FPC Chapter 3.3
An employee rides 340 miles monthly to work in a company provided 7-passenger van used
exclusively for commuting. The employer has organized a vanpool, offering rides to four other
employees. The employer uses the cents-per-mile method to determine the value of the
commute. Calculate the amount of the benefit that is taxable. - ANS-$0.00
A nonexempt assembly line worker, who is paid biweekly, works the following hours during the
pay period:
Week 1:
First shift at $12.00 per hour; 27 hours
Second shift at $14.00 per hour; 16 hours
Week 2:
First shift at $12.00 per hour; 10 hours
Third shift at $16.00 per hour; 37 hours
During this pay period, the payroll department imputes the monthly amount of the employee's
Group-Term Life Insurance benefit valued at $7.32. Determine the total taxable compensation
for the employee for this pay period. - ANS-$1339.49
Week 1
$12.00 * 27 = $324.00 - Regular Pay 1st Shift
$14.00 * 16 = $224.00 - Regular Pay 2nd Shift
$324.00 + $224.00 = $548.00 - Regular Pay
27 + 16 = 43 - Total Hours worked
$548. = $12.74 - Hourly Rate
$12.74 * 0.5 + $12.74 = $19.12 - Overtime Rate
$12.74 * 40 = $509.60 - Gross Wages
$19.12 * 3 = $57.36 - Overtime Wages
$509.60 + $57.36 = 566.96 - Wages combined 567.12
Week 2
$12.00 * 10 = $120.00 - Regular Pay 1st Shift
$16.00 * 37 = $592.00 - Regular Pay 2nd Shift
$592.00 + $120.00 = $712.00 - Regular Pay
37 + 10 = 47 - Total Hours Worked
, $712. = $15.15 - Hourly Rate
$15.15 * 0.5 + $15.15 = $22.73 - Overtime Rate
$15.15 * 40 = $606.00 - Gross Wages
$22.73 * 7 = $159.11 - Overtime Wages
$606.00 + $159.11 = 765.11 - Wages Combined 765.02
$7.32 - GTL Benefit Value
765.11 + 566.96 + $7.32 = $1339.39 - Wages & GTL
Which of the following types of compensation is taxable?
A. Cost of a job-related seminar
B. Subscription to a job-related newsletter
C. Personal use of company vehicle
D. Employer reimbursement for professional organization fees - ANS-C. Personal use of
company vehicle
***Prizes for retail salespeople. Noncash prizes awarded to retail salespeople paid solely on a
commission basis for exceeding quotas or selling the most goods receive special treatment.
Employers do not have to withhold federal income tax from such prizes, although they must be
reported as income to the salespeople on their Forms W-2. However, the prizes are subject to
social security, Medicare, and FUTA taxes.***
An employee was awarded a trip for two for exceeding sales goals by 150%. The fair market
value of the trip must be reported as taxable income to the employee.
A. True
B. False - ANS-A. True
***Prizes for retail salespeople. Noncash prizes awarded to retail salespeople paid solely on a
commission basis for exceeding quotas or selling the most goods receive special treatment.
Employers do not have to withhold federal income tax from such prizes, although they must be
reported as income to the salespeople on their Forms W-2. However, the prizes are subject to
social security, Medicare, and FUTA taxes.***
A 56-year-old employee is provided $190,000.00 in group-term life insurance. Using IRS
Uniform Premium Table I for group-term life insurance, found in the Reference Tables, calculate
the monthly taxable value of this coverage. - ANS-$60.20
***The value of group-term life insurance in excess of $50,000 is determined by using IRS
Section 79 Table I and the uniform premiums it provides, rather than the actual cost to
employers.***
An employee rides 340 miles monthly to work in a company provided 7-passenger van used
exclusively for commuting. The employer has organized a vanpool, offering rides to four other
employees. The employer uses the cents-per-mile method to determine the value of the
commute. Calculate the amount of the benefit that is taxable. - ANS-$0.00
A nonexempt assembly line worker, who is paid biweekly, works the following hours during the
pay period:
Week 1:
First shift at $12.00 per hour; 27 hours
Second shift at $14.00 per hour; 16 hours
Week 2:
First shift at $12.00 per hour; 10 hours
Third shift at $16.00 per hour; 37 hours
During this pay period, the payroll department imputes the monthly amount of the employee's
Group-Term Life Insurance benefit valued at $7.32. Determine the total taxable compensation
for the employee for this pay period. - ANS-$1339.49
Week 1
$12.00 * 27 = $324.00 - Regular Pay 1st Shift
$14.00 * 16 = $224.00 - Regular Pay 2nd Shift
$324.00 + $224.00 = $548.00 - Regular Pay
27 + 16 = 43 - Total Hours worked
$548. = $12.74 - Hourly Rate
$12.74 * 0.5 + $12.74 = $19.12 - Overtime Rate
$12.74 * 40 = $509.60 - Gross Wages
$19.12 * 3 = $57.36 - Overtime Wages
$509.60 + $57.36 = 566.96 - Wages combined 567.12
Week 2
$12.00 * 10 = $120.00 - Regular Pay 1st Shift
$16.00 * 37 = $592.00 - Regular Pay 2nd Shift
$592.00 + $120.00 = $712.00 - Regular Pay
37 + 10 = 47 - Total Hours Worked
, $712. = $15.15 - Hourly Rate
$15.15 * 0.5 + $15.15 = $22.73 - Overtime Rate
$15.15 * 40 = $606.00 - Gross Wages
$22.73 * 7 = $159.11 - Overtime Wages
$606.00 + $159.11 = 765.11 - Wages Combined 765.02
$7.32 - GTL Benefit Value
765.11 + 566.96 + $7.32 = $1339.39 - Wages & GTL
Which of the following types of compensation is taxable?
A. Cost of a job-related seminar
B. Subscription to a job-related newsletter
C. Personal use of company vehicle
D. Employer reimbursement for professional organization fees - ANS-C. Personal use of
company vehicle
***Prizes for retail salespeople. Noncash prizes awarded to retail salespeople paid solely on a
commission basis for exceeding quotas or selling the most goods receive special treatment.
Employers do not have to withhold federal income tax from such prizes, although they must be
reported as income to the salespeople on their Forms W-2. However, the prizes are subject to
social security, Medicare, and FUTA taxes.***
An employee was awarded a trip for two for exceeding sales goals by 150%. The fair market
value of the trip must be reported as taxable income to the employee.
A. True
B. False - ANS-A. True
***Prizes for retail salespeople. Noncash prizes awarded to retail salespeople paid solely on a
commission basis for exceeding quotas or selling the most goods receive special treatment.
Employers do not have to withhold federal income tax from such prizes, although they must be
reported as income to the salespeople on their Forms W-2. However, the prizes are subject to
social security, Medicare, and FUTA taxes.***
A 56-year-old employee is provided $190,000.00 in group-term life insurance. Using IRS
Uniform Premium Table I for group-term life insurance, found in the Reference Tables, calculate
the monthly taxable value of this coverage. - ANS-$60.20
***The value of group-term life insurance in excess of $50,000 is determined by using IRS
Section 79 Table I and the uniform premiums it provides, rather than the actual cost to
employers.***
