✓ TradeExamPro

TradeExamPro › Contractor › Contractor business and law

Tax labor law practice questions

30 questions from the contractor business and law practice test.

Beta. These questions are new and are being checked by licensed tradespeople. If one looks wrong, use “Report this question” and we will fix it.

Tax labor law practice test

10 questions, graded as you go, with the reason for every answer. No sign-up.

What this covers

Sample questions

An employee earns gross wages of $1,200 for the week, well below the Social Security wage base. How much FICA tax (Social Security at 6.2% plus Medicare at 1.45%) is withheld from the employee's pay?

Answer in dollars.

Show the answer

91.8 dollars

Combined employee rate = 6.2% + 1.45% = 7.65%. Withholding = $1,200 x 0.0765 = $91.80.

Reference: Federal Insurance Contributions Act, 26 U.S.C. 3101

Who pays the federal unemployment (FUTA) tax?

  1. The employee only
  2. The employer only
  3. Employer and employee equally
  4. The state workforce agency
Show the answer

B. The employer only

FUTA is a tax on the employer and is never withheld from wages. Social Security and Medicare are the taxes split between employer and employee.

Reference: Federal Unemployment Tax Act, 26 U.S.C. 3301

A contractor pays a framer by the hour, sets his start and quitting times, supplies all tools and materials, and directs how the work is done. The framer works only for this contractor. For federal tax purposes he is most likely which of the following?

  1. An independent contractor, because he is a skilled tradesman
  2. An independent contractor, because he agreed in writing to receive a 1099
  3. An employee, because the contractor controls how the work is done
  4. A partner, because he works only for this one company
Show the answer

C. An employee, because the contractor controls how the work is done

Classification turns on the right to direct and control the work and on the financial relationship, not on the label the parties choose. Set hours, supplied tools, hourly pay and direction of methods all point to employee status. Agreeing to a 1099 does not make someone an independent contractor.

Reference: IRS common-law control test (behavioural control, financial control, relationship); IRS Publication 15-A

Other topics