312 MODULE 30 REGULATION OF EMPLOYMENT AND ENVIRONMENT

MULTIPLE-CHOICE ANSWERS

l. b - - 1l. b - - 2l. a - - 3l. b - - 4l. b - -

2. a - - 12. d - - 22. b - - 32. d - - 42. a - -
3. b - - 13. a - - 23. c - - 33. a - - 43. d - -
4. a - - 14. b - - 24. a - - 34. d - - 44. d - -
5. d - - 15. b - - 25. c - - 35. d - -
6. b - - 16. a - - 26. a - - 36. c - -
7. d - - 17. c - - 27. b - - 37. d - -
8. c - - 18. a - - 28. d - - 38. a - -
9. a - - 19. c - - 29. d - - 39. d - - 1st: _/44= -%
10. d - - 20. b - - 30. a - - 40. c - - 2nd: --"44 = - %

MULTIPLE-CHOICE ANSWER EXPLANATIONS

A. Federal Social Security Act
1. (b) Taxes payable under the Federal Unemployment
Tax Act (FUTA) are used to provide unemployment com-
pensation benefits to workers who lose jobs and cannot find
replacement work. These taxes paid are deductible by the
employer as a business expense for federal income tax pur-
poses. Therefore, answer (b) is correct. Answer (c) is incor-
rect because only those employers who paid wages of
$1,500 or more during any calendar quarter or who em-
ployed at least one employee for at least one day a week for
twenty weeks must pay FUTA taxes. Answer (d) is incor-
rect because it is the employer, not the employee, who pays
the taxes. Answer (a) is incorrect because the taxes payable
under the FUT A are calculated as a fixed percentage of only
the first $6,000 of wages of each employee.
2. (a) Unemployment compensation is intended for
workers who lose jobs through no fault of their own and
cannot find replacement work. Answer (a) is correct be-
cause a CP A fired as a result of the employer's business
reversals is entitled to receive unemployment compensation.
Answer (b) is incorrect because an accountant who refuses
to accept replacement work offered himlher would not re-
ceive unemployment compensation., Answers (c) and (d) are
incorrect because unemployment compensation is not in-
tended for an employee whose actions led to his/her loss of a
job.
3. (b) Directors' fees are generally treated as self-
employment income and thus are subject to social security
self-employment tax.
4. (a) Answer (a) is best since the nondeduction of the
FICA tax and the payment of it by the employer effectively
raises'the income of the employee. Answer (d) is not correct
because although the employer is required to withhold tax
on wages and is liable for payment of such tax whether or
not it 'is collected, the employer's liability can be relieved
after showing the employee's related income tax liability has
been paid. Therefore, since the employer has paid the taxes,
the employer is not subject to penalty. Answer (c) is not
correct since no mention is made of a gift. Answer (b) is not
correct since no reference is made to wages not being an
ordinary and necessary business expense.
5. (d) Social security benefits may include payments to
spouses, including divorced spouses in somecases, and to
children. It may also include medicare payments but not
medicaid payments.
6. (b) Earned income in excess of the annual limita-
tion will cause a reduction in a retired person's social secu-
rity benefits. Answer (b) is therefore correct, since "direc-
tor's fees" are considered earned income. Answers (a), (c),
and (d) are incorrect because proceeds from an annuity, pen-
sion payments, and stock dividends are not considered
earned income.
7. (d) Unemployment insurance tax must be paid by
the employer if the employer employs one or more persons
covered by the act. Payments for unemployment insurance
are not deducted from employees' salaries. Workers' com-
pensation is a form of strict liability whereby the employer is
liable to the employee for injuries or diseases sustained by
the employee which arise out of and in the course of em-
ployment. The insurance is paid by the employer and the
cost is passed on as an expense of doing business. Thus,
worker's compensation insurance also is not paid by the
employee.
8. (c) Social security tax applies to wages, defined as
all compensation for employment. Employment compensa-
tion does not have to be in the form of cash to be included in
wages taxed under the Federal Insurance Contributions Act
(FlCA). Therefore, a car received as a productivity award is
considered employment compensation subject to the social
security tax and answers (a), (b), and (d) are incorrect, be-
cause these are not wages.
9. (a) Both a failure to supply taxpayer identification
numbers and a failure to make timely FlCA deposits would
be violations of the Act. As all employees are required to
participate in Social Security, their identification numbers
must be supplied in order to track employment and cumula-
tive FlCA tax paid to rhe government. The Act also explic-
itly states that an employer's failure to collect and deposit
taxes in a timely manner subjects himlher to penalties and
interest.
B. Workers' Compensation Act
10. (d) Workers' compensation benefits arise out of a
type of strict liability whereby employers are liable for inju-
ries or diseases sustained by employees which arise from the
scope of the employment. Temporary office workers are
usually either independent contractors or are employees of a
separate employment agency. Answer (a) is incorrect be-
cause the employment laws are especially meant to protect
minors. Answer (b) is incorrect because truck drivers are
not exempted. Answer (c) is incorrect because union af-
filiation does not create an exemption.
11. (b) Under workers' compensation laws, any em-
ployee injured during the course of employment is entitled
to workers' compensation benefits regardless of fault, as