FREE CPP Basic Questions and Answers

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At what point does an organization need to obtain an IRS Form W-9 from an individual?

Correct! Wrong!

Explanation:
Businesses can get an independent contractor's taxpayer identification number by using the Internal Revenue Service (IRS) Form W-9. Non-profit organizations also use this form to get a donor's taxpayer identification number so they can deduct the donation from their taxes. Form W-9 is used to prepare Form 1099s and is retained on file by the organization rather than being submitted to the IRS.

What is the highest salary level in 2023 that will be subject to Social Security taxes?

Correct! Wrong!

Explanation:
Employees' Social Security taxes are only due on the first $160,200 of income in 2023. This is referred to as the taxable maximum, or the contribution and benefit base. Over this threshold, wages are exempt from Social Security tax. Medicare's Hospital Insurance program has no upper limit on taxable income. An employee may be eligible for a refund of any excess contribution if they pay more tax than what is necessary.

What is the minimum age that an employee may operate a motor vehicle on public roads?

Correct! Wrong!

Explanation:
A 17-year-old may operate a motor vehicle on public roadways under the FLSA's regulations for child labor provided they fulfill the standards regarding the vehicle's weight and amount of driving time. Under-17-year-old employees are not permitted to drive on public roadways. Employees under the age of 18 are not permitted to work as outside helpers on motor vehicles, so the 17-year-old is not allowed to exit the vehicle. Employees who are required to exit the vehicle or who ride outside it to deliver or help move products are known as outside helpers.

When is it possible for an employer to gross up an employee's income?

Correct! Wrong!

Explanation:
Employers may increase an employee's salary in one of two ways: either to cover extra taxes that the employee has to pay, such as when they receive a bonus payment or a taxable fringe perk. An employee obtains a particular amount without having to pay a portion of that bonus or perk as taxes when their compensation is grossed up. Despite the appearance that the company is covering the employee's tax liability, the employee is ultimately responsible for collecting and paying the taxes.

What kind of employee is considered as a statutory employee?

Correct! Wrong!

Explanation:
A self-employed person who is regarded as an employee for tax purposes is referred to as a statutory employee.
If an accountant serves multiple clients, they could be regarded as independent contractors. If a real estate agent's pay is determined by sales rather than by the number of hours they work, they are regarded as statutory non-employees. An employee who is employed through a temporary agency is referred to as a leased.

Which employment tax is exempt from having to be withheld from employees' paychecks?

Correct! Wrong!

Explanation:
Paychecks of employees are not withheld from federal unemployment taxes. Only the employer is responsible for paying them and any applicable state unemployment taxes. Although the employer deducts federal income taxes from the employee's paycheck, the employee is responsible for paying these taxes. Both the employee and the employer are responsible for paying Medicare and Social Security.

Which test is not necessary to be exempt as a creative professional employee under the FLSA?

Correct! Wrong!

Explanation:
The business needs to retain the copyright on the work. As a general rule, employees who are paid less than $684 per week are non-exempt and are entitled to overtime pay. However, under the Fair Labor Standards Act (FLSA), employers are not required to provide overtime pay for certain "exempt" occupations, such as those falling under the categories "learned professional" or "creative professional."

What is the minimum pay for a worker who gets tipped for services rendered?

Correct! Wrong!

Explanation:
For covered, non-exempt workers, the federal minimum wage is $7.25 per hour. Nonetheless, a tipped employee may get a minimum wage of $2.13 per hour from their employer if:
- The employee's hourly pay plus tips equals the federal minimum wage.
- The employee keeps the tips.
- The employee gets tips of more than $30 every month.
Employers are required to reimburse employees for any difference between the federal minimum wage and $2.13 per hour plus tips.

What prerequisite has to be fulfilled for an income to be considered as constructively received by a taxpayer?

Correct! Wrong!

Explanation:
When a taxpayer who receives income on a cash basis has received that income, it is determined by constructive receipt. Income that is made available to the taxpayer without significant restrictions on their access is deemed to have been received by the taxpayer. It is not necessary for the taxpayer to physically manage the money.

What is the eligibility criteria for benefits under the 1993 Family and Medical Leave Act for an employee?

Correct! Wrong!

Explanation:
A minimum of 12 months of employment with the company, with 1,250 hours completed within the last 12 months. For family or medical reasons, employees must take unpaid leave under the Family and Medical Leave Act (FMLA) in companies with 50 or more employees. For a maximum of 12 weeks, the FMLA offers unpaid leave that is covered by your work.

What form is used by the Internal Revenue Service (IRS) to report Federal Unemployment Tax (FUTA) paid by an employer?

Correct! Wrong!

Explanation:
Employers are required to submit their annual Federal Unemployment Tax (FUTA) liability using Form 940. Employees who lose their jobs are eligible for unemployment benefits through FUTA and the state unemployment tax.

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