Chapter 5 Smartbook and exercises Springer
Which of the following are potential indicators of payroll fraud (select all that apply)?
Absence of the bank's or the recipient's address Handwritten additions to the paycheck Changes in font type
The purpose for using grossed-up pay is to
Achieve a predetermined net pay Satisfy tax liabilities
Court ordered garnishments can be for
Alimony student loans Child support
Unlike the use of paper checks or direct deposit for payroll disbursement, paycards do not require employees to have a
Bank account
Which of the following statements are true about state and local income taxes?
Certain states have no personal income tax deduction Some localities levy income tax on employees. State tax rates on employee earnings vary among states
During the first step of determining grossed-up pay, what computation must occur?
Compute the total percentage of mandatory taxes
When an employer pays with cash, what information should the pay advice contain?
Deductions Gross pay Net pay
Daryl Simpson is the owner of Padua Products. During the holiday season, he wants to reward his employees for their work during the year, and he has asked you to gross up their bonuses so that they receive the full amount as net pay. What amount(s) should you consider when computing the grossed-up pay?
Desired bonus amount garnishments income taxes
Put the list in the correct processing order
Determine gross pay Determine pre tax deductions Determine federal withholding taxes Determine post tax deductions
Which of the following describes a method in which employee earnings are transferred automatically from the employer's bank account to the employee's bank account?
Direct deposit
Timing of the employee repayment of an advance is determined by:
Employee agreement
Who would be subject to additional Medicare taxes?
Employees earning more than $200,000
True or false: A company must have a physical address in a state to owe taxes there?
Employees earning the wages in a state determine tax liability, not the employer's location. False
True or false: A company must use an accounting software when paying employees by check?
False
Which of the following are more often employer-only taxes
Federal Unemployment taxes State Unemployment taxes
What are some reasons that employers may pay their employee's wages in cash?
High liquidity for employees Temporary workers
Which of the following is true about Social Security and Medicare taxes as they pertain to earnings limits?
Highly compensated employees are subject to additional medicare tax withholding. Once an employee's year-to-date earnings exceed the wage base, no additional social security tax is withheld.
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 some advantages of paying employees by check?
Improved traceability Improved record-keeping
Which of the following are a disadvantage of paying employees by check?
Increased reconciliation process Increased risk of lost payroll
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
When using the wage-bracket method the payroll accountant needs to know
Marital status Exemptions
Mandatory tax deductions for all employees include the following:
Medicare SS taxes Federal income
FICA taxes are comprised of
Medicare taxes. Social Security taxes.
An Oregon employer has employees who live and work in Nevada. Where will the employees be required to pay income taxes?
Neither
Which of the following are NOT determinates of federal withholding taxes?
Net Pay Job classification
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 in FICA tax liability Lower federal income tax
Teddy Harrington is a new payroll clerk with B&H Farms. As he prepares to use the wage-bracket tables to determine federal income tax withholdings, what information does he need for each employee?
Pay frequency Taxable income
Which of the following are potential disadvantages to using paycards as a payroll disbursement method (select all that apply)?
Paycards may be lost or stolen Banks and retailers may limit the amount of cash back available.
Health insurance is an example of a _____ tax deduction.
Pre
The employer's role in federal income taxes is
Reporter COllector Depositor
Which of the following can be included for garnishment reductions?
Retroactive Pay Bonuses Commissions
Which controls would improve accountability in cash payroll systems?
Signed receipts
Old Age Surviver Disability Insurance (OASDI) is another name for:
Social Security tax
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 States may apply a variety of additional taxes State taxes follow similar guidelines as federal taxes
After computing employee gross pay, the next step is to
Subtract pre-tax deductions
Define escheatment.
The process of leaving a check uncashed
The percentage method calculates withholding amounts based upon
Tiered income level
Internet technologies allow the transfer of funds for cryptocurrencies by:
Transfers between wallets International payment without exchange rates
Social Security and Medicare can be higher than federal taxable income because of retirement contributions.
True
True or False: When considering garnishing an employee, if the amount paid is for services rendered it can be garnished.
True
True or false: Paycards may be accessed anywhere that credit cards are accepted.
True
True or false: Disposable income limits apply to union dues.
Union dues are not court mandated and are therefore not subject to disposable income limits. False
A potential pitfall of using access to a company website as part of their direct deposit process is:
Vulnerability to hacking of company records
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
Under which circumstances could the percentage method be used to determine federal income tax withholding amounts?
When the employee's taxable income exceeds the maximum amount on the appropriate wage-bracket table. When computational accuracy is critical When using a computerized accounting system to compute payroll deductions
Consumer credit is an obligation which is paid in _____ earnings.
after-tax
Employees may chose to use direct deposit to
avoid losing the paycheck. decrease wait time for access to their payroll. avoid going to the bank.
Employees compensated through direct deposit would include
breakdown of payroll is provided through the pay advice. payment transfers to the employee's bank account.
The wage base
can change annually. provides a maximum withholding amount.
The _____ _____ may be liable for payroll check fraud until such activity is proven.
check issuer
Information on local (city or county) taxes can be found through
city revenue department. county revenue department.
Charitable contributions are
deducted post-tax. reported on the employee's itemized tax return.
Social Security taxes were designed to cover people for:
disability old age retirement illness
The maximum garnishment for an employee is determined on
disposable income.
FICA taxes are imposed on _____.
eligible wages
Employers would owe taxes when
employees earned income in a different state.
Manual calculations of payroll taxes using the wage-bracket method would
estimate the amount for year end.
Medicare taxes provide for
health insurance coverage for individuals eligible to enroll in Medicare benefits.
Prior to 2006, Regulation E would have
ignored losses on paycards.
Occupational privilege taxes may be imposed by
local governments.
Employers may choose to use direct deposit to avoid
lost paychecks.
Employers issuing paychecks to employees should
maintain a policy on unclaimed property. ensure sufficient funds are in the bank account. use a dedicated payroll account.
Employees who travel for work could find paycards
more convenient than checks. a viable option to direct deposit.
Charitable contributions are
paid by the employee and remitted by the employer.
Access to a company's website or online portal can provide employees with access to
personal information (W-4,W-2). their payroll history.
The repayment by an employee of an advance is treated as a _____-tax deduction.
post
Post-tax deductions
reduce employee net pay.
A form used to track all employee deductions to ensure accuracy of employee pay is called a payroll
register
Obtaining the employee's _____ and _____ averts problems associated with timely cash payments.
signature and date
Employees may be subject to
state income taxes. state disability taxes.
Post-tax deductions are comprised of
voluntary withholdings. mandatory withholdings.
Employee deductions for union dues are considered
voluntary.
The employee completes which form to identify the withholding information for federal income taxes?
w-4
What are the two methods payroll accountants use to determine federal income tax withholding amounts?
wage bracket method percentage method
The maximum garnishment rule for consumer credit is:
25%
Lyle Ingram, the payroll accountant, needs to compute net pay for the employees for Hay Industries. Place the following steps in the proper order (e.g. 1 for the first step, 5 for the last step).
3, 2, 4, 5, 1
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?
3850 4O1K is not subject to tax but United Way is
Which of the following are the rates for Social Security and Medicare taxes, respectively?
6.2%, 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
In 2019, Social Security taxes have a maximum wage base of
$132,900
At what income level do many employees contribute an additional percentage to their Medicare tax deduction?
$200,000
An employee earns $4,000 per week and contributes $150 to their 401(k) plan and $75 to United Way. What is the employee's FICA taxes for the period?
$4,000 x (.062 + .0145) = $306 306
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 2019 is
12.4%
Social Security taxes are calculated with a wage base of:
132900
