Fundamentals of Taxation

Business

Quiz 10 :

Payroll Taxes

Quiz 10 :

Payroll Taxes

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Who pays FICA? What are the percentages and limits on the payments?
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Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. Payroll taxes are those portions of salary which is withheld by employer when paying salaries to employees and then this portion is submitted to government by employer on behalf of the employee. When payment is given to employee by the employer then they include many things in this payment like salaries, incentives, bones, commission, payment against fringe benefits which are taxable, etc.Federal Insurance Contribution Act taxes are commonly known as FICA taxes. There are two components of FICA taxes i.
e. social security taxes and medicare taxes. Social security taxes are collected to enable government to pay of old age, survivors and disability insurance, which is social, legal and administrative responsibility of the government. Medicare taxes are collected by government to pay for medical insurance of old age people and other individuals which come under specific categories.
FICA taxes are also withheld by the employers. FICA is paid by employee as well as employers. Social security taxes are 4.2 percent of the taxable salary up to the annual salary limit of $106,800, while employer has to pay social security tax of 6.2 percent up to the same higher limit of employee annual wage. Both employee and employer have to pay 1.45 percent of the employee's annual earning as medicare tax.

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If a taxpayer makes $30,000 per year, will the annual withholding differ depending on whether the taxpayer is paid weekly, semimonthly, or monthly? Explain.
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The annual withholding will not materially differ regardless of the pay period of the taxpayer. As the payroll period gets shorter, tax withholding per check will decrease, yet the total for the year will remain roughly the same.

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What are the penalties for not making timely payroll deposits?
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Income tax is the tax paid by individuals, household and business entities to the government on the earnings that they have. Payroll taxes are those portions of salary which is withheld by employer when paying salaries to employees and then this portion is submitted to government by employer on behalf of the employee. When payment is given to employee by the employer then they include many things in this payment like salaries, incentives, bones, commission, payment against fringe benefits which are taxable, etc.The penalties for not paying or depositing payroll taxes on time by employer are as follows:
• When the late period is less than 5 days then penalty charged is 2 percent of the taxes due.• When the late period is less than or equal to 15 days but more than 5 days then penalty charged is 5 percent of the taxes due.• When the late period is more than 15 days then penalty charged is 10 percent of the taxes due.• If it was needed that taxes are to be paid electronically but it is not paid in that manner then there is 10 percent penalty.
• It taxes are deposited directly to IRS, or paid when return is submitted or paid to some unauthorized institution then there is 10 percent penalty imposed.• When payroll taxes are still due after 10 days of first notice issued by IRS regarding nonpayment then 15 percent penalty will be charged.

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What individuals are subject to the payroll taxes on household employees?
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When must monthly and semiweekly schedule depositors make their deposits? What taxes must be deposited?
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Use the information from Problem 57. Prepare the Form 941, including Schedule B, for the second quarter of 2010. Assume that the payroll is consistent every pay period beginning in April through June 30 and that all tax deposits were made on a timely basis as required. Jones Company's Employer Identification Number (EIN) is 36-1238975 and its address is 1825 Elkhart Way, Columbus, GA 31904. Assume Jones paid $2,400 in COBRA assistance payments for two individuals for the quarter. There were no new employees hired.
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If a taxpayer works more than one job, will the withholding from the various jobs necessarily cover his or her tax liability? Explain.
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How often must employers report payroll taxes to the IRS? What form must the employer file?
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When are employees required to report tips to their employer? Are tips subject to the same withholding requirements as regular salary?
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What are the tip reporting requirements for large food and beverage establishments?
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If a business fails to make payroll deposits, who is held responsible?
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What is the FUTA tax, and at what percentage is it assessed?
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What is a lookback period?
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Use the information from Problem 57. Prepare the Form 940 for 2010. Assume that Jones Company has timely paid all amounts due to the state unemployment fund assume a total amount of $3,471) and that the payroll was consistent throughout the entire year. No FUTA deposits were made during the year.
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Who completes Form W-4, and what is its purpose? What information does it provide to employers?
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In addition to federal tax withholding, what other taxes are employers required to withhold from an employee's paycheck? How are the calculations made?
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Use the information from Problem 57. Prepare a Form W-2 for Heather Burk. Her SSN is 412-34-5670 and her address is 988 Main Street, Midland, GA 31820. The EIN for Jones Company is 36-1238975 and its address is 1825 Elkhart Way, Columbus, GA 31904.
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What are the rules for deducting COBRA assistance payments on Form 941 for the 2010 tax year?
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What type of compensation is subject to employer withholding
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When must employers make payroll tax deposits?
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