Exam 3: Social Security Taxes

The Social Security Act does not require self-employed persons to have an account number.

FICA defines all of the following as employees except :

On payday, Friday, a semiweekly depositor has accumulated employment taxes totaling $13,900. The taxes should be deposited on or before the following Wednesday.

Under FICA, each partner in a partnership is defined as an employee of that organization.

Employers who fail to file employment tax returns are subject to both civil and criminal penalties.

Employees and independent contractors pay different FICA tax rates.

Nonagricultural employers who withhold income taxes and are liable for social security taxes must file a monthly tax and information return.

Exempt educational assistance includes payments for tools that employees keep after they complete a course of instruction.

Severance pay is considered taxable wages under FICA.

FICA defines wages as including the cash value of meals provided for the convenience of the employees.

Instruction 3-1 Use the following tax rates, ceiling and maximum taxes: Employee and Employer OASDI:     6.20%                  $132,900                          $8,239.80 Employee* and Employer HI:           1.45%                  No limit                           No maximum Self-employed OASDI:                      12.4%                  $132,900                        $16,479.60 Self-employed HI:                                2.9%                    No limit                          No maximum *Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to self-employed. Rounding Rules: Unless instructed otherwise compute hourly rate and overtime rates as follows: 1. Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimals places (round the hourly rate to 2 decimal places     before multiplying by one and one-half to determine the overtime rate). 2. If the third decimal place is 5 or more, round to the next higher cent. 3. If the third decimal place is less than 5, drop the third decimal place. Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow.  Refer to Instruction  3-1 . Fess receives wages totaling $75,700 and has net earnings from self-employment amounting to $61,300. In determining her taxable self-employment income for the OASDI tax, how much of her net self-employment earnings must Fess count?

If tax deposits are made on time, there is no penalty for late filing of Form 941.

Self-employed persons include their self-employment taxes in their quarterly payment of estimated federal income taxes.

Under FICA only, cash tips of more than $100 in a month are defined as taxable wages.

Under SECA, all of an individual's self-employment income is counted in determining the HI tax.

The FICA tax rates for the self-employed are:

Instruction 3-1 *Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to self-employed. Rounding Rules: Unless instructed otherwise compute hourly rate and overtime rates as follows: 1. Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimals places (round the hourly rate to 2 decimal places     before multiplying by one and one-half to determine the overtime rate). 2. If the third decimal place is 5 or more, round to the next higher cent. 3. If the third decimal place is less than 5, drop the third decimal place. Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow. Refer to Instruction  3-1 . On August 1, Huff (part-time waitress) reported on Form 4070 the cash tips of $158.50 that she received in July. During August, Huff was paid wages of $550 by her employer. Determine:

If an employee, who works two or more separate jobs, pays OASDI taxes on wages in excess of the taxable wage base, the employee is entitled to a refund of the overpayment.

Instruction 3-1 *Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to self-employed. Rounding Rules: Unless instructed otherwise compute hourly rate and overtime rates as follows: 1. Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimals places (round the hourly rate to 2 decimal places     before multiplying by one and one-half to determine the overtime rate). 2. If the third decimal place is 5 or more, round to the next higher cent. 3. If the third decimal place is less than 5, drop the third decimal place. Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow. Refer to Instruction  3-1 . Dee is paid $2,345 on November 8, 20--. Dee had cumulative gross earnings, including overtime pay, of $131,600 prior to this pay.

Monthly depositors are required to deposit their taxes by the 15th day of the following month.