IAB Taxation & Compliance 2 — Questions and Answers
Question 1: A self-employed bookkeeper earns $85,000 net profit. What is the self-employment tax rate applied to net earnings?
- 10.0%
- 12.4%
- 15.3% (Correct answer)
- 17.6%
Correct answer: 15.3%
Self-employment tax is 15.3%, comprising 12.4% Social Security and 2.9% Medicare, applied to net self-employment earnings.
Question 2: Which IRS form is used by employers to report annual wages and withholding for each employee?
- Form 941
- Form W-2 (Correct answer)
- Form 1099-NEC
- Form W-4
Correct answer: Form W-2
Form W-2 (Wage and Tax Statement) is issued by employers annually to report each employee's wages and taxes withheld.
Question 3: Under the cash basis of accounting for tax purposes, income is recognized when:
- Earned, regardless of receipt
- Invoiced to the customer
- Actually received (Correct answer)
- The contract is signed
Correct answer: Actually received
Under the cash method, income is recognized when payment is actually received, not when earned or invoiced.
Question 4: A business purchases equipment for $50,000. Under Section 179, the maximum first-year expensing deduction for 2024 is:
- $25,000
- $50,000
- $1,160,000 (Correct answer)
- Unlimited
Correct answer: $1,160,000
The Section 179 deduction limit for 2024 is $1,160,000, allowing businesses to expense qualifying property in the year of purchase.
Question 5: Which payroll tax deposit schedule applies to employers with $50,000 or less in employment taxes in the lookback period?
- Daily depositor
- Monthly depositor (Correct answer)
- Semi-weekly depositor
- Quarterly depositor
Correct answer: Monthly depositor
Employers who reported $50,000 or less in employment taxes during the lookback period are monthly depositors.
Question 6: What is the penalty rate for failure to deposit payroll taxes 1-5 days late?
- 2% (Correct answer)
- 5%
- 10%
- 15%
Correct answer: 2%
A 2% penalty applies when payroll tax deposits are 1-5 days late, escalating with longer delays.
Question 7: Which of the following is NOT a requirement for a worker to be classified as an independent contractor rather than an employee?
- Controls how work is performed
- Uses own tools and equipment
- Works for multiple clients
- Earns more than $600 annually (Correct answer)
Correct answer: Earns more than $600 annually
The $600 threshold triggers 1099-NEC reporting but is not a factor in determining worker classification.
IAB Taxation & Compliance 2
A self-employed bookkeeper earns $85,000 net profit.
What is the self-employment tax rate applied to net earnings?