ACC 105 Chapter 5 Smartbook: Employee Net Pay & Pay Methods

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Medicare taxes provide for:

health insurance coverage for individuals eligible to enroll in Medicare benefits

True or False: The wage-bracket method is useful for manual payroll preparation because the process of federal tax withholding is an absolute amount that will match the year-end tax forms.

False

True or false: Disposable income limits apply to union dues.

False

True or false: Paycards require employees to have a bank account.

False

To determine taxes to withhold using the __ method, the payroll clerk may use Publication 15-T.

Wage-Bracket

In 2020, Social Security taxes are calculated with a wage base of:

$137,700

In 2020, Social Security taxes have a maximum wage base of_.

$137,700

An employee earns $4,000 per week and contributes $150 to their 401(k) plan and $75 to United Way. What amount of employee's wages are subject to federal income taxes?

$3,850 ($4,000 - 150 = $3,850)

An employee earns $4,000 per week and contributes $150 to their 401(k) plan and $75 to United Way, a charity. What is the employee's FICA taxes for the period?

$306 ($4,000 x (.062 + .0145) = $306 Social Security Tax Rate = 6.2 Medicare Tax Rate = 1.45)

George had gross wages of $1,000, 401(k) deduction equal to 15% of gross wages and health insurance of $50. George's taxable income is $_.

$800 (1,000 x .15 = 150 150 + 50 = 200 1,000 - 200 = 800)

Employers issuing paper checks to employees should:

-use a dedicated payroll account -maintain an unclaimed property account -ensure sufficient funds are in the bank account

Highly compensated employees are subject to an additional 0.9% Medicare tax because of the __ Act.

Affordable Care

_ is a type of cryptocurrency that has gained popularity.

Bitcoin or Ethereum

If a firm operates in multiple states, state __ requirements may become more complex.

Income Tax

True or False: Most states have a state income tax.

True

The maximum garnishment for an employee is determined on:

disposable income

FICA taxes are imposed on _.

eligible wages

Manual calculations of payroll taxes using the wage-bracket method would:

estimate the amount for year end

Charitable contributions are:

paid by the employee and remitted by the employer

Post-tax deductions:

reduce employee net pay

After computing employee gross pay, the next step is to:

subtract pre-tax deductions

When an employer pays with cash, what information should the pay advice contain?

-Deductions -Gross pay -Net pay

Which of the following are more often employer-only taxes?

-Federal unemployment taxes -State unemployment taxes

Which of the following are potential indicators of payroll fraud?

-Handwritten additions to the paycheck -Changes in font type -Absence of the bank's or the recipient's address

When would a company use paycards for the payment of employees?

-If they have traveling workers -Large number of employees that do not have bank accounts

What are advantages of paying employees by check?

-Improved traceability -Simplicity of accounting records

Which of the following are disadvantages of paying employees by check?

-Increased risk of lost pay check -Increased reconciliation process

Internet technologies allow the transfer of funds for cryptocurrencies by:

-International payment without exchange rates -Transfers between wallets

Which of the following is true about the Social Security wage base?

-It usually changes annually -The tax rate is 6.2% of eligible wages

Which of the following are NOT determinates of federal withholding taxes on Form W-4 from 2019 or prior years?

-Job classification -Net pay

Mandatory tax deductions for all employees include the following:

-Medicare taxes -Federal income taxes -Social Security taxes

FICA taxes comprise which of the following:

-Medicare taxes. -Social Security taxes.

Daniel is a new employee looking at contributing to a 401(k) offered through the company. How will his contributions affect his tax liability?

-No change to FICA tax liability -Lower federal income tax

In addition to tracking hours and accurately compensating employees based on their marital status and withholdings, the employer must keep the employee's _ number in a _ file.

-Paycard -Secure

The purpose for using grossed-up pay is to:

-Satisfy tax liabilities -Achieve a predetermined net pay

Obtaining the employee's _ and _ averts problems associated with timely cash payments.

-Signature -Date

Which of the following are types of taxes employers would match?

-Social Security taxes -Medicare taxes

The following is true about state taxes on employees earnings:

-States tax rates may vary by wage levels. -State taxes follow similar guidelines as federal taxes. -States may apply a variety of additional taxes.

What are some reasons that employers may pay their employee's wages in cash?

-Temporary workers -High liquidity for employees

When would an employee want to have additional taxes withheld by their employer?

-When the employee has more than one job. -When the employee has additional income for which no income tax is withheld.

Court ordered garnishments can be for:

-child support -student loans -alimony

Information on local (city or county) taxes can be found through:

-city revenue department -county revenue department

Employees may choose to use direct deposit to:

-decrease wait time for access to their payroll -avoid losing the paycheck -avoid going to the bank

Charitable contributions are:

-deducted post-tax -reported on the employee's itemized tax return

The employer's role in federal income taxes is:

-depositor -reporter -collector

When using the wage-bracket method the payroll accountant needs to know:

-exemptions -marital status

Post-tax deductions are comprised of:

-mandatory withholdings -voluntary withholdings

Social Security taxes were designed to cover people for:

-retirement -disability -old age -illness

Employees may be subject to:

-state disability taxes. -state income taxes.

When using the wage-brack method in Publication 15-t, the payroll clerk identifies the:

-taxable income -marital status

Put the list in the correct processing order:

1. Determine Gross Pay 2. Determine Pre-Tax Deductions 3. Determine Federal Withholding Taxes 4. Determine Post-Tax Deductions

Under the percentage method, place the items in calculation order:

1. Gross Pay 2. Federal Taxable Wages 3. Withholding Allowance Deduction 4. Tiered Tax Rate

The combined rate for Social Security taxes in 2020 is:

12.4%

In 2020, Publication _ was issued for the sole purpose of income tax calculations.

15-T

The combined maximum Medicare tax rate for an individual earning more than $200,000 annually would be _.

2.35% (1.45% + 0.9% = 2.35%)

Unlike the use of paper checks or direct deposit for payroll disbursement, paycards do not require employees to have a __.

Bank Account

The __ may be liable for payroll check fraud until such activity is proven.

Check Issuer

During the first step of determining grossed-up pay, what computation must occur?

Compute the total percentage of mandatory taxes

What is a potential problem when using an electronic portal for employee access to pay records?

Computer Hacking

What item(s) was/were new on the Form 2020 W-4?

Dependents under 17

Timing of the employee repayment of an advance is determined by:

Employee agreement

Define escheatment.

Leaving a check uncashed

Employers may choose to use direct deposit to avoid:

Lost Paychecks

When using direct deposit, a best practice is to grant employees access to an __ to view their pay advice.

Online Portal

The repayment by an employee of an advance is treated as a _-tax deduction.

Post-tax

Until 2006, __ applied to funds on deposit in an FDIC-insured institution but has since been extended to paycards.

Regulation E

Which controls would improve accountability in cash payroll systems?

Signed receipts

An employer must withhold state income taxes when:

The state in which they operate has a state income tax

True or False: Social Security and Medicare can be higher than federal taxable income because of retirement contributions.

True

True or False: The new Form W-4 removes the withholding allowances and focuses on marital status, annual income, and dependents.

True

True or false: Paycards may be accessed anywhere that credit cards are accepted.

True

Employee deductions for union dues are considered:

Voluntary

The employee completes which form to identify the withholding information for federal income taxes?

W-4

The wage based for the additional Medicare tax is determined by the information on the employee's _.

W-4

Occupational privilege taxes may be imposed by:

local governments

Which of the following is correct regarding employer's withholding of state taxes:

the amount must be based on all wages earned within their state

The percentage method calculates withholding amounts based upon:

tiered income level

Once the employer has computed the employee's gross pay, the next step is:

to deducted mandatory, voluntary, and mandated amounts


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