Comprehensive Test No. 3

1. If you receive benefits from a health-care plan provided to you by your employer are any of the benefits received ever taxable?

Yes

No

Publication 17; Page 48

Explanation

Publication 17; Page 48

2. Generally, any interest you receive or that is credited to your account is taxable. Whatform(s) could you possibly receive showing the amount of taxable interest that was credited to an account or received by you during 2014?

1099-OID

1099-DIV

1099-INT

Publication 17; Page 57

Explanation

Publication 17; Page 57

Submit

3. True or False: Dividends are distributions of money, stock, stock rights, other property or services paid to you by a corporation, mutual fund, a partnership, an estate, a trust or an association that is taxed as a corporation.

True

False

Publication 17; Page 64

Explanation

Publication 17; Page 64

4. What form is used by most corporations and mutual funds to show you the dividends and distributions you received during the year?

1099-INT

1099-DIV

1099-OID

Publication 17; Page 64

Explanation

Publication 17; Page 64

5. True or False: A client of yours works for a large corporation that is not a public utility company, and the dividends that are credited to him are not paid to him in cash. Rather, they are used automatically by the company to buy additional shares of stock in the company at fair market value. In others words, they are "reinvested". Even though your client does not receive the cash, he is still required to include them on his return in the year credited since they were reinvested.

True

False

Publication 17; Page 66

Explanation

Publication 17; Page 66

6. True or False: If you perform services other than as an independent contractor, your employer should send you Form W-2 showing the pay you received for your services. Report your pay on line 2 of Form 1040 or 1040A, or line 1 of Form 1040EZ, even if you did not receive a Form W-2.

True

False

Publication 17; Page 46

Explanation

Publication 17; Page 46

7. You have been an employee of a large corporation for a number of years. You now have an excellent health-care package where your employer pays $350 per month ($4200 per year) toward your health-care plan. How much of the $4200 that your employer paid (considered to be the value of the health-care plan for the tax year) would be included in your income as additional wages for the current tax year?

$4200

$2100

$1050

$0

Publication 17; Page 48

Explanation

Publication 17; Page 48

8. If you retired on disability, payments you receive under a plan that is paid for by your employer are taxed as wages until you reach minimum retirement age. These taxable disability payments are reported on line 7 of Form 1040 or Form 1040A until that time. What, generally, is minimum retirement age?

The age at which you can first receive Social Security payments if you are not disabled.

Age 65

Age 59 1/2

The age at which you can first receive a pension or annuity if you are not disabled.

Publication 17; Page 52

Explanation

Publication 17; Page 52

9. On what line of Form 1040 would you report taxable disability payments you received during 2014 for amounts you received from the day after you reached minimum retirement age?

Line 7

Line 12 (a & b)

Line 16 (a & b)

Publication 17; Page 52

Explanation

Publication 17; Page 52

10. True or False: Allocated tips are tips that your employer will assign to you in addition to the tips you reported for the year if you 1) worked in an establishment that must allocate tips to employees and 2) the tips you reported to your employer were less than your share of 8% of food and drink sales.

True

False

Publication 17; Page 56

Explanation

Publication 17; Page 56

11. True or False: You must report all cash, check, and debit and credit card tips you received to your employer.

True

False

Publication 17; Page 55

Explanation

Publication 17; Page 55

12. Check the situation(s) below that would generally require the recipient to include the amount of money or value s/he receives in his/her gross income for federal income tax purposes at the time paid or contributed.

Exempt-interest Dividends

Housing allowance stipulated as such that is part of a minister's pay used wholly to pay rent on the home in which s/he lives.

A lump sum payment for cancellation of your employment contract.

Tips of less than $20 in any one month from any one job.

Non-pension payments made to military personnel on active duty.

Veteran's benefits paid under a law administered by the VA.

Life insurance proceeds received in a lump sum.

The premium your one employer paid for you covering you with $50,000 of group-term life insurance if this was non-key person life insurance.

The premium your one employer paid for you covering you with $35,000 in group-permanent life insurance coverage.

The cost of $40,000 of term-life insurance coverage that your one employer paid for you only because you were so valuable to him/her.

Compensatory damages you received for physical sickness or physical injury, whether paid in a lump-sum or periodic payments.

Amounts received as workers' compensation for an occupational sickness or injury paid under a workers' compensation act.

Interest paid on U.S. Savings Bonds by "cash method" taxpayers.

Disability income received for personal sickness or injury from a plan paid for by you.

Interest paid by the IRS on a tax refund.

A fee a minister receives for performing a baptism.

Personal use of employer provided car.

A part of your compensation contributed by your employer to an "elective deferral" (401(k)) plan for you of $17,500 or less (excluding Section 457 Plans).

Publication 17; Pages 46-66

Explanation

Publication 17; Pages 46-66

Submit

13. CHOOSE THE CORRECT ANSWER: What is Form 4137 (Social Security and Medicare Tax on Unreported Tip Income) used for?

Form 4137 is used to figure Social Security and Medicare tax on tips of $20 or less in any month that were not reported to an employer.

Form 4137 is used to figure Social Security and Medicare tax on tips of less than $20 in any month that were not reported to an employer.

Form 4137 is used to figure Social Security and Medicare tax on tips of $20 or more in any month that were not reported to an employer.

Form 4137 is used to figure Social Security and Medicare tax on tips of more than $20 in any month that were not reported to an employer.

Publication 17; Page 55

Explanation

Publication 17; Page 55

14. Form W-2, Wage and Tax Statement, is given to employees by their employer showing the pay received for services as well as other items. Check the item(s) below that could also be included on an employee's Form W-2.

Rents

Medicare Tax Withheld

Social Security Tax Withheld

Interest

Back Pay Awards

Royalties

Tips

Capital Gain Distributions

Publication 17; Pages 46-66

Explanation

Publication 17; Pages 46-66

Submit