FPC Chapters 4, 5, & 6
Which of the following employee benefits is nontaxable compensation?
❑ a. Company vehicle (personal use)
❑ b. Gifts, prizes and awards
❑ c. Company vehicle (business use)
❑ d. Moving expenses - ANS-c. Company vehicle (business use)
Which of the following employee benefits is taxable compensation?
❑ a. Workers' Compensation benefits
❑ b. Health Savings Accounts
❑ c. Sick pay
❑ d. Qualified transportation fringes - ANS-c. Sick pay
A retail sales clerk took advantage of the company's employee discount program to purchase
clothes at 10% off the normal retail price. This service represents:
❑ a. taxable compensation.
❑ b. a qualified employee discount.
❑ c. a working condition fringe.
❑ d. a no‑additional‑cost service. - ANS-b. a qualified employee discount.
An employee belongs to a professional organization. When his company pays his dues, the
payment is:
❑ a. taxable compensation.
❑ b. a de minimis fringe.
❑ c. a working condition fringe.
❑ d. a no‑additional cost service. - ANS-c. a working condition fringe.
An employee's parking garage is two blocks away from his downtown office. It costs $300.00
per month to rent a stall there, but the employee doesn't mind because it's convenient and his
employer reimburses him for 100% of the costs. How much of his monthly parking is taxable?
❑ a. $20.00
❑ b. $30.00
❑ c. $280.00
❑ d. $300.00 - ANS-c.$280.00
up to $280 per month in 2022 for employee paid parking can be excluded from the employees
income. the amount over $280 (300-280=20) is included in the employees income
, An employer provides an employee $350.00 each month in bus tokens so she can commute to
work. How much of this expense is nontaxable?
a. $70.00
❑ b. $280.00
❑ c. $300.00
❑ d. $350.00 - ANS-b. $280.00
A salesperson drives a company‑owned vehicle valued at $25,000. In the year, he logs 12,000
miles for business travel and 4,000 miles for personal use.
1. Use the annual lease value method (see table on page 4‑15) to calculate the value of his
personal use of the vehicle. $ __________
2. Determine the value of the salesperson's personal use of this vehicle using the cents‑per‑mile
method based on 10,000 business miles and 5,200 personal miles.
$ __________ - ANS-1. $1,712.50
The salesperson uses the car 75% for business and 25% personal (4,000/16,000 total miles) for
personal use. the lease value of a $25,000 automobile is $6,850 and 6,850x25%=$1,712.50
2. $1,703.52 (5,200 personal miles x $0.585 per mile = $1,703.52 for personal use of the
vehicle)
What federal taxes, if any, must the salesperson's employer withhold for his personal use of the
company vehicle?
❑ a. Social security tax and Medicare tax only
❑ b. Federal income tax only
❑ c. Federal income tax, social security tax, and Medicare tax
❑ d. No taxes are required to be withheld - ANS-a. Social security tax and Medicare tax only
For her 10 years of service, an employee was given a gold necklace valued at $100. Which of
the following is true?
❑ a. The gift must be included in her taxable compensation.
❑ b. The gift is tax‑free.
❑ c. Only social security tax and Medicare tax should be withheld on the fair market value of
the award.
❑ d. Only federal income tax should be withheld on the fair market value of the award. - ANS-b.
The gift is tax‑free.
Which of the following employee benefits is nontaxable compensation?
❑ a. Company vehicle (personal use)
❑ b. Gifts, prizes and awards
❑ c. Company vehicle (business use)
❑ d. Moving expenses - ANS-c. Company vehicle (business use)
Which of the following employee benefits is taxable compensation?
❑ a. Workers' Compensation benefits
❑ b. Health Savings Accounts
❑ c. Sick pay
❑ d. Qualified transportation fringes - ANS-c. Sick pay
A retail sales clerk took advantage of the company's employee discount program to purchase
clothes at 10% off the normal retail price. This service represents:
❑ a. taxable compensation.
❑ b. a qualified employee discount.
❑ c. a working condition fringe.
❑ d. a no‑additional‑cost service. - ANS-b. a qualified employee discount.
An employee belongs to a professional organization. When his company pays his dues, the
payment is:
❑ a. taxable compensation.
❑ b. a de minimis fringe.
❑ c. a working condition fringe.
❑ d. a no‑additional cost service. - ANS-c. a working condition fringe.
An employee's parking garage is two blocks away from his downtown office. It costs $300.00
per month to rent a stall there, but the employee doesn't mind because it's convenient and his
employer reimburses him for 100% of the costs. How much of his monthly parking is taxable?
❑ a. $20.00
❑ b. $30.00
❑ c. $280.00
❑ d. $300.00 - ANS-c.$280.00
up to $280 per month in 2022 for employee paid parking can be excluded from the employees
income. the amount over $280 (300-280=20) is included in the employees income
, An employer provides an employee $350.00 each month in bus tokens so she can commute to
work. How much of this expense is nontaxable?
a. $70.00
❑ b. $280.00
❑ c. $300.00
❑ d. $350.00 - ANS-b. $280.00
A salesperson drives a company‑owned vehicle valued at $25,000. In the year, he logs 12,000
miles for business travel and 4,000 miles for personal use.
1. Use the annual lease value method (see table on page 4‑15) to calculate the value of his
personal use of the vehicle. $ __________
2. Determine the value of the salesperson's personal use of this vehicle using the cents‑per‑mile
method based on 10,000 business miles and 5,200 personal miles.
$ __________ - ANS-1. $1,712.50
The salesperson uses the car 75% for business and 25% personal (4,000/16,000 total miles) for
personal use. the lease value of a $25,000 automobile is $6,850 and 6,850x25%=$1,712.50
2. $1,703.52 (5,200 personal miles x $0.585 per mile = $1,703.52 for personal use of the
vehicle)
What federal taxes, if any, must the salesperson's employer withhold for his personal use of the
company vehicle?
❑ a. Social security tax and Medicare tax only
❑ b. Federal income tax only
❑ c. Federal income tax, social security tax, and Medicare tax
❑ d. No taxes are required to be withheld - ANS-a. Social security tax and Medicare tax only
For her 10 years of service, an employee was given a gold necklace valued at $100. Which of
the following is true?
❑ a. The gift must be included in her taxable compensation.
❑ b. The gift is tax‑free.
❑ c. Only social security tax and Medicare tax should be withheld on the fair market value of
the award.
❑ d. Only federal income tax should be withheld on the fair market value of the award. - ANS-b.
The gift is tax‑free.
