AFTR Tax Withholding and Estimated Taxes Flashcards

Which taxpayers are generally required to make estimated tax payments?

Answer: Taxpayers who expect to owe at least $1,000 in tax after subtracting withholding and credits

Individuals must generally make estimated tax payments if they expect to owe at least $1,000 in tax after withholding and refundable credits.

A retiree receiving pension income with no withholding should:

Answer: Submit Form W-4P to request voluntary withholding from the pension

Form W-4P allows pension and annuity recipients to elect voluntary federal income tax withholding from their periodic payments.

Self-employed individuals pay self-employment tax in lieu of which taxes normally withheld by an employer?

Answer: Social Security and Medicare taxes (FICA)

Self-employment tax covers the employee and employer shares of Social Security and Medicare (FICA) taxes, which would otherwise be split and withheld by an employer.

What is the self-employment tax rate applied to net self-employment earnings (up to the Social Security wage base)?

Answer: 15.3%

The self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare, applied to 92.35% of net self-employment income.

If the IRS determines a worker is misclassified as an independent contractor rather than an employee, which party bears primary liability for unpaid payroll taxes?

Answer: The employer (business)

When workers are misclassified, the employer is primarily liable for the employee share of FICA taxes that should have been withheld, plus the employer share.

Backup withholding at the rate of 24% is required when:

Answer: A payee fails to provide a correct TIN or the IRS notifies the payer

Backup withholding at 24% applies when a payee does not furnish a correct taxpayer identification number or receives an IRS B-notice indicating an incorrect TIN.