Tax Planning & Compliance Flashcards
7 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Tax Planning & Compliance flashcards as text
A state has a reciprocal agreement with a neighboring state. How does this affect income tax withholding for a resident who works in the neighboring state?
Answer: The employer withholds income tax only for the employee's state of residence
Under a reciprocal agreement, the employer withholds income tax only for the state where the employee lives, not the state where the work is performed.
What is the employer's penalty for intentionally failing to file correct information returns such as W-2s?
Answer: $630 per return with no annual maximum
For intentional disregard of filing requirements, the penalty is $630 per return (indexed for inflation) with no annual maximum cap.
An employer uses the aggregate method for supplemental wage withholding. What does this involve?
Answer: Adding supplemental wages to the most recent regular wages and withholding as if it were a single payment
The aggregate method combines supplemental and regular wages from the most recent payroll period and computes withholding on the total as one payment.
Under IRC Section 125, which of the following is a qualifying benefit that can be offered through a cafeteria plan?
Answer: Dependent care flexible spending account
Dependent care flexible spending accounts are a qualified benefit under Section 125 cafeteria plans and reduce employees' taxable income.
Which form must an employer file annually to report FUTA tax?
Answer: Form 940
Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, is filed annually to report and reconcile federal unemployment tax liability.
A domestic service worker (housekeeper) earns $2,800 from a household employer in 2024. What is the employer's FICA obligation?
Answer: FICA is due because wages exceed the $2,700 household employer threshold
For 2024, household employers must withhold and pay FICA when cash wages paid to a domestic worker reach $2,700 or more in the calendar year.
What is the primary purpose of IRS Form 945?
Answer: To report annual withheld federal income tax from nonpayroll payments such as pensions and gambling winnings
Form 945 is an annual return used to report federal income tax withheld from nonpayroll payments, including pensions, annuities, and backup withholding.