Module 3 Flashcards

Question

Adoption Assistance Limitation

Answer 1

$17,280 non taxable

Answer 2

Report on W2, Box 12, Code T (example T is for Toddler**)

Answer 3

Yes if: -combined loan amounts over $10,000 -interest rates below the federal interest rate The difference between the interest rate the employer is charging and the federal interest rate is subject to SOCIAL SECURITY, MEDICARE and FUTA taxes.

Answer 4

Employee has the opportunity to purchase the employer corporation stock at a fixed price for certian period of time, without the conditions placed on incentive stock options.When the option is excercised, the employee receives income equal to the excess of the value of the stock over the price paid by the employee. The income is TAXABLE and must be reported on the employee's W2 in Boxes, 1, 3, 5 as well as Box 12 with code

Answer 5

The wages paid after an employee death depends on when the wages are paid in relation to employees death. -Employee dies before cashing paycheckIf employee dies after receiving a paycheck but before cashing, the employer should reissue the check to the employees personal reprsentative for the same net amount, since income and eployment taxes were properly withheld. The wges and amounts withheld must be reported on teh deceased employee's form W2-Wages paid after employee dies and in the same year.Wages paid to estate or legal representative are not subject to Fed only SS, Med, FUTA. The amounts must be reported on W2 in boxes 3-6 and 1099 misc.-Wages paid after the year of deahNot subject to any taxes but must be reported on W2 and 1099 misc.

Answer 6

April 1, 2026.

Answer 7

April 1, 2026. When an employer uses the IRS Special Accounting Rule, the value of an employee's noncash fringe benefit provided in November and/or December are included in the employee's income in the next tax year.

Answer 8

False Generally, qualified scholarships and fellowship grants are excluded from the gross taxable income of the recipient. However, the exclusion does not apply to any amount representing payment for teaching, research, or other services required as a condition of receiving the scholarship.

Answer 9

6,160 8800 x .70

Answer 10

The employer must withhold social security and Medicare taxes on the value of the personal use of the vehicle. Under IRS rules, the value of the personal use of a company vehicle is subject to social security and Medicare tax withholding. It is the employer’s option whether to withhold income tax. When using the cents-per-mile valuation method the value of the vehicle cannot exceed the luxury vehicle value ($61,200.00 in 2025). It does not matter if the employee drives more personal than business miles in the company-vehicles when determining the taxation of the personal use of the vehicle.

Answer 11

False Under IRS rules, company-subsidized meals provided in a discriminatory manner are included in an employee's income.

Answer 12

The correct answer is: $34.50 Under IRS rules, calculate the taxable value of excess GTL coverage with six steps: 1) Determine the GTL coverage; 2) Calculate the excess coverage (the amount over $50,000); 3) Divide the excess by $1,000; 4) Determine the employee’s age on December 31; 5) Using IRS Table 1 Uniform Premium for one month, multiply the value for the employee’s age by the amount from Step 3; 6) Subtract any after-tax GTL deductions from the employee’s pay to determine the taxable amount.

Answer 13

D. Report $10,000.00 in Box 1 on the employee's Form W-2. Under the IRC, the sale of a stock acquired in an ISO not meeting the holding period requirements (selling within 2 years of the option’s grant or sale within 1 year after exercise) is a disqualifying disposition. The difference between the option and exercise price (sale price if lower) is included only in Box 1 on Form W-2.

Answer 14

C. An employee sells stock acquired in an incentive stock option plan before the required holding period ends Under IRS rules for an incentive stock option plan, when the employee sells the stock before the required holding period ends, a disqualifying disposition has occurred. When a disqualifying disposition has occurred, income from the sale (the difference between the option price and exercise price or sale price if lower) is reported on Form W-2 in Box 1. It is not reported in Boxes 3 or 5. In a nonqualified stock option plan, income is reported when an employee exercises the stock option (purchases the stock at a price less than the fair market value). The income is reported in Boxes 1, 3, and 5 on Form W-2.

Answer 15

No-additional cost services Qualified EE discounts Working condition fringes De minimis fringes Qualified transportation benefits Qualified retirement advice services On=premise athletic facilities

Answer 16

Must include in their wages the value or taxable benefits they could have selected. Each benefit could have further restrictions for highly comped EEs

Answer 17

An officer A shareholder who owns more than 5% of the voting power or value of all classes of the ER stock An EE who is highly compensated based on the facts & circumstances ($160k per year) A spouse or dependent of a person described in one of the above

Answer 18

If more than 25% of the total non-taxable benefits provided go to key employees

Answer 19

One of the following: 1) An Officer having annual pay of more than $230k 2) An EE who is either of the following: a) a 5% business owner, or b) a 1% owner of the business who's pay is more than $150k

Answer 20

A tax free benefit consisting of free services offered by an ER at no substantial additional cost to the ER Conditions: 1) Service is regularly offered for sale to the customer during normal line of business 2) ER bears no substantial additional cost 3) Offered on equal terms to EEs and does not discriminate

Answer 21

Discounted goods or services offered by an ER w/out adding to EEs income Discount cannot exceed gross profit percentage, 20% of customer price Must be in ERs line of business Cannot discriminate in favor of highly comped EEs

Answer 22

certain work-related property or services offered by an ER

Answer 23

Business use of the company car or airplane. Professional dues and membership fees. Job related education. Out placement services. Business use of cell phones provided primarily for business purposes

Answer 24

Real estate and personal property held for investment

Answer 25

Current and former. Retirees and disabled employees

Answer 26

Items with a value exceeding $100 do not qualify If value is to large to be De minimis, then entire value is taxable

Answer 27

Because they are considered cash equivalent. Not considered de minimis per IRS even a value is less than $100

Answer 28

Non-Excludable de minimis fringe benefits

Answer 29

1. Property or service must relate to the employer's trade or business. 2. The employee must be able to take a business deduction on their personal tax return. 3. The employer must maintain the required records to substantiate the business deductions

Answer 30

Current employee, partner, director, or independent contractor performing services for the employer

Answer 31

The employer must require beforehand that the payment be used for business activity, and that the excess be returned within a reasonable time period

Answer 32

Combined Transit passes, vouchers, tokens, Fair cards, Highway commuter vehicles, and parking

Answer 33

Fair market value

Answer 34

A way to provide qualified Transportation benefits on a pre-tax basis

Answer 35

Before the employee is able to receive the taxable compensation

Answer 36

A fixed dollar amount or a fixed percentage of compensation

Answer 37

The amount the fair market value of the benefit exceeds the exclusion amount, plus any amount paid by the employee for the benefit

Answer 38

401k, 403b, SEP, Simple Plan Not provided for 457 b plans

Answer 39

Amount included = FMV - (Amt EE pays + any amount excluded by law IFBA = FMV - (EPA + AEL) IFBA: Includable Fringe Benefit Amount EPA: Employee Paid Amount After Taxes AEL: Amount Excluded by Law

Answer 40

Employers can choose how frequently to pay. Example per pay, quarterly, etc. Exception: for stocks, when an employer transfers these to employee they should be considered paid upon transfer to employee.

Answer 41

Anything not excluded by law is taxable

Answer 42

Federal income tax Social Security and Medicare (under FICA) FUTA tax

Answer 43

Non cash only: Fringe benefits provided to employees during November and December can be treated as paid the next year Employers must notify employees. If they use rule for one employee, must use for all employees

Answer 44

The amount cannot be excluded from the employee's W-2

Answer 45

The employer excludes the repayment from income on W-2

Answer 46

Generally refers to money or benefits received that must be returned due to special circumstances or events. Different from a repayment because it usually involves a penalty

Answer 47

When an employee wins a lawsuit or settlement against their employer for alleged violations of federal and state employment laws, the amounts awarded are often considered to be back pay for wages unlawfully denied. Per irs, payments are in fact subject to income and employee taxes

Answer 48

Boxes 1, 3, and 5 of the W-2

Answer 49

FIT is not withheld from statutory. SS and Medicare is withheld. Excluded from FUTA only if employee is solely paid via Commission

Answer 50

Yes, as long as the manufacturer is paying the salesperson at the employer's request, because then the commissions are wages because they are comp performed for the ER The third party would be responsible for all taxes on the commission payment

Answer 51

1099-MISC if they are paid through a 457 plan or a non-qualified deferred comp plan 1099-R if they are paid under a qualified plan or under something other than a pension, retirement, or profit sharing plan

Answer 52

No to SS and Medicare Yes to federal income tax

Answer 53

Any amount paid to or for the benefit of an individual to reimburse or pay reasonable and necessary personnel, family, living, or funeral expenses incurred as a result of a qualified disaster. IRS rules payments are not included in gross income

Answer 54

Depends on employers policy what is considered wages

Answer 55

Payment is not considered wages and is reported on a 1099-MISC in box 3

Answer 56

Employees donate a certain number of paid leave days, which are then deposited in a leave bank. Payments under a leave sharing plan are considered taxable income and are wages.

Answer 57

Once a month, by the 10th of the next month. Example, must report June tips to employer by July 10th. Only applies if they've earned at least $20 in tips in one month.

Answer 58

Employer can ask employees to come up with the money. If not enough, employer must withhold ss, medicare, and fit on regular wages, first, and then collect tax on tips. Any uncollected employee tax on tips must be reported on W-2 box 12-A for SS, and 12-B for Medicare

Answer 59

When employee reports the tips to employer

Answer 60

Form 4137, Social Security and Medicare tax on unreported tip income

Answer 61

When employer receives a notice and demand from irs. Employer must pay social security and Medicare taxes owed on the employer side and report on next form 941

Answer 62

Establishment with more than 10 employees must allocate tips if the amount reported for a pay period is less than 8% of establishments gross sales subject to tips for the period. Reported in box 8

Answer 63

An excess parachute payment is made due to a change in ownership. The excess parachute payment is the amount that exceeds the employee’s five-year average compensation.

Answer 64

Dependent care assistance is taxable when an excess of the taxable limit is received by an employee during the calendar year. The excess is reported in boxes 1, 3 and 5 of Form W-2.

Answer 65

Taxable and nontaxable dependent care assistance benefits are reported on Form W-2 in Box 10. Taxable benefits are also reported in boxes 1, 3, and 5

Answer 66

For employees on temporary military assignment, differential military pay is subject to FITW, social security, Medicare, and FUTA taxes. For employees on active duty, payments are only subject to FITW

Answer 67

Employer-provided lodging is not taxable when furnished on the employer’s premises, furnished for the convenience of the employer, and as a required condition of employment

Answer 68

The formula for taxable benefits is the fair market value less amounts excluded by law less any amounts paid for the benefit with after-tax dollars.

Answer 69

Employees may be reimbursed in an accountable plan $319 per day for business travel expenses incurred in a high cost location

Answer 70

The fair market value of the stock on the date restrictions end is taxable for federal income, social security, Medicare and FUTA taxes.

Answer 71

The spread from the sale of an incentive stock option is not wages but is treated as a capital gain or loss. A disqualifying disposition could result in a profit being included in taxable income

Answer 72

Nontaxable dependent care assistance benefits are provided only when dependent care is necessary for the employee to work. Dependent children must be under age 13 or cannot care for themselves.

Answer 73

The spread (difference between purchase price and FMV on date of purchase) is taxable for federal income tax, social security, Medicare and FUTA taxes on the date of exercise (date stock is purchased).

Answer 74

Nontaxable per diem reimbursements are made under an accountable plan for expenses incurred while traveling away from home overnight at a rate less than or equal to a federal or IRS per diem rate

Answer 75

Nontaxable use of company vehicles include business use, de minimis use, qualified nonpersonal use vehicles, and certain automobile salespersons’ use.

Answer 76

The personal use of a company aircraft is taxable. The taxable amount can be calculated using the general valuation rule or noncommercial flight valuation rule.

Answer 77

The lesser of the difference between the option price and FMV on purchase date or option price and FMV on sale date is taxable for federal income tax

Answer 78

When taxes exceed normal cash wages, the IRS has defined the priority for the withholding of taxes from tips as social security and Medicare first, then federal income tax.

Answer 79

Tips are deemed paid when the employee reports the tips to the employer, using the employer’s required reporting method.

Answer 80

If conditions are met, length of service, safety, and civic/charitable awards are not taxable.

Answer 81

Form 3921, Exercise of an Incentive Stock Option Under Section 422(b), reports the transfer of the stock purchased in an incentive stock option plan to the employee and IRS.

Answer 82

Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan Under Section 423(c), reports the transfer of the stock purchased in an ESPP to the employee and IRS

Answer 83

Form 8922, Third-Pay Sick Pay Recap, is filed with the IRS by employers or insurance companies paying third-party sick pay to reconcile the differences between Forms W-2 and 941.

Answer 84

A §83(b) election allows an employee the ability to have the FMV of the stock included in gross income on the date of the grant of the restricted stock

Answer 85

Imputed income is the value of noncash benefits received and included in employee income. When imputing income, an employee pays taxes on a fringe benefit from paid wages.

Answer 86

The difference between the current federal interest rate and a lower employer interest rate on loans made to employees.

Answer 87

All of an employee’s compensation, in whatever form, is taxable unless specifically excluded by law

Answer 88

An award of stock to an employee as compensation is taxable when the restrictions on the stock (substantial risk of forfeiture) has passed.

Answer 89

Back pay is taxable in the year paid even if earned in a prior year. Back pay awarded under a statute is reported to SSA for allocation to the individual’s earnings record.

Answer 90

Short or long term disability benefits are taxable when the premiums are paid for by the employer and/or if the employee pays with pretax dollars.

Answer 91

Whole-life insurance payable to an employee’s beneficiary is taxable. The taxable amount is the increase in cash surrender value for the year and reasonable net premium cost

Answer 92

FIT is withheld when employer pays (based on W-4), when agent pays (supplemental wages), and when third-party pays (W-4S). Social security and Medicare taxes are withheld for 6 calendar months

Answer 93

Social security and Medicare taxes are withheld on the taxable value of group-term life insurance. It is taxable for federal income tax, but withholding is not required

Answer 94

Adoption assistance is subject to social security and Medicare tax withholding. Adoption assistance is not subject to FITW but is reported on Form W-2 in Box 12 with Code T.

Answer 95

False - Under IRS rules, federal income, social security and Medicare taxes are not withheld from allocated tips.

Answer 96

$3,570.00 Under IRS rules, to determine the income using the cents-per-mile method, multiply the personal miles times the standard business mileage rate ($0.700 per mile in 2025).

Answer 97

D. a documented hotel bill is submitted when an employee works late and has no transportation home.

Answer 98

False - Federal income tax withholding is optional.

Answer 99

A. §83(b) Employees can make an §83(b) election which allows the employee the ability to elect to include income of the fair market value of the stock at the time of election.

Answer 100

C. The insurer The insurer is responsible for filing Form 8922, Third-Party Sick Pay Recap, when third-party sick pay is reported on Form W-2 under the name and EIN of the employer. Form 8922 provides the IRS the ability to reconcile the differences between Forms W-2 and 941 when the employer and third-party sick pay providers share the responsibilities for the reporting and depositing.

Answer 101

C. employee exercises the option. Under IRS rules, nonqualified stock options are subject to federal income tax withholding when the employee exercises the option.

Answer 102

A. The employer The employer is responsible for filing Form 8922, Third-Party Sick Pay Recap, when third-party sick pay is reported on Form W-2 under the name and EIN of the insurer. Form 8922 provides the IRS the ability to reconcile the differences between Forms W-2 and 941 when an employer and the third-party sick pay provider share the responsibilities for reporting and depositing.

Answer 103

If the Third Party issues the W-2s under their name and EIN: The employer files Form 8922. If the Employer issues the W-2s under their name and EIN: The third-party agent/insurer files Form 8922.

Answer 104

Taxable sick pay = Employee's sick pay x (Employer-paid premiums for last 3 years / Total premiums for last 3 years)

Answer 105

D. Federal income, social security, and Medicare taxes are withheld. Under IRS rules, when a disabled employee receives payments from the employer’s agent, income tax is withheld using the supplemental wage withholding method’s optional flat rate. Social security and Medicare taxes are withheld for six calendar months beginning with the first month after the employee’s last day of work.

Answer 106

B. When the risk of forfeiture ends Under IRS rules, when stock provided to an employee contains restrictions, the fair-market value of the stock is included in the employee’s income when the risk of forfeiture ends.

Module 3 Flashcards

Fringe Benefits & Other Payments (130 cards)