IAB Taxation & Compliance 4

Question 1

A company provides health insurance to employees. These premiums are generally:

Accepted Answer

Deductible by the employer and excluded from employee income

Answer

Employer-paid health insurance premiums are deductible business expenses and excluded from employees' taxable income under IRC Section 106.

Question 2

Which form is used to report an S-corporation's income, deductions, and other tax items to the IRS?

Accepted Answer

Form 1120-S

Answer

Form 1120-S is the annual income tax return filed by S-corporations, reporting income that flows through to shareholders.

Question 3

A business owner uses their personal vehicle 60% for business. How should the vehicle depreciation deduction be calculated?

Accepted Answer

Only 60% of allowable depreciation may be deducted

Answer

When a vehicle is used for both business and personal purposes, only the business-use percentage (60%) of the depreciation deduction is allowable.

Question 4

The IRS statute of limitations for assessing additional tax on a standard return is generally:

Accepted Answer

3 years from filing or due date

Answer

The IRS generally has 3 years from the later of the filing date or the return's due date to assess additional taxes.

Question 5

An employee contributes to a traditional 401(k) plan. These contributions are:

Accepted Answer

Excluded from federal taxable wages but subject to FICA taxes

Answer

Traditional 401(k) pre-tax contributions reduce federal (and usually state) taxable income but are still subject to Social Security and Medicare (FICA) taxes.

(IAB) International Association of Bookkeepers Certification Practice Test

(IAB) International Association of Bookkeepers Certification Practice Test

IAB Taxation & Compliance 4