Payroll Fundamentals Ch. 1
Comprehensive Questions
(Frequently Most Tested) with
Verified Answers
Worker Status - Answer: Employee or Independent Contractor
Employee - Answer: -Taxes withheld
-Provide W-2
-Unemployment taxes paid
-Subject to all federal and state laws
Independent Contractor - Answer: -No taxes withheld
-Provide 1099-MISC to report payments over $600 for the year
-No unemployment taxes are paid
Independent Contractor: Reasonable Basis Test - Answer: An employer may treat a worker as an
independent contractor if it has a "reasonable basis" to do so (as determined by section 530 of the
Revenue Act of 1978)
-Court decisions, published IRS rulings, private letter ruling, etc.
-Past IRS audit
-A longstanding, recognized practice
Temporary help agency/service employees
and
Leased employees - Answer: The company ("employer") contracts with a vendor (temporary agency or
leasing company) to provide staff to do work.
, Consequences of mis-classifying workers? - Answer: Government may lose revenue
-federal, state, local tax revenue
Many agencies "enforce" proper classification of workers such as? - Answer: -IRS
-DOL
-state unemployment agencies
-state and local government agencies
The Immigration Reform and Control Act of 1986 (IRCA) - Answer: employers must comply by verifying
the identity and right to work of its employees. Make sure both sections of Form I-9 are complete.
Form SS-5 - Answer: how to get a SSN
New hire Reporting - Answer: -Federal new hire reporting requirement
(Personal Responsibility and Work Opportunity Reconciliation Act of 1996)
-All states must have an automated State Directory of New Hires and transmit information to the
National Directory of New Hires
-All employers must report information about newly hired employees within 20 calendar days of the hire
-Can be reported to just one state
-Federal reporting does not apply to independent contractors, but some states require
FLSA stands for what? - Answer: Fair Labor Standards Act
FLSA does what? - Answer: Sets minimum wage and overtime rules,
Comprehensive Questions
(Frequently Most Tested) with
Verified Answers
Worker Status - Answer: Employee or Independent Contractor
Employee - Answer: -Taxes withheld
-Provide W-2
-Unemployment taxes paid
-Subject to all federal and state laws
Independent Contractor - Answer: -No taxes withheld
-Provide 1099-MISC to report payments over $600 for the year
-No unemployment taxes are paid
Independent Contractor: Reasonable Basis Test - Answer: An employer may treat a worker as an
independent contractor if it has a "reasonable basis" to do so (as determined by section 530 of the
Revenue Act of 1978)
-Court decisions, published IRS rulings, private letter ruling, etc.
-Past IRS audit
-A longstanding, recognized practice
Temporary help agency/service employees
and
Leased employees - Answer: The company ("employer") contracts with a vendor (temporary agency or
leasing company) to provide staff to do work.
, Consequences of mis-classifying workers? - Answer: Government may lose revenue
-federal, state, local tax revenue
Many agencies "enforce" proper classification of workers such as? - Answer: -IRS
-DOL
-state unemployment agencies
-state and local government agencies
The Immigration Reform and Control Act of 1986 (IRCA) - Answer: employers must comply by verifying
the identity and right to work of its employees. Make sure both sections of Form I-9 are complete.
Form SS-5 - Answer: how to get a SSN
New hire Reporting - Answer: -Federal new hire reporting requirement
(Personal Responsibility and Work Opportunity Reconciliation Act of 1996)
-All states must have an automated State Directory of New Hires and transmit information to the
National Directory of New Hires
-All employers must report information about newly hired employees within 20 calendar days of the hire
-Can be reported to just one state
-Federal reporting does not apply to independent contractors, but some states require
FLSA stands for what? - Answer: Fair Labor Standards Act
FLSA does what? - Answer: Sets minimum wage and overtime rules,
