Ch 5 Payroll Practice Test

26. Included under the definition of employees for FUTA purposes are:
Incorrect
A) independent contractors.
B) insurance agents paid solely on commission.
C) student nurses.
D) officers of a corporation.
E) members of partnerships.

D) officers of a corporation.

27. Voluntary contributions to a state’s unemployment department are:

A) allowed in all states.

B) designed to increase an employers’s reserve account in order to lower the
employer’s contribution rate.

C) capable of being paid at any time with no limit.

D) returned to the employer at the end of the following year.

E) sent directly to the IRS.

B) designed to increase an employers’s reserve account in order to lower the employer’s contribution rate.

30. When recording the deposit of FUTA taxes owed, the proper entry is:

A) FUTA Tax Expense- Cash

B) Payroll Taxes- Cash

C) Payroll Taxes- FUTA Taxes Payable

D) FUTA Taxes Payable- Cash

E) FUTA Tax Expense- FUTA Taxes Payable

D) FUTA Taxes Payable- Cash

14. At the time that the entry is made to record the employers payroll taxes, the SUTA tax is recorded at the net amount (0.6%).
A) True
B) False

B) False

1. Unemployment taxes (FUTA and SUTA) do not have to be paid by an employer who has only part-time employees.

A) True
B) False

B) False

2. Once a company attains the status of employer for FUTA purposes, that status continues for four calendar years.
A) True
B) False

B) False

3. Directors of corporations who only attend and participate in board of directors’ meetings are not covered as employees under FUTA.
A) True
B) False

A) True

4. Advance payments for work done in the future are not taxable wages for FUTA purposes.

A) True
B) False

B) False

5. Retirement pay is taxable wages for FUTA purposes.
A) True
B) False

B) False

6. Educational assistance payments made to workers to improve skills required of their jobs are nontaxable for unemployment purposes.
A) True
B) False

A) True

7. There is a uniform rate of unemployment benefits payable by all states.
A) True
B) False

B) False

8. In some states, employers may obtain reduced unemployment compensation rates by making voluntary contributions to the state fund.
A) True
B) False

A) True

9. The mailing of Form 940 is considered timely if it is postmarked on or before the due date.
A) True
B) False

A) True

10. An employer can use a credit card to pay the balance with Form 940 (under $500.)
A) True
B) False

A) True

11. For FUTA purposes, an employer can be any one of the following except:
A) an individual.
B) a partnership.
C) a trust.
D) a corporation.
E) All of the above can be employers.

E) All of the above can be employers.

12. Included under the definition of employees for FUTA purposes are:
A) independent contractors.
B) insurance agents paid solely on commission
C) student nurses.
D) officers of a corporation.
E) members of partnerships.

D) officers of a corporation.

13. Which of the following is not a factor considered in determining coverage of interstate employees?
A) Location of base of operations
B) Place where work is localized
C) Location of company’s payroll department
D) Location of employee’s residence
E) Location of place from which operations are controlled

C) Location of company’s payroll department

14. Which of the following payments are taxable payments for federal unemployment tax?
A) Christmas gifts, excluding noncash gifts of nominal value
B) Caddy fees
C) Courtesy discounts to employees and their families
D) Workers’ compensation payments
E) Value of meals and lodging furnished employees for the convenience of the employer

A) Christmas gifts, excluding noncash gifts of nominal value

15. Which of the following types of payments are not taxable wages for federal unemployment tax?
A) Retirement pay
B) Cash prizes and awards for doing outstanding work
C) Dismissal pay.
D) Bonuses as remuneration for services
E) Payment under a guaranteed annual wage plan

A) Retirement pay

16. Which of the following provides for a reduction in the employer’s state unemployment tax rate based on the employer’s experience with the risk of unemployment?
A) Voluntary contribution
B) Title XII advances
C) Pooled-fund laws
D) Experience-rating plan
E) None of the above

D) Experience-rating plan

17. In order to avoid a credit reduction for Title XII advances, a state must repay the loans by:
A) the end of the year of the loans.
B) the end of the year the credit reduction is scheduled to take effect.
C) the end of the third year after the year of the loans.
D) November 10 of the year the credit reduction is scheduled to take effect.
E) June 30 of the year after the loans.

D) November 10 of the year the credit reduction is scheduled to take effect.

18. Voluntary contributions to a state’s unemployment department are:
A) allowed in all states.
B) designed to increase an employer’s reserve account in order to lower the employer’s contribution rate.
C) capable of being paid at any time with no time limit.
D) returned to the employer at the end of the following year.
E) sent directly to the IRS.

B) designed to increase an employer’s reserve account in order to lower the employer’s contribution rate.

19. The person who is not an authorized signer of Form 940 is:
A) the individual, if a sole proprietorship.
B) the accountant from the company’s independent auditing firm.
C) the president, if a corporation.
D) a fiduciary, if a trust.
E) all of the above are authorized signers.

B) the accountant from the company’s independent auditing firm.

20. When making a payment of FUTA taxes, the employer must make the payment by the:
A) end of the month after the quarter.
B) 15th of the month after the quarter.
C) 10th of the month after the quarter.
D) end of the following quarter.
E) same day of the FICA and FIT deposits.

A) end of the month after the quarter.

21. The federal unemployment tax is imposed on employers, and thus, is not deducted from employees’ wages
A) True
B) False

A) True

22. Educational assistance payments to workers are considered nontaxable wages for unemployment purposes.
A) True
B) False

A) True

23. For the purpose of the FUTA tax, members of partnerships are considered employees.
A) True
B) False

B) False

24. FUTA coverage does not include service of any nature performed outside the United States by a citizen of the United States for an American employer.
A) True
B) False

B) False

25. The location of the employee’s residence is the primary factor to be considered in determining coverage of an employee who works in more than one state.
A) True
B) False

B) False

26. In the garnishment process, federal tax levies take secondary priority to wages withheld for child support orders.
A) True
B) False

A) True

46. A bonus paid as remuneration for services is not considered taxable wages for unemployment tax purposes even if the employee has not exceeded the taxable wage base.
A) True
B) False

B) False

47. In the case of an employee who changes jobs during the year, only the first employer must pay FUTA tax on that employee’s earnings.
A) True
B) False

B) False

48. The maximum credit that can be applied to the FUTA tax because of SUTA contributions is 5.4%.
A) True
B) False

A) True

49. If an employer pays a SUTA tax of 2.0%, the total credit that can be claimed against the FUTA tax is 2.0%.
A) True
B) False

B) False

50. E-pay or a major debit or credit card can be used to pay the required FUTA deposits during the year.
A) True
B) False

B) False