Term
| List the factors used under the common law test in determining whether a business has the right to control the financial aspects of a worker’s activities. |
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Definition
Whether the worker...
• has made a significant financial investment in performing the work
• has business expenses that are unreimbursed
• makes his or her services available to the general market
• is paid on a regularly recurring basis or by the job |
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Term
| The four categories of statutory employees are: |
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Definition
• Agent-drivers or commission-drivers
• Full-time life insurance salespersons
• Homeworkers
• Traveling or city salespersons |
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Term
| The two categories of statutory non employees are: |
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Definition
• Qualified real estate agents
• Direct sellers |
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Term
Which of the following forms may be completed and submitted to the IRS to determine the employment status of an individual for federal income and employment tax purposes?
a. Form SS-4
b. Form SS-5
c. Form SS-8
d. Form W-9 |
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Definition
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Term
Which of the following forms must be submitted to an independent contractor (who is paid at least $600) after the end of the year for services performed during that year?
a. Form W-2
b. Form 1099-MISC
c. Form 1096
d. Form SS-8 |
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Definition
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Term
All of the following types of evidence support an employer’s treatment of a worker as an independent contractor under the “reasonable basis” test except:
a. Place of work
b. Court decisions
c. Private letter rulings
d. Past IRS employment tax audits |
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Definition
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Term
All of the following facts and circumstances would be typical of an independent contractor except:
a. Works off site
b. Paid by the hour
c. Furnishes own tools
d. Sets own work hours |
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Definition
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Term
Each of the following individuals would be classified as an employee except:
a. Controller of a company
b. College professor
c. Attorney (solo practitioner)
d. City police officer |
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Definition
| c. Attorney (solo practitioner) |
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Term
All of the following workers are statutory employees except:
a. Full-time life insurance salespersons
b. Qualified real estate agents
c. Homeworkers
d. Traveling or city salespersons |
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Definition
| b. Qualified real estate agents |
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Term
Full-time life insurance salespersons paid solely by commission are exempt from:
a. Social security and Medicare taxes
b. Social security tax only
c. FUTA tax
d. Social security, Medicare, and FUTA taxes |
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Definition
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Term
If an employer fails to withhold social security and Medicare taxes from a worker it misclassifies as an independent contractor and does not file a Form W-2 or a Form 1099 for that worker, what
penalty may the IRS impose?
a. 10% of the employee’s share of social security and Medicare taxes
b. 20% of the employee’s share of social security and Medicare taxes
c. 40% of the employee’s share of social security and Medicare taxes
d. 100% of the employee’s share of social security and Medicare taxes |
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Definition
| c. 40% of the employee’s share of social security and Medicare taxes |
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Term
How long must an employer retain a Form I-9 for a terminated employee who worked for the employer for more than four years?
a. 1 year after termination
b. 3 years after termination
c. 7 years after termination
d. Does not have to keep terminated employees’ I-9 forms |
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Definition
| a. 1 year after termination |
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Term
Which of the following situations describes one of the general requirements that must be met for workers to be considered statutory employees?
a. They have a continuing relationship with the employer
b. They have a substantial investment in the business equipment
c. They are licensed real estate agents
d. Most of their compensation is related to sales |
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Definition
| a. They have a continuing relationship with the employer |
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Term
Each of the following goals is a reason why states might require employers to report newly hired employees except:
a. to detect welfare fraud
b. to detect unemployment compensation fraud
c. to locate individuals who have not claimed state lottery winnings
d. to locate noncustodial parents subject to a child support withholding order |
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Definition
| c. to locate individuals who have not claimed state lottery winnings |
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Term
Which of the following individuals are statutory nonemployees?
a. homeworkers
b. full-time life insurance salespersons
c. newspaper deliverers
d. traveling salespersons |
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Definition
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Term
| What are the three parts of the ABC test? |
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Definition
• The worker is free from control or direction in performing the work both by agreement and in reality (Absence of control).
• The work is performed outside the usual course of the company’s business or away from any of the employer’s facilities (Business—unusual and/or away).
• The worker is customarily engaged in an independent trade, occupation, or business (Customarily independent contractor). |
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Term
| What is the ABC test used to determine? |
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Definition
| a worker’s employment status under state unemployment insurance laws. |
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Term
| What information must be reported by an employer for each new hire under the federal new hire reporting requirement? |
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Definition
employee's name,
address,
social security number,
and first day of work for which compensation is paid,
as well as the employer’s name,
address,
and federal employer identification number. |
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Term
| When must employers report newly hired employees under the federal new hire reporting requirement? |
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Definition
In general, employers must report new hires within 20 calendar days of the date of hire. Employers that
report magnetically or electronically must send 2 transmissions per calendar month which are 12-16 days
apart. |
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Term
| What is the name of the program employers can use to verify the employment authorization status of new hires with U.S. Citizenship and Immigration Services? |
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Definition
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Term
| What is Form I-9 used for? |
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Definition
Form I-9 is used to verify that an individual has the legal right to work in the United States. The
Immigration Reform and Control Act of 1986 makes it illegal for an employer to hire an unauthorized
worker. |
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Term
| Compare a temporary help agency employee and a leased employee. |
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Definition
Temporary workers are hired, screened, and trained by the temporary help agency to provide services for
clients. They are employees of the temporary help agency, which sets their wages and has the sole right to
hire and fire. The agency is also responsible for all payroll taxes.
Leased employees are hired, trained, and qualified by a leasing company, which provides workers for a
client company. The client pays a fee to the leasing company to cover the cost of payroll, benefits, etc.
Responsibility for payroll taxes depends on the degree of control exercised by the client over the employees’
work and which entity has control over the payment of their wages. |
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Term
| When leasing an employee or using a temporary help agency, aside from looking at the cost, what should you know about the overall company that you are dealing with to avoid having to pay any withholding or employment taxes? |
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Definition
Employers should make sure they are dealing with a financially secure and reputable company before
entering into a contract, since the temporary help agency or leasing company’s financial failure could lead
to the client company becoming liable for any withholding or employment taxes that remain unpaid. |
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Term
| When a client company hires leased employees, who is responsible for withholding and/or paying federal income, social security, Medicare, and FUTA taxes? |
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Definition
Although the client company may have the right to hire and fire the workers, set wage levels, and supervise
their work, the workers are generally employees of the leasing company, which is responsible for withholding
federal income tax and social security and Medicare taxes, as well as paying the employer’s share of social
security, Medicare, and FUTA taxes, because of the leasing company’s control over the payment of wages. |
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Term
| What factors do the courts & the Dept of Labor consider when making an employment status determination under the FLSA? |
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Definition
• Whether the worker has the chance to make a profit or risks a loss based on how skillfully the work is
performed
• Whether the worker invests in tools or materials required to perform the work or hires helpers
• Whether the work requires a special skill
• How permanent the working relationship is
• Whether the work performed is an integral part of the employer’s business operation |
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Term
| Why would many employers rather use workers who are not employees to perform services for them? |
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Definition
Employers would rather use workers who are not employees to perform services for them because employers
must withhold income and employment taxes from employees’ wages and pay employment taxes with
their own funds. Employers also must pay federal and state unemployment taxes based on their employees’
wages. If a worker is an employee, most companies have their own list of benefits and other entitlements
that are provided to employees but not to independent contractors. |
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Term
| What does a social security card prove in terms of an employee’s work authorization status under IRCA? |
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Definition
A social security card that does not contain language saying that employment is not work-authorized is
proof of an employee’s authorization to work in the U.S., but not proof of identity. |
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Term
| Which factors are considered NOT to be important by the IRS in making a worker classification determination because of changes in the workplace over the years? |
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Definition
part-time or full-time work,
the location of the work,
and hours of work. |
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Term
T/F
If the employer has the right to control what work will be done & how that work will be done, an employer-employee relationship exists. |
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Definition
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Term
T/F
Full-time life insurance salespersons are always considered statutory employees and are never subject to FUTA tax. |
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Definition
False
Their earnings must consist solely of commissions to be exempt from FUTA tax. |
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Term
T/F
Workers hired through a temporary help agency are not employees of the client company. |
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Definition
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Term
T/F
Telemarketers working under the direction of a company are usually independent contractors. |
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Definition
False
If telemarketers work under the direction and control of a company, they are employees of that company. |
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Term
T/F
An accountant who provides bookkeeping and payroll services to several local businesses and works at her own office is an independent contractor. |
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Definition
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Term
T/F
The responsibility for determining the employment status of an individual who performs services rests with the employer. |
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Definition
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Term
T/F
If an independent contractor timely provides the employer with a correct Taxpayer Identification Number, there will be no backup withholding. |
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Definition
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Term
T/F
If an employer uses the E-Verify Program, a new hire does not have to enter their SSN in Section 1 of Form I-9. |
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Definition
False
If an employer uses the E-Verify program, new hires must enter their SSN in Section 1 of
Form I-9. |
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Term
T/F
Managers and executives are excluded from the employer-employee relationship for tax purposes. |
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Definition
False
Managers and executives are classified as employees, for tax purposes, although they are exempt under most wage-hour and labor relations laws. |
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Term
T/F
Length of employment makes no difference in determining employment status. |
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Definition
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Term
T/F
Technical services specialists are specifically excluded from the “reasonable basis” test. |
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Definition
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Term
T/F
Under the ABC test, one of the determining factors is whether the worker in question is free from control or direction in performing the work both by agreement and in reality. |
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Definition
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Term
T/F
Part-time employees are not covered under the federal payroll tax laws even if they meet the common law test for employment status. |
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Definition
False
Part-time employees are covered under the federal payroll tax laws if they meet the common law test for employment status. |
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Term
T/F
“Reciprocity agreements” require employers to withhold state income tax only for their employees’ states of residence. |
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Definition
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Term
T/F
Employers can demand specific documents to prove an employee’s eligibility to work in the U.S. |
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Definition
False
Employers cannot demand specific documents to prove an employee’s eligibility to work.
New hires can produce any approved documents listed in the Form I-9 instructions that prove identity and work authorization. |
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Term
T/F
Employers who claim Section 530 status for their workers because a significant segment of their industry classifies similar workers the same way must show that at least 50% of the industry treats these workers as independent contractors. |
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Definition
False
The IRS cannot require an employer to show that more than 25% of its industry treated similarly situated workers as independent contractors. |
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Term
T/F
An employer that changes its classification of a worker from independent contractor to employee may still claim Section 530 protection for the period before the change in treatment. |
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Definition
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Term
T/F
An IRS agent conducting an employment tax audit must give the employer written notice of the availability of the Section 530 protections. |
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Definition
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Term
T/F
Under the federal new hire reporting requirements, multistate employers must report a new hire to the state in which the employee works. |
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Definition
False
Multistate employers can designate one state in which they have employees as the state to which they will report all new hires. |
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Term
T/F
If an employee resigns after working for an employer for five years, the employer must retain the employee’s Form I-9 for three years after the employee’s last day of employment. |
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Definition
False
The employer must retain the employee’s Form I-9 for one year after the employee’s last day of employment. |
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