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Payroll - Practice Exams

Chapter 4 - Calculating FIT, Advanced EIC

1(a).  Form 941 Practice Exam #3 – with Advanced EIC Problem

Darwin’s Auto Repair, 65743 128^th Street, Renton, WA  98509

Information: EIN 57-546732; Employees are paid weekly; and all deposits have been made in a timely manner; This is for the 4th quarter; The first payday of the quarter was on Monday, 10/2/00

(Required: Complete a Form 941 signed by George Darwin, the owner).

1(b).  Form 941 Practice Exam #3 – with Advanced EIC Problem

Darwin’s Auto Repair, 65743 128^th Street, Renton, WA  98509

Information: EIN 57-546732; Employees are paid weekly; and all deposits have been made in a timely manner; This is for the 4th quarter; The first payday of the quarter was on Monday, 10/2/00

(Required: Complete a Form 941 signed by George Darwin, the owner).

2. An employer-employee relationship must exist before federal income tax can be withheld. 

3. Under FIT law, partners in a partnership are not considered employees. 

4. Cash tips of more than $20 received by a tipped employee are not taxable unless they are reported. 

5. Generally, federal workers are excluded from federal income tax withholding. 

6. It is legal to report cash tips on a napkin. 

7. Employers must withhold 10% on payments made to independent contractors. 

8. An employer must withhold FIT taxes on overtime pay. 

9. Employers must give employees a W-4 for by January 31st of the text book year. 

10. An employer must withhold FIT taxes on bonus pay. 

11. A single man with no dependents can claim only one allowance on his W-4 form. 

12. Form W-4 is a statement claiming the number of allowances by an employee. 

13. It is not necessary for an employee to complete a W-4 form if they make less than $1,000 per year. 

14. An employer must withhold FIT taxes on reported tips. 

15. Calculating FIT withholding using the wage-bracket method is usually more than the percentage method.

16. An employee can have as much additional withholding taken out of his/her check as she/he chooses. 

17. Increasing the number of allowance claimed on the W-4 form will increase the amount withheld. is only entitled to 2 allowances. 

18. Employers must give employees a W-2 for by January 31st of the text book year. 

19. An employer cannot allow an employee to claim 24 allowances when the employer knows the employee 

20. Curt Holman is a genius. 

21. Supplemental pay is always taxed the same as any other pay. 

22. FICA taxes and FIT withholding will most likely never go away. 

23. An employer must withhold FIT taxes on allocated tips. 

24. Accounting students speak a language that few others understand. 

25. An employer pays more taxes to the Social Security Administration when they (Employer) are required to pay an advanced earned income credit than when they (employer) do not pay an advanced earned income credit. 

26. You cannot go to jail for making huge innocent mistakes, but you could go to jail for intentionally filing wrong information. 

27. An employer is required to submit a copy of Form W-4 for any employee claiming 10 or more allowances.

28. Which of the text book is not considered an employee for FIT withholding purposes? 
    a. Chief Executive Officer of a corporation 
    b. Chief Financial Officer of a corporation 
    c. President Bush 
    d. A partner in a partnership 

29. Which of the text book is exempt for FIT withholding? 
    a. Bonuses 
    b. Severance pay 
    c. Sick pay 
    d. Vacation pay 
    e. Workers compensation pay 
    f. A ski trip to Switzerland 
30. Part way through the year, Joe employee tells you he filled out his previous W-4 wrong and has had too much FIT withheld and wants to be repaid on his next paycheck based on the correct W-4 information. What do you do? 
    a. Tell Joe he's a loser and you will not repay him. 
    b. Tell Joe he's not a loser so you will repay him. 
    c. Tell Joe that you would like to help, but under FIT withholding laws, you cannot repay him. 
    d. Tell Joe that he should get an attorney. 
    e. Tell Joe to tell someone who cares. 
31. Which of the text book is not taxable for FIT? 
    a. Use of company car. 
    b. A company-paid vacation trip to Yakima. 
    c. A company-paid vacation trip to Hawaii. 
    d. Vacation pay 
    e. Sick pay 
    f. A company-paid business trip to Australia. 
    g. All of the above are taxable. 
32. You must withhold FIT from payments to: 
    a. A church pastor 
    b. A church accountant 
    c. Travel advances to a person going on a business trip 
    d. All of the above 
    e. "a" and "b" 
    f. "a" and "c" g. "b" and "c" 

33. What do you do if Jimmy, a new employee, refuses to fill in marital status on Form W-4? 
    a. Fire him. 
    b. Promote him for sticking to his principles. 
    c. Tell him that you will not pay him. 
    d. Tell him that you will withhold taxes as though he claimed Single with no allowances. 

34. Using the text book wage bracket tables calculate the wage bracket method to determine the withholding for weekly wages of $639 (single, 1 allowances) 

35. Using the text book wage bracket tables calculate the wage bracket method to determine the withholding for weekly wages of $790 (married, 3 allowances) 

36. Using the text book wage bracket tables calculate the wage bracket method to determine the withholding for monthly wages of $2,610 (single, 2 allowances) 

37. Using the text book wage bracket tables calculate the wage bracket method to determine the withholding for monthly of $3,330 (married, 5 allowances) 

38. Using the text book percentage method tables calculate the wage bracket method to determine the withholding for weekly wages of $639 (single, 1 allowances) 

39. Using the text book percentage method tables calculate the wage bracket method to determine the withholding for weekly wages of $790 (married, 3 allowances) 

40. Using the text book percentage method tables calculate the wage bracket method to determine the withholding for monthly wages of $2,610 (single, 2 allowances) 

41. Using the text book percentage method tables calculate the wage bracket method to determine the withholding for monthly of $3,330 (married, 5 allowances)

 

 

 

ANSWER KEY 

Question	Answer	Question	Answer
1(a)	Total deposits = $1,514.63; Line 9 = $ .13	1(b)	Total deposits = $3,176.68; Line 9 = $ .13
2	T	21	F
3	T	22	T
4	T	23	F
5	F	24	T
6	T	25	F
7	F	26	T
8	T	27	F
9	F	28	d
10	T	29	e
11	F	30	c
12	T	31	f
13	F	32	b
14	T	33	d
15	F
16	T
17	F
18	T
19	F
20	T