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Compensation and Retirement Planning
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Principles of Taxation

Business

Quiz 15 :
Compensation and Retirement Planning

Quiz 15 :
Compensation and Retirement Planning

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The classification of a worker as an employee or an independent contractor determines how much payroll tax a company must pay.
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True False
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Answer:

True

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Employers must withhold state and federal income tax from compensation paid to independent contractors.
Free
True False
Answer:

Answer:

False

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An independent contractor is not entitled to the same fringe benefits as an employee.
Free
True False
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Answer:

True

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Self-employed individuals have fewer opportunities than employees to underpay income and payroll taxes.
True False
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Mr.Hazel,the principal executive officer of a publicly held corporation,received $2.5 million compensation this year.The compensation consisted of an $800,000 base salary and a $1.7 million year-end bonus for outstanding performance.The corporation is allowed to deduct the entire amount of Mr.Hazel's compensation.
True False
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The IRS is less likely to raise the issue of reasonable compensation during the audit of a publicly held corporation than a closely held corporation.
True False
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In 2019,Dargo Inc.,a calendar year corporation,accrued a $75,000 year-end bonus payable to its communications director.Dargo and the director are not related parties.Dargo paid the bonus to the director on February 8,2020.Dargo can deduct the bonus in 2019.
True False
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In 2019,Largo Inc.,a calendar year corporation,accrued a $45,000 year-end bonus payable to its communications director.Largo and the director are not related parties.Largo paid the bonus to the director on April 3,2020.Dargo can deduct the bonus in 2019.
True False
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An S corporation generated $160,000 ordinary taxable income this year.The shareholders must pay both income and self-employment tax on their pro rata shares of this income.
True False
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A shareholder-employee of an S corporation prefers to receive a greater salary rather than a greater pro-rata share of corporate taxable income.
True False
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Wages paid by an employer to an employee who is the employer's child under age 18 are not subject to federal FICA and unemployment taxes.
True False
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Employees don't include the value of any compensatory fringe benefits in gross income because the benefit doesn't consist of a direct cash payment.
True False
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The value of employer-provided health insurance is excluded from the employee's gross income.
True False
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An employee recognizes taxable income if his employer provides group-term life insurance coverage in excess of $50,000.
True False
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Olan Inc.provides an on-site day care center free of charge to employees who have pre-school children.Employees who enroll their children may exclude the value of this fringe benefit from gross income.
True False
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The value of a nontaxable fringe benefit is different for each employee because employees have different financial needs and consumption preferences.
True False
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Self-employed individuals are allowed to deduct the cost of health insurance for themselves and their families only as an itemized deduction.
True False
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A cafeteria plan allows employees to select between a variety of nontaxable fringe benefits or taxable cash compensation.
True False
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An employee who receives restricted stock as compensation from a corporate employer must include the stock's fair market value in gross income in the year of receipt,even though the employee's ownership rights in the stock are nonvested.
True False
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A corporation that transfers restricted stock to an employee as compensation may deduct the stock's fair market value in the year of transfer even if the employee doesn't recognize the value as gross income in the year of transfer.
True False
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