CPE Accounting & Tax Institute |
CPE & CE Credit: 8 Hours (Tax) |
Please submit answer form with multiple choice or true/false answers for the following questions.
Does Section 530 Apply?
1. Section 530 terminates both the business's and the worker's employment tax liability if certain requirements are met.
A. True
B. False
Introduction
Consistency Test
2. The business must meet which items below as aspects of the consistency test:
A. Filing all required Forms 1099.
B. Treating all workers in similar positions the same.
C. Both A and B.
Reasonable Basis Test
3. The business must reasonably rely on one of the following to satisfy the reasonable basis test:
A. Prior audit.
B. Judicial precedent safe haven.
C. Industry practice safe haven.
D. Other reasonable basis.
E. Any one of A, B, C or D.
4. Meeting the consistency and reasonable basis tests will give the business relief from employment taxes with respect to workers whose status is in question.
A. True
B. False
Historical Background
5. Section 530 of the Revenue Code of 1078, as amended, is part of the Internal Revenue Code (IRC).
A. True
B. False
6. After Section 530 was amended by Section 1706 of the Tax Reform Act of 1986, Section 530(d) denies relief for certain technically skilled workers who provide services under the three party situation.
A. True
B. False
7. It is necessary for the business to claim Section 530 relief for it to be applicable.
A. True
B. False
8. Section 530 relief is available throughout the examination or administrative (including appeals) process, as well as any subsequent judicial proceeding.
A. True
B. False
9. When Congress enacted Section 530, the IRS was barred from issuing any regulations or revenue rulings pertaining to worker classification.
A. True
B. False
10. Section 530 is a relief provision that should be considered as the first step in any case involving worker classification.
A. True
B. False
11. Considering Section 530 first is consistent with prior policy and contradicts the Small Business Job Protection Act of 1996.
A. True
B. False
12. If a misclassified worker paid tax under the Self Employment Tax Contribution Act (SECA), the worker may file a claim for refund for the difference between SECA tax and the employee share of FICA.
A. True
B. False
13. Workers as employees generally cannot deduct unreimbursed business expenses above the line on Schedule C, but must deduct them, if at all, as miscellaneous itemized deductions on Schedule A, Form 1040, subject to the two-percent limitation of IRC Section 67.
A. True
B. False
14. The worker as an employee can adopt or maintain a self-employed retirement plan.
A. True
B. False
15. Certain benefits provided by the business to a worker as an employee may be excludable from income by the employee due to specific IRC exclusions provided only to employees (eg. employer provided accident and health insurance).
A. True
B. False
Consistency Test: Reporting Consistency
Information Returns:
16. The first requirement a business must meet to obtain relief under Section 530 is timely filing of all required Form 1099s with respect to the worker for the period on a basis consistent with the business's treatment of the worker as not being an employee.
A. True
B. False
17. If a business fails to file the required returns in a previous year, it is not precluded from qualifying for Section 530 relief in a subsequent period if all required returns were filed on a basis consistent with the treatment of the worker as not being and employee for the relief period.
A. True
B. False
18. Even if the business is not required to file Forms 1099 with respect to the worker, Section 530 relief may be denied on the basis that the return was not filed.
A. True
B. False
19. Businesses that mistakenly, in good faith, file the wrong type of Form 1099 do not lose Section 530 eligibility.
A. True
B. False
20. Form 1099, reporting payments of $600 or more, must generally be filed by the last day of February following the close of the year in which the payment for service was made.
A. True
B. False
21. Section 530 provisions apply even if the business or a predecessor treated the worker, or any worker holding a substantially similar position, as an employee at any time after December 31,1977.
A. True
B. False
22. A substantially similar position exists if the job functions, duties, and responsibilities are substantially similar and the control and supervision of those duties and responsibilities are substantially similar.
A. True
B. False
23. The day to day services that workers perform and the method by which they perform those services are not relevant in determining whether workers treated as independent contractors hold substantially similar positions to workers treated as employees.
A. True
B. False
Consistency Test: Substantive Consistency
24. Filing Form 940, 941, 942, 943, or W-2 with respect to a worker, whether or not tax was withheld from the worker, is treatment of the worker as an employee for that period.
A. True
B. False
25. The filing of a delinquent or amended employment tax return for a particular period is treatment of the worker as an employee if the filing was a result of IRS compliance procedures.
A. True
B. False
26. Filing of a delinquent or amended employment tax return for periods after the period under audit is treatment of the workers as employees for those later periods, regardless of the time at which the return is filed.
A. True
B. False
27. Either use of an IRC Section 6020(b) return prepared by the IRS or the signing for Form 2504 (Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment) consititutes treatment consistent or inconsistent with payments to an independent contractor.
A. True
B. False
28. If a business treats workers as employees for state unemployment or state withholding purposes, that is treatment for purposes of Section 530.
A. True
B. False
Treatment by Predecessor
29. Section 530 specifically states that the treatment by predecessor entities will be taken into account when evaluating substantive consistency to ensure substantive consistency is not avoided by the formation of new entities.
A. True
B. False
Changing treatment of workers
30. If the business begins to treat misclassified workers as employees, relief is not available under Section 530 for the years it treated them as independent contractors, even if it meets both consistency requirements (reporting and substantive consistency) and reasonable basis for the years prior to the change in treatment.
A. True
B. False
Dual Status
31. An employer can recieve Section 530 relief when its workers perform services in two capacities (employee and independent contractor) such as where a bookkeeper might be seperately engaged to design and print an advertising brochure.
A. True
B. False
Consistency Test
32. ABC Corporation's 2006 returns were examined and it was found that 100 workers, all doing the same job, were being treated as independent contractors. Examiner discovered that five of these 100 workers were, in 2002, treated as employees while they performed substantially the same job as in 2006.
A. ABC Corporation can claim relief under section 530 in 2006 for all but the five workers treated as employees in 2002.
B. ABC Corporation cannot claim relief under section 530 in 2006 for any of these 100 workers because of inconsistent treatment
Reasonable Basis Test - Liberal Construction
33. The Congressional direction to liberally construe section 530 means that facts which indicate that the conditions of section 530 have been satisfied by a particular business are to be viewed liberally in favor of the business.
A. True
B. False
Reasonable Basis Test - Liberal Construction
34. Liberal construction means that the conditions for obtaining section 530 relief should be discounted or ignored if most are satisfied.
A. True
B. False
Reasonable Basis Test - Burden of Proof
35. If the taxpayer establishes a prima facie case that it was reasonable not to treat an individual as an employee and the taxpayer cooperates fully with reasonable requests from the examiner, the burden of proof shifts from taxpayer to the IRS under section 530(c)(e)(4).
A. True
B. False
Reasonable Basis Test - which burden of proof shifts
36. Section 530(e)(3)(4) shifts the burden of proof in determining whether the taxpayer had any other reasonable basis for treating the worker as an independent contractor in addition to reporting and substantive consistency requirements.
A. True
B. False
Reasonable Basis Test - Reasonable reliance
37. If the business establishes the existance of a safe haven, the business is not required to show reasonable reliance on the safe haven for treating its workers as independent contractors.
A. True
B. False
Reasonable Basis Test - Prior audit
38. For the prior audit safe haven for treating workers as independent contractors, taxpayers may continue to rely on any audit began before January 1, 1997, even though the audit was not related to employment tax matters.
A. True
B. False
Reasonable Basis Test - Prior audit
39. Audits conducted by agencies other than the IRS may qualify a business for relief based upon the prior audit safe haven.
A. True
B. False
Reasonable Basis Test - Judicial precedent
40. To obtain relief under section 530 judicial precedent, the business must demonstrate reasonable reliance on:
A. judicial precedent
B. a published ruling
C. technical advice relating to that business
D. a letter ruling to that business
E. any of the above
Reasonable Basis Test - Judicial precedent
41. One case is sufficient to establish a precedent that creates a safe haven under section 530 judicial precedent.
A. True
B. False
Reasonable Basis Test - Judicial precedent
42. Businesses are entitled to the judicial precedent safe haven under section 530, based upon rulings by state administrative agencies.
A. True
B. False
Reasonable Basis Test - Judicial precedent
43. The definition of industry practice under the section 530 safe haven is generally the practice by businesses located in the same geographic or metropolitan area which compete for the same customers.
A. True
B. False
Reasonable Basis Test - Industry Practice
44. To obtain relief under section 530 industry practice, the practice must always be for a period of 10 years or more to be considered long-standing.
A. True
B. False
Reasonable Basis Test - Industry Practice
45. If 25 percent or more of a taxpayer's industry follows a practice, the significant segment requirement is met for relief under section 530 industry practice.
A. True
B. False
Reasonable Basis Test - Industry Practice
46. To establish a "reasonable basis" of industry practice by the taxpayer under section 530(e)(2)(B), the fact that a formal survey was not conducted when independent contractor treatment began is conclusive that the business did not rely on industry practice.
A. True
B. False
Reasonable Basis Test - Industry Practice
47. A claim of reliance on industry practice for relief under section 530, requires that the business knew of the industry practice at the time when independent contractor treatment began by the business.
A. True
B. False
Reasonable Basis Test - Industry Practice
48. Relevant factors to establish reliance on industry practice was reasonable for relief under section 530 include knowledge of industry practice through:
A. Personal experience
B. A formal study
C. An opinion from an advisor with industry qualifications
D. All of the above
Other Reasonable Basis
49. To establish reasonable basis by reliance on the advice of an attorney or accountant, court cases require the business to present:
A. Evidence of the educational and experiential qualifications of the attorney or accountant
B. Evidence that the attorney or accountant issued the advice after reviewing facts furnished by the business
C. Both A and B
Other Reasonable Basis
50. A business that makes a reasonable effort to establish independent contractor treatment for its workers under common law but falls just short of satisfying the common law standard may present a valid section 530 safe haven under "other reasonable basis."
A. True
B. False
Other Reasonable Basis - Prior audit of predecessor
51. A prior audit of the business predecessor may qualify the business for section 530 "other reasonable basis" relief if there has merely been a change in the form of the business and the successor is in the same line of business.
A. True
B. False
Other Reasonable Basis - Good Faith
52. Good faith is an affirmative standard sufficient by itself to provide section 530 relief.
A. True
B. False
Other Reasonable Basis - Other situations
53. Section 530 relief is available to employers who fail to treat illegal aliens as employees because they have no social security numbers.
A. True
B. False
Workers Covered by Section 530
54. If a business meets the requirements of section 530 with respect to a group of workers, it is generally not necessary to determine whether the workers are independent contractors or employees.
A. True
B. False
Workers Covered by Section 530
55. Statutory employees are not employees for purposes of section 530.
A. True
B. False
Workers Not Covered by Section 530
56. Section 530(d) provides that relief under section 530(a) is not available in the case of a worker who, pursuant to an arrangement between the business and a client, provides services for that client as:
A. Engineer
B. Designer
C. Drafter
D. Computer Programmer
E. All of the above
Workers Not Covered by Section 530
57. Technical service workers who are precluded from relief under section 530(a) as a result of section 530(d), are deemed employees without regard to classification under common law rules.
A. True
B. False
Effect of Section 530 Relief on Employee
58. If the business's liability for federal employment tax obligations is terminated by section 530(a)(1), the worker remains liable for employee FICA tax with respect to all wages received.
A. True
B. False
Independent Contractor or Employee: The Common Law Standard
59. Provided they meet specific qualifications by statute, a worker is not an employee for purposes of FICA, FUTA, or federal income tax withholding if engaged in the occupation of:
A. Real Estate Agent
B. Direct Seller
C. Companion Sitter
D. Both A and B
E. A, B and C
Common Law Employee: Control Standard
60. Following the common law standard, the employment tax regulations provide that an employer-employee relationship exists when the business for which the services are performed has the right to direct and control the worker who performs the services.
A. True
B. False
Common Law Employee: Control Standard
61. The "Twenty Factor Test" is the conclusive legal test rather than merely an analytical tool used for determining worker status.
A. True
B. False
Common Law Employee: Control Standard
62. Some of the twenty common law factors listed in Rev. Rul. 87-41 are no longer relevant as business relationships change over time.
A. True
B. False
Common Law Employee: Control Standard
63. A worker may not perform services for a single business in more than one capacity such as performing one type of service as an independent contractor but performing another type of service as an employee.
A. True
B. False
Common Law Employee: Control Standard
64. All relevant information needs to be explored and weighed before answering the legal question of whether the right to direct and control associated with an employer-employee relationship exists.
A. True
B. False
Common Law Employee: Control Standard
65. Examples of key facts that illustrate the right to direct and control or the absence of such right includes:
A. Behavioral control
B. Financial control
C. How parties perceive their relationship
D. A and B
E. A, B and C
Behavioral Control
66. An employer-employee relationship is indicated the more instructions are given to the worker regarding how the job gets done rather than the end result.
A. True
B. False
Behavioral Control
67. The requirement that a worker obtain approval before taking certain actions is not evidence of control over worker's behavior in the performance of worker's services.
A. True
B. False
Behavioral Control - Degree of Instruction
68. The more detailed the instructions provided to a worker that the worker is required to follow, the more control the business exercises over the worker and the more likely the business retains the right to control the methods by which the worker performs the work.
A. True
B. False
Behavioral Control - Third Party Mandates
69. If a business requires its workers to comply with rules established by a third party (such as municipal building codes related to construction), the fact that such rules are imposed by the business as well should be given more weight than those without third party influence in determining whether the business has retained the right to control the worker.
A. True
B. False
Behavioral Control - Instructions by customer
70. When the business passes on the customer's instructions about how work is to be done as its own, the instructions should be disregarded in determining whether the business has retained control over the worker.
A. True
B. False
Behavioral Control - Business Identification as instructions
71. If the nature of the worker's occupation combined with increasing concern for safety, is such that the worker must be identified with the business for security purposes, wearing of a uniform or placing the business's name on a vehicle is viewed as the type of instruction consistent with employee status.
A. True
B. False
Behavioral Control - Nature of occupation for instructions
72. Generally, highly trained professionals such as doctors, accountants, lawyers, engineers or computer specialists that are engaged in the pursuit of an independent trade, business or profession in which they offer their services to the public are independent contractors and not employees.
A. True
B. False
Behavioral Control - Nature of work for instructions
73. The right to control contemplated by Treas. Reg. section 31 3121(d)-1(c)(2) and the common law as incident of employment requires the presence of a need to control not whether the business retains the right to direct and control the worker.
A. True
B. False
Behavioral Control - Training
74. The following types of training are strong evidence of an employer-employee relationship.
A. Orientation or information sessions about the business's policies, new product line, or applicable statutes or governmental regulations.
B. Programs that are voluntary and are attended by a worker without compensation.
C. Periodic or on-going training provided by a business about detailed procedures to be followed and methods to be used.
D. A and B
E. All of the above
Financial Control - Economic Dependence
75. A basis for determining worker classification accepted by Congress and the Supreme Court is whether the worker is economically dependent on or independent of the business for which services are performed.
A. True
B. False
Financial Control - Significant Investment
76. A significant investment is not necessary for independent contractor status.
A. True
B. False
Financial Control - Business Expenses
77. The more a worker chooses to incur expenses and bear their costs, the more an independent contractor status is indicated based upon evidence that the worker has the right to direct and control the financial aspects of the business operations.
A. True
B. False
Financial Control
78. Advertising activities are essential for independent contractor status.
A. True
B. False
Financial Control - Salary or hourly wage
79. Except in some lines of business such as law, where it is typical to pay independent contractors on an hourly basis, a worker compensated hourly, daily, weekly or similar basis that guarantees a return on labor is evidence of an employer-employee relationship.
A. True
B. False
Financial Control - Realization of profit and loss
80. A worker's ability to receive more money by working longer hours or receive less money by working less is the strongest evidence that a worker controls the business aspects of services rendered and is an independent contractor.
A. True
B. False
Relationship of the Parties
81. A contractual designation in and of itself, is sufficient evidence for determining worker status.
A. True
B. False
Relationship of the Parties
82. If a worker receives employee benefits, such as paid vacation days, paid sick days, health insurance, life or disability insurance, or a pension, this consitutes some evidence of employee status.
A. True
B. False
Relationship of the Parties
83. State laws, or determinations of state or federal agencies that characterize a worker as an employee for purposes of various benefits are conclusive evidence in determining worker status for employement tax liability.
A. True
B. False
Relationship of the Parties
84. A business's ability to refuse payment for unsatisfactory work is a characteristic of an independent contractor relationship.
A. True
B. False
Relationship of the Parties
85. A service provider is always an employee where the service performed by the worker is desireable, necessary, or essential to a business.
A. True
B. False
Facts of Lesser Importance
86. The fact that a worker performed services on a part-time basis or worked for more than one person or business is currently significant evidence indicating that the worker is an independent contractor.
A. True
B. False
Weighing The Evidence
87. You must weigh the evidence before you in order to determine whether, looking at the relationship between the worker and business as a whole, evidence of control or autonomy predominates to conclude the worker is an employee or an independent contractor.
A. True
B. False
Statutory Employees, Statutory Non-Employees And other Classes of Workers
Corporate Officers
88. An officer of a corporation is an employee of the corporation where the officer does not perform any services or performs only minor services and the officer is not entitled to receive, directly or indirectly, any remuneration.
A. True
B. False
Corporate Officers
89. A director of a corporation, acting in the capacity of a director, is not an employee of the corporation for these services, even if that worker also serves as an employee or officer of the corporation for other services.
A. True
B. False
Statutory Employees
90. If a worker is not an employee under the usual common law rules or a corporate officer, the worker and the business can not be subject to employement taxes.
A. True
B. False
Statutory Employees
91. IRC section 3121(d)(3) workers that are considered employees for FICA tax, and, in some instances, FUTA tax, but not for federal income tax withholding includes:
A. Agent-drivers or commission drivers
B. Full-time life insurance salespersons
C. Home workers
D. A and B
E. A, B and C
Statutory Employees
92. In order for IRC section 3121(d)(3) to apply when a worker performs services for remuneration for a business, the contract of service must contemplate that the worker will personally perform substantially all the work.
A. True
B. False
Categories of Statutory Employees
93. The salesperson who devotes substantial efforts to selling applications for insurance contracts other than life insurance and annuity contracts (for example, health and accident, fire, automobile, etc.) meets the occupational group for statutory employees under IRC section 3121(d)(3).
A. True
B. False
Categories of Statutory Employees
94. In order for traveling or city salespersons to fall within the statutory test, in addition to meeting the three general requirements, their entire or principal business activity must be devoted to soliciting and transmitting orders for merchandise of a single business.
A. True
B. False
Categories of Statutory Employees
95. Statutory employees under IRC section 3121(d)(3) are not employees for the purpose of deducting trade or business expenses and therefore may deduct their expenses on Schedule C rather than as miscellaneous itemized deductions.
A. True
B. False
Statutory Non-Employees
96. A quilified real estate agent under IRC section 3508 is a statutory non-employee for FICA, FUTA and federal income tax withholding.
A. True
B. False
Course Evaluation
97. Indicate your professional designation.
A. CPA
B. Public Accountant
C. Enrolled Agent
D. CMA
E. Other___________________
98. Indicate years professional experience in the course subject matter.
A. Less than 5
B. 5 to 10 years
C. 11 to 15 years
D. 16 to 20 years
E. 21 and over
99. Did the program meet your learning objectives?
A. Yes
B. No
100. Did the program materials contribute to the achievement of your learning objectives?
A. Yes
B. No
101. Did you find the program content relevant and timely?
A. Yes
B. No
102. Was the difficulty of the questions:
A. about right
B. too easy
C. too difficult
103. Was the indicated prerequisites (if any) for the program appropriate?
A. Yes
B. No
104. Do you plan to use additional courses from CPE Accounting & Tax Institute.
A. Yes
B. No
Copyright © 2005 - 2007 By
CPE Accounting and Tax Institute
