Exam 4: Employee Compensation

Jose worked at an architectural firm as an employee for the first four months of 2018 before he established his own business. He earned $53,300 at the architectural firm. His net income from his sole proprietorship was $78,000. Determine Jose's self-employment tax for 2018.

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Question 1

Correct Answer:

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$78,000 x .9235 = $72,033 x .029 = $2,088.95 Medicare tax; $128,400 - $53,300 = $75,100 maximum subject to Social Security tax. $75,100 x .124 = $9,312.40. Total SE tax = $11,401.35 ($2,088.95 + $9,312.40) for 2018.

Which of the following would not be considered a de minimis fringe benefit?

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Question 2

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Briefly explain the differences in taxation between distributions from a traditional IRA and distributions from a Roth IRA.

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Question 3

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Distributions from a traditional IRA that represent contributions from pretax income (the usual case) and income earned on the investment in the IRA are fully taxable upon distribution from the traditional IRA. Only those contributions that are made with after-tax income can be returned without further taxation. Contributions to a Roth IRA are not deductible from income (unlike most contributions to traditional IRAs), and distributions that meet certain time requirements are fully tax free when withdrawn. Thus, the earnings on the income contributed to the Roth IRA are received tax free.

Which type of retirement plan would not be available to a corporation with 3,000 employees?

(Multiple Choice)

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Question 4

Which one of the following employee benefits can a staff accountant exclude from income?

(Multiple Choice)

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Question 5

Walter works busy season at the Seaside Hotel. for the 6 months he works there, his employer pays Walter a salary of $1,200 per month and gives him an additional $200 per month to help pay the cost of health insurance that he purchases for himself. The employer also supplies him with uniforms required to worn on the job valued at $700. What is Walter's taxable income for the six months that he works at the hotel?

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Question 6

In 2018 Lindsey decides she no longer wants to work in public accounting and decides to attend massage therapy school so that she may work as a massage therapist. She spends $6,000 for the education, obtains the required training and licensures in 2018, and began working with clients within her new career as a massage therapist in November 2018. For Susie, is the massage therapy school a work-related education expense?

(Multiple Choice)

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Question 7

A U. S. citizen working in a foreign country with a higher tax rate on income than the U. S. tax rate, is usually better off claiming the foreign tax credit than the foreign earned income exclusion.

(True/False)

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Question 8

Self-employed individuals make the deposits to their self-employment taxes in the months of April, July, September, and January.

(True/False)

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Question 9

Pablo earns $85,000 from his regular job as a salesman and an additional $60,000 from his sole proprietorship in 2018. What is his self-employment tax (rounded to the nearest dollar)?

(Multiple Choice)

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Question 10

George's flexible spending plan allows him to select fringe benefits equal to 10 percent of his annual salary of $75,000. Which of the following would be taxable if selected?

(Multiple Choice)

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Question 11

S corporations have an incentive to pay unusually low salaries to an employee-shareholder to avoid FICA taxes.

(True/False)

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Question 12

Taxable compensation received from a business does not include:

(Multiple Choice)

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Question 13

Which of the following are characteristics of a traditional IRA?

(Multiple Choice)

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Question 14

What is a phantom stock plan?

(Multiple Choice)

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Question 15

What is the maximum deductible contribution that Erick (age 32 and single) can make in 2018 to an Individual Retirement Account(s) if he earns $62,000 and is not covered by an employer-sponsored retirement plan?

(Multiple Choice)

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Question 16

Megan accepts an assignment working in Germany for the first 9 months of 2018 from Ferguson Corporation. Ferguson Corporation paid Megan's salary of $78,000 plus an additional $7,000 bonus. Megan paid $5,000 to the German government in taxes on this income. During 2018, Megan also earned $9,000 of interest income from corporate bonds and $4,000 of dividend income from U.S. corporations. The maximum foreign earned income exclusion for 2018 is $103,900. How much should Megan include in her gross income on her U.S. tax return for 2018?

(Multiple Choice)

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Question 17

Manuel's employer provides him with $80,000 of group term life insurance coverage for the year at no cost. The amount from the group term life insurance premium table for someone who is 40 years old is $0.10. How much must Manuel include in income as a result of this benefit if he is 40 years old and is not considered a key employee?

(Multiple Choice)

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Question 18

Stock appreciation rights allow an employee to benefit from an increase in the value of the employer's stock without actually purchasing the stock.

(True/False)

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Question 19

A rational taxpayer in the 25% tax bracket who wants health insurance would prefer the employer pay the $5,000 premium for this health insurance rather than receive a $5,000 increase in salary to purchase health insurance on his own.

(True/False)

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Question 20

Showing 1 - 20 of 101

Jose worked at an architectural firm as an employee for the first four months of 2018 before he established his own business. He earned $53,300 at the architectural firm. His net income from his sole proprietorship was $78,000. Determine Jose's self-employment tax for 2018.

Which of the following would not be considered a de minimis fringe benefit?

Briefly explain the differences in taxation between distributions from a traditional IRA and distributions from a Roth IRA.

Which type of retirement plan would not be available to a corporation with 3,000 employees?

Which one of the following employee benefits can a staff accountant exclude from income?

A U. S. citizen working in a foreign country with a higher tax rate on income than the U. S. tax rate, is usually better off claiming the foreign tax credit than the foreign earned income exclusion.

Self-employed individuals make the deposits to their self-employment taxes in the months of April, July, September, and January.

Pablo earns $85,000 from his regular job as a salesman and an additional $60,000 from his sole proprietorship in 2018. What is his self-employment tax (rounded to the nearest dollar)?

George's flexible spending plan allows him to select fringe benefits equal to 10 percent of his annual salary of $75,000. Which of the following would be taxable if selected?

S corporations have an incentive to pay unusually low salaries to an employee-shareholder to avoid FICA taxes.

Taxable compensation received from a business does not include:

Which of the following are characteristics of a traditional IRA?

What is a phantom stock plan?

What is the maximum deductible contribution that Erick (age 32 and single) can make in 2018 to an Individual Retirement Account(s) if he earns $62,000 and is not covered by an employer-sponsored retirement plan?

Stock appreciation rights allow an employee to benefit from an increase in the value of the employer's stock without actually purchasing the stock.

A rational taxpayer in the 25% tax bracket who wants health insurance would prefer the employer pay the $5,000 premium for this health insurance rather than receive a $5,000 increase in salary to purchase health insurance on his own.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Deductions for Individuals and Tax Determination

Business Expenses

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

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