CORRECT ANSWERS|LATEST 2025/2026|GUARANTEED
Cafeteria plan are authorized by what Internal Revenue Code Section?
A. 125
B. 401k
C. 403b
D. 457b - ANSWER a. 125
All of the following are tax implications of a cafeteria plan except:
A. No income tax withholding
B. No social security and medicare tax withholding
C. Must withhold income, social security, and medicare taxes
D. No form W2 reporting - ANSWER C. Must withhold income, social security, and
medicare taxes
One of the options in an employee's cafeteria benefit plan is a dependent care flexible
spending account. He earmarked $100 per month to the account to pay for child care but spend
only $1000 by the end of the plans grace period. At the end of the grace period, what happens
to the $200 left in the account?
A. The amount is forfeited
B. It will be added to his taxable income
C. He can use it to "buy" ab additional benefit
D. It ill carry over to the next year - ANSWER A. The amount is forfeited
Prior to beginning work for a company, a chemical engineer signed a contract stating that she
agreed to work as an independent contractor. She performs all her duties in the companys
laboratories, works under the companys direction, and maintains regular office hours. What is
her status?
1
,A. Independent contractor under common law
B. Independent contractor under reasonable basis test
C. Employee - ANSWER C. Employee
Do not assume that the employer has fulfilled its responsibilities and is free from penalty
simply by having a worker sign a contract stating he is a 1099. Individuals do not have a right to
waive their ee status in a contract.
A retired safety inspector for the company was rehired as a consultant when the company
expanded its plant operations. The retired employee was a natural choice. The tasks he
undertook as a consultant were the same as the ones he performed before retirement. Paid
monthly, he has agreed to work under the direction of his old boss until the new plant
facilitates are fully operational? What is his status?
A. Independent contractor under common law
B. Independent contractor under reasonable basis test
C. Employee - ANSWER C. Employee
Consultants are generally treated as independent contractors. However, when an ex ee is
performing the same or similar job as before retirement, it is unlikely that he qualified as a 1099
after termination
A receptionist has agreed to work afternoons at the company until the company can find a full
time replacement. What is the receptionists status?
A. Independent contractor under common law
B. Independent contractor under reasonable basis
C. Employee - ANSWER C. Employee
Whether or not an ee is full time or part time or works a few weeks or a lifetime for the
company is not relevant her. She is an employee.
2
,All of the following types of employees are classified as exempt from the flsas min wage and OT
requirements except:
A. Professional
B. Outside salesperson
C. Administrative
D. Computer repairman - ANSWER D. Computer repairman
A computer repairman does not perform the duties required to qualify as an exempt computer
professional
A waitress is paid $2.25 per hour and she receives $225 in tips during the week. She works 4o
hours per week. Which of the following is true?
A. Her employer is allowed to reduce her cash wage to no less than $2.13 per hour
B. Her base pay must be increase to $4.5 per hour after a 90 day training period.
C. She must be paid $5.12 per hour by her employer
D. Her base salary must be raised to $3 per hour to comply with fed min wage requirements. -
ANSWER A. Her employer is allowed to reduce her cash wage to no less than $2.13 per
hour
Her employer can claim the full federal tip credit because she receives tips and with her tips, is
paid more than the current federal minimum wage purposes, her employer must pay her at
least $2.13 per hour and her hourly rate plus tips must equal at least the current federal min
wage
If a state sets the minimum wage at a rate greater than the federal minimum wage, the state
minimum wage must be paid to workers in that state
- true
-false - ANSWER TRUE
Tips can be counted toward the employees minimum wage - ANSWER TRUE
3
, An employee works 40 hours per week as a fry cook. During the week, she substitutes for one of
the waitresses and reports $5 per week in tips. Can her employer pay her $2.13 per hour?
- yes
- no - ANSWER no
Because she isnt making $30 a month. The tip credit can be used to reduce the minimum wage
only if the employee regularly receives tips and documents receiving more than $30/month
Employers who provide paid vacation leave must count the hours of paid time off when
determining if the employee must receive an overtime premium when the total hours worked
in a week exceed 40.
True
False - ANSWER false
Only hours worked count toward determining whether overtime premiums must be paid
under the FLSA
The FLSA requires immediate payment of an employees final paycheck upon termination
True
False - ANSWER FALSE
However, most states impose time limits governing when an employees final paycheck must be
paid to the employee
An employee's parking garage is 2 blocks away from his downtown office. It costs $275/month
to rent a stall there, but the employee doesn't mind because its convenient and his employer
reimburses him 100% of the cost. How much of his monthly parking is taxable? -
ANSWER $15.
4
Cafeteria plan are authorized by what Internal Revenue Code Section?
A. 125
B. 401k
C. 403b
D. 457b - ANSWER a. 125
All of the following are tax implications of a cafeteria plan except:
A. No income tax withholding
B. No social security and medicare tax withholding
C. Must withhold income, social security, and medicare taxes
D. No form W2 reporting - ANSWER C. Must withhold income, social security, and
medicare taxes
One of the options in an employee's cafeteria benefit plan is a dependent care flexible
spending account. He earmarked $100 per month to the account to pay for child care but spend
only $1000 by the end of the plans grace period. At the end of the grace period, what happens
to the $200 left in the account?
A. The amount is forfeited
B. It will be added to his taxable income
C. He can use it to "buy" ab additional benefit
D. It ill carry over to the next year - ANSWER A. The amount is forfeited
Prior to beginning work for a company, a chemical engineer signed a contract stating that she
agreed to work as an independent contractor. She performs all her duties in the companys
laboratories, works under the companys direction, and maintains regular office hours. What is
her status?
1
,A. Independent contractor under common law
B. Independent contractor under reasonable basis test
C. Employee - ANSWER C. Employee
Do not assume that the employer has fulfilled its responsibilities and is free from penalty
simply by having a worker sign a contract stating he is a 1099. Individuals do not have a right to
waive their ee status in a contract.
A retired safety inspector for the company was rehired as a consultant when the company
expanded its plant operations. The retired employee was a natural choice. The tasks he
undertook as a consultant were the same as the ones he performed before retirement. Paid
monthly, he has agreed to work under the direction of his old boss until the new plant
facilitates are fully operational? What is his status?
A. Independent contractor under common law
B. Independent contractor under reasonable basis test
C. Employee - ANSWER C. Employee
Consultants are generally treated as independent contractors. However, when an ex ee is
performing the same or similar job as before retirement, it is unlikely that he qualified as a 1099
after termination
A receptionist has agreed to work afternoons at the company until the company can find a full
time replacement. What is the receptionists status?
A. Independent contractor under common law
B. Independent contractor under reasonable basis
C. Employee - ANSWER C. Employee
Whether or not an ee is full time or part time or works a few weeks or a lifetime for the
company is not relevant her. She is an employee.
2
,All of the following types of employees are classified as exempt from the flsas min wage and OT
requirements except:
A. Professional
B. Outside salesperson
C. Administrative
D. Computer repairman - ANSWER D. Computer repairman
A computer repairman does not perform the duties required to qualify as an exempt computer
professional
A waitress is paid $2.25 per hour and she receives $225 in tips during the week. She works 4o
hours per week. Which of the following is true?
A. Her employer is allowed to reduce her cash wage to no less than $2.13 per hour
B. Her base pay must be increase to $4.5 per hour after a 90 day training period.
C. She must be paid $5.12 per hour by her employer
D. Her base salary must be raised to $3 per hour to comply with fed min wage requirements. -
ANSWER A. Her employer is allowed to reduce her cash wage to no less than $2.13 per
hour
Her employer can claim the full federal tip credit because she receives tips and with her tips, is
paid more than the current federal minimum wage purposes, her employer must pay her at
least $2.13 per hour and her hourly rate plus tips must equal at least the current federal min
wage
If a state sets the minimum wage at a rate greater than the federal minimum wage, the state
minimum wage must be paid to workers in that state
- true
-false - ANSWER TRUE
Tips can be counted toward the employees minimum wage - ANSWER TRUE
3
, An employee works 40 hours per week as a fry cook. During the week, she substitutes for one of
the waitresses and reports $5 per week in tips. Can her employer pay her $2.13 per hour?
- yes
- no - ANSWER no
Because she isnt making $30 a month. The tip credit can be used to reduce the minimum wage
only if the employee regularly receives tips and documents receiving more than $30/month
Employers who provide paid vacation leave must count the hours of paid time off when
determining if the employee must receive an overtime premium when the total hours worked
in a week exceed 40.
True
False - ANSWER false
Only hours worked count toward determining whether overtime premiums must be paid
under the FLSA
The FLSA requires immediate payment of an employees final paycheck upon termination
True
False - ANSWER FALSE
However, most states impose time limits governing when an employees final paycheck must be
paid to the employee
An employee's parking garage is 2 blocks away from his downtown office. It costs $275/month
to rent a stall there, but the employee doesn't mind because its convenient and his employer
reimburses him 100% of the cost. How much of his monthly parking is taxable? -
ANSWER $15.
4
