Test bank For Intro to Payroll 7th
Edition by Alan Dryden
What two forms do new hires fill out? - ANSI-9 and W-4
Federal taxes - ANSAll employees working in the US must pay federal income and employment
taxes on their wages.
State tax - ANSDepending on the state where the employee works they may also have to pay
state income taxes.
How do Federal and State taxes get paid? - ANSThe employers withhold the tax from the
wages and send the money directly to federal, state and local governments.
What are employment taxes? - ANSSocial security and Medicare taxes. AKA FICA taxes
(federal insurance contributions act).
Social security wages - ANSAre recorded in the employees individual social security account.
The money employees have earned will be used to determine their social security benefits when
they retire or become disabled.
Medicare - ANSMedicare taxes provide employees with basic health insurance once they reach
65, or earlier if they become disabled.
Three major categories of benefits paid through social security. - ANSRetirement, disability and
survivors.
Self employed social security. - ANSIndividuals pay their own social security taxes when they
file their income tax return and IRS reports their earnings to SSA.
Unemployment Insurance Tax - ANSEmployees who lose their job may be eligible for
unemployment benefits.
Who pays into unemployment tax - ANSThe federal tax is not withheld from the employees
wages. It is paid 100% by employer. Most states only the employer is responsible for paying.
Disability Insurance tax - ANSExists in 5 states. California, Hawaii, New Jersey, New York, and
Rhode Island).
Who pays into disability tax - ANSBoth employees and employers.
, Employee benefits - ANSEmployers are not required to provide benefit plans, but most do to
attract and retain good employees.
What is a TIN - ANSTaxpayer identification identification number that is provided by and
independent contractor. The company has no responsibility to withhold taxes from payments.
Employers obligation for independent contractors - ANSGive the contractor a completed form
1099-NEC (no employee compensation) when paying the contractor $600 or more during the
calendar year at the end of the year.
Form 1099 NEC - ANSStates how much the contractor was paid for services rendered during
the past calendar year. A copy must also be sent to the IRS.
Common law test - ANSA worker is a common law employee if the employer has the right to
control what work will be done and how it will be done. If an individual is subject to the control of
the company only as to what results are to be accomplished and not as to the details by which
those results are accomplished the Individual is not an employee.
Employee - ANS1. Required to comply with the employers instructions about when, where and
how to work.
2. Works exclusively for the employer.
3. Hired by the employer.
4. Subject to dismissal; can quit without liability.
5. Has a continuing relationship with the employer.
6. Work done personally.
7. Paid wages; reimbursed for expenses; participated in company's fringe benefits programs.
8. Furnished tools, equipment, materials, and training.
9. If an outside salesperson: company provides leads; sets terms and conditions of the sale,
assigns a territory, and controls the sales process.
Independent contractor - ANS1. Sets own hours; determines own sequence of work.
2. Can work for multiple employers; services available to the public.
3. Is self employed.
4. A contract governs how the relationship can be served.
5. Works by the job.
6. Permitted to employ assistants.
7. Performs services under the workers business name.
8. Payment by the job; opportunity for profit and loss.
9. Furnishes own tools, equipment, and training substantial investment by worker.
10. Controls the sales process and terms.
Three categories the IRS must consider when applying the common law test. - ANS1. Behavior
control
Edition by Alan Dryden
What two forms do new hires fill out? - ANSI-9 and W-4
Federal taxes - ANSAll employees working in the US must pay federal income and employment
taxes on their wages.
State tax - ANSDepending on the state where the employee works they may also have to pay
state income taxes.
How do Federal and State taxes get paid? - ANSThe employers withhold the tax from the
wages and send the money directly to federal, state and local governments.
What are employment taxes? - ANSSocial security and Medicare taxes. AKA FICA taxes
(federal insurance contributions act).
Social security wages - ANSAre recorded in the employees individual social security account.
The money employees have earned will be used to determine their social security benefits when
they retire or become disabled.
Medicare - ANSMedicare taxes provide employees with basic health insurance once they reach
65, or earlier if they become disabled.
Three major categories of benefits paid through social security. - ANSRetirement, disability and
survivors.
Self employed social security. - ANSIndividuals pay their own social security taxes when they
file their income tax return and IRS reports their earnings to SSA.
Unemployment Insurance Tax - ANSEmployees who lose their job may be eligible for
unemployment benefits.
Who pays into unemployment tax - ANSThe federal tax is not withheld from the employees
wages. It is paid 100% by employer. Most states only the employer is responsible for paying.
Disability Insurance tax - ANSExists in 5 states. California, Hawaii, New Jersey, New York, and
Rhode Island).
Who pays into disability tax - ANSBoth employees and employers.
, Employee benefits - ANSEmployers are not required to provide benefit plans, but most do to
attract and retain good employees.
What is a TIN - ANSTaxpayer identification identification number that is provided by and
independent contractor. The company has no responsibility to withhold taxes from payments.
Employers obligation for independent contractors - ANSGive the contractor a completed form
1099-NEC (no employee compensation) when paying the contractor $600 or more during the
calendar year at the end of the year.
Form 1099 NEC - ANSStates how much the contractor was paid for services rendered during
the past calendar year. A copy must also be sent to the IRS.
Common law test - ANSA worker is a common law employee if the employer has the right to
control what work will be done and how it will be done. If an individual is subject to the control of
the company only as to what results are to be accomplished and not as to the details by which
those results are accomplished the Individual is not an employee.
Employee - ANS1. Required to comply with the employers instructions about when, where and
how to work.
2. Works exclusively for the employer.
3. Hired by the employer.
4. Subject to dismissal; can quit without liability.
5. Has a continuing relationship with the employer.
6. Work done personally.
7. Paid wages; reimbursed for expenses; participated in company's fringe benefits programs.
8. Furnished tools, equipment, materials, and training.
9. If an outside salesperson: company provides leads; sets terms and conditions of the sale,
assigns a territory, and controls the sales process.
Independent contractor - ANS1. Sets own hours; determines own sequence of work.
2. Can work for multiple employers; services available to the public.
3. Is self employed.
4. A contract governs how the relationship can be served.
5. Works by the job.
6. Permitted to employ assistants.
7. Performs services under the workers business name.
8. Payment by the job; opportunity for profit and loss.
9. Furnishes own tools, equipment, and training substantial investment by worker.
10. Controls the sales process and terms.
Three categories the IRS must consider when applying the common law test. - ANS1. Behavior
control
