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2015-09-29 20:09:15

Flashcards for 2015 fundamental payroll certification exam
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  1. Sole proprietorship
    • - riskiest - liabilities of business = liabilities of owner
    • - payments made to owner from withdrawals from the company
    • - not subject to EE taxes
    • - owner will not receive W2

    Forms: 1040-ES (estimated federal tax payments filed quarterly), 1040-SE (filed annually with personal income tax - FICA calculated to be annually filed), 1040 Schedule C (identifies profit and loss)
  2. Partnership
    • Business relationship between two or more persons
    • Each partner contributes in return for percentage of ownership (and profits/losses)
    • Partners are responsible for tax liability percentages that correspond with percentage of ownership
    • In addition to draws, may receive guaranteed payments
    • Guaranteed payments/draws not subject to employment taxes
    • Owners don't receive W2s

    Forms: 1040-ES (deposit estimated federal tax payments quarterly), 1040-SE (used to file self-employment FICA taxes with owner's personal income taxes), Schedule K-1 [Form 1065] (outlines each partner's share of company income so each partner can pay their personal responsibility of business income)
  3. Corporation
    • Most complex form of business
    • Owners become shareholders --> not personally liable for business
    • Shareholders are typically corporate officers, making them EEs
    • Since EEs, subject to EE taxes and receive W2s
    • *also taxes on dividends

    Forms: Form 1120 (US Corporation Income Tax Return)
  4. Non-employee Corporate Officer
    • Shareholder of corporation
    • Does not receive or entitled to pay
    • Performs no or only minor services
    • Consultative nature
    • *taxed on dividends
  5. Guaranteed Payments
    • Fixed payment [in a partnership] without regard for the income of the partnership
    • AKA "Nonpassive Income"
    • Not subject to EE taxes
  6. S-Corporations
    • Shareholders are rewarded like owners in partnership --> personally liable for taxes
    • Used to avoid double taxation (ie, EE taxes and dividend taxes)
    • Typically 1-3 shareholders
    • **if a shareholder owns more than 2%, cannot be treated as an EE in regards to benefits (ie, benefits would be taxable)

    Forms: Form 2553 (application), Form 1120S (report financial information/identify taxes due), 1120S K-1 (identifies shareholders' share of company income/expenses) --> Form 1040 E (file with their personal income taxes)
  7. Limited Liability Company (LLC)
    • Limits members' personal liability for debts and actions of the company
    • No maximum number of members
    • Not available in all states
  8. Limited Liability Partnership (LLP)
    • Organized to protect individual partners from personal liability for negligent acts of other partners/EEs
    • Sometimes limited to organizations that provide a professional service (ie, law/medicine)
    • Not available in all states
  9. Limited Partnership (LP)
    • Requires at least one general partner
    • General partner(s) fully responsible for partnership obligations/normal business operations
    • General partner(s) report their share of profits and losses on personal tax returns
    • Requires at least one lo,opted part
    • Limited partner(s) shielded from partnership obligations beyond investment
    • Limited partner(s) do not pay tax, still file for informative purposes
  10. Professional Service Corporation (PS or PC)
    • Organized for sole purpose of providing a professional service for which shareholder is licensed
    • Limited personal liability for shareholders
    • Only available to certain professionals (ie, doctors, lawyers, etc)
  11. Non-Profit Organizations
    • Formed for civil, educational, charitable, and religious purposes
    • Tax exempt status
    • Limited personal liability
    • No shareholders - managed by board of directors or trustees
  12. Successor-Predecessor
    • Situation where one company acquires another company and picks up where old company left off
    • Potential tax savings by successor
  13. FEIN
    • Partnerships and corporations must obtain federal ID number
    • Sole proprietorship may use SSN if no EEs, but may not use SSN for payroll taxes and filings
    • Identification number for employer's business tax account
    • Used to identify tax liabilities and credits
  14. State ID Numbers
    • SIT: Required for states a business is located and for where EEs live/must pay SIT
    • SUI: Required for states a business has EEs working
    • Depends on state reciprocity agreements
  15. SUI Test
    • 1) localization (where does an EE work?)
    • 2) base of operations (home base)
    • 3) place of direction & control (where orders come from)
    • 4) residence of EE
  16. When Local ID number is required
    • ER required to withhold local taxes in which business is located (worked-in local)
    • Sometimes may be required to withhold taxes where EEs live (lived-in local)
    • Contact local agencies for individual requirements
  17. Federal Accounting Tax Year
    • Businesses may use calendar year
    • May adopt fiscal year to fit their field
    • Alternate accounting year does not affect employment tax deadlines
  18. FIT
    • Pay-as-you-go tax
    • EE paid tax, but ER withholds and deposits
    • Sole proprietorship, partnerships and S-corps are personally liable for the business tax liabilities
    • Forms: 1040-ES (sole props, partners, S corp shareholders use to calculate and pay estimated taxes), Form 1120-W (corps use to calculate taxes due)
  19. Self Employment Tax
    • Sole proprietorship and partnership owners responsible for paying if net earnings are greater than $400
    • Comprised of FICA - EE and ER portions
  20. Excise Taxes
    • May be applicable if:
    • - manufacture or sell certain product
    • - operate certain kind of business
    • - use various kinds of equipment, facilities or products
    • - receive payment for certain services
    • Designed for businesses, but allowed to pass on to consumers

    • Calculated:
    • -fixed percentage or
    • -fixed dollar amount dependent on quantity
  21. Employment Taxes
    • Taxes that must be withheld from EE earnings
    • -FICA
    • -FIT
    • -FUTA
    • -applicable state or local taxes
  22. FICA
    • Federal Insurance Contributions Act
    • Social Security & Medicare
  23. OASDI program
    Old-age, survivors, and disability insurance --> SSI
  24. Medicare taxes
    Provide basic health insurance to taxpayers in the event that they become disabled or when they hit 65
  25. Why Fit began
    • Need for revenue from Civil War
    • Revenue Act of 1861 (3%)
  26. FIT tax
    • Paid by EE through PR deductions
    • ER must deposit funds electronically to Federal Reserve (or to Third party processor)
    • Department of Treasury allocates funds
  27. FUTA and SUI
    • Jointly run federal and state programs
    • ER paid (generally)
    • Provide benefits to eligible EEs in the case that they lose their job
    • States generally pay EE while Federal funds pay administration costs
  28. States where FUTA and SUI paid by EE
    • Alaska
    • New Jersey
    • Pennsylvania
  29. States that don't require SIT
    • Alaska
    • Florida
    • Nevada
    • New Hampshire
    • South Dakota
    • Tennessee
    • Texas
    • Washington
    • Wyoming
  30. SDI states
    • State disability insurance provides benefits to eligible individuals in event that they suffer am injury or illness
    • Tax responsibility varies
    • California
    • New Jersey
    • New York
    • Rhode Island
    • Hawaii
  31. Local taxes
    • Typically paid by EE only
    • ER generally only withholds for where EE works
    • If EE provides, ER may also need to withhold taxes if situation calls for locals where EE lives
  32. States with locals
    • Pennsylvania
    • Ohio
    • Kentucky
    • Indiana
    • Michigan
    • Alabama
    • Oregon
    • Colorado
    • New York
    • Missouri
    • West Virginia
    • New Jersey
    • Delaware
  33. Common Law EE
    Anyone who performs service for you while you have the right to control what will be done and how it will be done

    Taxability: ER is required to withhold and remit income and FICA taxes as well as match FICA taxes and pay FUTA taxes
  34. Common Law Rules
    Behavioral control - EE if business has the right to dictate how work results are achieved

    Financial control - EE if cannot realize profit or loss, have reimbursed business expenses, no significant business expenses, exclusive to company, and paid a guaranteed wage amount

    Type of Relationship - EE if company provides benefits, work is expected to be indefinite, and work is a key aspect of regular business activity
  35. Independent Contractor
    • People hired to complete a project
    • Do not follow Common Law Rules
    • ER does mot have tax responsibility
    • ER only has control over the outcome
  36. Safe Harbor
    • If ER has reasonable basis for not treating worker as EE, may be relieved of rom paying employment taxes for EE
    • - relied on court case, audited by IRS, significance of segment of your industry, advice of lawyer or CPA
    • - must have filed required tax returns consistent with treatment of worker

    Section 530 Relief Requirements
  37. Statutory EEs
    • "Look like 1099, tax like EE"
    • Withhold FICA and sometimes FUTA

    • - D river (withhold FUTA Y)
    • - I nsurance sales agent (No withholding FUTA)
    • - Salesperson [traveling] (withhold FUTA Y)
    • - Homeworker (No withholding FUTA)
  38. Statutory Non EE
    • "Looks like EE, tax like 1099"
    • No withholding

    • - SITters (other than 3rd party agencies - companionship sitters only)
    • - REAl estate agents
    • - Direct Sellers (includes newspaper delivery)
  39. Leased EEs
    • ER has contract with staffing agency to provide EE
    • Agency receives finding fee if EE is hired
    • Agency is responsible for hiring, firing, controlling, and taxing
  40. Backup withholding
    If 1099 provides wrong or no TIN, ER required to withhold 28% from their taxable payments

    (ER can request TIN with Form W-9)
  41. Unintentional Misclassification: Section 3509(a)
    • ER classified EE as 1099
    • Information returns were filed

    • SS: 7.44% of wages AND 20% EE RATE
    • Medicare: 1.74% of wages AND 20% EE RATE
    • Additional Medicare: .18% if wages over $200k
    • Income Tax: 1.5% wages

    *must also file amended returns
  42. Unintentional Misclassification: Section 3509(b)
    • ER classified EE as 1099
    • Information returns were NOT filed

    • SS: 8.68% of wages AND 40% EE RATE
    • Medicare: 2.03% of wages AND 40% EE RATE
    • Additional Medicare: .36% if wages over $200k
    • Income Tax: 3% wages

    *must also file amended returns
  43. Intentional Misclassification
    • Section 3509 rates not available if ER intentionally Misclassification EE
    • Also not available if incomes taxes were withheld

  44. VCSP
    Voluntary Classification Settlement Program (2011)

    • IRS program that allows ERS to reclassify EEs for future tax periods
    • ERS may only have to pay 10% of amounts in 3509(a)
    • ERS might also be free of associated P&I
  45. Form SS-8
    Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding

    • While waiting on determination, must pay for current EE status
    • EE will have to comply retroactively if wrong
  46. Income Tax Forms
    • Sole prop - 1040 & Schedule C (or C-EZ or F [farm])
    • Partnership - 1065
    • Partnership (each individual) - 1040 & Schedule E
    • Corporation - 1120
    • S Corp - 1120S
    • S Corp Shareholders - 1040 & Schedule E
  47. Self-Employment Tax Form
    1040 and Schedule SE
  48. Estimated Tax Forms
    • Sole prop - 1040-ES
    • Partnership individuals - 1040-ES
    • Corporation - 1120-W
    • S Corp shareholder - 1040-ES
  49. Employment Tax Form
    • Social Security/Medicare: 941 or 944
    • FUTA: 940
  50. Form I-9
    • Department of Homeland Security: UC Citizenship and Immigration Services
    • Required for everybody except:
    • -1099
    • -domestic work (sporadic)
    • -leased EEs
    • -not physically working in US

    • EEs fill out first day
    • ERs fill out within 3 days
    • ERS must keep for 3 years after hire or 1 year after termination
  51. Form W-4
    • Withholding allowance certificate
    • First solicitation of SSN
    • Exempt EEs must submit new every year
    • - if don't submit by 2/15, will default to old W-4 or S/0

    ER must keep for 4 years
  52. W-4 Penalties
    ER may be subject to $500 for W-4 submitted with no reasonable basis (if amount withheld is less than required)
  53. Lock-in Letter
    • IRS may issue to specific amount/allowances for an ER to withhold for an EE
    • EE has period to dispute
    • ER must use until IRS informs otherwise
  54. Minimum EE hiring requirements
    • Legal name
    • SSN
    • Address
    • DOB
    • Gender
    • W-4
    • I-9

    New Hire Reporting: need all of the above (for EE/ER) AS WELL AS start date
  55. Minimum requirements hiring 1099
    • Legal or company name
    • Legal or company address
    • SSN or TIN
  56. 1099 TIN
    • Can use Form W-9 to request
    • If contractor does not supply (or supplies wrong one), ER required to withhold backup withholding:
    • -28% or 1099 pay
  57. Minimum Wage
    $7.25/hour - Federal, effective 7/2009

    $10.02/hour - Federal contractors, effective 2/2014
  58. Youth Minimum Wage
    • 1996 FLSA Amendment
    • Applies to EEs under 20 during first 90 days of employment
    • Illegal to only employ EEs under 20 and only keep for 90 days each
    • Youth rate is $4.25/hour
  59. Workweek
    • Basic unit of time for minimum wage calculations
    • "7 consecutive 24 hour periods"
    • If changing workweek, must calculate overlapping days in both periods and pay most beneficial option
  60. Special circumstances - minimum wage
    • Voluntary room and board - cash wages below minimum wage
    • Uniforms - street clothing = cash wages below minimum wage
  61. Tipped EEs
    EEs who receive at least $30/month in tips
  62. Disabled Workers
    • Special minimum wages
    • No absolute minimum
    • Commensurate - based on EEs skill level
  63. 8/80 Overtime Exception
    • Hospitals and nursing facilities
    • Overtime for more than 8 hours in a shift OR more than 80 hours in 14 days
    • Must be agreeable
  64. Youth Employment Regulations
    • 18+ - no restrictions
    • 16-17 - no hour restrictions as long as nonhazardous
    • 14-15 - no more than 3 hours on school day, 8 hours non school day, 18 hours while school is in session, 40 hours when school is out, and must be between 7-7
  65. Law Enforcement Overtime Ration
    • 171 hours/28 days = 6.11
    • *** must multiply by number of days and then round to whole number
  66. Fire Officer Overtime Ratio
    • 212 hours/28 days = 7.57
    • ***must multiply by number of days and round to whole number
  67. FASB
    Financial accounting standards board

    Sets accounting standards
  68. Accrual Principle
    Revenues and expenses are recorded ahem earned and incurred - not when cash is at hand
  69. Consistency Principle
    Requires accounts be prepared using the same method from period to period
  70. Materiality Principle
    Accountant canning more generally accepted accounting principles of too costly
  71. Balance sheet
    Used to report financial position of organization at a specific time (assets and claim on assets summary)
  72. Cash disbursement journal
    Records all checks written or spent

    Cash receipts is cash or checks deposited
  73. Payroll journal
    Payroll related transactions
  74. Accounts payable/accounts receivable journals
    Records all income and expense accruals
  75. Ledger
    Contains accounts of business (debits and credits have their own section)
  76. Process of recording journal information to ledger
  77. Traditional Compensatoom approach (grades)
    • Separate structures for EE function
    • Many ranges (grades)
    • Narrow ranges
    • Moderate differences between grades
  78. Broadbanding compensation approach
    • Separate structures by EE type
    • Few ranges
    • Wide ranges
  79. Career banding compensation approach
    • Few structures
    • Few ranges
    • No or extremely wide ranges
  80. Market pricing compensation strategy
    • Separate ranges for job type define by external labor market
    • Absence of coherent structure
  81. Fixed pay
    • No discretionary pay
    • "Base pay"
    • Not based on performance
  82. Variable pay
    • At risk pay
    • Changed directly with level of performance
    • Includes short-term incentive pay (less than one year)
  83. Long-term incentive pay
    Rewards performance to focus and reward performance for period longer than a year
  84. ECEC
    • ER costs for EE compensation
    • Measures cost of wages, salary, and benefits (mon farm or private sector)
  85. Performance planning
    Process whereby expectations are established for linking individual with team and organizational goals
  86. Equal Pay Act
    Disallows paying wages based on gender
  87. Title VII of Civil Rights Act 1964
    Disallows discrimination based on race, color, religion, sex or national origin you a homo fag
  88. ADEA
    Age discrimination employment act
  89. ADA
    Americans with disabilities act
  90. EEOC
    equal employment opportunity comisi on

    Organization that interprets/enforced acts against discrimination
  91. OSHA
    Occupational and safety health act
  92. Work measurement study
    Systematic application of industrial engineering techniques to establish work content and time it should take to complete a series of tasks
  93. MBE
    • Management by exceptions
    • Attention placed primarily on items that are exceptional
  94. Consumer Credit Protection Act
    Protects an EE from discharge based off of a garnishment withholding order
  95. ERISA
    • EE Retirement income security act
    • Covers most private sector EE Benefit plans
    • Generally doesn't cover churches or government entities
  96. McNamara-O'Hara Service Contract
    Wage and hour requirements for contracts and bids in excess of $2500
  97. Contract work hours and safety standards act
    Applies to contractors and subcontractors with federal service contracts over $100000
  98. Patient protection and affordable care act
    Those who earn more than $200k will pay higher Medicare hospital insurance and HI taxes in 2013
  99. Wage curve
    Depicts pay rates that are currently being paid for each job within a pay grade in relation with rankings
  100. 403(b)
    • Retirement for private sector church or nonprofit etc
    • "15 year rule" can contribute $3k more
  101. 457(b) plan
    • Government EEs
    • 3 years before retirement can contribute more
  102. Supplemental wages
    • 25% under 1000000
    • 39.6% over 100000
  103. Limit on garnishments
    • (EXCEPT CS)
    • 25% disposable earnings or 30x minimum wage
  104. Federal tax levy
    • ER notified through 668-w to withhold
    • Notified through 668-d when done
    • Follows tax levy chart
  105. Creditor garnishment
    • Withhold 25% disposable earnings or
    • Amount disposable wages are greater than 30x minimum wage
  106. Federal loan
    • Withhold 21% disposable earnings or
    • Amount disposable wages are greater than 30x minimum wage
  107. Automated clearing house (ACH)
    Electronic network for financial transactions in the USA
  108. OAFDI
    • Originating depository financial institution
    • Where ACH fund originated
  109. Gross up calculation
    (Desired amount)/(100% - total % of taxes paid)
  110. Look back period
    • July 1 - June 30
    • Determines deposit frequency
    • Less than $50k tax liabilities - monthly
  111. Monthly deposit frequency
    • Cutoff period is last day of the month
    • Must be deposited by 15th of the next month
    • If ever makes 100k deposit automatically switches to monthly
  112. Semi weekly depositor
    • Cutoff dates are Wednesdays and Fridays
    • Deposits are due 3 banking days after cutoff
  113. EFTPS
    • Electronic funds tax payment system
    • Transaction must be initiated 1 day prior to due date
  114. Form 941
    • ER quarterly federal tax return
    • Due the last day of the month following the end of the quarter
    • (944 for smaller businesses and 943 for agricultural)
  115. Form 940
    ERS annual federal unemployment tax return
  116. SECA
    FICA for ministers and clergy