has a continuing relationship with the employer
- Work done personally
- Performs Services unser the company's name
- Paid a salary, participates in company's fringe benefits programs
- Furnished tools, equipment, materials, and training
Common Law Test - Independent Contractor - Answer: - Sets own hours; determines own sequence of
work
- Can work for multiple employers; services to the public
- Is self-employed
- A contract governs how the relationship can be served
- Works by the job
- Permitted to employ assistants
- performs services under the worker's business name
- Payment by the job; opportunity for profit and loss
, Employee Sales - Answer: Company provides leads, sets terms and conditions of the sale, assigns a
territory, and controls the sales process
Independent Contractors - Sales - Answer: Controls the sales process and terms
Reasonable Basis Test - Answer: Exceptions to the common Law Test. Employers can classify certain
certain workers as independent contractors for employment tax purposes even though the workers
meet the requirement of a common Law Test, if they have a reasonable basis to do so
Misclassifying Workers - Answer: Represents a potential loss of revenue for all levels of government. IRS,
DOL, state unemployment agencies can assess severe penalties
IRCA (1986) - Answer: Immigration Reform and Control Act
IRCA Employer Sanctions - Answer: Employers that knowingly hire or continue to employ unauthorized
aliens face civil penalties. Could potentially face criminal penalties if the employer has a pattern of
violations
IRCA - Antidiscrimination - Answer: Prohibits discrimination in hiring or recruiting workers on basis of
national origin or citizenship
Verification of Eligibility - Answer: Burden of verifying that an employee is eligible to work is down to
employer.
By day 1 of employment, EE fills section one of I-9
Within 3 days, ER must review and complete section 2 of I-9
I-9 must be retained for 3 years or one year from term date, whichever is later
Social Security Administration encourages - Answer: 1) ER verify EE name and SSN on W-4 as part of
hiring process for tax WH and reporting purposes
Fundamentals Comprehensive
Questions (Frequently Most
Tested) with Verified Answers
Common Law Test - Questions - Answer: 1) How independent is the employee?
2) How much control can be exercised over the worker?
Common Law Test - Employee - Answer: - Required to comply with employer's instructions about when,
where, and how to work
- Works exclusively for the employer
- Hired by the employer
- Subject to dismissal; can quit without liability
- Has a continuing relationship with the employer
- Work done personally
- Performs Services unser the company's name
- Paid a salary, participates in company's fringe benefits programs
- Furnished tools, equipment, materials, and training
Common Law Test - Independent Contractor - Answer: - Sets own hours; determines own sequence of
work
- Can work for multiple employers; services to the public
- Is self-employed
- A contract governs how the relationship can be served
- Works by the job
- Permitted to employ assistants
- performs services under the worker's business name
- Payment by the job; opportunity for profit and loss
, Employee Sales - Answer: Company provides leads, sets terms and conditions of the sale, assigns a
territory, and controls the sales process
Independent Contractors - Sales - Answer: Controls the sales process and terms
Reasonable Basis Test - Answer: Exceptions to the common Law Test. Employers can classify certain
certain workers as independent contractors for employment tax purposes even though the workers
meet the requirement of a common Law Test, if they have a reasonable basis to do so
Misclassifying Workers - Answer: Represents a potential loss of revenue for all levels of government. IRS,
DOL, state unemployment agencies can assess severe penalties
IRCA (1986) - Answer: Immigration Reform and Control Act
IRCA Employer Sanctions - Answer: Employers that knowingly hire or continue to employ unauthorized
aliens face civil penalties. Could potentially face criminal penalties if the employer has a pattern of
violations
IRCA - Antidiscrimination - Answer: Prohibits discrimination in hiring or recruiting workers on basis of
national origin or citizenship
Verification of Eligibility - Answer: Burden of verifying that an employee is eligible to work is down to
employer.
By day 1 of employment, EE fills section one of I-9
Within 3 days, ER must review and complete section 2 of I-9
I-9 must be retained for 3 years or one year from term date, whichever is later
Social Security Administration encourages - Answer: 1) ER verify EE name and SSN on W-4 as part of
hiring process for tax WH and reporting purposes
