1. Under the federal income tax withholding law, which of the following is not defined as an employee?

A) Partner who draws compensation for services rendered the partnership

B) General manager, age 66

C) Payroll clerk hired one week ago

D) Governor of the state of Florida

E) Secretary employed by a not-for-profit corporation

2. Which of the following noncash fringe benefits does not represent taxable income subject to federal income tax withholding?

A) Flight on employer-provided airline

B) Personal use of company car

C) Sick pay

D) Employer-paid membership to a country club

E) All of the above are taxable.

3. For which of the following payments is the employer required to withhold federal income taxes?

A) Advances made to sales personnel for traveling expenses

B) Tipped employee's monthly tips of $120

C) Deceased person's wages paid to the estate

D) Minister of Presbyterian church

E) All of the above

4. Which of the following statements correctly describes the withholding of federal income taxes and social security taxes on tips?

A) Tips amounting to $10 or more in a calendar month must be reported by tipped employees to their employers.

B) The withholding of federal income taxes on employees' reported tip income is made from the amount of tips reported by employees.

C) When employees report taxable tips in connection with employment in which they also receive regular wages, the amount of tax to be withheld on the tips is computed as if the tips were a supplemental wage payment.

D) Employers do not withhold FICA taxes on the tipped employees' reported tip income.

E) None of the above statements is correct.

5. All of the following are properly defined as wages subject to the withholding of federal income taxes except:

A) year-end bonus.

B) kitchen appliances given by manufacturer in lieu of cash wages.

C) dismissal payment.

D) vacation pay.

E) payments made under worker's compensation law.

6. Which of the following cannot be included in a cafeteria plan?

A) Health insurance

B) Group-term life insurance (first $50,000 of coverage)

C) Dependent care assistance (first $5,000)

D) Self-insured medical reimbursement plan

E) Educational assistance

7. A personal allowance:

A) amounted to $2,000 in 2010.

B) may be claimed to exempt a portion of their earnings from withholding.

C) is indexed for inflation every calendar quarter.

D) may be claimed at the same time with each employer for whom an employee is working during the year.

E) for one person is a different amount for a single versus a married taxpayer.

8. Beech refuses to state her marital status on Form W-4 which she gave to you, the payroll manager, when she was hired. You should:

A) tell Beech that it is OK since you know that she was recently divorced and is reluctant to talk about it.

B) inform Beech that she will have to write the IRS and give her reasons for refusing to state her marital status.

C) tell Beech that you will have to withhold income taxes as if she were married and had claimed one allowance.

D) tell Beech that you will have to withhold income taxes according to the withholding table for a single employee with no allowances.

E) advise Beech to write "It is no business of yours." in the margin of her Form W-4.

9. Arch gives you an amended Form W-4 dated March 13, 2010, on which he claims two additional withholding allowances. He asks you to refund the excess taxes that were deducted from January 1 to March 13 when Arch claimed only one withholding allowance. You should:

A) repay the overwithheld taxes on Arch's next payday.

B) tell Arch that you will spread out a refund of the overwithheld taxes equally over the next six pays.

C) inform Arch that you are unable to repay the overwithheld taxes that were withheld before March 15 and that the adjustment will have to be made when he files his annual income tax return.

D) tell Arch to write the IRS immediately and ask for a refund of the overwithheld taxes.

E) inform Arch that you will appoint a committee to study his request.

10. To curb the practice of employees filing false Forms W-4, the IRS requires that an employer submit to the agency a copy of each Form W-4:

A) the IRS has requested in writing.

B) on which an employee, usually earning $180 each week at the time Form W-4 was filed, now claims to be exempt from withholding.

C) on which an employee claims to be single but has 9 withholding allowances.

D) on which a married employee claims no withholding allowances.

E) on which a recently divorced employee claims 5 withholding allowances and authorizes an additional $10 to be withheld each week.

11. All of the following statements correctly pertain to the advance payment of the earned income credit (EIC) except:

A) The EIC reduces federal income taxes mostly for workers who have dependent children and maintain a household.

B) The maximum amount of the EIC is adjusted annually for inflation.

C) Eligible employees who want to receive advance EIC payments must file Form W-5 with their employer.

D) If employees do not choose to get advance EIC payments, they lose the benefit of the EIC when they file their personal income tax returns.

E) All of the above statements are correct.

12. Which of the following forms is used to report the amount of distributions from pension and retirement plans?

A) W-2c

B) 1099-R

C) 1099-PEN

D) W-3p

E) W-4

13. An employer must file an information return under all of the following conditions except:

A) to report $1,000 of compensation paid to an individual who is not an employee.

B) to report the wages totaling $600 paid to an independent contractor during the calendar year.

C) to report dividends totaling $600 paid to an individual during the calendar year.

D) to report commissions of $500 paid to a self-employed salesman.

E) An information return must be filed under each of the above conditions.

14. Which of the following forms is used to report rents paid over $600 to landlords?

A) Form 1099-R

B) Form 1099-INT

C) Form 1099-MISC

D) Form 1099-G

E) Form 8027

15. A company must withhold federal income taxes from payments made to independent contractors in which of the following cases?

A) When there is a signed contract between the parties.

B) When the contractor is paid more than $10,000.

C) When the contractor is a corporation.

D) When the contractor has not provided a taxpayer identification number and the contract is $600 or more.

E) All of the above.