True
One purpose of Form W-4 is to determine an employee's withholding.
False
The employee's income for restricted stock is typically measured on the grant date.
True
When an employee has more than one employer during the year and the combined compensation exceeds the Social Security wage base, the excess Social Security is treated as an additional income tax payment
True
One primary purpose of equity compensation is to motivate employees.
True
When stock options are exercised they are converted into actual employer stock.
True
The use of restricted stock is rising relative to the use of stock options.
True
Fringe benefits are generally a form of non-cash compensation.
True
Flexible spending accounts allow employees to set aside before-tax dollars for medical and dependent care expenses.
True
An employee's income with respect to restricted stock is the fair market value on the vesting date.
False
A cafeteria plan provides employees discounted meals at a company sponsored dining room.
False
Up to $10,000 of dependent care expenses can be excluded from and employee's compensation
False
Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.
True
Group-term life insurance is fringe benefit that can be partially taxable and partially tax free.
True
Hotel employees can receive free nights lodging on a space available basis without incurring compensation.
True
Qualified employee discounts allow employees to purchase employer goods at a discount
False
Employees complete a Form W-2 to specify their income tax withholding.
c
Bonnie's employer provides her with an annual dinner club membership costing $5,000. Her marginal tax rate is 25 percent. Her employer has a marginal tax rate of 35 percent. What is Bonnie's after-tax benefit?
a) $0.
b) $1,250.
c) $3,750.
d) $5,000.
False
On Form W-4, an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.
False
A section 83(b) election freezes the value of restricted stock for compensation purposes on the vesting date.
a
Which of the following refers to the date stock options are awarded to an employee?
a) Grant date.
b) Exercise date.
c) Lapse date.
d) Vesting date.
d
Which of the following statements concerning cafeteria plans is true?
a) Allows employees to choose from a menu of fringe benefits or to choose cash.
b) Most of the menu choices are nontaxable fringe benefits.
c) Any cash elected is treated at taxable com
c
Which of the following isn't done by Form W-2?
a) Summarizes the employee's taxable salary and wages.
b) Provides annual Federal and state withholding information.
c) Indicates whether an employee had more than one employer during the year.
d) Generated b
False
The date on which stock options are given to the employee is called the exercise date.
b
When a CEOs salary exceeds $1,000,000, the employee _____ taxed on the entire amount, and the employer ______ allowed a deduction on the entire amount.
a) is, is
b) is, is not
c) is not, is
d) is not, is not
b
Rachel receives employer provided health insurance. The employers cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that its marginal tax rate is 35 percent?
a) $0
b) $3,900
d
Which of the following regarding the Form W-4 is incorrect?
a) Determines an employee's income tax withholding.
b) Employees can claim more allowances than personal exemptions that will be claimed.
c) Employees can specify additional amounts to be withhel
c
Lara, a single taxpayer with a 30 percent marginal tax rate, desires health insurance. The health insurance would cost Lara $5,000 to purchase if she pays for it herself (Lara's AGI is too high to receive any tax deduction for the insurance as a medical e
True
Up to $5,250 of educational benefits can be excluded from an employee's compensation.
False
Cornhusker Bank reimburses employees for dues to the local bankers association. The reimbursement is includible in the employee's income.
b
Tasha receives reimbursement from her employer for dependent care expenses for up to $8,000. Tasha applies for and receives reimbursement of $6,000 for her 10 year old son. How much, if any, is includible in her income?
a) $0.
b) $1,000.
c) $3,000.
d) $6,
d
Which of the following is not a purpose of equity-based compensation?
a) Provide risk and incentives to employees.
b) Motivate employees by aligning employee and employer incentives.
c) Avoid compensation limits for executives.
d) Provides a low or no cos
True
Employers sometimes pay a gross-up to employees to cover taxes associated with taxable fringe benefits they provide.
False
Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.
b
Which of the items is not correct regarding withholding?
a) Employees that also have self employment income can have additional amounts withheld to avoid estimated tax payments.
b) Employees cannot claim an allowance for a child unless they are entitled t
c
Which of the following forms is filled out by an employee, who is a citizen, at the beginning of an employment relationship?
a) Form I-9.
b) Form W-2.
c) Form W-4.
d) Form 1099.
True
Employees will always prefer to receive incentive stock options over nonqualified stock options.
b
Which of the following is false regarding dependent care expenses?
a) Up to $5,000 of reimbursed expenses can qualify.
b) Employers may discriminate among employees.
c) Dependent children under 13 qualify.
d) Spouses who are physically or mentally unable
b
Which of the following statements regarding income tax withholding is incorrect?
a) The withholding tables are designed so that employee withholding approximates the tax liability.
b) Large itemized deductions require the need for additional withholding.
False
An employer always receives a deduction for total compensation paid to a CEO.
True
An apartment manager can exclude the fair market value of free rent from his or her income.
d
Rick recently received 2,000 shares of restricted stock from his employer, Independence Corporation, when the share price was $10 per share. Rick 's restricted shares vested three years later when the market price was $14. Rick held the shares for a littl
True
Employees may exclude from income items such as occasional theater tickets, t-shirts, or a Thanksgiving turkey.
c
Which of the following is not a requirement of a "qualified employee discount"?
a) The discount relates to goods or services of the employer.
b) The discount doesn't exceed 20 percent of fair market value.
c) The discount can be elected up to five times a
True
Employer's expense for stock options is typically recognized earlier for book than tax purposes.
True
The date on which stock options are no longer subject to forfeiture is called the vesting date.
True
Group-term life insurance is a fringe benefit that can be partially taxable and partially tax free.
True
Health insurance is an example of a nontaxable fringe benefit.
c
Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $10 per share) from his employer. At the time he started working the stock price was $11 per share. Now that the share price is $25 per share, he intends to exer
c
Which of the following is a fringe benefit that employers can discriminate among employees?
a) No additional cost service.
b) Qualified employee discount.
c) Qualified transportation fringe.
d) Employee educational assistance.
c
Which of the following statements regarding employer provided educational benefits is true?
a) All undergraduate tuition expenses can be excluded.
b) Only educational benefits from public universities can be excluded.
c) Up to $5,250 in tuition benefits c
True
Current compensation is usually comprised of salary, wages, and bonuses.
True
Employer's receive a deduction for compensation paid to and employment taxes paid on behalf of employees. *
c
Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits. Each employee is allowed $6,000 in benefits. For 2012, Tanya selected $3,000 of parking, $2,000 in 401(k) contributions, and $1,000 of cash. How much must
False
Stock options will always provide employees with future compensation.
b
Grace's employer is now offering group-term life insurance. The company will provide each employee with $200,000 of group-term life insurance. It costs Grace's employer $700 to provide this amount of insurance to Grace each year. Assuming that Grace is 43
True
Employers computing taxable income under the accrual method may deduct wages accrued as compensation expense in one year and paid in the subsequent year, as long as the company makes the payment within 2� months after the employer's year-end. *
c
Which of the following is not an example of a taxable fringe benefit?
a) Personal use of corporate jet.
b) $1,000,000 group term life insurance policy.
c) $200 of employer provided parking.
d) Automobile allowance.
d
Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?
a) The fair market value of the rent of an apartment manager living on the premises.
b) An overtime meal provided to an employee while working la
b
Which of the following statements regarding restricted stock is false?
a) Like stock options, restricted stock has to vest before it can be sold.
b) Like nonqualified stock options, the employee's income inclusion for restricted stock is the bargain eleme
c
Which of the following items is not included on an employee's Form W-2?
a) Taxable wages, tips, and compensation
b) Social Security withholding
c) Value of stock options granted during the year
d) Federal and state income tax withholding