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Questions and Answers
What is the contribution rate effective from September 5th, 2016?
Who is primarily responsible for remitting the total contribution to NIBTT?
In what ratio are contributions shared between the employer and employee?
Which of the following must an employer maintain for their employees?
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For which age group does no deduction of contributions occur?
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What happens to an employer who fails to comply with contribution laws?
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Which factor is NOT considered when determining the deduction amount?
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What is the consequence of deducting part of the employer’s contribution from the employee’s wages?
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What is considered an insurable employee under the National Insurance Act?
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Why is the registration of employers and employees important for the NIBTT?
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Which of the following is NOT a short-term benefit provided by the NIBTT?
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What consequence can result from fraudulent registration with the NIBTT?
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Who must register with the NIBTT as an employer?
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Which benefit is categorized under long-term benefits?
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What is a requirement for an employee to be considered insurable?
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What type of workers does the NIBTT require to register as employers?
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What must happen to contributions in relation to the employer's assets?
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When are contributions due if an employee works only a few days in a week?
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What is the grace period for paying contributions for a month?
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What form should be filled out to request a contributions statement?
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What penalty does an employer face for failing to pay contributions?
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How can contributions be paid at the service center?
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What should happen when an employee receives a retroactive salary increase?
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What is required from each employer when an employee has multiple jobs?
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What must an employer provide to an employee within thirty days of termination?
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What happens if an employer fails to issue a Termination Certificate?
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How much of their contribution share can an employee claim as tax relief?
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What penalty is applied if contributions are not paid by the 15th of the following month?
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When does interest begin to apply on unpaid contributions and penalties?
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What is required for contributions to be considered in the highest earnings class?
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What is the consequence for not forwarding the Termination Certificate to the NIBTT?
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In which scenario is the employer’s share of contributions tax deductible?
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Who is eligible to register under the given conditions?
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What is the maximum period an employer has to register an employee if they do not provide their NI Number?
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What must an employee provide to their employer for registration?
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How long does an employee have to inform their employer of their NI Number once registered?
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What happens if an unregistered employee ceases work before completing the NI4 form?
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Which of the following is NOT a requirement for registration?
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Who is exempt from registering according to the criteria laid out?
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What is the purpose of submitting the NI4 Application form to the NIBTT Service Centre?
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What is the percentage rate of income tax for individuals with chargeable income over TTD 1 million?
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Which document is NOT required for self-employed individuals when applying for a BIR file number?
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Who is responsible for deducting and remitting taxes for employees under the PAYE system?
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What is the chargeable income calculated from?
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What is the purpose of obtaining a Pay As You Earn (PAYE) number?
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When can an employee file a tax return even if not legally required to do so?
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At what time of year is the filing deadline for tax returns typically set?
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What is a requirement for registering as a new employee with the BIR?
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What is the increased annual personal allowance for individuals effective from January 1, 2023?
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Which form is necessary for employees to ensure the correct amount of tax is withheld by their employer?
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What is NOT a valid deduction to reduce personal tax liability?
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When must an employee update their TD1 form?
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For self-employed individuals, when is the deadline for filing tax returns?
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Which document is issued by an employer that indicates an employee's effective date of employment and salary?
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What are self-employed individuals required to do regarding tax payments?
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What is the consequence for an employee if the TD1 form is not accurate or up to date?
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What must be submitted to claim tax deductions for certain expenses?
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Which of the following is NOT considered a supporting document for tax deductions?
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What is the first step in calculating total income tax based on a gross monthly salary of $10,000?
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How is the Total Annual NIS payment calculated?
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When submitting TD1 forms and supporting documents, which section should these be taken to?
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What percentage of the Total Annual NIS payment is used for the tax deduction calculation?
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What type of evidence is required for claiming first-time home ownership tax deduction?
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Which of the following is a legitimate expense that does not require approval from the Inland Revenue Division?
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What information is summarized on a payslip that an employee receives?
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What is the primary purpose of a time card in a business setting?
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How is the double entry for recording wage payments typically structured?
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Which of the following entries would be correct when statutory payments are made?
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What is recorded on an individual record card for each employee?
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What is the formula to calculate Chargeable Income?
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How much is the monthly PAYE deduction based on a Chargeable Income of $20,381.84?
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What is the total tax deducted from Janet James's income?
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Which of the following represents the total annual income for Janet James?
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What percentage is used to calculate the tax on Chargeable Income?
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Which document summarizes the gross salaries and total deductions for employees?
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What is the ROUND total amount utilized in the calculation of PAYE deduction for Janet?
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What is included in PAYE deductions besides the government allowance?
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What is the primary purpose of a payslip for an employee?
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How does a time card contribute to payroll management?
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What is included in an individual employee's record card?
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When wages are paid, what is the correct double entry to record the transaction for cash payments?
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What is the significance of statutory deductions reflected in payroll accounting?
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How is the Total Annual Income calculated from a gross monthly salary of $8,000?
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What documentation is required to claim deductions for education expenses?
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Which of the following deductions requires approval from the Inland Revenue Division?
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What is the correct way to calculate 70% of the Total Annual NIS payment of $5,168.80?
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What should you submit if your tax deductions include expenses not listed for approval?
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Which of the following is included in the calculation of Total Annual NIS payments?
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Which document serves as proof of the income earned for tax deductions?
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Which hours are the Taxpayer Services Section open for submitting TD1 forms?
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What is the standard rate used to calculate PAYE deductions?
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How is the Chargeable Income calculated for an individual with an annual income of $120,000 and total tax deductions of $93,618.16?
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What is the consequence of not calculating the PAYE deduction correctly?
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During which process is the payroll created?
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What is the main function of a payslip in the payroll process?
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How much is the monthly PAYE deduction for an individual with a tax on Chargeable Income of $5,095.46?
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Which record is NOT typically maintained in payroll records management?
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What is the calculation for the total annual income of an employee earning $9,500.00 per month?
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Study Notes
Benefits of National Insurance
- Short-term benefits include Sickness, Funeral Grant, Maternity Benefit, and Special Maternity.
- Long-term benefits cover Retirement, Invalidity, and Survivors.
- Employment Injury benefits encompass Medical Expenses, Disablement, and Death Benefit.
Registration Process
- Registration with NIBTT generates a unique Registration Number for Employers and Employees.
- Legal requirement facilitates efficient processing of benefits applications.
- Establishes a sound database of employers and insured persons.
Insurable Employment
- An insurable employee earns at least $200 per week under a contract of services.
- Employers include any person or entity employing at least one insurable employee.
Mandatory Registration
- Employers hiring at least one person must register within 14 days.
- All employees earning $200 or more per week must be registered.
- Registration applies to both paid and unpaid apprentices.
Exemptions from Registration
- Individuals earning less than $200 per week are exempt.
- Non-citizens exempt under international conventions or social security agreements are also excluded.
Registration Deadlines
- Employees must provide their NI Number within 7 days.
- Employers must register employees within 14 days if NI Number is not provided.
- Employees must be informed of their registration status within 21 days.
Employee Registration Procedure
- Unregistered employees need to complete the NI4 form with personal details within 7 days.
- Employers submit completed NI4 forms to the NIBTT Service Centre within 14 days of employment.
Contribution Payments Structure
- Contributions are calculated based on wages and structured into 16 earning classes.
- Rates are set at 13.5% of assumed average weekly earnings (from September 5, 2016).
- Payment responsibility is shared: 2/3 by the employer and 1/3 by the employee.
Consequences of Non-compliance
- Employers failing to register or make contributions face fines and potential imprisonment.
- Mandatory record-keeping for each employee, including full name, NI Number, and contribution records.
Contribution Payment Due Dates
- Contributions due each week based on the employee's work, including apprenticeship and probation.
- For monthly salaries, due dates reflect the number of Mondays in that month.
Requesting Contribution Statements
- Individuals can request contributions statements using the NI183 form at NIBTT service centers.
- Updates on personal information can be submitted using the NI165 form.
Penalties for Non-payment
- Employers failing to pay contributions may face a fine of $4,000 and additional fines per outstanding employee.
- Penalties apply if contributions are not paid by the 15th of the following month.
Payment Methods
- Contributions are payable via Cash, Certified Cheque, or Manager’s Cheque at district service centers.
- Personal cheques accepted up to valid bank card limit.
Retroactive Salary Increases
- Adjustments to contribution classes apply from the week of any retroactive salary increase payment.
Handling Multiple Employment
- All employers must contribute for employees with multiple jobs, with total contributions determining the highest earnings class applicable for the employee.
Termination of Employment Procedures
- Employers must provide a Termination Certificate within 30 days, detailing earnings and contributions.
- Certificate must be sent to NIBTT on the same day it is issued to the employee.
Tax Relief
- Employer contributions qualify as operating expenses, tax-deductible in full.
- Employees can claim 70% of their contributions as tax relief.
Interest on Late Payments
- Contributions and related penalties not paid by the 15th of the second month incur 15% interest on the total due.
Income Tax Overview
- The Pay As You Earn (PAYE) system requires employees over 17 to pay income tax based on their chargeable income.
- Chargeable income is calculated by subtracting allowances from the Gross Salary or Wage.
Who Pays Income Tax?
- All individuals earning income must pay income tax and a health surcharge, requiring a Board of Inland Revenue (BIR) file number.
- Employees have taxes deducted by employers, while self-employed individuals must file an annual tax return.
- Individuals with chargeable income under TTD 1 million face a 25% tax rate, while those over TTD 1 million are taxed at 30%.
BIR File Number and PAYE Number
- All employees and businesses must register for a BIR file number for tax payments and filing.
- A PAYE number is mandatory for companies and sole traders employing staff to remit withheld taxes.
Required Documents for Tax Registration
- Self-employed individuals need a Certificate of Registration and identification documents, while employees need proof of employment and income.
Significant Legislative Changes
- As of January 1, 2023, the annual personal allowance for income tax increased from TTD 84,000 to TTD 90,000.
Reducing Tax Liability
- Employees should complete a Tax Declaration 1 Form (TD1) to ensure accurate tax withholding.
- Self-employed individuals must file returns quarterly, documenting deductions and expenses.
- Deductions allowed include tertiary education expenses, home ownership, annuity contributions, and alimony payments.
Approval for Deductions
- Certain deductions require approval from the Inland Revenue Division via the TD1 form.
- Supporting documents are needed to substantiate other deductible expenses.
Calculating Income Tax
- Calculation examples for monthly salaries detail a step-by-step process involving total annual income, NIS payments, chargeable income, and PAYE deductions.
- The example specifically mentions the calculations for a gross monthly salary of TTD 10,000 and the resulting PAYE deduction.
Payroll Records
- Key payroll records include the payroll sheet, payslip, and individual record card, essential for tracking employee payments and deductions.
- A payroll summarizes total salaries, deductions, and net earnings; payslips provide detailed paycheck information to employees.
Time Cards
- Time cards are used to track employees' hours to determine payroll for hourly workers and assess attendance.
Accounting Entries
- Standard entries for salary payments involve debiting wages/salaries and crediting cash or bank.
- For statutory deductions, additional credits are made for payments due to legal authorities.
Statutory Payments
- Upon making statutory payments, appropriate entries must debit the respective payables (e.g., national insurance) and credit bank or cash.
Payslip Overview
- A payslip is provided alongside salary payments, summarizing payroll details including gross wage, deductions, and net salary.
- Payslip format varies by company, allowing employees to verify payment accuracy.
Individual Record Card
- Each employee has a personal record card that tracks their annual payroll data, including gross wages, deductions, and net salary.
- Information is regularly updated each time an employee is paid.
Time Cards
- Employees may use time cards, which they "punch" to record their arrival and departure times.
- Time cards help calculate hourly wages and assist in monitoring attendance and punctuality.
Accounting Entries for Salaries
- Salary payments require double entry bookkeeping:
- Debit Wages or Salaries account.
- Credit Cash account (for cash payments) or Bank account (for cheque payments).
- For statutory deductions not immediately remitted:
- Debit Wages or Salaries.
- Credit any applicable cash or bank accounts and individual statutory payments due.
Statutory Payment Entries
- When making statutory payments:
- Debit applicable accounts (e.g., national insurance, health insurance).
- Credit Cash or Bank account.
Income Tax Calculation
- Total Tax Deducted: 93,618.16 comprises 90,000 (tax-free allowance) plus 3,618.16.
- Chargeable Income is calculated by subtracting Total Tax Deducted from Total Annual Income.
- Tax on Chargeable Income is assessed at 25%.
PAYE Deduction Calculation
- PAYE deduction is derived by dividing the Tax on Chargeable Income by 12 months.
Example: Janet James' PAYE Calculation
- Monthly gross salary: 9,500.00; Annual income: 114,000.00 (9,500.00 x 12).
- Total annual NIS payment: 5,168.80 (99.40 x 52 weeks).
- 70% of NIS payment: 3,618.16.
- Total tax deducted: 93,618.16.
- Chargeable income: 20,381.84.
- Tax on chargeable income: 5,095.46.
- Monthly PAYE deduction: 424.62.
Payroll Records
- Key payroll records include payroll lists, payslips, and individual record cards.
- Payroll summarizes employees' gross salaries, deductions, and net wages for designated pay periods.
Additional Information for Tax Deductions
- Employees seeking tax deductions for specific expenses must submit a TD1 form to the Inland Revenue Division.
- Supporting documents are necessary to validate legitimate tax-deductible expenses, including payslips and ownership evidence.
Example Calculation for PAYE
- Gross monthly salary example: 10,000.00; Total annual income calculated as 10,000.00 x 12 months, equaling 96000.00.
- Total annual NIS payment calculated based on weekly rates multiplied by weeks in the year.
- 70% of the annual NIS payment is calculated for relevant tax deductions.
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Description
This quiz covers the various short-term and long-term benefits provided under social security schemes, including sickness, maternity, retirement, and special benefits. It also touches on the registration process for employers and employees, highlighting its importance and obligations.
