Section 1 - Employees vs. Nonemployees Flashcards Preview

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Flashcards in Section 1 - Employees vs. Nonemployees Deck (60)
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1

If the PEO fails to pay the employee or withhold and deposit employment taxes as required, the client firm is jointly liable.

 

True or False

True.

 

Much like with a temporary agency, if the PEO fails to pay the employee or withhold and deposit employment taxes as required, the client firm is jointly liable with the PEO.

2

Employees are paid wages, such as

Employees are paid wages, such as salaries, fees, bonuses, commissions, and vacation, retirement, fringes or other pay. Wages might also include employee referral awards, gifts certificates, stock, life insurance, termination or overtime pay and reimbursed moving expenses. 

3

What is the purpose or a company using a leased employee or Professional Employer Organization?

Instead of a temporary help agency, some firms use a leasing agency or professional employer organization (PEO) to reduce the administrative burden associated with workflow management. 

4

Workers who meet the common-law test are considered employees, and the length of employment has no bearing.

 

True or False

True.

So long as the individual was considered a common law employee, they are considered an employee even if the working relationship only lasted for one hour.

 

5

Employees are paid as an ordinary disbursement.

 

True or False

False.

 

There are six categories of workers, common law employees, statutory employees, statutory nonemployees, independent contractors, temporary help referred by an agency and leased employees. Of the six, only the first two categories, common law, and statutory employees are subject to payroll, the last 4 categories are paid as an ordinary disbursement.

6

Payments to statutory nonemployees are exempt from federal income tax withholding, FICA (Social security and Medicare) tax as well as FUTA.

 

True or False

True.

7

A company is liable for 100% of the federal income and FICA taxes they failed to withhold when: 
 

If an employer misclassifies an employee as an independent contractor with no regard to whether due to intentionally trying to evade taxes and filings or a lack of knowledge, they are 100% liable for the federal income and FICA taxes they failed to withhold.

 

The amount the company must pay depends on whether the company filed their 1099's to report payments.

8

A driver who picks up and delivers laundry or dry cleaning and is the employer’s agent or is paid by commision is what type of worker?

Statutory Employee

 

Payments to statutory employees are not subject to federal income tax withholding, but they are subject to FICA and FUTA.

9

An independent contractor must provide the payer with their taxpayer identification number (TIN) which can be either a ______ ______ ______ or  ______ ______ ______

Social security number (SSN) or Employer identification number (EIN)

10

If the agency fails to remit payment to employees or fails to pay or withhold employment taxes as required, the client firm can be found liable for the unpaid amount.

 

True or False

True.

 

The client firm and the temporary help agency are jointly responsible for compliance with the Federal, State and Local Wage laws and must adhere to that which is most favorable to the employee.

11

What type of worker is subject to the unique payroll tax and reporting requirements 

There are six categories of workers:

  • Common Law Employees
  • Statutory Employees
  • Statutory nonemployees
  • Independent contractors
  • Individuals referred by a temporary help agency
  • Leased employees

 

Employees (common-law and statutory) are subject to payroll which includes the employer withholding and depositing checks on behalf of employees, federal and state unemployment tax, as well as filing quarterly and annual returns with the appropriate agencies.

 

12

If a referral agency only receives a referral or placement fee and does not receive or pay the sitter’s salary, the agency is not considered the sitter’s employer.

 

True or False

True.

 

In cases as such, the sitter is generally considered to be self-employed for federal employment and withholding purposes which means the sitter is solely responsible for payment of federal income taxes, FICA, and state income taxes, depending on the state.

13

An independent contractor is different from an employee because

Generally, as an employee, the employer exercises control over who performs the work, what work is done, when and where the work is done as well as how. An independent contractor, on the other hand, has control over the methods and means by which the work is completed.

14

As a statutory nonemployee, what information must the employer provide you stated explicitly in a written agreement?

The performance-based pay arrangement and the fact that statutory nonemployees are not treated as an employee for federal tax purposes must be stipulated in a written agreement by the employer and given to the employee.

15

If an employer is ever unsure whether an individual should be treated as an independent contractor or employee, they are recommended to complete Form

Form SS-8, a 20 question evaluation that the IRS uses to determine an individual’s worker status.

16

Under the _____ ______ _______employers are liable for 100% of the federal income and FICA taxes they failed to withhold.

"IRC" Internal Revenue Code,

17

When a companion sitter considered self-employed?

If a referral agency only receives a referral or placement fee and does not receive or pay the sitter’s salary, the agency is not considered their employer, therefore, the sitter is considered self-employed for federal employment and withholding purposes.

18

Payments made to those considered statutory employees are not subject to federal income tax withholding, but they are subject to FICA (Social Security and Medicare) tax withholding and federal unemployment tax (FUTA).

 

True or False

True.

19

If a client makes a contractual agreement with an agency to use their employees for a specified period, usually during peak seasons or to replace employees out of work due to illness or vacation, the agency is referred to as a _______ _______ ________.

Temporary help agency

20

Under IRC, the company is _____% liable for the federal income and FICA taxes they failed to withhold if an employee was misclassified as an independent contractor. 
 

100%

21

An individual who provides personal attendance, companionship, or household services to children, the elderly or disabled is called a ______ ______.

Companion sitter.

22

Form W2 is filed for statutory employees.

 

 

True or False

True.

 

Statutory employees are treated similar to common law employees, the biggest difference, however, is that payments made to statutory employees are not subject to federal income taxes withheld, but still subject to FICA and FUTA.

23

When an employer wants a written determination from the IRS about a worker's status, Form _____ should be completed and submitted. 

Form SS-8.

24

When a company uses a PEO, they are paid as

When a company uses a PEO, they are paid as an ordinary disbursement, and the PEO is considered the employer.

 

Please note, the categories of workers subject to payroll are common law and statutory employees, on the other hand, statutory nonemployees, independent contractors, individuals referred by temporary help agencies and leased employees are paid as an ordinary disbursement.

25

When are employers required to provide a Form 1099-MISC?

Employers must provide a Form 1099-MISC to reflect fees of $600 or more, paid for nonemployee compensation.

26

If an independent contractor believes they should be considered employees, they have the option to get such matters determined by the IRS by

Completing and submitting Form SS-8.

 

 If the worker’s SS-8 does indeed indicate an employment relationship, the IRS may choose to audit the employer's tax records.

27

If an individual is not considered an employee, this relieves the employee of the administrative burdens of payroll.

 

True or False

True.

 

Only employees (common-law and statutory) are subject to the unique tax and reporting requirements associated with the complex process known as payroll.

 

Please note, if a worker was referred by a temporary agency or a leased employee, the individual is considered an employee of the agency, however, if the agency fails to pay or withhold taxes, the client company could be held liable unless the company is a Certified Professional Employer Organization (CPEO).

 

28

A statutory nonemployee is compensated based on 

A statutory nonemployee is compensated based on sales and other achievements, but not by the hour.

 

As a statutory nonemployee, the employer is required to provide workers in this category with a contract explaining that they will not be treated as employees for the purposes of federal income tax withholding and FICA tax.

29

Although the agency is the employer of an individual referred by a temporary help agency, what happens if the agency fails to pay the employee and withhold/deposit taxes on their behalf?

If the agency fails to remit payment to employees or fails to pay or withhold employment taxes as required, the client firm can be found liable for the unpaid amount. The client firm and the temporary help agency are jointly responsible for compliance with the Federal, State and Local Wage laws and must adhere to that which is most favorable to the employee.

30

If the common law test is met, the worker is considered:

An employee*