1. This is a person who performs services for an employer who has the right to control and direct the results of the work and the way in which it is done. The employer provides the employee's tools, materials and workplace. In addition, the employer can fire the employee.
A. Self-employed person.
B. A
common-law employee.
C. A
leased employee.
D. An
employee.
2. Under a SEP, you make the contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. SEP-IRAs are set up for, at a minimum, each eligible employee. An eligible employee is an individual who
A. Has reached age 21.
B. Has
worked for you in at least 3 of the last 5 years.
C. Has
received at least $500 in compensation from you in 2008.
D. All
of the above.
3. You cannot consider the part of an employee's compensation over $230,000 when figuring your contribution limit to a SEP-IRA for a common-law employee. The maximum contribution for an eligible employee is
A.
$5,250.
B.
$21,000.
C.
$46,000.
D.
$49,000.
4. Excess contributions are your contribution to an employee's SEP-IRA (or to your own SEP-IRA) for 2008 that exceed
A. 25%
of the employee's compensation (or for you, 20% of your net earnings from
self-employment).
B.
$46,000.
C.
The lesser of A or B above.
D.
The greater of A or B above.
5. When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. If you file your tax return and main the SEP using a fiscal year or short tax year,
A. You
deduct contributions made for a year on your tax return for that year.
B. You
deduct the yearly contributions on your tax return for the year within which the
calendar year ends.
C.
You deduct the contribution for the year after the year ends.
D.
You deduct contributions made for a year on your tax return for a prior year.
6. If you contribute to your own SEP-IRA, you must make a special compensation to figure your maximum deduction for these contributions. When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment, which takes in to account the deduction for one-half of your self-employment tax and
A. Your contributions.
B. 25%
of the compensation paid to the participants.
C.
Trade or business under common control described in section 414(c).
D.
The deduction for contributions to your own SEP-IRA.
7. Deduct the contributions you make for your common-law employees on your own tax return. Sole proprietors and partners deduct contributions for themselves on
A.
Schedule C (Form 1040).
B.
Schedule F (Form 1040).
C.
Line 28 of form 1040.
D.
Form 1065.
8. The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for
A.
Making excess contributions.
B.
Making early withdrawals.
C.
Not making required withdrawals.
D.
Any of the above.
9. You can set up a SIMPLE IRA plan if you meet the employer limit and
A. You
maintain another qualified plan.
B. You
do not maintain another qualified plan unless the other plan is for collective
bargaining employees.
C.
You do not maintain a plan for collective bargaining employees.
D.
Coverage under the plan has not significantly changed during the grace period.
10. You can set up a SIMPLE IRA plan only if you had
A. 200 or fewer employees who received $10,000 or more in compensation.
B. 100 or fewer employees who received $5,000 or more in compensation.
C. 50 or fewer employees who received $3,000 or more in compensation.
D. 2
or more employees who received $100 or more in compensation.
11. A SIMPLE IRA plan can permit participants who are 50 or over at the end of the calendar year to also make catch-up contributions. The catch-up contribution limit for 2008 for SIMPLE IRA plans is
A.
$2,500.
B.
$3,500.
C.
$10,500.
D.
$5,000.
12. To be a qualified plan, a defined benefit plan must benefit a least
A. 50 employees.
B. The greater of 40% of all employees or two employees.
C. At least the lesser of A or B above.
D.
The greater of A or B above.
13. For qualified plans, contributions or benefits to be provided can be in favor of highly compensated employees.
True False
14. In setting up a qualified plan, you must adopt a written plan. The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. The following organization generally can provide IRS-approved master or prototype plans.
A. Banks and insurance companies.
B. Trade or professional organizations.
C. Mutual funds.
D.
Any of the above.
15. The deductions limit for your contributions to a qualified plan depends on the kind of plan you have. The deduction for contributions to a defined contribution plan cannot be more than 25% of the compensation paid or accrued during the year to your eligible employees participating in the plan. When figuring the deduction limit, the following applies.
A. Elective deferrals are not subject to the limits.
B. Compensation includes elective deferrals.
C. The maximum compensation that can be taken into account for each employee is
$230,000.
D. All of the above.
16. A 401(k) plan can permit participants who are age 50 or older at the end of the calendar year to also make catch up contributions. The catch-up contribution limit for 2008 is
A. $2,500.
B. $3,500.
C. $10,500.
D. $5,000.
17. Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the the plan by the required beginning date. A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the calendar year in which he or she retires from employment with the employer maintaining the plan or
A. The calendar year in which he or she reaches age 55 1/2.
B. The calendar year in which he or she reaches age 65 1/2.
C. The calendar year in which he or she reaches age 70 1/2.
D. The calendar year in which he or she reaches age 59 1/2.
18. If the plan covers only you (or you and your spouse) and you (or your spouse) own the entire business (whether incorporated or unincorporated), your plan is a one-participant plan.
True False
19. If a distribution is made to an employee under the plan before he or she reaches age 59 1/2, the employee may have to pay a 10% additional tax on the distribution. This tax applies to the amount received that the employee must include in income. The 10% tax applies if distributions are made before age 59 1/2 and
A. Made to an
employee after separation from service if the separation occurred during or
after the calendar year in which the employee reached age 55.
B. Made to a
beneficiary (or to the estate of the employee) on or after the death of the
employee.
C. Made due to the
employee having a qualifying disability.
D. None of the
above.
20. The initial tax on a prohibited transaction is 15% of the amount involved for each year (or part of a year) in the taxable period. If the transaction is not corrected within the taxable period, an additional tax will be imposed of
A. 10% of the
amount involved.
B. 5% of the amount
involved.
C. 100% of the
amount involved.
D. 50% of the
amount involved.
21. You are a sole proprietor and your plan meets all the conditions for filing Form 5500-EZ. The total plan assets are more than $250,000. You should file Form 5500-EZ.
True False
22. You cannot use Form 5305-SEP if
A. You use the
services of your common-law employees.
B. You pay the
cost of the SEP contributions.
C. You are member
of an affiliated services group for which all your eligible employees
participate.
D. You have
eligible employees for whom IRAs have been set up.
23. A SARSEP set up before 1997 is available to you and your eligible employees only if
A. At least 50% of
your employees eligible to participate choose to make elective deferrals.
B. You have 25 or
fewer employees who were eligible to participate in the SEP at any time during
the preceding year.
C. The elective
deferrals of your highly compensated employees meet the SARSEP ADP test.
D. All of the
above.
24. You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2008.
True False
25. The most a participant can choose to defer for calendar year 2008 is the lesser of 25% of the participant's compensation (limited to $230,000 of the participant's compensation in 2008) and $15,500 in 2008. The limits apply to the total elective deferrals the employee makes for the year to a SEP and
A. Cash or deferred
arrangement (section 401(k) plan).
B. Salary reduction
arrangement under a tax-sheltered annuity plan (section 403(b) plan).
C. SIMPLE IRA plan.
D. Any of the
above.
26. If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up and a statement each year showing any contribution to their SEP-IRAs.
True False
27. If you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and 2 following years if coverage under the plan has not significantly changed during the grace period, and
A. The
SIMPLE IRA plan would have continued to qualified after the transaction if you
had remained a separate employer.
B. The
SIMPLE IRA plan would not continue to qualify of the transaction.
C.
SIMPLE IRA significantly changes during the grace period.
D.
None of the above.
28. If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period.
A. The
employee's opportunity to make or change a salary reduction choice under a
SIMPLE IRA plan.
B.
Your decision to make either matching contributions or non-elective
contributions.
C. A
summary description provided by the financial institution and written notice
that his or her balance can be transferred without cost or penalty if they use a
designated financial institution.
D.
Any of the above.
29. You can deduct your contributions and your employees can exclude these contributions from their gross income. The following contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes.
A.
Matching and non-elective contributions.
B.
Salary reduction contributions.
C.
SIMPLE IRA plan contributions.
D.
All of the above.
30. Your qualified plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of
A. The
plan year in which the participant reaches the earlier of age 65 or the normal
retirement age specified in the plan.
B. The
plan year in which the 10th anniversary of the year in which the participant
began participating in the plan occurs.
C.
The plan year in which the participant separates from service.
D.
The latest of A, B or C above.