APA CPP 2020
10. Which of the following participants in the direct deposit process distributes EFT payments to the receiving financial institutions? a. ODFI b. ACH c. RDFI d. FRB
b. ACH
10. When does an employer stop withholding for a federal tax levy? a. When Form 668-W is received b. When Form 668-D is received c. When Form 668-S is received d. When the IRS collection officer calls
b. When Form 668-D is received
12. What is the due date for Form 940? a. December 31 b. January 15 c. January 31 d. February 15
c. January 31
4. What are "escheat" laws? a. Federal laws governing the treatment of unclaimed wages as abandoned property b. State laws governing the treatment of unclaimed wages as abandoned property c. State laws protecting employees from their employer d. State laws outlining the frequency with which employees are paid
b. State laws governing the treatment of unclaimed wages as abandoned property
T/F: 3. Hospital workers are covered by the FLSA regardless of the hospital's annual volume of revenue.
True
T/F: 4. A successor employer retains the unemployment contribution rate it had immediately before the acquisition of the predecessor occurred if the successor was a covered employer in the state at that time.
True
T/F: 4. An amended Form W-4 filed by a current employee must be put into effect by the employer no later than the beginning of the first payroll period ending on or after the 30th day after the form is filed with the employer.
True
T/F: 17. Exempt employees do not have to be paid the required minimum wage or overtime payments.
True
T/F: 17. The purpose of a journal entry is to provide all the essential information about a business transaction.
True
T/F: 20. A regular review of all department policies, procedures, and documentation is vital in crisis prevention.
True
T/F: 7. An automated time and attendance system can remind managers to review and submit timesheets for their employees.
True
6. Which of the following requirements would not appear in a mid-level payroll job description? a. Maximum age b. Minimum education c. Specialized skills d. Key responsibilities
a. Maximum age
17. What document records payroll data for each payroll period? a. Earnings record b. Payroll register c. Payroll ledger d. Accounts receivable ledger
b. Payroll register
16. What is the process of transferring entries from the journal to the general ledger called? a. Journalizing b. Posting c. Footing d. Balancing
b. Posting
8. When determining the amount to send to the IRS to satisfy a tax levy, the exempt amount is deducted from what amount? a. Gross pay b. Disposable pay c. Take-home pay d. Federal income tax withheld
c. Take-home pay
5. Which days of the week occurs 53 times in 2020? a. Monday and Tuesday b. Thursday and Friday c. Wednesday and Thursday d. Tuesday and Wednesday
c. Wednesday and Thursday
T/F: 1. The FLSA always overrides any state wage-hour law.
False; Employers must comply with whichever law is more beneficial to the employee.
T/F: 18. Where there has been a merger or consolidation of two employers and one survives, the surviving corporation is considered to be the same employer as the acquired company and therefore must provide Forms W-2 to all the employees of the acquired company.
True
T/F: 19. The third-party administrator acting as the employer's agent may use the optional flat rate for federal income tax withholding from sick pay provided to employees.
True
T/F: 2. Direct deposit is one area where the federal and state governments share regulatory responsibility.
True
T/F: 2. FUTA tax applies only to wages when they are actually or constructively paid, not when earned.
True
T/F: 2. The basic unit for determining the proper wages due employees is the workweek.
True
T/F: 22. Immigrant visas are sought by individuals who wish to become lawful permanent residents of the U.S.
True
T/F: 3. Workers hired through a temporary help agency are not employees of the client company.
True
T/F: 9. Employers that store payroll records on microfilm or microfiche must have viewing equipment available when an inspection is requested.
True
5. When must a newly hired employee's Form W-4 be put into effect?
A Form W-4 submitted by a newly hired employee must be put into effect by the employer for the first wage payment after the form is submitted.
8. How does the Internal Revenue Code define "medical care" in terms of an employee's reimbursement for such medical care?
"Amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body."
6. What is the meaning of the term "compensable time?"
"Compensable time" is defined as all hours during which the employee is under the employer's control, even if the time is unproductive, so long as the time spent is for the employer's benefit.
5. What is the maximum amount of group-term life insurance an employer can provide an employee's dependents without its value being taxable to the employee?
$2,000. If the employer provides more than $2,000 in group-term life insurance to an employee's depen- dent, the value of the total amount including the first $2,000 becomes taxable to the employee. However, if the difference between the Table I value of the insurance and the amount paid by the employee in after-tax dollars is considered de minimis, then there is no income for the employee.
3. When is a Form 940 that has been mailed through the U.S. Postal Service considered filed?
A Form 940 that is mailed through the U.S. Postal Service is considered filed at the time it is postmarked by the U.S. Postal Service.
13. What is a balance sheet?
A balance sheet is a statement of the financial position of a business at a specific period in time. It is an itemized list showing the business's assets, liabilities, and owner's equity.
2. How do you define a de minimis fringe benefit?
A benefit whose value is so small that accounting for it would be unreasonable or impracticable.
2. If an employer wants to offer a SIMPLE plan to its employees, how many employees must work for the company? a. At least 100 employees b. 25 or more employees c. No more than 100 employees d. 25 or fewer employees
C. No more than 100 employees
15. What is a "defined contribution plan" and what are the characteristics of such a plan?
A defined contribution plan sets up individual accounts for each employee, with a set amount being contributed into the account by the employer and/or the employee periodically. The employee's retirement benefit depends on the amount of money in his or her account at retirement, which is determined by the contribution amounts and any investment gains or losses. Other characteristics of defined contribution plans include: • The plan provides for a contribution formula involving the employer and/or the employees • Employer contributions are made no less frequently than annually (usually more often) • Being able to see how much is in their accounts makes the plan easy to understand for employees • No need for actuarial calculations • Annual reports must be filed with the IRS and the Department of Labor
T/F: 11. Under a totalization agreement, expatriate employees working temporarily in a foreign country are subject only to U.S. social security tax, not the social security taxes of the foreign country.
True
7. An employer must withhold on group-term life insurance in excess of $50,000 for which of the following taxes? a. Social security and Medicare taxes only b. Social security, Medicare and federal income taxes c. Social security, Medicare and FUTA taxes d. Social security, Medicare, federal income, and FUTA taxes
A. Social security and Medicare taxes only
T/F: 21. Cafeteria plans can allow employees to carry over up to $1,000 of their health FSA salary reductions from one year to the next.
False; Cafeteria plans can allow employees to carry over up to $500 of their health FSA salary reductions from one year to the next.
T/F: 12. A paycheck is classified as a negotiable instrument.
True
24. Which taxes are elective deferrals to a §457(b) plan for public sector employees subject to if the employer is subject to social security and Medicare taxes? a. Social security and Medicare taxes b. Social security and Medicare taxes and federal income tax withholding c. Social security, Medicare, and FUTA taxes d. Social security, Medicare, and FUTA taxes and federal income tax withholding
A. Social security and Medicare taxes
6. What are the objectives of an automated payroll system?
A successful automated payroll system must: • Provide for compliance with federal, state, and local withholding, depositing, and reporting requirements • Issue timely and accurate paychecks and/or make accurate direct deposits and payroll card account deposits • Maintain adequate records of all data and transactions • Prepare internal reports • Guarantee the security of the system
3. All of the following types of evidence support an employer's treatment of a worker as an independent contractor under the "reasonable basis" test except: a. Place of work b. Court decisions c. Private letter rulings d. Past IRS employment tax audits
A. Place of work
T/F: 12. After all amounts on the balance sheet have been recorded in accounts, the total debits must equal the total credits.
True
T/F: 12. Enforcement of child support orders is a joint federal and state responsibility.
True
1. How does Form 668-W define an employee's take-home pay that is subject to a federal tax levy?
According to Form 668-W, when determining take-home pay the employer should allow the payroll deductions that were in effect when the levy notice was received
22. The special discrimination tests for §401(k) plans are both based on the ADP of employees who are eligible to participate in the plan. What does ADP mean? a. Automatic deferred pension b. Actual deferred pension c. Actual deferral percentage d. Actual defined percentage
C. Actual deferral percentage
T/F: 12. Expatriates are U.S. citizens or resident aliens working abroad.
True
13. Attendance at lectures, meetings, seminars, and training sessions is considered work time unless certain conditions are met. What are these conditions?
All the following conditions must be met for attendance at meetings, lectures, seminars, and training ses- sions to be considered nonwork time: • The meeting, lecture, etc., is not held during the employee's regular work hours. • Attendance is voluntary. • The meeting, lecture, etc., is not directly related to the employee's job. • The employee does not perform any productive work for the employer while attending.
5. Many critics claim that direct deposit is not paperless. Explain why.
Authorization agreements (where they are in paper form) still must be signed, checked for accuracy, and retained, and employees using direct deposit must be given statements on payday showing the compen- sation they earned and the deductions taken for the pay period. Some employers do use electronic pay statements in meeting that requirement.
T/F: 15. If an employee terminates employment during the year because of a permanent disability, then the value of group-term life insurance over $50,000 is not included in the employee's income.
True
10. For what travel expenses may an employer use the high-low per diem rate instead of the individual federal per diem rate of the locality of travel? a. Lodging, not just meals and incidentals, and the travel is within CONUS b. Lodging, meals and incidental expenses, and the travel is within CONUS c. Meals and incidental expenses, and the travel is outside CONUS d. None of the above
B. Lodging, meals and incidental expenses, and the travel is within CONUS
3. What are the rules regarding the timeliness of mailed payroll tax deposits?
Beginning with payroll tax deposits based on wages paid after December 31, 2010, they may not be mailed because they must be made by electronic funds transfer through the Electronic Federal Tax Payment Sys- tem. Federal tax deposit coupons and paper checks are no longer acceptable as a method of deposit.
8. Which of the following conditions need not be met for job-related educational assistance to be excluded from income? a. Courses are not taken to qualify the employee for a promotion or transfer b. Courses must be related to the employee's current job c. Must be covered by an Educational Assistance Program d. Course must not be necessary to meet the minimum education requirement of the job
C. Must be covered by an Educational Assistance Program
12. Which of the following individuals are statutory nonemployees? a. Homeworkers b. Full-time life insurance salespersons c. Newspaper deliverers d. Traveling salespersons
C. Newspaper deliverers
3. Explain the principle of constructive payment.
Constructive payment indicates the point in time when an employee has the ability to control the pay- ments for services from an employer.
T/F: 3. The shortfall rule allows an employer to deposit 95% of its payroll tax liability without a penalty.
False; At least 98% of the tax liability (or the liability - $100, if that is less) must be deposited to avoid a late payment penalty.
10. List the disadvantages of paying employees by paycheck as far as the employer is concerned.
Disadvantages for an employer in paying employees by paycheck include: • Lost or stolen checks • Unclaimed or uncashed checks • Employee time off needed to cash checks • Storage of cashed checks and related documents • Early preparation of vacation checks • Reconciliation of bank account with outstanding checks
10. What are earnings per share?
Earnings per share show the company's net income divided by the weighted average number of outstand- ing shares of stock.
T/F: 8. An automated time and attendance system cannot reduce the errors inherent in a manual timekeeping system.
False; An automated time and attendance system can often reduce the errors inherent in a manual timekeeping system.
1. What is a Form W-4?
Employee's Withholding Certificate
T/F: 25. An employee can be reimbursed for amounts spent on over-the-counter drugs that are not prescribed by a licensed physician through her health FSA.
False; An employee may not be reimbursed for amounts spent on over-the-counter drugs that are not prescribed by a licensed physician through her health FSA.
3. What is the basic difference between exempt and nonexempt employees?
Exempt employees do not have to be paid the required minimum wage or overtime pay, and the employer does not have to keep certain records detailing their work, while nonexempt employees must be paid the required minimum wage and overtime pay and the employer must keep detailed records of their work hours and wage payments.
15. What effect do expenses have on owner's equity?
Expenses have the effect of decreasing owner's equity.
12. Which factors are considered not to be important by the IRS in making a worker classification determination because of changes in the workplace over the years?
Factors that the IRS does not consider important in making worker classification determinations include part-time or full-time work, the location of the work, and hours of work.
T/F: 3. Records required by the FLSA must be made available for inspection by the Wage and Hour Division within 48 hours of a notice of inspection.
False; 72 hours.
T/F: 7. A biweekly salary is paid twice a month, usually on the 15th and last day of the month.
False; A biweekly salary is paid every two weeks.
T/F: 25. A mechanic must be reimbursed for the cost of laundering his work clothes if the clothes are required by the employer.
False; When employees are required to wear uniforms that cannot be worn as regular "street cloth- ing" and their cost and maintenance would put the employee below the minimum hourly wage, the employer must pay for the purchase, cleaning, and repair of the uniforms. If the uniform can be worn off the job, the employer need not reimburse the employee, even if the employee's wages go below the minimum.
1. What major piece of social legislation guarantees employees the right to unpaid leave to care for a newborn child or a seriously ill family member?
Family and Medical Leave Act.
12. For employers to exclude the value of a length of service award from an employee's income, what is the minimum length of service for which the award can be given?
Five years.
9. Name three voluntary deductions that are not subtracted from earnings to calculate disposable pay.
Following are some of the voluntary deductions which are not subtracted from earnings in calculating disposable pay: • Health insurance premiums (unless state law says otherwise) • Life insurance premiums • Union dues • Retirement plan contributions • United Way contributions • Other charitable contributions • Savings plan deductions, etc.
16. What form is used to report nonpayroll withheld taxes?
Form 945, Annual Return of Withheld Federal Income Tax.
11. What are eligible rollover distributions?
Generally all nonperiodic payments of all or any portion of the balance of a recipient's account in a quali- fied deferred compensation plan are eligible rollover distributions other than: • Substantially equal periodic payments made over the lifetime or life expectancy of the employee or his or her beneficiary, or made for a specified period of at least 10 years • Any minimum distribution that is required under IRC §401(a)(9) regarding qualified plans • Distributions not included in gross income (e.g., return of an employee's after-tax contributions), except for net unrealized appreciation of employer securities • Returns of amounts deferred under a §401(k) or §403(b) plan that exceed the elective deferral limits • Loans treated as deemed distributions • Dividends paid on employer securities • Distributions of the cost of current life insurance coverage
10. What is the difference between an "accountable plan" and a "nonaccountable plan" in relation to the tax treatment of an employee's business travel expense reimbursements?
If a reimbursement is made under an "accountable plan," the amount reimbursed is excluded from income and is not subject to federal income tax withholding or social security, Medicare, and FUTA taxes. If the reimbursement is made under a "nonaccountable plan," the reimbursement or the excess amount is included in income and is subject to federal income tax withholding and social security, Medicare, and FUTA taxes.
T/F: 12. If a new employee first paid wages in 2020 does not provide a completed Form W-4, the employer must withhold as if the employee had checked the box for Single or Married filing separately in Step 1(c) and made no entries in Steps 2-4 of the 2020 Form W-4.
True
6. Why must payroll managers learn the strengths and weaknesses of their employees before delegating tasks to them?
If their delegation is unsuccessful, they must do the work themselves, which tends to result in unfulfilled employees and burned out managers.
12. What factors determine an employee's residence?
Some of the factors that generally indicate residency include: • Physical presence • Where family members live and children attend school • Where the employee works, has business interests, and owns property • Where bank accounts and business interests are maintained
14. What effect does revenue have on owner's equity?
Revenue has the effect of increasing owner's equity.
7. What is the main disadvantage of using a service provider?
Slow response time to needed changes and emergency requirements.
14. What is the common name of the regulations issued by the Department of Health and Human Services to implement the privacy requirements of the Health Insurance Portability and Accountability Act?
The Privacy Rule.
13. What is the employer social security tax rate for wages paid in 2020?
The employer social security tax rate for wages paid in 2020 is 6.2%.
14. What information must the payroll department maintain for the proper administration of defined benefit plans?
The payroll department must maintain accurate records of: • Hours worked • Compensation earned • Date of birth • Date of hire
18. What is the purpose of backup withholding?
The purpose of backup withholding is to ensure that income tax is paid on income reported on Forms 1099.
T/F: 14. The FLSA is commonly known as the Federal Wage-Hour Law.
True
12. States that offer the voluntary contribution option routinely impose restrictions on its use. What classifications of employers are often barred from making such contributions?
The voluntary contribution option is often made unavailable to: • New employers • Negative reserve balance employers, • Employers that have not paid state taxes on time
4. When is group health insurance deducted from an employee's gross wages in determining disposable pay?
When the law of the state where the employee works requires that health insurance be deducted to deter- mine the employee's disposable earnings.
6. How many parts does Form 668-W, Notice of Levy on Wages, Salary and Other Income, contain? a. Three parts b. Four parts c. Five parts d. Six parts
d. Six parts
9. An employer is required to file information returns electronically, but instead mailed 380 paper Forms W-2 on time with the correct information. How many returns are subject to the failure-to-file penalty? __________
380 - 249 = 131 returns subject to penalty.
12. The statement "the only people who can manage time are those who use it well," defines an application of what skill? a. Planning b. Organizing c. Good meeting skills d. Time management
d. Time management
T/F: 17. If an employee chooses to receive part of an eligible rollover distribution and to directly roll over the rest, federal income tax withholding is required only on the portion received by the employee.
True
T/F: 17. Reflective listening is a technique where the listener repeats what they think they heard and asks the speaker for verification.
True
T/F: 18. A journal entry containing more than one debit or more than one credit is called a compound entry.
True
T/F: 18. Employee business travel expense reimbursements under a nonaccountable plan are subject to income withholding and employment taxes.
True
T/F: 19. Employers are required to notify employees who have no federal income tax withheld from wages and do not claim exempt of their possible eligibility for a tax refund because of the EIC.
True
T/F: 19. General ledger accounts are arranged in the order they appear on the chart of accounts.
True
T/F: 19. Seamen working on foreign ships are fully exempt from the FLSA's minimum wage and overtime requirements.
True
T/F: 2. After an employer forwards abandoned (uncashed) paychecks to the appropriate state agency, state law may require that the employer keep a record of the employee's name and last known address for a specified period of time.
True
T/F: 2. After entries have been recorded in the journal, they are posted to the General Ledger.
True
T/F: 2. An employer may not discriminate in favor of highly compensated employees when providing no-additional-cost services.
True
T/F: 20. At the end of each pay period, many businesses enter the hours worked, gross earnings, deductions, and net pay of their employees in a payroll register.
True
T/F: 20. Employers are required to pay FUTA tax on wages paid to nonresident aliens working in the U.S.
True
T/F: 20. When an employee's wife regularly uses a company car to go shopping, the value of this employee fringe benefit is included in the employee's gross income.
True
T/F: 20. When determining the reserve ratio, the higher the ratio, the lower the tax rate.
True
T/F: 21. For a 40-hour workweek, Paul, who is a nonexempt employee, is paid $270. This is a violation of the FLSA.
True
T/F: 21. If a withholding agent has 250 or more Forms 1042-S to file with the IRS, it must do so electronically.
True
T/F: 22. Building a team network must have high priority and wide visibility throughout the company.
True
T/F: 22. Form W-3 is used only by employers that file paper Copies A of Form W-2 with the SSA.
True
T/F: 14. Telling an employee how often he or she was late and what an adverse effect this had on the workloads of other employees will achieve better results than accusing an employee of having a "lousy attitude."
True
T/F: 15. The determination of residency made under the Internal Revenue Code applies to an alien's status for U.S. income tax purposes.
True
T/F: 15. When determining the amount of federal income tax to withhold using the percentage method, employers may round off the withholding amount to the nearest dollar.
True
T/F: 16. "Mom and Pop" shops whose only employees are immediate family members are excluded from coverage under the FLSA.
True
T/F: 16. Always be specific when giving feedback, whether it is positive or negative.
True
T/F: 16. Any accounting period of 12 consecutive months can serve as a company's fiscal year.
True
T/F: 16. Copy A of all paper W-2 Forms and Form W-3 must be filed with the SSA by January 31 of the year following the calendar year for which wages are reported.
True
T/F: 16. Lawful permanent residents of the U.S. are considered residents for income tax purposes.
True
6. What is the place the employee intends to return to after a foreign assignment? a. Tax home b. Vacation home c. Residence d. Domicile
d. Domicile
6. During 2020, Sam Flashner, who is single and 33 years old, earned $27,500. Calculate the maximum IRA contribution that Sam is allowed.
$6,000 — the lesser of $27,500 x 100% or $6,000 annual applicable dollar limit for 2020.
8. Your state sets 50% of "disposable earnings" as the maximum for child support withholding. Your employee is not supporting another spouse and/or children, so the CCPA's maximum is 60%. What percentage do you use?
50%, because it is more beneficial to the employee.
13. What are the advantages of pre-tax benefit contributions?
A pre-tax contribution is one that is made from an employee's wages before the taxes on those wages are calculated, while an after-tax contribution is made after the tax is calculated. A pre-tax contribution will result in higher take-home pay for the employee.
5. What is the maximum number of hours a nonexempt employee can work in a workweek under the FLSA before overtime premium pay is due? a. 40 b. 55 c. 80 d. 168
A. 40
T/F: 10. The rate of social security tax paid by an employer on an employee's wages in 2020 is 6.2%.
True
4. What is the FLSA salary test for outside salespersons? a. $455 per workweek b. $250 per workweek c. $684 per workweek d. There is no salary minimum
D. There is no salary minimum
11. To which taxes are payments received as workers' compensation subject? a. Social security and Medicare taxes only b. Federal income tax only c. Social security, Medicare, and federal income taxes d. Workers' compensation benefits are not taxable
D. Workers' compensation benefits are not taxable
T/F: 15. Federal and state laws generally require that a copy of records be retained in paper form for audit purposes.
False; The various federal and state laws generally do not require that records be kept in any particular form and often specifically allow record retention on micromedia, digitally, or electronically
6. What does a Form W-4 tell the employer?
Form W-4 tells the employer the employee's anticipated tax return filing status, what adjustments to the employee's taxable wages the employee is making, and what tax credits the employee is claiming so that the proper amount of federal income tax is withheld. Form W-4 also notifies the employer whether the employee is claiming exempt from withholding and whether the employee is a nonresident alien. In addi- tion, it may indicate that the employee wants an additional amount of tax withheld beyond the amount that is calculated by the employer.
6. Within a payroll system there are checks and balances to ensure the accuracy of a company's financial records and the security of its assets. What are they called?
Internal controls
1. Who would be interested in the financial records of a business?
Management, stockholders, investors, employees, and auditors would be interested in the financial records of a business.
1. What are the general deposit requirements for monthly, semiweekly, and one-day depositors?
Monthly depositors must deposit their accumulated tax liability for each calendar month by the 15th of the following month. Semiweekly depositors must deposit their payroll tax liability for wages paid on Wednesday, Thursday and Friday by the following Wednesday. The payroll tax liability for wages paid on Saturday, Sunday, Monday, and Tuesday must be paid by the following Friday. If an employer's accumulated payroll tax liability reaches $100,000 on any day during a monthly or semi- weekly deposit period, the liability must be deposited by the close of the next business day.
14. Can employees receive advance payments of the Earned Income Credit for wages paid in 2020?
No. Advance payments of the Earned Income Credit were eliminated for wages paid after December 31, 2010.
8. What steps must be taken to obtain an EIN by phone?
Only foreign employers can take the following steps to obtain an EIN by phone: • Complete Form SS-4 before calling • Call 267-941-1099 • Provide the requested information from Form SS-4 • Write the EIN on the SS-4, sign and date it, and keep it for your records
3. Can an employee of a public school who participates in a §403(b) tax-sheltered annuity also participate in a §401(k) plan?
Only if the §401(k) plan existed prior to the effective date of the Tax Reform Act of 1986.
1. Name two things that reasonable housing expenses do not include.
Reasonable housing expenses do not include the following: • Telephone and cable television charges • Capital expenditures such as mortgage payments or furniture • Cost of domestic labor such as a maid or gardener • Lavish or extravagant expenses under the circumstance
5. When selecting a new system, who should be included on the project team?
Representatives of the following departments should be included on the system selection and implementation project team: • Payroll • Human resources • Benefits • Accounting • Tax • Budget/finance • Data processing/MIS • Facilities
4. What is Schedule R (Form 941) used for?
Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, is filed to allocate the aggregate information reported on Form 941 to each of the clients of the reporting agent or Certified Professional Employer Organization.
10. What is the difference between sick pay and workers' compensation benefits?
Sick pay may take many forms, but its essential purpose is to replace the wages of an employee who cannot work because of a nonjob-related illness or injury. Workers' compensation, however, deals with payments to employees who cannot work because of job-related injuries or illness.
10. What are tax equalization plans?
Tax equalization plans ensure that all expatriates continue to incur a tax burden equal to what they would incur if they were living and working in the U.S., regardless of the actual foreign tax liability.
11. What are the advantages of storing payroll and employment records on microfilm or microfiche?
The advantages of micromedia storage over paper storage include: • Less space needed for storage • Reduced storage costs • Less chance of losing individual documents • Increased durability
19. Which amounts on Forms 941, W-2, and W-3 does the SSA compare to make sure employers are taxing and reporting wages correctly?
The amounts compared by the SSA include: • Social security wages • Social security tips • Medicare wages and tips
T/F: 1. An employer is not subject to FUTA tax if it is a tax-exempt nonprofit, religious, charitable, or educational organization.
True
T/F: 19. Salary advances (prepaid wages) must be included in the employee's income for the payroll period in which they are received.
True
24. What is the threshold amount for requiring reporting of service payments to individuals who are not employees on Form 1099-NEC? a. $10 b. $400 c. $600 d. $550
c. $600
14.When must employers report newly hired employees under the federal new hire reporting requirement?
The employer must report each new hire's name, address, social security number, and first day of work for which compensation is paid, as well as the employer's name, address, and federal employer identification number.
T/F: 1. An employer should refuse to change an employee's name until a new social security card with the employee's new name is presented or the new information has been otherwise verified with the SSA.
True
15. What is the name of the program employers can use to verify the employment authorization status of new hires with U.S. Citizenship and Immigration Services?
The name of the program offered by U.S. Citizenship and Immigration Services that employers can use to verify the employment authorization status of new hires is the E-Verify Program.
12. What is the role of an internal auditor?
The job of a company's internal auditor is to review the efficiency of the organization's internal control procedures and to identify weaknesses in the controls.
9. What is the lookback period for determining an employer's Form 941 payroll tax depositor status?
The lookback period is the 12-month period ending June 30 of the previous year.
T/F: 1. If the employer has the right to control what work will be done and how that work will be done, an employer-employee relationship exists under the common law test.
True
1. What is the "normal" credit an employer can take against FUTA tax liability?
The normal credit against FUTA tax liability equals the amount of an employer's required contributions that are timely paid into a certified state unemployment insurance fund. It is also called the 90% credit because the amount of the credit is limited to 90% of the 6.0% FUTA tax rate
3. Who are the payroll department's customers?
The payroll department's customers include: • Employees • Other departments • Upper management • Federal, state and local government agencies
T/F: 1. Wages earned abroad by a U.S. citizen or resident alien may be exempt from federal income tax withholding if the employer is required to withhold foreign taxes under the law of the foreign country.
True
15. What special conditions must be satisfied for "commercial travelers" to be exempt from federal income tax withholding?
The specific conditions that must be satisfied for the "commercial traveler" exemption to apply are as follows: • The nonresident alien employee is in the U.S. for no more than a total of 90 days during the taxable year • Compensation received for work performed in the U.S. totals no more than $3,000 during the taxable year • The nonresident alien is employed by: a U.S. employer in a foreign country or a U.S. possession or by a foreign employer not engaged in a trade or business in the U.S.
T/F: 10. Involuntary deductions are those over which an employer and employee have no control.
True
4. What is the time limit for filing an FLSA complaint with the Wage and Hour Division?
The time limit is two years after the alleged violation or three years if the violation was willful.
T/F: 10. Payments of expenses decrease assets and decrease owner's equity.
True
4. How do U.S. citizens and resident aliens qualify for the foreign earned income exclusion under the physical presence test?
This test is met if the expatriate employee has a foreign tax home and is physically present in a foreign country (or countries) for 330 full days during any consecutive 12-month period.
T/F: . There must be a plan for the payroll department to achieve its mission of satisfying employees, government, and upper management.
True
T/F: 5. If supplemental wages paid with regular wages are not clearly identified, the employer must withhold federal income tax as if the combined payment is a wage payment for that payroll period.
True
T/F: 5. The balance sheet is a financial statement that shows the financial position of a business on a certain date.
True
7. How long does the ADEA require that records of an employee's name, address, date of birth, occupation, pay rate, and compensation earned be kept? a. 2 years b. 3 years c. 4 years d. 5 years
b. 3 years
10. What are medical child support orders?
Under a medical child support order, a noncustodial parent is required to provide health insurance for the child by enrolling the child in the parent's employer-sponsored health insurance plan. The order may also provide for automatic enrollment of the child if the parent fails to accomplish the enrollment.
7. Explain accrual accounting as it applies to payroll.
Under accrual accounting, revenue is recognized and recorded when earned and expenses are recognized and recorded when incurred. Accrual entries are made at the end of an accounting period to estimate pay- roll expenses and liabilities incurred between the end of the last payroll period and the accounting period end.
7. How many days must an individual be present in a foreign country over a 12-month period to qualify for the foreign earned income exclusion under the physical presence test? a. 365 days b. 330 days c. 120 days d. 90 days
b. 330 days
17. List those areas affected by union contract obligations which can affect areas of payroll processing.
Union contract obligations can affect the following areas of payroll processing: • Dues checkoffs • Fringe benefit contributions • Upcoming layoffs • Wage increases • Probationary employees • Overtime and other premium pay
7. Terry earns $10.00 per hour for a 40-hour week in 2021 and is paid biweekly. During the last pay period, Terry worked 43 hours in the first week and 39 hours in the second week. His regular deductions include: Federal income tax: $56.00 State income tax: 11.20 Social security tax: 51.77 Medicare tax: 12.11 Creditor garnishment: 50.00 Life insurance premium: 10.00 Union dues: 5.00 What is Terry's disposable pay? $_____________________
Week one: Regular pay ($10.00 x 43): $430.00 Overtime premium (0.5 x $10 x 3): + 15.00 Total: 445.00 Week two: Regular pay ($10.00 x 39): 390.00 Total earnings (2 weeks): 835.00 Federal income tax: -56.00 State income tax: - 11.20 Social security tax ($835 x 6.2%): - 51.77 Medicare tax ($835 x 1.45%): - 12.11 Disposable earnings: $703.92
13. With regard to bonuses, what is meant by the "push money exception?"
When a manufacturer pays a bonus to sales employees working for a retailer to get them to "push" its products, the bonus is not wages because it is being paid by a third party, not the employer (for services performed for the third party), and is not subject to federal income tax withholding or social security, Medicare, and FUTA taxes. The bonus is taxable income to the sales employees, however, and must be reported on their personal income tax return.
15. What is meant by the term "golden parachute" payments?
When companies change ownership, key executives are often provided with "golden parachutes" to soften their landing should they be terminated by the new owner. The tax law defines a "parachute payment" as compensation that is paid to an officer, shareholder, or highly compensated employee only after a change in corporate ownership or control and that is at least three times the employee's average compensation during the five most recent tax years.
1. What records must an employer keep under the FLSA for an employee who is receiving remedial education?
Where employees are exempt from overtime pay requirements for time spent receiving remedial education, the employer must keep, in addition to other required records, records of the hours spent by each employee receiving such remedial education and the wages paid for those hours.
3. What factors determine whether an expatriate employee is a bona fide resident of a foreign country?
Whether an expatriate employee is a bona fide resident of a foreign country depends on the following factors: • Whether the employee brings his or her family and they intend to make the foreign country their home for the duration of the assignment • Purchase of a home or signing a long-term lease in the foreign country • Involvement in the culture and social life of the foreign country • The terms of the employment agreement regarding the foreign assignment • The type of visa or residence permit secured by the employee
14. An employee with a 2018 Form W-4 on file claiming married with 5 allowances is paid federal income taxable wages of $2,345 every other Wednesday. Using Publication 15-T, Worksheet 3 (wage bracket method), how much federal income tax must be withheld from each wage payment? a. $112 b. $108 c. $92 d. $132
a. $112
7. What is the FUTA wage base for 2020? a. $7,000 b. $19,500 c. $132,900 d. $137,700
a. $7,000
10. All of the following features are advantages of an automated time and attendance system except: a. Less time spent on processing b. Fewer errors introduced during processing c. More time spent on administrative tasks d. Decreased costs
c. More time spent on administrative tasks
3. What law governs the maximum amount that can be withheld from an employee's wages for spousal or child support? a. Family Support Act of 1988 b. Omnibus Budget Reconciliation Act of 1993 c. Child Support Enforcement Amendments of 1984 d. Consumer Credit Protection Act
d. Consumer Credit Protection Act
4. If the Department of Labor requests a Form I-9 for inspection, how long does the employer have to produce it?
3 days
9. Compute the net pay for Susie Brown, who is paid weekly and claims married filing jointly with no entries in Steps 2-4 on her 2020 Form W-4, based on the following information: Gross pay for the pay period: $650 Pre-tax contributions to a qualified cafeteria plan: 6% Federal income tax withheld (percentage method, Publication 15-T, Worksheet 1): $13.41 Social security tax rate: 6.2% Medicare tax rate: 1.45%
9. Gross wages=$650.00 Cafeteria plan ($650 x 6%)=-39.00 Taxable wages: $611.00 FITW=- 13.41 Soc. Sec. ($611.00 x 6.2%)=- 37.88 Medicare ($611.00 x 1.45%)=-8.86 Net Pay: $550.85
10. What should be included in a request for proposal (RFP)?
A Request for Proposal should include the following: • The employer's purpose in issuing the request • Specific payroll information—size, frequency, union vs. nonunion, salaried and hourly • Functional requirements of a new system now and in the future • Number of fields required for earnings and deductions • Whether human resources and benefits will be integrated with the payroll system and what interfaces will be required • Training needs and whether this should be included in the bid • Level of support (maintenance) expected • Contract terms and conditions • Instructions to vendor on how to submit proposal
2. Which of the following conditions of employment is governed by the FLSA? a. The frequency of pay for employees b. Recordkeeping requirements c. Hours worked by employees over the age of 16 d. Lunch and rest break requirements
B. Recordkeeping requirements
3. What is the CCPA and how does it affect child support withholding?
CCPA stands for Consumer Credit Protection Act. It provides the legal framework around which state child support withholding laws have been constructed and limits the amount that can be withheld for child support.
15. Mark contributes $75 per month to a flexible spending arrangement as part of a cafeteria plan to pay for uncovered medical and dental expenses for his family. At the end of the year (the plan has no grace period or carryover), Mark has $250 left in the account. What happens to the balance in the account? a. The balance will be carried over to the following year b. The balance is forfeited c. It will be included in Mark's income d. It can be transferred to a separate plan
B. The balance is forfeited
T/F: 11. If the employer's FUTA tax liability for the first quarter is $600, no deposit is required.
False; If the employer's quarterly FUTA tax liability is more than $500, a deposit is required.
21. Which of the following statements is true concerning employee salary deferrals to a §401(k) plan? a. They are subject to federal income tax withholding b. They are subject to social security and Medicare tax withholding c. They are subject to federal income, social security, and Medicare tax withholding d. Employee contributions are not taxable
B. They are subject to social security and Medicare tax withholding
13. Which of the following benefits is not a qualified benefit for a cafeteria plan? a. Coverage under accident and health insurance plans (medical, dental, vision, sick pay, etc.) b. Working condition fringes c. Participating in a §401(k) plan cash or deferred arrangement d. Group-term life insurance in excess of $50,000
B. Working condition fringes
8. What are reversals, and how do they affect accounting?
Accruals generally are estimates, so they must be corrected by reversing entries during the next accounting period when the actual expenses and liabilities are recorded.
8. List the advantages of using an in-house payroll system.
Advantages of using an in-house automated payroll system include: • Control of the system • Convenient access • Downtime can be reduced • System security • Scheduling flexibility • Interactive applications
T/F: 21. The general ledger is classified as a record of original entry.
False; The general ledger is the record of final entry.
8. What is an education allowance?
An education allowance is added compensation for an expatriate employee so the employee can send his or her children to a private or boarding school.
13. What are the requirements for filing Form 941 by employers that are going out of business?
An employer that will no longer be in business and will not be paying wages subject to federal income withholding, social security, and Medicare taxes should do the following: • Check the box on Line 17 when completing its last Form 941 indicating that it will not file any returns in the future; • Enter the date that final wages were paid; • Attach a statement showing the address where the employer's records will be kept, the name of the person keeping the records, and, if the business has been sold or transferred, the name and address of the new owner and the date of the sale or transfer; • File the Form 941 by the end of the first month after the end of the quarter during which the employer stopped paying wages; and • File Schedule D (Form 941), Report of Discrepancies Caused by Acquisitions, Statutory Mergers, or Consol- idations, if the employer is no longer in business as the result of a statutory merger or consolidation, or if it qualifies as a predecessor or successor after an acquisition.
5. For payments made to a disabled employee by a third party who is not an agent, the third party is not required to withhold federal income tax unless the employee requests that a certain amount be withheld by furnishing the third party with: a. Form W-4 b. Form W-4S c. Form W-4P d. Form 1099-R
B. Form W-4S
6. All of the following workers are statutory employees except: a. Full-time life insurance salespersons b. Qualified real estate agents c. Homeworkers d. Traveling or city salespersons
B. Qualified real estate agents
1. An employee uses a company car 40% for personal use in 2020. The car has a fair market value of $25,000. Using the IRS Annual Lease Value Table, calculate the taxable compensation for the employee's personal use of the car.
Annual lease value = $6,850 Taxable amount: $6,850 x 40% = $2,740
4. Name the five types of accounts that are generally used by businesses to classify transactions.
Asset, Liability, Expense, Revenue, and Equity.
1. What government agency enforces the Equal Pay Act? a. National Labor Relations Board b. Equal Employment Opportunity Commission c. Wage and Hour Division d. Federal Trade Commission
B. Equal Employment Opportunity Commission
20. For 2020, the maximum amount of salary that an employee may elect to defer to a §401(k) plan that does not allow catch-up contributions is: a. $26,000 b. $19,000 c. $19,500 d. $57,000
C. $19,500
23. Under §403(b), where an annuity plan includes a salary reduction agreement but does not allow catch-up contributions, assuming no other plan exists, what is the maximum amount employees can defer to the plan in 2020? a. $26,000 b. $19,000 c. $19,500 d. Maximum exclusion allowance
C. $19,500
2. Name the popular benefit offered by mid-size and large employers that gives employees a choice from a "menu" of cash compensation and nontaxable qualified benefits.
Cafeteria plan.
2. Name three commonly used system edits in payroll systems.
Commonly used payroll system edits include: • Warning that a payment is being generated for a terminated employee • Report for new hires • Error message when no payment is generated for an active employee • Error message for negative net pay • Error message for negative deductions • Report when compensation exceeds certain amounts • Report for excessive overtime (or any overtime in some companies) • Report when rate of pay changes
1. You implement a child support withholding order. Your employee complains that it is the wrong amount. You verify that you are withholding the amount stated in the order correctly. What should you do?
Continue withholding according to the order unless and until you receive notification in writing from the court or issuing agency that a change is necessary.
10. Under the employer's disability plan, the employer pays 80% of the cost of insurance and the employee pays the difference. An employee received $3,000 in disability pay from a third-party insurer during the first six calendar months of disability, and $500 a month for each of the next three months. How much of the disability pay is taxable for social security and Medicare, and how much is taxable for FIT? a. $4,500 SS and Med. taxable, $4,500 FIT taxable b. $3,000 SS and Med. taxable, $4,500 FIT taxable c. $2,400 SS and Med. taxable, $4,500 FIT taxable d. $2,400 SS and Med. taxable, $3,600 FIT taxable
D. $2,400 SS and Med. taxable, $3,600 FIT taxable
3. What is the minimum wage that hourly paid computer professionals must be paid to be exempt from the overtime requirements of the FLSA? a. $4.25 per hour b. $10.00 per hour c. $29.967 per hour d. $27.63 per hour
D. $27.63 per hour
15. What penalties can be assessed for violations of the FLSA's child labor restrictions?
Employers can be fined up to $13,072 for each violation of the child labor restrictions and up to $59,413 for each violation that causes the death or serious injury of a minor.
2. How long must the employer keep an employee's Form W-4 on file?
Employers must retain each employee's Form W-4 for at least four years after the date the last tax return was due using information from the form, which is April 15 of the following year (e.g., if an employee files an amended W-4 in 2020, the previous W-4 must be retained until at least April 15, 2025).
T/F: 17. If an employee changes jobs during the year, only the first employer pays FUTA taxes on behalf of the employee.
False; If an employee works for more than one employer, the wage limit must be applied to the wages paid by each employer.
T/F: 14. When selecting a paycard vendor, it is not important for an employer to determine whether the vendor can comply with state wage payment requirements.
False; When selecting a paycard vendor, it is very important for an employer to determine whether the vendor can comply with state wage payment requirements.
5. Mindy earns $8.50 per hour and is paid weekly during 2021. Last pay period she worked 40 hours. Her deductions include: Federal income tax: $19.00 State income tax: 1.90 Social security tax: 21.08 Medicare tax: 4.93 U.S. Savings Bonds: 15.00 What is Mindy's disposable pay? $_____________________
Gross pay ($8.50 x 40): $340.00 Federal income tax: - 19.00 State income tax: - 1.90 Social security tax: - 21.08 Medicare tax: - 4.93 Disposable earnings: $293.09
6. What must be done with an undeliverable Form W-2c?
If a Form W-2c cannot be delivered to an employee after a reasonable effort to do so has been made, the employer must keep the form for four years or maintain an electronic file containing the information on the form for the same time period.
11. In regards to substantiating employee business expenses, what does the IRS mean by a "pattern of abuse?"
If an employer regularly fails to comply with the requirements for reimbursing or advancing amounts paid or incurred by employees for business expenses, the IRS will consider this a "pattern of abuse" and will treat all payments as being made under a nonaccountable plan.
9. What reconciliation steps should be taken before filing quarterly and year-end returns?
In preparing to file quarterly Forms 941 and annual Form 940, employers should verify the following: • That FUTA, social security, and Medicare tax deposits for the quarter equal the current tax rates for each, multiplied by the taxable wages for each, taking into account any wages subject to Additional Medicare tax • The total Form 941 tax deposits for the quarter equal the liability section for Form 941 (Line 13 of Form 941 equals Line 16 of Form 941 or the "Total liability for the quarter" line of Schedule B, whichever applies), although monthly depositors may pay their lawful $100 or 2% deposit shortfall with Form 941, in which case total deposits would not equal the liability • Total FUTA tax deposits equal Part 4, Line 13 and Part 5, Line 17 of Form 940
7. What are some common income tax treaty benefits?
Income tax treaty benefits include: • Nondiscrimination clauses allowing resident aliens to qualify for the foreign earned income and hous- ing cost exclusions under the bona fide residence test as well as the physical presence test • A partial or total exemption from taxation by the foreign country for an employee's wages for personal ser- vices performed in the treaty country if the employee's stay is short and certain other requirements are met • Wages received by a U.S. teacher or professor in a treaty country are exempt from foreign taxes under most treaties for temporary periods of up to 2 or 3 years • Amounts received by U.S. residents for study, research, or business and technical training are generally exempt from the treaty country's income tax • To avoid double taxation, tax treaties provide for credits and deductions to reduce taxes imposed by the foreign country
1. Name four other systems that often interface with payroll within a company.
Other company systems that interface with payroll include: • Human resources • Benefits • Accounting • Bank reconciliation • Direct deposit • Time and attendance • General ledger
T/F: 14. A separate account is kept for each asset, liability, and owner's equity item that a business has.
True
19. What are the four stages of team development?
The four stages of team development are: • Forming • Storming • Norming • Performing
15. What federal agency enforces the HIPAA restrictions on the release of personal health information?
The Department of Health and Human Services.
T/F: 11. An employee's social security number is needed by the employer even if there is no withholding.
True
T/F: 14. If an employer sells or transfers its business, a separate Form 941 must be filed by both the previous and current owners for the quarter in which the sale took place.
True
8. Name three qualities that can help make a payroll manager a strong leader.
Three qualities that can help make a payroll manager a strong leader include: • Having a vision • Building team support • Seeking partners
T/F: 11. For levies carrying over to the next calendar year, if an employee does not complete a new Part 3 of Form 668-W, the employer must use the exempt amount table for the year during which the most recent Part 3 statement of dependents and filing status was filed.
True
6. How does the federal garnishment limit apply to multiple garnishments?
The federal garnishment maximum applies no matter how many garnishments are received for an employee.
8. What questions must be answered before overtime pay can be calculated?
The following questions must be answered to properly calculate overtime pay: • What is the employee's workweek? • What constitutes hours worked? • What payments made to the employee are considered wages? • What is the employee's regular rate of pay?
T/F: 12. The FLSA does not require that an employee's preliminary and postliminary activities be counted as time worked.
True
T/F: 12. Training must be aimed at improving the skills and knowledge needed to achieve the department's mission.
True
T/F: 14. Plastic surgery for cosmetic purposes is not "medical care" as defined by the Internal Revenue Code.
True
T/F: 12. Under the ABC test, one of the determining factors is whether the worker in question is free from control or direction in performing the work both by agreement and in reality.
True
T/F: 13. A reward to reinforce and encourage continued positive behavior or a punishment to encourage modified behavior is an element of effective feedback.
True
T/F: 13. Any reimbursement for medical care expenses in excess of the amount actually spent or incurred by the employee is taxable income to the employee.
True
T/F: 13. Employers are not required to withhold federal income tax on excess group-term life insurance coverage.
True
T/F: 13. Entering an amount on the left side of an account is called debiting the account.
True
T/F: 13. Government employers that withhold federal income tax and only the Medicare portion of FICA taxes must report these taxes on Form 941.
True
9. What is the "regular rate of pay" and how is it determined?
The regular rate of pay is an hourly rate of pay determined by dividing the total regular pay actually earned for the workweek by the total number of hours worked. For salaried nonexempt employees, the regular rate of pay is the employee's salary divided by the number of hours the salary is intended to compensate.
12. Once a crisis is over, what are some of the things the payroll manager can do to ensure the lessons it taught are not forgotten?
There are several things the payroll manager can do to ensure that the lessons a crisis has taught are not forgotten: • Conduct a meeting of the team to discuss the crisis and determine which of the problems that occurred during the crisis are preventable • Initiate a plan to prevent those problems that can be prevented from reoccurring • List the successful results of the crisis management operation and include them in a "Crisis File" for future reference • List all the issues that were not satisfactorily resolved and formulate procedures to resolve them • Express your appreciation to your staff once again for their hard work during the crisis
3. What is the general retention period under the Internal Revenue Code for copies of employer tax returns and information returns?
These records must be kept for at least four years after the due date of the tax (or the date the tax is paid, if later) for the return period to which the records relate.
11. What must an employee's primary duty be to qualify for the administrative employee exemption under the FLSA?
To qualify as an administrative employee: • The employee's primary duty must be the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers. • The employee's primary duty must include the exercise of discretion and independent judgment regarding matters of significance.
9. What conditions must be satisfied for an employer-provided group health insurance plan to be nondiscriminatory in terms of eligibility and benefits?
To be nondiscriminatory in terms of eligibility, an employer-provided group health insurance plan must benefit: • At least 70% of all employees • At least 80% of all employees who are eligible to participate in the plan (if at least 70% of all employees are eligible to participate) or • A classification of employees that the Secretary of the Treasury finds not to be discriminatory In terms of benefits, an employer-provided group plan is nondiscriminatory if all the benefits provided to highly compensated employees are provided to all other participating employees. Plans may have limits on benefits, but they must be uniform for all participants when based on employer contributions and must not be proportionately based on employee compensation. Until the IRS issues guidance on applying the nondiscrimination rules to third-party insured plans, they apply only to employers with self-insured plans.
6. What are totalization agreements?
Totalization agreements are agreements between the U.S. and another country under which expatriate employees working "temporarily" in the foreign country would be subject to U.S. social security tax only. Wages earned by employees working "permanently" in the foreign country would be subject only to the foreign country's social security taxes. The reverse is also true for foreign employees working in the U.S.
15. What method of internal control requires employees to show identification to get paid, thus discouraging the creation of phantom employees? a. Physical payouts b. Segregation of duties c. Job rotation d. System edits
a. Physical payouts
17. What is the penalty for late filing of employment tax returns?
Unless an employer has reasonable cause and is not guilty of willful neglect, late filing of Form 941 or other employment tax returns results in an "addition to tax," the amount of which depends on how late the return is filed. The amount is: 5% of the amount of tax required to be shown on the return (after account- ing for deposits and credits) for each month or fraction of a month that the return is late, to a maximum of 25% (15% per month to a maximum of 75% of the unpaid tax if the late filing is fraudulent).
15. Name the three most common mistakes that managers commit when conducting employee performance appraisals.
When conducting performance appraisals, managers often make these common mistakes: • Guilt over negative evaluations • No accountability for the manager • Improper application of standards
12. After the new system has been selected and approved, what is the next step in the selection process? a. Specify scope b. Implementation c. Review d. Define requirements
b. Implementation
12. Employers are assigned "classification codes" based on their type of business for determining the employer's workers' compensation premium. Outline the classification code exemptions.
While an employer's business generally determines its classification code, and the more dangerous the business the higher the dollar value assigned to that code, some employees may be assigned a different or less costly code because of the duties they perform. Employees who work exclusively in an office, outside sales employees, and drivers and their helpers may be assigned a "standard exception classification." Such classifications generally carry a significantly lower dollar value than other employee classifications.
12. Tony is a nonexempt employee who works 35 hours per week and is paid a monthly salary of $2,500. During a certain workweek, Tony worked 43 hours. Calculate his total earnings for the workweek.
Yearly earnings: $2,500 x 12 months = $30,000 Hours worked in a year: 52 weeks x 35 hours = 1,820 Regular rate of pay: $30,000 ÷ 1,820 = $16.48 Regular pay: $16.48 x 43 hours = $708.64 Overtime hours: 43 - 40 = 3 Overtime premium rate: $16.48 x .5 = $8.24 Overtime premium pay: $8.24 x 3 = $24.72 Total earnings: $708.64 + $24.72 = $733.36
10. Company B hires a computer systems analyst and agrees to pay the employee $25 an hour. If this person works over 40 hours in a week, is the employee due overtime pay?
Yes. In order for the computer professional exemption to apply to an hourly paid employee, the employee would have to be paid at least $27.63 per hour.
1. Under the FLSA, all of the following records are required to be kept for at least three years from the last date they were in effect except for? a. Records showing additions to or deductions from employees' wages b. Collective bargaining agreements c. Certificates authorizing the employment of minors d. Records showing total sales volume and goods purchased
a. Records showing additions to or deductions from employees' wages
2. What is the FUTA tax rate in 2020? a. 7.65% b. 6.2% c. 6.0% d. 5.4%
c. 6.0%
5. An employee is supposed to receive his last paycheck of $1,500 for 2020 on Thursday, December 31. Because of a system failure, paychecks are not available until Thursday, January 7, 2021. Before December 31, the employee's 2020 earnings were $137,000. How much social security and Medicare taxes must be withheld? a. Social security $43.40 and Medicare $21.75 b. Social security $93 and Medicare $0 c. Social security $0 and Medicare $21.75 d. Social security $93 and Medicare $21.75
d. Social security $93 and Medicare $21.75
19. Which account has an entry when the deposit of state income tax withheld is made? a. Employees' income tax payable b. Payroll tax expenses c. State tax expense d. State income tax payable
d. State income tax payable
16. If an employer overwithholds federal income tax from its employees' wages and discovers the error after filing Form 941 for the quarter during which the error was made but before the end of the year, which option is not available to the employer? a. The employer may reimburse the employee for the overwithheld amount b. The employer may reduce future withheld taxes during the same calendar year that the error occurred c. The employer may apply the overwithheld amount to the next calendar quarter in the same year that the error occurred d. The employer may apply the overwithheld amount to the following year to reduce the amount withheld in the new year
d. The employer may apply the overwithheld amount to the following year to reduce the amount withheld in the new year
15. When the IRS publishes regulations they are coded "T.D." What does T.D. stand for? a. Tax Data b. Tax Development c. Technical Decision d. Treasury Decision
d. Treasury Decision
8. Better Build PC electronically filed all of its 500 2021 Forms W-2 on time with the SSA, but it did not file its 50 2021 Forms 1099-NEC with the IRS until August 10. What is the penalty for late filing? $__________
(50 x $280 maximum penalty) = $14,000 since the returns were filed after August 1.
4. Under the Family and Medical Leave Act, eligible employees are entitled to how many weeks of unpaid leave in a year to be with a newborn or newly adopted child, to take care of a seriously ill child, spouse, or parent, or to care for themselves if they are seriously ill?
12 weeks (26 weeks if the child, spouse, or parent is a covered military servicemember suffering a serious injury or illness).
9. As part of a "needs and wants analysis" in choosing a new payroll system, a Current Situation Analysis is essential. What does this entail?
A Current Situation Analysis should include the following components: • Documentation of all work flow into/out of the current system • Documentation of the procedures for maintenance, including who is called, response time, and average downtime • Identify who receives information from the payroll system, how often, and whether they are using it • Along with the end users, identify and prioritize complaints, problems, and restrictions • Identify any actual or potential compliance problems • Document any manual processes that might be eliminated by automation • Identify all costs of the current system—tax updates, corporate policy changes, computer time, paper, system shutdowns, etc.
15. What is a FUTA credit reduction state?
A FUTA credit reduction state is a state or territory that has a loan from the Federal Unemployment Account that is taken out in one year and has not repaid the full amount of the loan by the end of the following calendar year. If the loan is not repaid by November 10 of the year the reduction is scheduled to take effect, a credit reduction of 0.3% goes into effect, with employers in that state having their effective FUTA tax rate increased to 0.9% (0.6% + 0.3%).
8. What is a branded paycard?
A branded paycard has either a Mastercard®, Visa®, or Discover Network® logo imprinted on it and is accepted wherever cards issued by these companies are accepted.
11. What are the three important characteristics of a payroll management report?
A payroll manager's report to upper management should have the following characteristics: • Include only the relevant information • The information should be produced in a timely manner • It should be written clearly but briefly
11. What does a social security card prove in terms of an employee's work authorization status under IRCA?
A social security card that does not contain language saying that employment is not work-authorized is proof of an employee's authorization to work in the U.S., but not proof of identity.
1. Calculate the amount of federal income tax to be withheld in each of the following situations using the percentage method (Publication 15-T, Worksheet 1). a. Mark Hayes has a 2017 Form W-4 on file claiming single with one allowance. His income for the month is $1,800 and he is paid semimonthly. $_____________________ b. Collin Jones completes a 2020 Form W-4 with a filing status of single or married filing separately and he enters $2,000 in Step 3 of the form. Jones receives a monthly salary of $3,546. $_____________________ c. Sandra Stelone is single and claimed two allowances on her 2018 Form W-4. She receives an annual salary of $27,456 and is paid on a weekly basis. $_____________________
A. Step 1. Adjust the employee's wage amount: 1a. Taxable wages this payroll period = $900.00 [$1,800 ÷ 2 = $90 1b. Pay periods this year = 24 1c. Wages subject to withholding = $21,600.00 Note: Skip Lines 1d -1i because they are for a 2020 Form W-4 or later 1j. Number of allowances on pre-2020 Form W-4 = 1 1k. Multiply Line 1j by $4,300 = $4,300.00 1l. Subtract Line 1k from Line 1c = $17,300.00 Step 2. Figure the Tentative Withholding Amount: 2a. Amount from Line 1l = $17,300.00 2b. Find the row in the appropriate Annual Percentage Method table in which the amount on Line 2a is at least the amount in Column A but less than the amount in Column B, then enter here the amount from Column A of that row = $13,675.00 2c. Amount from Column C = $987.50 2d. Percent from Column D = 12% 2e. Line 2a - Line 2b = $3,625.00 2f. Line 2e x Line 2d = $435.00 2g. Line 2c + Line 2f = $1,422.50 2h. Line 2g ÷ Line 1b = $59.27 Step 3. Account for tax credits: 3a. 0 (because the employee's Form W-4 is a pre-2020 form) = 0 3b. Line 3a ÷ Line 1b = 0 3c. Line 2h - Line 3b = 0 Step 4. Figure the final amount to withhold: 4a. Additional amount to withhold (Line 6 of pre-2020 Form W-4) 4b. Line 3c + Line 4a = $59.27 b. Step 1. Adjust the employee's wage amount: 1a. Taxable wages this payroll period = $3,546.00 1b. Pay periods this year = 12 1c. Wages subject to withholding = $42,552.00 1d. Amount from 2020 Form W-4 Step 4(a) = $0 1e. Line 1c + Line 1d = $42,552.00 1f. Amount from 2020 Form W-4 Step 4(b) = $0 1g. $8,600 because the employee is single or married filing separately = $8,600.00 1h. Line 1f + Line 1g = $8,600.00 1i. Line 1e - Line 1h = $33,952.00 Note: Skip Lines 1j -1l because they are for a pre-2020 Form W-4 Step 2. Figure the Tentative Withholding Amount: 2a. Amount from Line 1i = $33,952.00 2b. Find the row in the appropriate Annual Percentage Method table in which the amount on Line 2a is at least the amount in Column A but less than the amount in Column B, then enter here the amount from Column A of that row = $13,675.00 2c. Amount from Column C = $987.50 2d. Percent from Column D = 12% 2e. Line 2a - Line 2b = $20,277.00 2f. Line 2e x Line 2d = $2,433.24 2g. Line 2c + Line 2f = $3,420.74 2h. Line 2g ÷ Line 1b = $285.06 Step 3. Account for tax credits: 3a. Amount from 2020 Form W-4 Step 3 = $285.06 3b. Line 3a ÷ Line 1b = $166.67 3c. Line 2h - Line 3b = $118.39 Step 4. Figure the final amount to withhold: 4a. Additional amount to withhold (Step 4(c) of 2020 Form W-4) = $0 4b. Line 3c + Line 4a = $118.39 c. Step 1. Adjust the employee's wage amount: 1a. Taxable wages this payroll period = $528.00 [$27,456.00 ÷ 52] 1b. Pay periods this year 52 1c. Wages subject to withholding = $27,456.00 Note: Skip Lines 1d -1i because they are for a 2020 Form W-4 or later. 1j. Number of allowances on pre-2020 Form W-4 = 2 1k. Multiply Line 1j by $4,300 = $8,600.00 1l. Subtract Line 1k from Line 1c = $18,856.00 Step 2. Figure the Tentative Withholding Amount: 2a. Amount from Line 1l = $18,856.00 2b. Find the row in the appropriate Annual Percentage Method table in which the amount on Line 2a is at least the amount in Column A but less than the amount in Column B, then enter here the amount from Column A of that row = $13,675.00 2c. Amount from Column C = $987.50 2d. Percent from Column D = 12% 2e. Line 2a - Line 2b = $5,181.00 2f. Line 2e x Line 2d = $621.72 2g. Line 2c + Line 2f = $1,609.22 2h. Line 2g ÷ Line 1b = $30.95 Step 3. Account for tax credits: 3a. 0 (because the employee's Form W-4 is a pre-2020 form) $0 3b. Line 3a ÷ Line 1b = $0 3c. Line 2h - Line 3b = $30.95 Step 4. Figure the final amount to withhold: 4a. Additional amount to withhold (Line 6 of pre-2020 Form W-4) = $0 4b. Line 3c + Line 4a = $30.95
11. David has child and dependent care expenses of $6,500 during 2020, and his employer reimburses him in full during the same year. How much of the reimbursement is taxable to David for 2020? a. $1,500 b. $5,000 c. $6,500 d. None of it is taxable
A. $1,500
16. Emma, a sales representative, receives a $1,500 bonus in December 2020 for outstanding performance. The bonus is supplemental wages subject to federal income tax withholding at a flat 22% rate; the social security tax rate is 6.2%; and the Medicare tax rate is 1.45%. Assuming there are no state or local taxes and that Emma has received wages of $100,000 during the year so far, what is the amount Emma must be paid to guarantee her a net bonus of $1,500. a. $2,132.20 b. $2,039.43 c. $2,227.17 d. $2,162.94
A. $2,132.20
9. How long must an employer retain a Form I-9 for a terminated employee who worked for the employer for more than four years? a. 1 year after termination b. 3 years after termination c. 7 years after termination d. Does not have to keep terminated employees' I-9 forms
A. 1 year after termination
5. The business standard mileage rate for 2020 is: a. 57.5 cents per mile b. 56 cents per mile c. 54.5 cents per mile d. 58 cents per mile
A. 57.5 cents per mile
1. Classify each item that follows as an asset, liability, or owner's equity. a. Cash _______________ b. Loan payable to a bank _______________ c. Delivery equipment _______________ d. Account payable to a creditor _______________ e. Office furniture _______________ f. Owner's financial interest _______________ g. Petty cash _______________ h. Mortgage payable to a bank _______________ i. FUTA taxes payable _______________
A. Asset B. Liability C. Asset D. Liability E. Liability F. Owner's Equity G. Asset H. Liability I. Liability
2. Some of the ledger accounts of the Morris Bookkeeping Service, owned and operated by Paul Morris, are listed below. In the columns at the right, indicate by a check mark (√) whether these accounts are shown on the income statement or the balance sheet. a. Accounts payable Income Statement _______________ Balance Sheet _______________ b. Accounts receivable Income Statement _______________ Balance Sheet _______________ c. Advertising expense Income Statement _______________ Balance Sheet _______________ d. Cash Income Statement _______________ Balance Sheet _______________ e. Salaries payable Income Statement _______________ Balance Sheet _______________ f. Office equipment Income Statement _______________ Balance Sheet _______________ g. Paul Morris, capital Income Statement _______________ Balance Sheet _______________ h. Miscellaneous expense Income Statement _______________ Balance Sheet _______________ i. Office furniture Income Statement _______________ Balance Sheet _______________ j. Rent expense Income Statement _______________ Balance Sheet _______________
A. Balance sheet B. Balance sheet C. Income statement D. Balance sheet E. Balance sheet F. Balance sheet G. Balance sheet H. Income statement I. Balance sheet J. Income statement
19. Which department in a company generally administers defined benefit plans? a. Benefits department b. Human resources department c. Payroll department d. Accounting department
A. Benefits department
3. Enter the normal balance (debit or credit) for each of the following accounts. a. Accounts receivable _______________ b. Social security tax payable _______________ c. Sales _______________ d. Sales tax payable _______________ e. Accounts payable _______________ f. Wage garnishments payable _______________ g. Payroll taxes expense _______________ h. Professional fees payable _______________ i. Freight expense _______________ j. Life insurance premiums payable _______________
A. Debit B. Credit C. Credit D. Credit E. Credit F. Credit G. Debit H. Credit I. Debit J. Credit
6. An employee has been absent from work for nine months because of a non job-related illness and is not expected to return to work for another three months. Which taxes must be withheld at this point from disability payments made to the employee by the employer? a. Federal income tax b. Social security and Medicare taxes c. Social security, Medicare, and FUTA taxes d. No withholding required
A. Federal income tax
10. Which of the following situations describes one of the general requirements that must be met for workers to be considered statutory employees? a. They have a continuing relationship with the employer b. They have a substantial investment in the business equipment c. They are licensed real estate agents d. Most of their compensation is related to sales
A. They have a continuing relationship with the employer
8. Which section of the Internal Revenue Code regulates cafeteria plans? a. §125 b. §127 c. §128 d. §162
A. §125
3. The planning and organizing process consists of defining three key activities. What are these activities?
Activities that must be defined during the planning and organizing process include: • Goals and objectives • The time frame
2. What are some of the advantages and disadvantages of direct deposit for an employer?
Advantages of direct deposit for an employer include: • Prevents lost and stolen checks • Employees do not have to take time out of their work day to cash or deposit their paycheck • Employers do not have to file/store cashed checks and related documents • Better control of check stock Disadvantages of direct deposit for an employer include: • Direct deposit is not a paperless system, since employers still may have to provide employees with a written statement of hours worked and deductions from gross pay, as well as collect a written authorization form, depending on their policies and procedures • Direct deposit cannot be made mandatory in many states • Employer cannot dictate the financial institution that the employee uses in most states • Employer's loss of interest on payroll funds before paychecks clear
2. How does the IRS define a "tax home"?
An employee's tax home is the location of his or her regular place of business. If there is none, the employ- ee's tax home is where the employee regularly lives.
4. What must an employer do in relation to filing Form 940 when it goes out of business?
An employer that ceases doing business must file a Form 940 for the portion of the last calendar year it was in business and check Box d in the upper right hand corner of page 1 indicating no future returns will be filed. The employer must also attach a statement to the form including the following information: • The location where required records will be kept • Who is responsible for keeping the records • The name and address of the purchaser of the business or the fact that there was no purchaser or that the purchaser's name is unknown
9. An employer pays for 100% of the insurance for its employees as part of a sickness and disability benefits plan. Assume an employee received $1,800 in disability pay from a third-party insurer during the first six calendar months of disability and $600 over the seventh and eighth months. How much of the disability pay would be social security and Medicare taxable, and how much is FIT taxable? a. $1,800 SS and Med. taxable, $1,800 FIT taxable b. $1,800 SS and Med. taxable, $2,400 FIT taxable c. $2,400 SS and Med. taxable, $2,400 FIT taxable d. $2,400 SS and Med. taxable, $1,800 FIT taxable
B. $1,800 SS and Med. taxable, $2,400 FIT taxable
12. An employee who regularly earns $400 per week is called to jury duty and is given $150 per week in jury duty pay. The employer makes up the difference between the jury duty pay and the employee's regular pay. What amount is subject to federal income tax withholding and social security, Medicare, and FUTA taxes? a. $150 b. $250 c. $400 d. None of the above
B. $250
6. Barbara is an hourly paid employee making $7.48 per hour. She is scheduled to work 35 hours a week. For the past week, Barbara worked 43 hours. Under the FLSA, what is the minimum she must receive as gross pay? a. $261.80 b. $332.86 c. $310.42 d. $321.64
B. $332.86
6. The IRS-approved rate for employer-provided fuel for 2020 is: a. 5 cents per mile b. 5.5 cents per mile c. 7.5 cents per mile d. 9 cents per mile
B. 5.5 cents per mile
13. The definition of a "newly hired" employee for the purposes of new hire reporting includes an employee who was previously employed by the employer but has been separated from that prior employment for: a. At least 6 weeks b. At least 60 consecutive days c. At least 2 calendar months d. At least 30 consecutive days
B. At least 60 consecutive days
15. All of the following payments are classified as wages subject to federal income tax withholding except: a. Gift certificates for a local supermarket provided at the end of the year. b. Deceased worker's wages paid to the worker's estate or legal representative c. Bonuses d. Back pay awards
B. Deceased worker's wages paid to the worker's estate or legal representative
10. Which of the following areas is not governed by the Portal-to-Portal Act? a. Travel time b. Equal pay for equal work c. De minimis time d. Preliminary and postliminary activities
B. Equal pay for equal work
7. Which of the following laws established minimum wage and overtime standards in the U.S.? a. Civil Rights Act b. Fair Labor Standards Act c. Age Discrimination in Employment Act d. Federal Insurance Contributions Act
B. Fair Labor Standards Act
2. Which of the following forms must be submitted to an independent contractor (who is paid at least $600) after the end of the year for services performed during that year? a. Form W-2nd b. Form 1099-MISC (or, beginning with payments made in 2020 reported in 2021, Form 1099-NEC) c. Form 1096 d. Form SS-8
B. Form 1099-MISC (or, beginning with payments made in 2020 reported in 2021, Form 1099-NEC)
14. All of the following expenses incurred while on business travel qualify as a travel expense except: a. Dry cleaning of suit b. Gift purchased for a prospective customer c. Meals d. Tips
B. Gift purchased for a prospective customer
9. Employees covered by collective bargaining agreements may be exempt from which provisions of the FLSA? a. Minimum wage requirements b. Overtime pay requirements c. Minimum wage and overtime pay requirements d. Child labor restrictions
B. Overtime pay requirements
3. Which of the following developments is not a circumstance that would allow benefit changes during the plan year under a cafeteria plan? a. A strike or lockout b. The company institutes a 1% across-the-board salary reduction c. A change in the participant's legal marital status d. The employee terminates during the plan year
B. The company institutes a 1% across-the-board salary reduction
14. Under a dependent care assistance flexible spending arrangement, employees may be reimbursed up to what amount of dependent care expenses for each plan year? a. $2,000 b. $3,000 c. $5,000 d. $10,000
C. $5,000
25. In 2020, what is the maximum amount of contributions that can be made by an employee and an employer to the employee's account in a defined contribution plan? a. $19,500 b. $26,000 c. $57,000 d. $285,000
C. $57,000
8. If an employer fails to withhold social security and Medicare taxes from a worker it misclassifies as an independent contractor and does not file a Form W-2 or a Form 1099 for that worker, what penalty may the IRS impose? a. 10% of the employee's share of social security and Medicare taxes b. 20% of the employee's share of social security and Medicare taxes c. 40% of the employee's share of social security and Medicare taxes d. 100% of the employee's share of social security and Medicare taxes
C. 40% of the employee's share of social security and Medicare taxes
4. The Family and Medical Leave Act applies to private sector employers with: a. 75 or more employees b. 150 or more employees c. 50 or more employees d. 50 or fewer employees
C. 50 or more employees
1. At what age is an employee no longer subject to a 10% excise tax when the employee receives a distribution from his or her qualified retirement plan? a. 60 b. 62 c. 59½ d. 58
C. 59½
7. An employee receives serious car injuries while away from work on February 15, 2020, and does not return to work until November 1, 2020. Through what date must the employer withhold and pay social security, Medicare, and FUTA taxes on sick pay given to the employee by the employer? a. July 15, 2020 b. August 15, 2020 c. August 31, 2020 d. September 1, 2020
C. August 31, 2020
1. All of the following benefits are nontaxable fringe benefits except: a. No-additional-cost services b. Qualified employee discounts c. Employer-paid membership fees to an athletic club d. De minimis fringes
C. Employer-paid membership fees to an athletic club
7. Full-time life insurance salespersons paid solely by commission are exempt from: a. Social security and Medicare taxes b. Social security tax only c. FUTA tax d. Social security, Medicare, and FUTA taxes
C. FUTA tax
12. An agreement is made between the employer and the employees whereby the employer pays the employees all or part of their salary while they are receiving workers' compensation benefits, in return for which the employees turn over their workers' compensation benefits to the employer. Under such an arrangement, any amount paid in excess of the employee's workers' compensation benefits is wages subject to: a. Social security and Medicare taxes only b. Federal income tax only c. Social security, Medicare, and federal income taxes d. Excess is not taxable
C. Social security, Medicare, and federal income taxes
17. Johnny's employer contributes $150 per month to his stock bonus option plan as part of his benefits package. Johnny now wishes to take the $150 per month in cash. What will be the tax treatment of the benefit? a. The $150 will be a tax-free benefit to Johnny b. The $150 is subject to federal income tax withholding only c. The $150 is subject to federal income tax withholding and social security, Medicare, and FUTA taxes d. The $150 is subject to social security, Medicare, and FUTA taxes only
C. The $150 is subject to federal income tax withholding and social security, Medicare, and FUTA taxes
11. Each of the following goals is a reason why states might require employers to report newly hired employees except: a. To detect welfare fraud b. To detect unemployment compensation fraud c. To locate individuals who have not claimed state lottery winnings d. To locate noncustodial parents subject to a child support withholding order
C. To locate individuals who have not claimed state lottery winnings
6. Name the three main nondiscrimination tests that cafeteria plans must satisfy to qualify for preferential tax treatment.
Cafeteria plans must satisfy the following three nondiscrimination tests: • Eligibility test • Contributions and benefits test • Concentration test
11. What are three common mistakes made during system selection which could seriously damage the project at a later phase?
Common mistakes made during selection of a new payroll system include: • Not including representatives of all the potential user departments • Failing to provide enough time for project team members to work on their system selection duties • Failing to prioritize needs and desires • Making decisions without sufficient input • Failing to consider all the costs associated with a new system • Making on-site visits only to customers referred by a vendor or service provider • Failing to thoroughly check for signs of obsolescence • Failing to negotiate performance guarantees • Not considering future company needs—shortsightedness
8. Sam's regular workweek consists of 40 hours and he is paid biweekly. If Sam works 38 hours in week one and 43 hours in week two, how many overtime hours must he be paid for? a. 0 b. 1 c. 1.5 d. 3
D. 3
9. Under the "fixed-date" method for substantiating business travel expenses, an advance can be provided no more than how many days before an expense is incurred? a. 10 days b. 15 days c. 20 days d. 30 days
D. 30 days
13. All of the following items incurred while on business travel are travel expenses except: a. The cost of meals b. The cost of lodging c. Transportation costs d. Cost of entertaining clients
D. Cost of entertaining clients
2. All of the following benefits are working condition fringe benefits except: a. Business use of a company car or airplane b. Dues and membership fees to professional organizations c. Goods used for product testing by employees d. Dependent care assistance
D. Dependent care assistance
4. All of the following data elements are recordkeeping requirements for the business use of company-provided vehicles except: a. Date of the trip b. Business purpose of the trip c. Mileage for the trip d. Lodging expenses incurred during the trip
D. Lodging expenses incurred during the trip
15. If an employer that hires employees in more than one state wants to report all its new hires to just one state, it can request permission to do so by filing the following form with the Department of Health and Human Services: a. Form W-4, Employee's Withholding Certificate b. Form W-9, Request for Taxpayer Identification Number and Certification c. Multiple Worksite Report d. Multistate Employer Notification Form for New Hire Reporting
D. Multistate Employer Notification Form for New Hire Reporting
16. Tammy selects a dependent care package from her employer's cafeteria plan. The cost of the package is $200 per month. Tammy's employer pays $150 per month to her cafeteria plan and Tammy defers part of her salary to pay the difference. What taxes must the employer withhold? a. FIT, social security, and Medicare taxes from the employer contribution b. FIT, social security, and Medicare taxes from the employee contribution c. FIT, social security, and Medicare taxes from both the employer and employee contributions d. No taxes must be withheld from either the employer or employee contribution
D. No taxes must be withheld from either the employer or employee contribution
3. All of the following benefits are de minimis fringe benefits except: a. Occasional tickets to sporting events b. Subscriptions to business periodicals c. Traditional holiday gifts (e.g., turkeys, candy) d. Occasional personal use of company telephones
D. Occasional personal use of company telephones
18. At the start of the year, Donna elects to buy medical and dental insurance as part of her company's cafeteria plan. During the year Donna gets married and her husband has full medical and dental insurance which can be extended to cover his whole family. Donna wants to replace the medical and dental insurance with group-term life insurance. Which of the following statements is true? a. If the amount is not spent by the end of the year it has to be forfeited b. The replacement package becomes fully taxable c. Once selected, benefits cannot be changed during the plan year d. Since Donna has had a change in status and her new election is consistent with that change, this option is available to her
D. Since Donna has had a change in status and her new election is consistent with that change, this option is available to her
7. Anderson Distributors pays its employees on a weekly basis. The totals for the payroll for the week ended January 1, 2021, are as follows: Regular wages $12,400.00 Overtime pay 1,800.00 Commissions paid 2,200.00 Social security tax withheld 1,016.80 Medicare tax withheld 237.80 Federal income tax withheld 2,460.00 State income tax withheld 246.00 Life insurance premiums withheld 30.00 After-tax health insurance premiums withheld 22.00 Use 0.6% to calculate the employer's FUTA tax and 2.7% to calculate the employer's SUTA tax. Show the journal entries that should be made to record the payroll.
Date: Jan 03, 2020 Item 1. Wages/salaries expense - Debit 2. Social security tax payable - Credit 3. Medicare tax payable - Credit 4. Federal income tax payable - Credit 5. State income tax payable - Credit 6. Life insurance premiums payable - Credit 7. Health insurance premiums payable - Credit 8. Wages/salaries payable - Credit Date: Jan 03, 2020 Item 1. Payroll taxes expense - Debit 2. Social security tax payable - Credit 3. Medicare tax payable - Credit 4. FUTA tax payable - Credit 5. SUTA tax payable - Credit Date: Jan 03, 2020 Item 1. Wages/salaries payable - Debit 2. Cash - Credit
5. Solar Products' payroll was $40,000 on January 8, 2021. The applicable tax rates are as follows: Social security, 6.2%; Medicare, 1.45%; FUTA, 0.6%; and SUTA, 2.7%. Show the journal entry that would be made to record the employer's payroll taxes, assuming no employee has reached any applicable wage limit.
Date: Jan 10, 2020 Item 1. Payroll taxes expense - Debit 2. Social security tax payable - Credit 3. Medicare tax payable - Credit 4. FUTA tax payable - Credit 5. SUTA tax payable - Credit
4. The payroll records of Redwood Lumber for the week ended January 2, 2021, are as follows: Gross earnings $50,000.00 Social security tax withheld 3,092.56 Medicare tax withheld 723.26 Federal income tax withheld 7,500.00 State income tax withheld 750.00 City income tax withheld 375.00 Life insurance premium withheld 200.00 Health insurance premium (pre-tax) withheld 120.00 Credit union contributions withheld 100.00 Record the weekly payroll information for January 2, 2021, in the journal.
Date: Jan 3, 2020 Item 1. Wages/salary expense - Debit 2. Social security tax payable - Credit 3. Medicare tax payable - Credit 4. Federal income tax payable - Credit 5. State income tax payable - Credit 6. City income tax payable - Credit 7. Life insurance premiums payable - Credit 8. Health insurance premiums payable - Credit 9. Credit union contributions payable - Credit 10. Wages/salaries payable - Credit
15. Under IRS regulations, what methods may employers use to notify employees who have no income tax withheld and do not file exempt of their possible eligibility for a tax refund because of the EIC.
Employers must provide notification of the right to the earned income credit by giving the employees one of the following: • Copy B of Form W-2, Wage and Tax Statement (IRS-supplied forms have the required EIC statement on the back of Copy B; substitutes used for this purpose must have the required statement on the back of the employee copy) • Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit • A written statement with the exact same wording as Notice 797
10. What are the retention requirements for Form I-9?
Employers must retain the completed Form I-9, Employment Eligibility Verification, for at least three years after the date of hire or one year after the date of termination, whichever is later.
5. When leasing an employee or using a temporary help agency, aside from looking at the cost, what should you know about the overall company that you are dealing with to avoid having to pay any withholding or employment taxes?
Employers should make sure they are dealing with a financially secure and reputable company before entering into a contract, since the temporary help agency or leasing company's financial failure could lead to the client company becoming liable for any withholding or employment taxes that remain unpaid.
2. What is the penalty for failing to withhold and remit payment as prescribed under an IRS notice of levy?
Employers that fail to withhold and pay over an amount not exempt from levy after receiving Form 668-W are liable for the full amount required to be withheld, plus interest from the wage payment date. In addition, the employer is liable for a penalty equal to 50% of the amount recoverable by the IRS after the failure to withhold and remit.
7. What is the purpose of Form 944?
Employers that have a payroll tax liability of up to $1,000 in a calendar year file Form 944, Employer's Annual Federal Tax Return, rather than Form 941, Employer's Quarterly Federal Tax Return.
10. How does an employer amend an incorrect Form 940?
Employers that make an error on Form 940 need to file an amended return. They do this by filing a new Form 940 for the year being amended with the correct numbers. Box a in the upper right corner of page 1 indicating an amended return should be checked. The form should be accompanied by a statement as to why the amended return is necessary.
8. What additional records must be kept under the FLSA by employers of tipped employees?
Employers that use the tip credit to pay part of a tipped employee's minimum wage must keep, in addition to other required records, the following: • Some notation of the records showing that the employee's wages are determined partly by tips • The amount reported by the employee to the employer as tips (weekly or monthly), which may be taken from IRS Form 4070 • The amount of the tip credit taken by the employer • Hours worked and straight-time earnings for time worked other than as a tipped employee • Hours worked and straight-time earnings for time worked as a tipped employee
10. Why would many employers rather use workers who are not employees to perform services for them?
Employers would rather use workers who are not employees to perform services for them because employers must withhold income and employment taxes from employees wages and pay employement taxes with their own funds. Employers also must pay federal and state unemployment taxes based on ther employees wages. If a worker is an employee, most companies have their own list of benefits and other entitlements that are provided to employees but not to independent contractors.
14. On Form 941, how does the employer treat fractional cents that cause differences in calculating the employer's and employees' social security and Medicare taxes?
Enter on Line 7 the difference between the total security and Medicare taxes on Line 5e and the amount actually withheld from employees' wages and paid by the employer that is due to rounding to the nearest penny.
14. What conditions and limitations must be satisfied for employer-provided dependent care assistance to be excluded from an employee's income?
Exclusion limitation: The excluded amount of dependent care assistance cannot exceed $5,000 in a year or the employee's earned income for the year, whichever is less. When expenses are incurred: An employer's dependent care expenses are treated as incurred when the care is provided, not when payments are made to the employee or third party. Written plan: The dependent care assistance program must be a separate, written plan of the employer and it must be designed solely for the employees' benefit. No discrimination: The program must not discriminate in favor of highly compensated employees. Notification: Eligible employees must receive reasonable notification of the availability and terms of the program. Annual statement: The employer must give the employee a statement each year by January 31 showing the dependent care assistance provided by the employer during the previous year (Box 10 of Form W-2).
T/F: 3. A pre-tax deduction will result in less take-home pay for the employee than an after-tax deduction.
False; A pre-tax contribution will result in more take-home pay for the employee.
T/F: 6. Accounts payable are assets.
False; Accounts payable are liabilities.
T/F: 19. Allocated tips should be included in Box 1 of Form W-2.
False; Allocated tips should not be included in Box 1, 5, or 7 of Form W-2, but they should be included in Box 8.
T/F: 10. An automated time and attendance system should not integrate with an employer's human resources, payroll, and cost accounting systems.
False; An automated time and attendance system should integrate with an employer's human resources, payroll, and cost accounting systems.
T/F: 9. An employer may be required to deduct a creditor garnishment from an employee's wages by order of the creditor.
False; An employer is only required to garnish an employee's wages by order of a court, not the creditor.
T/F: 4. The job title is a strong factor in determining whether an employee is exempt from the minimum wage and overtime provisions of the FLSA.
False; An important sounding job title does not exempt an employee from the minimum wage and overtime pay provisions of the FLSA. The employee's actual duties and salary must meet the tests of the exemption.
T/F: 7. In a business, the assets must always be equal to the liabilities minus the owner's equity.
False; Assets must equal liabilities plus owner's equity.
T/F: 7. Legal requirements governing the hiring process are for the lawyers to worry about—not payroll managers.
False; At all times during the hiring process—from job analysis through interviewing and orientation—the payroll manager must keep in mind the legal requirements surrounding the process.
T/F: 10. The time spent by employees during bona fide meal periods is considered working time.
False; Bona fide meal periods during which the employee is completely relieved from duty are not working time.
T/F: 14. A $25.00 check with a note attached saying "Buy a Christmas turkey with this." is excluded from taxable earnings as a de minimis fringe.
False; Cash gifts or gift certificates with a cash value are never de minimis fringes.They are included in income and are taxable to the employee.
T/F: 7. Even though "white collar" workers may be exempt from the FLSA's overtime pay requirements, records of their hours worked must still be kept by the employer.
False; Certain records relating to overtime pay requirements, including hours worked, need not be kept for exempt "white collar" employees. However, employers must include in their records the basis on which wages are paid so that each employee's total earnings for each pay period can be calculated.
T/F: 18. If the employee admits that a severe personal problem is harming his or her work performance, the payroll manager should try to take the place of a professional counselor.
False; Counseling should not be used by a payroll manager when an employee has a severe personal problem. The employee should be referred to an appropriate employee counseling program if the employer has an Employee Assistance Program.
T/F: 5. Documentation of the payroll system and its procedures is not a very important part of a company's overall control mechanisms.
False; Documentation is a very important part of a company's overall control mechanisms.
T/F: 13. Employees have the option on their Form W-4 to have a flat dollar amount of tax withheld from their pay.
False; Employees cannot indicate on their W-4 form that they wish to have a flat amount of tax withheld rather than an amount based on their filing status and entries in Steps 2, 3, and 4 of their 2020 Form W-4. They can indicate an additional amount of tax to withhold in Step 4(c).
T/F: 23. Laid-off or terminated employees are the only individuals who are eligible for unemployment benefits.
False; Employees whose hours are reduced are also eligible, so long as they are not earning more than the weekly benefit amount.
T/F: 12. Employer contributions to an accident or health insurance plan that provides insurance for its employees and their spouses and dependents are considered wages and are subject to federal income withholding and social security, Medicare, and FUTA taxes.
False; Employer contributions to an accident or health insurance plan for the benefit of its employees and their spouses, dependents, and adult children under age 27 are not wages and are not subject to federal income tax withholding or social security, Medicare, and FUTA taxes.
T/F: 6. Employers failing to withhold and pay over amounts not exempt from levy after receiving Form 668-W are not liable for the full amount required to be withheld.
False; Employers are liable for the full amount required to be withheld.
T/F: 19. An employer can terminate an employee because of inconvenience caused in administering a creditor garnishment order.
False; Employers are prohibited by the CCPA from terminating an employee because the employ- ee's earnings have been subjected to garnishment for any one indebtedness.
T/F: 9. Employers cannot require eligible employees to use any paid vacation, personal, sick, medical, or family leave as part of the 12-week guaranteed leave under the Family and Medical Leave Act.
False; Employers can require eligible employees to use any paid vacation, personal, sick, medical, or family leave as part of the 12-week guaranteed leave.
T/F: 15. Employers can demand specific documents to prove an employee's eligibility to work in the U.S.
False; Employers cannot demand specific documents to prove an employee's eligibility to work. New hires can produce any approved documents listed in the Form I-9 instructions that prove identity and work authorization.
T/F: 18. Under IRCA, nonresident aliens are required to produce their social security cards as proof of authorization to work in the U.S.
False; Employers cannot require nonresident aliens to produce their social security cards as proof of authorization to work in the U.S. The alien can produce any approved document to show work authorization.
T/F: 24. Employers in a credit reduction state pay FUTA tax at a lower rate than employers in a state that is not subject to credit reduction.
False; Employers in a credit reduction state pay FUTA tax at a higher rate than employers in a state that is not subject to credit reduction.
T/F: 17. An employer should not withhold child support from payments made to independent contractors.
False; Employers must withhold child support from payments made to independent contractors when required to do so by order of a court or state child support enforcement agency.
T/F: 19. Employers that have a great deal of turnover generally have a lower experience rate.
False; Employers that have a great deal of turnover generally have a higher experience rate.
T/F: 14. The FUTA tax for 2020 is based on 6.0% of each employee's wages up to $137,700.
False; FUTA tax is based on the first $7,000 in wages paid to each employee in 2020.
T/F: 9. The Form 941 payroll tax deposit lookback period for calendar year 2021 is January 1, 2020-June 30, 2020.
False; For calendar year 2020, the payroll tax deposit lookback period is July 1, 2018 - June 30, 2019.
T/F: 4. For purposes of the foreign earned income exclusion, Guam is considered to be a foreign country.
False; For purposes of the §911 exclusions, all territories of the U.S., including Guam, are not considered foreign countries.
T/F: 16. When using the wage bracket method of withholding, if the wage payments are above the maximum table amount, the employer has the option to use the optional flat rate.
False; For wage payments equaling or exceeding the maximum amount, the percentage method of withholding must be used.
T/F: 6. An EIN is obtained from the Social Security Administration using Form SS-4.
False; Form SS-4 is filed with the IRS, not the SSA.
T/F: 12. Form W-4 must be retained by the employer for three years.
False; Form W-4 must be retained by the employer for at least four years after the date the last return was filed using the information on the form (i.e., the employee's personal income tax return for the last year during which the Form W-4 was in effect, which is due the follow- ing April 15).
T/F: 12. Forms 941 that are mailed through the U.S. Postal Service are considered timely if postmarked at least one day before the due date.
False; Forms 941 sent by U.S. mail are considered timely if postmarked no later than the form's due date.
T/F: 22. Gifts provided to an employee by his or her employer are excluded from income.
False; Gifts provided to employees must be included in the employees' income unless they can be excluded as a de minimis fringe benefit or as a gift between relatives that is not based on the employer-employee relationship.
T/F: 18. Government employees are subject to a different set of child support withholding order requirements than those applicable to private sector employees.
False; Government employees are subject to child and spousal support withholding orders on the same basis as private sector employees.
T/F: 10. When an employee uses a company aircraft for business and personal use, the cost of travel for personal use is excluded from the employee's income.
False; If an employee uses a company aircraft for business and personal use, the value of the per- sonal use is included in the employee's income.
T/F: 8. If an employer uses the E-Verify Program, a new hire does not have to enter their SSN in Section 1 of Form I-9.
False; If an employer uses the E-Verify program, new hires must enter their SSN in Section 1 of Form I-9.
T/F: 4. Telemarketers working under the direction of a company are usually independent contractors.
False; If telemarketers work under the direction and control of a company, they are employees of that company.
T/F: 12. If the FUTA tax deposit due date falls on a Saturday, the deposit is due the Friday before.
False; If the FUTA tax deposit due date falls on a Saturday, the deposit is due on the next busi- ness day.
T/F: 22. Wages other than cash are included in the minimum wage calculation if they primarily benefit the employer.
False; In addition to wages paid in the form of cash, employees may be paid in other forms as well. They may be paid partly in room, board, or other facilities provided by the employer. These facilities must primarily benefit the employee, not the employer, in order to be classified as wages.
T/F: 20. Employers wishing to use substitute W-2 forms should send a sample to the IRS for approval prior to use.
False; In general, employers wishing to use substitute W-2 forms should not send a sample to the IRS for approval prior to use.
T/F: 19. Nonresident aliens exempt from federal income tax are also exempt from social security and Medicare taxes.
False; In general, social security and Medicare taxes apply to all wages paid for work performed in the U.S., regardless of the citizenship or residency status of the employee (unless exempted by a totalization agreement).
T/F: 5. Cafeteria plans that are the result of collective bargaining between an employer and a union are not exempt from the nondiscrimination tests applicable to cafeteria plans.
False; In this case, cafeteria plans are exempt from the nondiscrimination tests.
T/F: 9. Managers and executives are excluded from the employer-employee relationship for tax purposes.
False; Managers and executives are classified as employees for tax purposes, although they are exempt under most wage-hour and labor relations laws
T/F: 21. Managers who are constantly moving from crisis to crisis are seen to be productive and efficient.
False; Managers who are constantly moving from crisis to crisis, or who fail to delegate properly, have no time to focus on the payroll department's overall mission of quality service or their own personal goals and objectives.
T/F: 4. All states regulate the payment of wages owed to deceased employees.
False; More than 15 states have no statutory provisions dealing with paying wages owed to deceased employees.
T/F: 1. Most newly promoted payroll managers achieve their position because they have shown great management skills in the past.
False; Most payroll managers achieve their position because of their technical proficiency.
T/F: 3. The Fair Labor Standards Act regulates the payment of wages on termination of employment.
False; Most states have a separate set of rules governing when employees must be paid when they separate from employment, either through discharge, layoff, or resignation.
T/F: 19. Under the federal new hire reporting requirements, multistate employers must report a new hire to the state in which the employee works.
False; Multistate employers can designate one state in which they have employees as the state to which they will report all new hires.
T/F: 2. New employers deposit their payroll tax liability as a semiweekly depositor.
False; New employers are classified as monthly depositors.
T/F: 5. Nonprofit and public sector employers must choose the direct reimbursement method to satisfy their state unemployment insurance liability.
False; Nonprofit and public sector employers may choose the direct reimbursement method or the experience-rated method to satisfy their state unemployment insurance liability.
T/F: 23. Nonprofit organizations engaged in a trade or business are exempt from the 1099 reporting requirements.
False; Nonprofit organizations engaged in a trade or business are not exempt from Form 1099 reporting requirements.
T/F: 23. At the beginning of the year, Frances elects to buy medical and dental insurance as part of a package in her company's cafeteria plan. During the year Frances has the option to change to a different plan at any time.
False; Once selected, benefits cannot be changed during the plan year unless the cafeteria plan permits the employee to make a change if there is a change in status that causes the employee or the employee's spouse, dependent, or adult child under age 27 to lose or gain coverage under the plan, or premiums or coverage are significantly altered by the insurance carrier or the employer.
T/F: 8. All pay received for overtime hours is excluded from an employer's total payroll when calculating workers' compensation premiums.
False; Only the premium portion of overtime is excluded. The straight time portion is included.
T/F: 24. All paper Forms 1099-NEC must be sent to the SSA with the appropriate transmittal form by February 28 of the year following the year in which payments were made.
False; Paper Forms 1099-NEC must be sent to the IRS Processing Center listed on the 1099 series instructions. They must be sent by January 31 of the year following the year in which the payments were made.
T/F: 13. Part-time employees are not covered under the federal payroll tax laws even if they meet the common law test for employment status.
False; Part-time employees are covered under the federal payroll tax laws if they meet the common law test for employment status.
T/F: 24. Paychecks that cannot be delivered should be returned to the payroll department.
False; Payroll checks that cannot be delivered should be returned to a department other than pay- roll and be locked up until the employee returns and can receive the check.
T/F: 1. Payroll records retained in compliance with IRS recordkeeping requirements must be kept in paper form.
False; Payroll records may be retained in any form, including microfilm, microfiche, paper, or computerized.
T/F: 3. Regardless of the accounting periods or fiscal year that a company uses, payroll taxes do not have to be reported on a calendar year basis.
False; Payroll taxes are always reported on a calendar year basis.
T/F: 23. Performance evaluations are considered to be an informal way of giving feedback.
False; Performance evaluations are a formal way of giving feedback. They provide a form and written record of how employees are performing relative to present goals that are designed to help the department and company meet their overall business goals.
T/F: 15. Reduced escheat issues is not an employer benefit of implementing a paycard program.
False; Reduced escheat issues is an important employer benefit of implementing a paycard program.
T/F: 10. Expenses incurred for a move from the U.S. to a foreign country are not included in foreign earned income.
False; Reimbursements for nondeductible moving expenses incurred for a move from the U.S. to a foreign country are included in foreign earned income.
T/F: 7. Restaurant employers can participate in the Tip Rate Determination Agreement by checking a box on Form 941 filed for the fourth quarter of a calendar year.
False; Restaurant employers wishing to participate in a TRDA must agree with the IRS on a certain tip percentage based on the charge tips it reported and an IRS formula to determine cash tips. Also, 75% of the employees at each establishment must agree to report the tip percentage agreed on in the TRDA.
T/F:15. The revenue earned during the accounting period appears on the balance sheet.
False; Revenue appears on the income statement.
T/F: 16. Scholarships and fellowships are included in an individual's income even if the individual is a candidate for a degree at an educational institution.
False; Scholarships and fellowships covering tuition and related fees are excluded from an individ- ual's income if the individual is a candidate for a degree at an educational institution.
T/F: 25. The cost of traveling from Boston to Germany for a trip that is for both business and pleasure may be deducted in full as a travel expense.
False; Special rules and limitations apply to combined business and pleasure travel outside the United States. Even though the trip is primarily for business, if the trip has any element of pleasure, the cost of traveling to and from the destination must be allocated between the business and personal portions of the trip.
T/F: 20. Taxicab drivers are exempt from the minimum wage and overtime requirements of the FLSA.
False; Taxicab drivers are only exempt from the overtime pay requirements.
T/F: 2. Creditor garnishments are always allowed up to 25% of disposable earnings.
False; The Consumer Credit Protection Act imposes a lower limit depending on the amount of the employee's disposable earnings in relation to the minimum wage, and various state laws also have more severe restrictions.
T/F: 11. The Fair Labor Standards Act requires that employees be paid at least monthly.
False; The FLSA does not regulate the frequency of wage payments. Each state regulates when employees must be paid.
T/F: 8. The FLSA requires overtime pay for hours worked on Sunday.
False; The FLSA does not require overtime pay for hours worked on Sunday, unless the total hours worked for the workweek exceed 40.
T/F: 11. The FLSA requires employers to pay employees for hours not worked because of illness.
False; The FLSA does not require the employer to pay for hours not worked because of illness.
T/F: 15. Sharon works in Hawaii, where the minimum hourly wage is $10.10. At that time, Sharon must be paid at least the federal minimum hourly wage of $7.25 if she is covered by both the state wage-hour law and the FLSA.
False; The Hawaii state minimum hourly wage is higher than the federal minimum wage, so Sharon must be paid the state minimum hourly wage of $10.10.
T/F: 16. Employers who claim Section 530 status for their workers because a significant segment of their industry classifies similar workers the same way must show that at least 50% of the industry treats these workers as independent contractors.
False; The IRS cannot require an employer to show that more than 25% of its industry treated similarly situated workers as independent contractors.
T/F: 1. The Internal Revenue Code specifically defines the term "fringe benefits."
False; The Internal Revenue Code does not define the term "fringe benefits," although it includes several examples.
T/F: 9. The annual lease method for valuing vehicles includes the value of employer-provided fuel.
False; The annual lease value does not include the value of employer-provided fuel.
T/F: 15. If a monthly depositor has a total tax liability for a quarter of less than $2,500, the employer must pay it with Form 941.
False; The employer has the option to either deposit the amount or pay it with Form 941.
T/F: 10. An employer has accumulated payroll taxes on Form 941 of $42,000 during the 2021 lookback period. The employer is a semiweekly depositor for 2021.
False; The employer is a monthly depositor for 2020 because its total payroll tax liability for the 2020 lookback period is less than $50,000.
T/F: 9. Form 940 is filed each quarter by employers that are subject to FUTA tax.
False; The employer must file Form 940 annually, no later than January 31 following the close of the calendar year.
T/F: 20. If an employee resigns after working for an employer for five years, the employer must retain the employee's Form I-9 for three years after the employee's last day of employment.
False; The employer must retain the employee's Form I-9 for one year after the employee's last day of employment.
T/F: 3. An employer that voluntarily chooses to participate in its state's unemployment insurance program does not receive the normal credit for timely state payments it makes.
False; The employer receives the normal credit for timely payments it makes.
T/F: 5. Employers that use a payroll service provider are relieved of their recordkeeping responsibilities.
False; The employer remains ultimately responsible for the recordkeeping requirements.
T/F: 3. The amount of an employee's wages that is subject to a federal tax levy is the amount remaining after the exempt amount has been subtracted from the employee's "gross pay."
False; The exempt amount is subtracted from the employee's "take-home pay."
T/F: 25. The final stage of team development is norming.
False; The final stage of team development is performing.
T/F: 13. The final test before going live with a new system is called project testing.
False; The final test before going live with a new system is called parallel testing.
T/F: 13. The foreign earned income exclusion is only available to one spouse even if both have foreign earned income.
False; The foreign earned income exclusion is available to each spouse to the extent that each spouse actually has foreign earned income.
T/F: 18. The general rules for depositing withheld federal income, social security, and Medicare taxes do not apply to sick pay.
False; The general rules for depositing withheld federal income, social security, and Medicare taxes do apply to sick pay, although the party liable for depositing the taxes may change.
T/F: 3. Qualified employee discounts may be offered to employees in any line of the employer's business.
False; The goods or services must be offered for sale to customers in the employer's line of business in which the employee normally works.
T/F: 4. The income statement summarizes an organization's revenues, expenses, and earnings for the current year only.
False; The income statement summarizes the organization's revenues, expenses, and earnings for the current and preceding fiscal years.
T/F: 11. The initial step in selecting a new payroll system is to prepare a request for proposal.
False; The initial step in selecting a new payroll system is to put together a project team or task force.
T/F: 22. The payroll expense journal will debit salaries/wages payable and credit an expense account for the labor cost.
False; The payroll expense journal will debit an expense account for the labor costs (salary expense) and credit a liability account (accrued salaries/wages).
T/F: 9. The payroll manager can let each employee decide what responsibility or task or portion of a task he or she will take.
False; The payroll manager must decide which employee will be assigned the responsibility for each task or portion of a task in the department.
T/F: 21. The period for which a terminated employee is eligible to claim benefits is known as the "taxable year."
False; The period for which a terminated employee is eligible to claim benefits is known as the "benefit year."
T/F: 8. The property owned by a business is known as its liabilities.
False; The property owned by a business is known as assets.
T/F: 10. Records required to be kept under the FLSA must be stored at the employer's worksite for inspection.
False; The records required by the FLSA may be stored by the employer either at the work site or at a central location where its records are customarily maintained.
T/F: 8. The backup withholding rate for 2020 is 28%.
False; The required rate for backup withholding in 2020 is 24%.
T/F: 2. U.S. citizens and resident alien employees working outside the U.S. can exclude up to $107,600 of foreign earned income from their gross income in 2021.
False; The total exclusion is up to the first $107,600 of foreign earned income in 2020.
T/F: 2. Full-time life insurance salespersons are always considered statutory employees and are never subject to FUTA tax.
False; Their earnings must consist solely of commissions to be exempt from FUTA tax.
T/F: 10. If 250 or more employees consent to direct deposit, then all employees must comply.
False; There is no minimum number required. Each state has its own regulations and requirements regarding mandatory direct deposit.
T/F: 1. The Fair Labor Standards Act regulates how often employees must be paid by their employer or how soon they must be paid after performing services.
False; These matters are left up to the individual states.
T/F: 23. Death benefits paid to an employee's estate or beneficiary upon the death of the employee are excluded from income up to $5,000.
False; This exclusion was repealed in 1996.
T/F: 7. If a semiweekly period overlaps quarters and you have two paydays—one in each quarter—you can choose which quarter to include the wages for purposes of making payroll tax deposits.
False; This scenario creates 2 separate deposit obligations that must be satisfied by the same day.
T/F: 5. Timely completion of the subtasks won't lead to attainment of the objectives.
False; Timely completion of subtasks will lead to attainment of the objectives.
T/F: 26. To qualify for the travel expense deduction, the employee must be away from home for at least 24 hours.
False; To deduct travel expenses, an employee must be in travel status. The employee must usually be away from home "overnight." Overnight does not literally mean 24 hours. It is a period of time longer than an ordinary work day during which rest or relief from work is required. The deduction may also be available to employees who travel from their residence to a temporary work location and return home on the same day. In addition, the deduction may be available to employees staying overnight near where the employee lives if certain require- ments are met that show the employer benefits from the overnight stay.
T/F: 13. To determine gross earnings, the total overtime earnings are subtracted from the total regular earnings.
False; To determine gross earnings, the total overtime earnings are added to the total regular earnings.
T/F: 11. Training is a cure-all for every performance problem.
False; Training can improve skills and knowledge, not attitude.
T/F: 7. Travel and living expense reimbursements for employees on a temporary foreign assignment must be included in income.
False; Travel and living expense reimbursements for employees on a temporary foreign assignment may be excluded from income as reimbursed employee business travel expenses if they are provided under an accountable plan.
T/F: 9. Employers are required by the FLSA to give rest periods to employees.
False; Under the FLSA, employers are not required to give rest periods to employees. However, rest periods may be required by state law.
T/F: 6. Under the principle of constructive payment, an employee is considered to have been paid wages when they are earned and become payable.
False; Under the principle of constructive payment, an employee is considered to have been paid wages when they are actually or constructively paid, not when they are earned or payable.
T/F: 10. If an employee receives training and still does not improve, disciplinary action is the next step to take.
False; Use a different training method before resorting to discipline.
T/F: 8. Disposable pay is the same as take-home pay.
False; Voluntary deductions are not subtracted from gross pay to determine disposable earnings, which only take into account deductions required by law, but they are subtracted to deter- mine take-home pay.
T/F: 2. Under the principle of constructive payment, an employee is considered to have been paid wages that have been made available to the employee with "substantial limitation or restriction."
False; Wages are considered constructively paid only if they are made available to the employee without "substantial limitation or restriction."
T/F: 17. When receiving undercollected taxes from employees, any overcollection of taxes from one employee may be used to offset an undercollection from another.
False; When recovering undercollections from employees, each employee must be treated separately, so an overcollection of taxes from one employee cannot be used to offset an undercollection from another.
T/F: 24. For the purpose of determining whether the minimum wage has been paid, service charges automatically added to a customer's bill are classified as tips.
False; Where service charges are automatically added to customers' bills and then turned over to the employee, these amounts are not tips and are considered wages when determining whether the minimum wage has been paid.
T/F: 19. For payroll managers, crisis management is probably the least important leadership test they will have.
False; While most payroll managers do not like to think about it, crisis management is one of the most important leadership tests they will have.
T/F: 1. You receive an IRS levy on an employee. You must receive Parts 3 and 4 filled out and signed by the employee before executing the levy.
False; You must use the table for married filing separate with no dependents if the employee does not submit a statement of filing status and dependent
14. What are some of the characteristics of a successful team?
Following are the characteristics that define effective teams and team players: • The team has clear and specific goals and objectives. • Team meetings have a relaxed atmosphere where members can offer help and share experiences. • Each member has a role in reaching the team's goals. • Team members listen without judging and with interest in what others are saying. • There is civilized disagreement among team members, who criticize constructively. • Decisions are reached by a consensus of support, not unanimity, with even disagreeing members pledging to support the final decision. • There is open communication and trust among members. • Each member has a clear assignment. • All members are responsible for the team's success or failure. • The team builds networks with employees outside the team and asks for their feedback. • The team contains a diversity of employee styles—contributors, collaborators, communicators, and challengers. • The team performs a formal or informal self-assessment.
6. What records must be kept under the FLSA for at least two years from their last date of entry?
Following is a list of records that must be kept for at least two years from their last date of entry under the FLSA: • Basic employment and earning records that support the data for each nonexempt employee's hours of work, basis for determining wages, and wages paid (e.g., time or production cards) • Order, shipping, and billing records showing customer orders, shipping and delivery records, and customer billings • Records substantiating additions to or deductions from employees' wages, including purchase orders, operating cost records, wage assignments, and garnishments
8. Name three types of employee compensation that are exempt from FUTA.
Following is a list of several FUTA exempt payments: • Sick or disability pay paid more than six calendar months after the last month the employee worked for an employer • Sickness or injury payments made under a state workers' compensation law or a law in the nature of a workers' compensation law • Payments made under a deferred compensation plan, except elective deferrals to the plan • Noncash payments to an employee for work done outside the employer's trade or business • Qualified moving expense reimbursements (This exclusion has been suspended for tax years 2018 through 2025. The suspension, however, does not apply to certain moves of American military personnel. (see Sections 7.1-2 and 3.3-2)) • Death or disability retirement benefits • Noncash payments to agricultural workers • Reimbursements for, or provision of, deductible dependent care assistance • Value of group-term life insurance coverage • Value of deductible meals and lodging provided by the employer • Wages owed to a deceased employee and paid to a beneficiary after the year of the employee's death • Tips not reported by an employee to an employer (generally if less than $20 a month)
9. Name three types of employment that are exempt from FUTA.
Following is a list of several types of employment that are exempt from FUTA: • Work on a foreign ship outside the U.S. • Work done by students for the school where they attend classes or for an organized camp • Work performed as student nurses or hospital interns • Life insurance agents who receive only commissions • Newspaper deliverers under age 18 who deliver directly to customers • Certain nonimmigrant aliens working under F, J, M or Q visas • Work performed for a spouse or child • Work performed by a child under age 21 for his or her parents • Work performed by an inmate of a penal institution • Work performed by an election worker who is paid less than $1,800 in 2019 • Work performed by alien agricultural workers under an H-2A visa • Work performed by statutory nonemployees
5. Under the FLSA, name four types of employment data records that must be kept for each covered employee for at least three years after the last date of entry.
Following is a list of the records that must be kept for three years after the last date of entry for each covered employee under the FLSA: • Name, as it appears on the employee's social security card • Home address, including apartment number, if any, and Zip code • Date of birth, if under age 19 • Sex and occupation (for use in determining Equal Pay Act compliance) • The beginning of the employee's workweek (time and day) • Regular rate of pay for overtime weeks, the basis for determining the rate, and any payments excluded from the regular rate • Hours worked each workday and workweek • Straight-time earnings (including straight-time pay for overtime hours) • Overtime premium earnings • Additions to and deductions from wages for each pay period • Total wages paid for each pay period • Date of payment and the pay period covered
5. What types of income constitute "foreign earned income"?
Foreign earned income is income earned by an employee from sources within a foreign country while that employee has a foreign tax home and qualifies for the foreign earned income exclusion under the bona fide residence or physical presence test. Earned income includes all compensation, such as wages, salaries, com- missions, bonuses, tax reimbursements, cost of living allowances, educational reimbursements, professional fees, etc., paid for personal services rendered, including noncash payments.
7. What is Form I-9 used for?
Form I-9 is used to verify that an individual has the legal right to work in the US. The Immigration Reform and Control Act of 1986 makes it illegal for an employee to hire an unauthorized worker.
7. What are the four communication skills the manager must possess in directing employees?
Four communication skills managers must possess when directing employees are: • Listening • Providing feedback • Coaching • Leading
12. What are four environmental concerns (i.e., physical plant issues) commonly addressed in protecting system hardware?
Four environmental concerns that need to be addressed regarding new system hardware are: • Need for climate controlled rooms • Power surges or spikes • Dirt • Humidity
9. Employee Don is paid $2,600 on the 15th and last day of each month. His regular deductions include: Federal income tax: $325.00 State income tax: 112.50 Social security tax: 159.34 Medicare tax: 37.27 Child support: 100.00 Tax levy: 50.00 Life insurance premium: 30.00 United Way contribution: 25.00 Health insurance (pre-tax): 30.00 Savings: 50.00 On February 1, 2021, Don's employer receives a creditor garnishment order requiring $500 to be withheld. Calculate the maximum amount of Don's disposable earnings that can be withheld for this garnishment under federal law. $_____________________
Gross pay: $2,600.00 Federal income tax: - 325.00 State income tax: - 112.50 Social security tax ($2,570 x 6.2%): - 159.34 Medicare tax ($2,570 x 1.45%): - 37.27 Disposable pay: $1,965.89 The lesser of: $1,965.89 x 25% = $491.47 or $1,965.89 - $471.25 = $1,494.64 Therefore, the maximum amount of Don's disposable earnings that can be garnished is $491.47. However, since $150 of Don's disposable earnings are already subject to a child support withholding order and a federal tax levy, only $341.47 is subject to garnishment ($491.47 - $150).
10. Carol Conway is paid $900 in wages every Friday in 2020. Carol's 2017 Form W-4 claims single and 1 withholding allowance. She contributes 6% before taxes to a §401(k) plan, and $10 per week in pre-tax deductions to a qualified cafeteria plan. Using the percentage method, Publication 15-T, Worksheet 1, the federal income tax withheld is $77.83. The social security rate is 6.2%, the Medicare rate is 1.45%, and there are no state taxes. Calculate Carol's net pay for the week.
Gross wages=$900.00 Cafeteria plan=- 10.00 §401(k) plan ($900 x 6%)=- 54.00 FITW=- 77.83 Soc. Sec. [($900 - $10) x 6.2%]=- 55.18 Medicare [($900 - $10) x 1.45%]=- 12.91 Net pay: $690.08
9. Margie's annual salary is $23,400, and she is paid every Friday. Margie is a nonexempt employee who normally works 40 hours per workweek. In one workweek, Margie worked 48 hours. Calculate her total earnings for the workweek.
Hours worked in a year: 52 weeks x 40 hours = 2,080 Regular rate of pay: $23,400 ÷ 2,080 = $11.25 Regular pay: $11.25 x 48 hours = $540.00 Overtime hours: 48 - 40 = 8 Overtime premium rate: $11.25 x .5 = $5.63 Overtime premium pay: $5.63 x 8 = $45.04 Total earnings: $540.00 + $45.04 = $585.04
5. Payroll expenses may be recorded in one of two ways, functionally or by type of pay. Explain.
If payroll expenses are recorded functionally, entries must be based on the processes supported by the expenses (e.g., manufacturing, sales, administration). This means that the payroll would have to be dis- tributed into different labor distribution expense accounts and a separate Labor Distribution Subsidiary Ledger would have to be kept. Recording payroll expenses by type of pay can be done where the payroll register breaks down employees' wages into regular and overtime pay.
7. What additional records must be kept under the FLSA by employers of hospital employees?
In addition to other required records, hospitals and residential care facilities whose employees have a work period of 14 consecutive days (rather than 7 for other employees) must keep records of the time and day on which the 14-day period begins, hours worked each day and each 14-day period, and straight-time and overtime premium earnings paid in each 14-day period. They also must keep a copy of the written agree- ment between the hospital and the employee allowing use of the 14-day work period or a memorandum summarizing its terms if the agreement is oral.
4. List the five questions the payroll manager must answer when developing a job description.
In developing a job description, the payroll manager must answer the five following questions: • What are the educational requirements needed to perform the job? • What knowledge/skills must the applicant have before being offered the job? • What training opportunities can be offered to the new employee? • What is the level of supervision required on the job? • How much communication and interaction with other employees will be necessary?
3. What is the chart of accounts?
In most companies, a "chart of accounts" lists each account by name and number, with the number being used to identify accounts in an automated system.
7. What conditions must be satisfied for an employee to claim exempt from withholding?
In order to be exempt from withholding, the employee must certify that all of the following are true: • The employee had a right to a refund of all federal income tax withheld in the prior year because the employee had no tax liability. • The employee expects to have no tax liability in the current year. • The employee cannot be claimed as a dependent on someone else's income tax return if the employee will have more than $1,100 in income (including at least $350 in nonwage income) in 2020.
9. Who is a control employee for purposes of using the commuting method of valuation of personal use of a company car?
In the private sector, a control employee is an employee who: • Is a corporate officer earning at least $115,000 in 2020 (indexed annually) • Is a director • Earns at least $230,000 in 2020 (indexed annually) or • Is a 1% owner In the public sector, a control employee is an employee who: • Is an elected official or • Earns more than a federal employee at Executive Level V ($160,100) in 2020
5. What is the 100% penalty?
Individuals who are responsible for collecting, accounting for, and paying over withheld income and employment taxes and who willfully fail to do so are subject to an additional penalty equal to the total amount of the taxes owed. This is known as the "Trust Fund Recovery Penalty" or the "100% penalty."
11. In terms of third-party sick pay, what information should the employer provide the third party to aid the third party in properly meeting its withholding, depositing, and reporting responsibilities?
Information an employer should provide a third-party payer of sick pay includes: • The total wages paid by the employer to the employee during the calendar year before the third party begins making payments (helps determine whether the social security and FUTA wage bases have been met) • The last month in which the employee worked for the employer (helps determine how long the third party is responsible for social security and Medicare taxes) • Employee contributions made to the cost of the insurance after taxes have been withheld (helps deter- mine how much of each disability payment is taxable)
5. What types of questions work best in an interview?
Interview questions should be open-ended and force applicants to explain past behavior rather than ques- tions that call for one word answers.
1. In Box 12 of Form W-2, match the following codes with the item to which they relate. Code A, B, C, D, E, F, G, H, J, K, L, M, N, Q, R, S, T, V, W, Y, Z, AA, BB, DD, EE, FF, GG, HH _____ Sick pay not included as income _____ Value of group-term life insurance over $50,000 _____ Section 403(b) elective deferrals _____ Designated Roth contributions to a governmental 457(b) plan _____ Nontaxable combat pay _____ Section 401(k) elective deferrals _____ Permitted benefits under a qualified small employer health reimbursement arrangement _____ Section 457(b) elective deferrals _____ Health savings account contributions _____ Adoption benefits _____ Designated Roth contributions to a Section 401(k) plan _____ Section 408(k)(6) elective deferrals _____ Section 501(c)(18)(D) elective deferrals _____ Income from qualified equity grants under section 83(i) _____ Value of employer-provided health coverage _____ Deferrals under a Section 409A nonqualified deferred compensation plan _____ Uncollected Medicare tax on tips _____ Medical savings account contributions _____ Uncollected social security tax on tips _____ Nonstatutory stock options _____ Designated Roth contributions to a Section 403(b) plan _____ Nontaxable part of employee business expense reimbursements _____ Tax on excess golden parachute payments _____ Aggregate deferrals under section 83(i) elections _____ Income under Section 409A on a nonqualified deferred compensation plan _____ Uncollected social security tax on value of group-term life insurance coverage over $50,000 _____ Uncollected Medicare tax on value of group-term life insurance coverage over $50,000 _____ SIMPLE retirement account contributions
J Sick pay not included as income C Value of group-term life insurance over $50,000 E Section 403(b) elective deferrals EE Designated Roth contributions to a governmental 457(b) plan Q Nontaxable combat pay D Section 401(k) elective deferrals FF Permitted benefits under a qualified small employer health reimbursement arrangement G Section 457(b) elective deferrals W Health savings account contributions T Adoption benefits AA Designated Roth contributions to a Section 401(k) plan F Section 408(k)(6) elective deferrals H Section 501(c)(18)(D) elective deferrals GG Income from qualified equity grants under section 83(i) DD Value of employer-provided health coverage Y Deferrals under a Section 409A nonqualified deferred compensation plan B Uncollected Medicare tax on tips R Medical savings account contributions A Uncollected social security tax on tips V Nonstatutory stock options BB Designated Roth contributions to a Section 403(b) plan L Nontaxable part of employee business expense reimbursements K Tax on excess golden parachute payments HH Aggregate deferrals under section 83(i) elections Z Income under Section 409A on a nonqualified deferred compensation plan M Uncollected social security tax on value of group-term life insurance coverage over $50,000 N Uncollected Medicare tax on value of group-term life insurance coverage over $50,000 S SIMPLE retirement account contributions
2. John Frazier's gross pay is $1,000 per week. On August 1, 2021, his employer receives a Form 668-W stating that a tax levy was being issued against John's wages for $8,000. John claims single with 1 dependent on Part 3 of the form. As of August 1, John had the following deductions: Federal income tax: $110.00 State income tax: 30.00 Social security tax: 62.00 Medicare tax: 14.50 §401(k) plan: 40.00 Total $256.50 How much of John's wages per pay period are subject to the tax levy? $_____________________
John's take-home pay:, $743.50 ($1,00.00 - $256.50) Exempt amount: -324.04 (Taken from 2021 table) Amount subject to levy: $419.46
10. Ken's Bike Shop began operating on March 5, 2021 and files Forms 941 for the remainder of 2021. What is Ken's Form 941 lookback period for 2022?
March 5, 2020 through June 30, 2020.
11. Employer Mark starts business on July 6, 2021. As a new employer, Mark is classified as a monthly depositor. On Friday, July 9, Mark pays wages and accumulates a tax liability of $55,000. On Friday, July 16, Mark again accumulates taxes of $55,000 after his second payday. How much is Mark's deposit obligation? When must it be paid?
Mark's deposit obligation as of July 17 is $110,000. It must be deposited by the close of the next business day (Monday, July 20). Mark becomes a semiweekly depositor for the rest of 2020 and all of 2021.
3. Matthew Winters is married and files jointly, claiming 4 dependents on Part 3 of Form 668-W for a tax levy being issued against his semimonthly wages of $2,500. Matthew's employer receives the notice on September 14, 2021. Prior to this period, Matthew's deductions for each pay period consisted of: Federal income tax: $200.00 State income tax: 100.80 Social security tax: 148.80 Medicare tax: 34.80 §401(k) plan: 80.00 Health ins. (pre-tax) 100.00 Total $664.40 What amount of Matthew's wages per pay period is subject to the tax levy? $_____________________
Matthew's take-home pay: $1,835.60 ($2,500.00 - $664.40) Exempt amount: -1,762.51 (Taken from 2021 table) Amount subject to levy: $73.09
14. What restrictions does the FLSA place on employers regarding the employment of minors under 18?
No minors under age 18 can work in a job that has been declared hazardous by the Wage and Hour Division. Some minors age 16 and 17 are exempt from these restrictions under student learner or appren- ticeship programs, under an exception for loading paper balers and compactors, or under an exception for 17-year-olds who work with wood products under the supervision of a parent and meet several other requirements.
9. How is achievement a motivator for some employees?
Often the best performers are driven by a personal need to succeed and be the best rather than by money or other incentives.
18. What steps must be taken to conduct a successful meeting, once the type of meeting has been determined?
Once the type of meeting has been determined, the manager leading the meeting should take the follow- ing steps: • Prepare an agenda • Keep the meeting on track • Promote participation • Keep written records
8. During cutbacks or reductions in force (RIFs), employers sometimes provide outplacement services for employees who will be terminated. Under what circumstances is the value of these services not taxable income to the employee?
Outplacement services are not included in employees' income under the following circumstances: • The employer derives a substantial business benefit from providing the outplacement services other than providing the compensation (e.g., a positive corporate image, an attractive benefit that encourages new hires). • The employees do not have the choice of accepting cash rather than the outplacement services (e.g., a higher severance payment if the services are refused). • The employees would be able to deduct the cost of the outplacement services as a business expense on their personal tax returns.
12. What is backup withholding?
Payers must generally withhold 24% of reportable nonpayroll payments during 2020 if payees fail to fur- nish payers with their taxpayer identification number or the IRS notifies them to withhold. This withhold- ing is referred to as backup withholding.
2. Tom uses a company car 70% for business purposes each month of 2020. The car has a fair market value of $45,000. Tom drives the car 12,000 miles during 2020. Calculate the value of the personal use of the vehicle using the cents-per-mile method.
Personal use: 100% - 70% = 30% Personal mileage: 12,000 miles x .30 = 3,600 miles Taxable amount: (3,600 miles x $0.575) = $2,070.00
10. List four rewards you can give employees who have demonstrated the potential for leadership.
Possible rewards for employees who have demonstrated leadership potential include: • Public recognition • Promotion to supervisory positions • Leadership roles (projects, teams or tasks) • Taking them into your confidence (seeking their input)
4. Explain the process of prenotification under the Automated Clearing House system.
Prenotification involves sending zero dollar amounts through the ACH network as a test before the first actual direct deposit for an employee. If such a "prenote" is used (it is an optional procedure), it must be sent at least 3 business days before any actual pay is sent through the network. This is a test of the accuracy of the information in the authorization agreement.
4. List three major reasons why payroll, human resources, and benefits would benefit from an integrated system.
Reasons why an integrated payroll, human resources, and benefits system would benefit a company include: • Streamlining functions that make up the highest percentage of cost in most organizations • Storing complete data in a single separate database, which means that the information needed to make intelligent business decisions is readily available, • Significant improvements in existing systems are often impossible, because most of their time and energy is spent supporting necessary interfaces among the existing systems' databases
5. George, a nonexempt employee, received a production bonus of $38 for a workweek in addition to his regular hourly rate of $10. George worked 44 hours during the workweek. Calculate his total earnings for the workweek.
Regular hourly pay: $10.00 x 44 hours = $440.00 Total regular pay: $440 + $38.00 = $478.00 Regular rate of pay: $478 ÷ 44 hours = $10.86 Overtime hours: 44 - 40 = 4 Overtime premium rate: $10.86 x .5 = $5.43 Overtime premium pay: $5.43 x 4 = $21.72 Total earnings: $478.00 + $21.72 = $499.72
6. Barry earns $7.50 per hour for a regular 40-hour week in 2021. Last week Barry worked 48 hours. His regular deductions include: Federal income tax: $24.00 State income tax: 4.80 Social security tax: 24.18 Medicare tax: 5.66 Child support: 25.00 What is Barry's disposable pay? $____________________
Regular pay ($7.50 x 48): $360.00 Overtime premium: +30.00 Gross pay: 390.00 Federal income tax: - 24.00 State income tax: - 4.80 Social security tax ($390 x 6.2%): - 24.18 Medicare tax ($390 x 1.45%): - 5.66 Disposable earnings: $331.36
3. Bob, a nonexempt employee, receives an hourly wage of $12 for a 35-hour workweek. In one week, in addition to his regular hours he worked 7 hours on Saturday. Calculate his total earnings for the workweek.
Regular pay: $12 x 42 hours = $504.00 Overtime hours: 42 - 40 = 2 Overtime premium rate: $12.00 x .5 = $6.00 Overtime premium pay: $6.00 x 2 = $12.00 Total earnings: $504.00 + $12.00 = $516.00
2. Joe, a nonexempt employee, receives an hourly wage of $9 for a 40-hour workweek. During one workweek he worked 47 hours. Calculate his total earnings for the workweek.
Regular pay: $9.00 x 47 hours = $423.00 Overtime hours: 47 - 40 = 7 Overtime premium rate: $9.00 x .5 = $4.50 Overtime premium pay: $4.50 x 7 = $31.50 Total earnings: $423.00 + $31.50 = $454.50
6. Susan, a nonexempt employee, received a Christmas bonus of $100 from her employer that does not have to be included in her regular rate of pay for the week in which it is received. During that week, Susan worked 48 hours and her hourly rate of pay was $9.50. Calculate her total earnings for the workweek.
Regular pay: $9.50 x 48 hours = $456.00 Overtime hours: 48 - 40 = 8 Overtime premium rate: $9.50 x .5 = $4.75 Overtime premium pay: $4.75 x 8 = $38.00 Discretionary bonus: $100.00 Total earnings: $456.00 + $38.00 + $100.00 = $594.00
4. Teri is a nonexempt employee whose normal hourly rate is $10, but she receives a $1 per hour shift differential for working the midnight to 8 a.m. shift. During one workweek she works 45 hours on the late shift. Calculate her total earnings for the workweek.
Regular pay: ($10 + $1) x 45 hours = $495 Overtime hours: 45 - 40 = 5 Overtime premium rate: $11.00 x .5 = $5.50 Overtime premium pay: $5.50 x 5 = $27.50 Total earnings: $495.00 + $27.50 = $522.50
7. Eric, a nonexempt employee, is paid a shift differential for working different shifts. For 3 days during the workweek he works 8 hours a day for $10 an hour. On 2 other days, he works 10 hours a day for $12 an hour. Calculate Eric's total earnings for the workweek.
Regular pay: ($10.00 x 24 hours) + ($12.00 x 20 hours) = $240.00 + $240.00 = $480.00 Regular rate of pay: $480.00 ÷ 44 hours = $10.91 Overtime hours: 44 - 40 = 4 Overtime premium rate: $10.91 x .5 = $5.46 Overtime premium pay: $5.46 x 4 = $21.84 Total earnings: $480.00 + $21.84 = $501.84
15. Debbie agreed with her employer prior to the performance of any work that she would be paid 1.5 times the regular piece rate for any work produced during overtime hours. Debbie is paid $0.30 for each unit she produces. In one workweek, she produced 1,560 units in the first 40 hours and 212 in the next 4 hours. Calculate her total earnings for the workweek.
Regular piecework earnings: $0.30 x 1,560 units = $468.00 Overtime piece rate: $0.30 x 1.5 = $0.45 Overtime earnings: $0.45 x 212 = $95.40 Total earnings: $468.00 + $95.40 = $563.40
13. John, a production worker, is paid $0.50 per unit under a piece-rate system. During one workweek, John produced 840 units in 46 hours. Calculate his total earnings for the workweek.
Regular piecework earnings: $0.50 x 840 units = $420.00 Regular rate of pay: $420.00 ÷ 46 hours = $9.13 Overtime hours: 46 - 40 = 6 Overtime premium rate: $9.13 x .5 = $4.57 Overtime premium pay: $4.57 x 6 = $27.42 Total earnings: $420.00 + $27.42 = $447.42
14. Mark works under the piece-rate system and receives $2 for each component he produces. He also receives a bonus of $0.50 for each component over 300 in a workweek. In one workweek, Mark produced 326 components in 43 hours. Calculate his total earnings for the workweek.
Regular piecework earnings: $2.00 x 326 units = $652.00 Production bonus: $0.50 x 26 units = $13.00 Total piecework earnings plus bonus: $652.00 + $13.00 = $665.00 Regular rate of pay: $665.00 ÷ 43 hours = $15.47 Overtime hours: 43 - 40 = 3 Overtime premium rate: $15.47 x .5 = $7.74 Overtime premium pay: $7.74 x 3 = $23.22 Total earnings: $652.00 + $13.00 + $23.22 = $688.22
8. Joe, a nonexempt employee, is paid a salary of $520 a week for a workweek consisting of 40 hours. Overtime is paid at 1.5 times the regular rate of pay. Last week Joe worked 49 hours. Calculate his total earnings for the week.
Regular rate of pay: $520.00 ÷ 40 hours = $13.00 Regular pay: $13.00 x 49 hours = $637.00 Overtime hours: 49 - 40 = 9 Overtime premium rate: $13.00 x .5 = $6.50 Overtime premium pay: $6.50 x 9 = $58.50 Total earnings: $637.00 + $58.50 = $695.50
15. What is Schedule B (Form 941) used for?
Schedule B records an employer's payroll tax liability, not its deposits. Semiweekly depositors at any time during a quarter must file a Schedule B with Form 941.
16. Other than IRS regulations, what other sources of guidance are available for the interpretation of tax laws?
Some of the forms of guidance in interpreting tax laws, other than IRS regulations, include: • Revenue Procedures • Revenue Rulings • Private Letter Rulings • Publications • Announcements, Notices, and News Releases • Field Service Advice, Service Center Advice, Internal Legal Memoranda
3. What laws cover unclaimed paychecks, and what is generally required of the employer?
State escheat laws govern the treatment of unclaimed paychecks. Under these laws, employers are generally required to: • Try to locate and contact the employee • File an annual report with the state where the employee resides that includes the employee's name, last known address, amount of the check, and the related payday • Hold the checks for a certain length of time before turning them over to the state as abandoned property
1. What laws govern how often an employer must pay its employees?
State laws govern how often employers must pay employees.
3. Bill was born on March 17, 1981 and earns $75,000 per year. His company provides group-term life insurance coverage at two times each employee's annual salary. Calculate the monthly taxable value of Bill's group-term life insurance coverage for 2020.
Step 1: 2 x $75,000 = $150,000 Step 2: $150,000 - $50,000 = $100,000 Step 3: $100,000 ÷ $1,000 = 100 Step 4: Bill is 39 years old as of 12-31-20 Step 5: $0.09 x 100 = $9.00 monthly taxable coverage
4. Assume the same facts as in Problem No. 3, except that Bill's salary increases by $3,000 on May 1, 2020, and at the same time he begins contributing $5 per month in after-tax dollars toward the insurance coverage. Recalculate the monthly taxable value of Bill's group-term life insurance coverage for May-December 2020.
Step 1: 2 x $78,000 = $156,000 Step 2: $156,000 - $50,000 = $106,000 Step 3: $106,000 ÷ $1,000 = 106 Step 4: Bill is 39 years old as of 12-31-20 Step 5: $0.09 x 106 = $9.54 monthly taxable coverage Step 6: $9.54 - $5.00 = $4.54 monthly taxable coverage for May - December
1. David, a nonexempt hospital employee, has agreed with the hospital to work on a 14-day work period basis, and his regular rate of pay is $10 an hour. David works 5 days at 9 hours each and 4 days at 10 hours each during the 14-day period. Calculate his gross pay for the period.
Step 1: Calculate total earnings due if overtime pay is required for hours worked over 8 in a day. Regular pay: $10 x 85 hours = $850 Overtime hours: [5 x (9 - 8)] + [4 x (10 - 8)] = 13 Overtime premium rate: $10 x .5 = $5 Overtime premium pay: $5 x 13 hours = $65 Total earnings: $850 + $65 = $915 Step 2: Calculate total earnings due if overtime pay is required for hours worked over 80 in the 14-day work period. Regular pay: $10 x 85 hours = $850 Overtime hours: 85 - 80 = 5 Overtime premium rate: $10 x .5 = $5 Overtime premium pay: $5 x 5 hours = $25 Total earnings: $850 + $25 = $875 Step 3: David must be paid the higher of the result in Step 1 or 2 — $915.
2. What are subsidiary ledgers?
Subsidiary ledgers are used for a single type of account and are subordinate to the general ledger. For example, entries documenting payroll expenses and liabilities may be contained in a subsidiary ledger known as the Payroll Register. Other subsidiary ledgers that contain entries for several accounts might include Accounts Payable, Accounts Receivable, and Fixed Assets.
1. In situational leadership, the way managers handle their staff depends on the way they deal with what two factors?
Tasks and relationships.
9. What are tax protection plans?
Tax protection plans attempt to guarantee that the employee will be reimbursed by the employer to the extent that the employee's combined income and social security taxes in the U.S. and the foreign country exceed the amount the employee would have paid if living and working in the U.S.
6. When an employee travels on business for his or her employer and receives an advance to pay business-related expenses, what are the general rules for determining when the advance is taxable to the employee and when is it not?
Taxable: When the employer has a nonaccountable plan because it does not require the employee to sub- stantiate business travel expenses and to return any amount not spent by the employee on business within a reasonable period of time. Nontaxable: When the employer has an accountable plan and the employee is required to substantiate business travel expenses and refund the balance of the advance not used within a reasonable period of time.
4. Compare a temporary help agency employee and a leased employee.
Temporary workers are hired, screened and trained by the temporary help agency to provide services for clients. They are employees of the Temporary Help agency, which sets their wages and has the sole right to hire and fire. Agency is also responsible for all payroll taxes. Leased Employees are hired, trained, and qualified by a leasing company, which provides workers for a client company. The client pays a fee to the leasing company to cover the cost of payroll, benefits, etc. Responsibility for payroll taxes depends on the degree of control exercised by the client over the employee's work and which entity has control over the payment of their wages.
7. What are some of the benefits for employers in paying employees with electronic paycards?
The benefits for employers in paying employees with electronic paycards include: • Reduced costs for manual checks, lost and stolen checks, stop payment orders, fraudulent cashing of duplicate checks, paycheck production and handling, and bank reconciliation fees • Enhanced efficiency by eliminating paper paychecks • All employees are eligible for electronic funds transfer • Increased employee productivity as less time is spent cashing paychecks • Reduction of escheat issues
4. Why is the date of actual or constructive payment of wages important?
The date of actual or constructive payment is important because it determines when wages are taxed and reported and at what rates.
13.What information must be reported by an employer for each new hire under the federal new hire reporting requirement?
The employer must report each new hire's name, address, social security number, and first day of work for which compensation is paid, as well as the employer's name, address, and federal employer identification number.
8. Under what circumstances must an employer submit Forms W-4 to the IRS?
The employer must submit Form W-4 to the IRS in the following situations: • The IRS directs the employer to do so in a written notice to the employer. • The IRS directs the employer to do so in published guidance, such as a revenue procedure.
9. What factors do the courts and the Department of Labor consider when making an employment status determination under the FLSA?
The factors courts and the DOL consider when making an employment status determination under the FLSA include: • Whether the work performed is an integral part of the employer's business operation • Whether the worker has the chance to make a profit or risks a loss based on his or her managerial skills • Whether the worker invests in tools or materials required to perform the work and the extent of the worker's investment in relation to the employer's • Whether the work requires special skills or initiatives • How permanent the working relationship is • The degree of control exercised or retained by the employer
1. List the factors used under the common law test in determining whether a business has the right to control the financial aspects of a worker's activities.
The factors used by the IRS in determining whether an employer has the right to direct or control the financial aspects of a worker's activities (i.e., whether the worker can suffer a profit or loss) include: • Whether the worker has made a significant financial investment in performing the work • Whether the worker has business expenses that are unreimbursed • Whether the worker makes his or her services available to the general market • Whether the worker is paid on a regularly recurring basis or by the job
2. What are the four categories of statutory employees?
The factors used by the IRS in determining whether an employer has the right to direct or control the financial aspects of a worker's activities (i.e., whether the worker can suffer a profit or loss) include: • Whether the worker has made a significant financial investment in performing the work • Whether the worker has business expenses that are unreimbursed • Whether the worker makes his or her services available to the general market • Whether the worker is paid on a regularly recurring basis or by the job
1. What are five areas regulated by the Fair Labor Standards Act?
The five major areas regulated by the Fair Labor Standards Act are: • Minimum wage • Overtime • Child labor • Equal pay • Recordkeeping
12. Outline the penalties for failing to make payroll tax deposits on time.
The following are the penalties for not making payroll tax deposits on time: • 2% of the undeposited amount if it is deposited within 5 days of the due date • 5% of the undeposited amount if it is deposited within 6-15 days of the due date • 10% of the undeposited amount if it is deposited more than 15 days after the due date • 15% of the undeposited amount if it is not paid within 10 days after the employer receives its first IRS delinquency notice or on the same day that a notice and demand for payment is received
9. What are the steps involved in establishing an electronic funds transfer?
The following are the steps involved in establishing an electronic funds transfer: • The employee must give authorization for direct deposit by designating the financial institution(s) to which the employee's pay will be transferred, the type of account to which the pay will be transferred, the number of the account, and the financial institution's routing number. • The employer prepares an automated file of direct deposit records which is sent to a financial insti- tution with the ability to process the file, known as the Originating Depository Financial Institution (ODFI). • The ODFI processes the file through the Automated Clearing House (ACH) operator. • The ACH operator processes electronic payments between the ODFI and the financial institutions designated by the employees to receive the payments and coordinates the financial settlement between the participating financial institutions. • The Receiving Depository Financial Institutions (RDFI) designated by the employees accept the elec- tronic payments and post them to their customers' (the employees') accounts. • On payday, the employees receive an information statement containing the same data that would have been shown on the pay stub, had the employee been paid by check.
7. The "white collar" exemption from the minimum wage and overtime provisions of the FLSA is made up of what categories of employees?
The following categories of employees make up the "white collar" exemption under the FLSA: • Administrative • Executive • Professional • Computer-related professional • Outside sales
12. What conditions must be met for an employer to take advantage of the tip credit?
The following conditions must be met for an employer to apply the tip credit to the minimum wage: • The employee must be a "tipped employee," which is an employee working in an occupation in which he or she regularly receives at least $30 per month in tips. • The employee must receive at least as much in tips as the credit taken by the employer. • The employee must be informed about the tip credit provisions of the law before the credit is taken. • All tips received by the employee must be kept by the employee, although tip pooling may be required among employees who are customarily and regularly tipped. • Credit card tips must be given to the employee by the next payday.
1. What conditions must be satisfied for the employer to use the vehicle cents-per-mile method in determining the fair market value of the personal use of a company-provided vehicle?
The following conditions must be met for an employer to use the vehicle cents-per-mile method of valuing an employee's personal use of an employer-provided car. • The employer must expect the employee to regularly use the vehicle while conducting the employ- er's business, or the vehicle must actually be driven at least 10,000 miles and be used primarily by employees. • The fair market value of the vehicle cannot exceed $50,400 for cars placed in service in 2020. • If the employee pays for fuel, the mileage rate is reduced by $.055 per mile.
7. What categories of employers are not subject to FUTA tax?
The following employers are not subject to FUTA tax: • Federal, state, and local government employers, including their political subdivisions • Indian tribes • Nonprofit religious, charitable, or educational organizations that are tax-exempt
11. What factors determine an employee's domicile?
The following factors generally indicate an employee's domicile: • Where the employee votes • Where the employee maintains a residence • Where the employee's immediate family lives and where children attend school • Whether the employee owns a new abode or has a short-term lease • Where the employee returns after vacations or other leaves from work • The state issuing the employee's driver's license • Where bank accounts and business associations are maintained
2. Who can sign the employer's Form 940?
The following individuals can sign an employer's Form 940: • The individual owning the business, if it is a sole proprietorship • The president, vice president, or other principal corporate officer authorized to act, if the employer is a corporation (including a limited liability company treated as a corporation) • An authorized member, partner, or officer of an unincorporated association or partnership (including a limited liability company treated as a partnership) having knowledge of the organization's affairs • The owner or principal officer authorized to act, if it is a single member limited liability company treated as a disregarded entity • A fiduciary if the employer is a trust or estate
14. What standards (required by all the states) must be met by claimants to become and remain eligible for benefits?
The following standards must be met for employees to be eligible for unemployment benefits: • Earning a certain amount of wages in the "base period" • Being involuntarily unemployed for reasons other than misconduct connected with their work • Filing a claim for benefits • Registering for work with the state employment security office • Being physically and mentally able to work • Be looking for and available for work (other than during time spent on job training or jury duty) • Not being unemployed because of a labor dispute other than a lockout • Being truthful in applying for benefits
13. What are the four combinations of time categories which tell a manager what his or her priorities should be?
The four combinations of time categories are: • Urgent and important—crisis management, immediate attention needed • Not urgent but important—planning and prevention activities • Urgent but not important—pressing activities that may be easy to accomplish • Not urgent and not important—easily accomplished, time-wasting activities
6. What are the four factors that employers can use in determining which state an employee who is working in two or more states should be "allocated" to for unemployment insurance purposes?
The four factors used by employers in allocating employees who work in more than one state for purposes of unemployment insurance are: • Are services "localized?" • Does the employee have a "base of operations?" • Is there a "place of direction or control?" • What is the employee's "state of residence?"
11. What are the four methods that states use to determine an employer's experience rate?
The four methods used to determine an employer's unemployment insurance experience rating are: • Reserve ratio • Benefit ratio • Benefit-wage ratio • Payroll stabilization
2. What are the fundamental skills that must be mastered in most managerial positions?
The fundamental skills that most managers must master to be successful include: • Strategic planning/organizing • Staffing • Giving directions • Controlling progress • Reporting to upper management
20. What are the penalties for failure to file information returns for 2021 on time and with correct information?
The general penalties for failure to file information returns for tax year 2020 on time and with correct information are as follows: • $50 per return if the failure to file or provide correct information is corrected within 30 days after the due date, with a maximum penalty of $565,000 a year ($197,500 for small businesses) • $110 per return if the failure to file or provide correct information is corrected more than 30 days after the due date but before August 1 of the same year the return is due, with a maximum penalty of $1,696,000 a year ($565,000 for small businesses) • $280 per return if the failure to file or provide correct information is not corrected by August 1, with a maximum penalty of $3,392,000 ($1,130,500 for small businesses)
16. What is the purpose of the journal?
The journal is used to list all the necessary information about a transaction in one place. The journal is the first accounting record of business transactions and is therefore referred to as a record of original entry.
7. What is the amount that will be garnished from an employee's pay to satisfy a delinquent federal agency loan?
The lesser of the amount stated on the garnishment order up to 15% of an employee's disposable earn- ings or the excess of the employee's disposable earnings over 30 times the federal minimum wage may be garnished to satisfy a delinquent federal agency loan unless the employee consents in writing to a higher amount.
8. Employee Jane's disposable earnings for the week are $320. Her employer receives a creditor garnishment order requiring that $250 be withheld on February 1, 2021. What is the amount of Jane's disposable earnings that can be garnished under federal law? $_____________________
The lesser of: $320.00 x 25% = $80.00 or $320.00 - $217.50 = $102.50 Therefore, the maximum amount of Jane's disposable earnings that can be garnished is $80.00.
12. What is the main disadvantage of storing payroll and employment records on micromedia?
The main problem is one of quality control—the camera may not photograph 100% of every document, the image may be partially unreadable, and verification of the image after it develops can be a time-consuming process.
6. What are some of the problems that may arise when periodic pay is reduced as a result of an extra payday caused by the calendar?
The main problem is whether to recompute weekly or biweekly paychecks for exempt salaried employees who are earning a certain amount annually. Employers are free to reduce exempt salaried employees' pay when faced with an extra payday, so long as there is no contract guaranteeing a certain amount of pay each weekly or biweekly pay period and the employee's pay is not reduced below the minimum required by state or federal law. Employers may also face a hostile reaction from salaried employees whose pay is reduced in this manner.
5. A plan similar to the fluctuating workweek plan was approved by the U.S. Supreme Court and later made part of the FLSA and its regulations. What is this plan called, and what does it provide?
The plan is called the "Belo" plan, named after the company involved in the Supreme Court's decision, and the plan guarantees a fixed salary for irregular hours that includes a set amount of overtime pay.
9. What is the goal of the IRS in establishing procedures for employer records processed by computers?
The procedures are generally aimed at achieving one goal—making it easy for the IRS to determine the employer's correct tax liability.
11. What is the purpose of an external audit?
The purposes of an external audit include: • To determine the accuracy of financial statements • To depict the company's financial condition and determine whether the notes to financial statements accurately summarize the company's accounting policies and procedures • To guard against any possible conflict of interest • To safeguard the company's assets • To provide an objective opinion as to the fairness of the financial statements
5. What are three examples of changes in status that allow a cafeteria plan to permit an employee to change a cafeteria plan benefit election during the plan year?
The status changes that allow a cafeteria plan to permit an employee to change a cafeteria plan benefit elec- tion during the year are: • Marital status changes - marriage (including same-sex marriage), divorce, death of spouse, legal sepa- ration, or annulment • Changes in the number of dependents - birth, adoption, placement for adoption, or death of a dependent • Employment status changes (applies to employee, spouse, dependent, or adult child under 27) - ter- mination or commencement of employment, strike or lockout, starting or ending an unpaid leave of absence, change in worksite, change from full-time to part-time, exempt to nonexempt, or salaried to hourly status • Change in dependent or adult child status - any event that causes an employee's dependent or adult child under 27 to become covered or lose coverage (e.g., attainment of a certain age) • Residence change - a change in the place of residence of the employee, spouse, dependent, or adult child under 27 • Adoptions - the commencement or termination of an adoption proceeding • Reduction in hours not resulting in loss of coverage - a change in work hours from at least 30 to less than 30 per week • Enrollment in a qualified health plan through a Marketplace under the ACA - employee can revoke current coverage
14. What factors determine an alien's status under the substantial presence test?
The substantial presence test to determine an alien's tax status requires the following: • That the alien be present in the U.S. for at least 31 days during the current calendar year • That the total of the number of days of U.S. presence during the current calendar year, plus one-third of the U.S. days during the first preceding calendar year, plus one-sixth of the U.S. days during the second preceding calendar year, be at least 183 days (no rounding allowed—fractions must be used)
7. Name the three major types of health care plans offered by employers to their employees.
The three major types of health insurance plans offered by employers are: • Traditional health insurance (fee-for-service) • Health Maintenance Organizations • Preferred Provider Organizations
3. An employee's personal use of a company-provided vehicle generally is a taxable benefit. What are the 3 special valuation methods that can be used to determine the taxable amount?
The three special valuation methods are: • Annual lease value method • Vehicle cents-per-mile method • Commuting method
3. What are the two categories of statutory nonemployees?
The two categories of statutory nonemployees are: • Qualified real estate agents • Direct sellers
10. What method of federal income tax withholding must be used if the employee claims exempt from withholding, has received $10,000 in regular and supplemental wages so far during the year, and is paid a bonus of $1,000 during a payroll period?
The withholding exemption would apply to the supplemental wages as well, so no withholding for federal income tax would be done.
6. Joan has been granted a bonus of $6,000 net in 2020. Perform the gross-up for tax purposes. Use 22% for FIT, 3.5% for SIT, 6.2% for social security, and 1.45% for Medicare. The bonus will not put Joan over the social security wage limit. Please determine the amount for the following: a. Gross-up b. FITW c. SITW d. Social Security e. Medicare f. Net payment
Total tax % = 22% + 3.5% + 6.2% + 1.45% = 33.15% Gross-up % = 100% - 33.15% = 66.85% a. Gross earnings = $6,000 ÷ .6685 = $8,975.32 b. FITW = 22% x $8,975.32= - $1,974.57 c. SITW = 3.5% x $8,975.32= - $314.14 d. Soc. Sec. = 6.2% x $8,975.32= - $556.47 e. Medicare = 1.45% x $8,975.32= - $130.14 f. Net payment: $6,000.00
T/F: 1. A service provider is an independent company that processes its clients' payrolls for a fee.
True
T/F: 1. All employers that are required to deposit their withheld income and employment taxes face a penalty if they do not make their tax deposits electronically.
True
T/F: 1. Under generally accepted accounting principles, the realization principle governs the recording of revenue.
True
T/F: 10. Each state requires employers to contribute toward its unemployment insurance program in the form of state unemployment taxes.
True
T/F: 10. Length of employment makes no difference in determining employment status.
True
T/F: 10. When an employee requests FMLA leave to care for a newborn or newly adopted child, he or she must give the employer 30 days' notice or as much as can be given under the circumstances.
True
T/F: 11. A cafeteria plan provides participants a choice among taxable (cash) and nontaxable (qualified) benefits.
True
T/F: 11. Amounts charged for the sale of services or goods are referred to as revenue.
True
T/F: 11. If an employer accumulates taxes of $100,000 or more on any one day during a deposit period, it must deposit the liability by the next business day.
True
T/F: 11. If an employer has incomplete records and an employee files a lawsuit for unpaid overtime, the court will most likely accept the employee's evidence of hours worked and wages received.
True
T/F: 11. Qualified employee discounts qualify as nontaxable fringe benefits.
True
T/F: 11. Technical services specialists are specifically excluded from the "reasonable basis" test.
True
T/F: 12. If a vendor balks at answering some of the questions about a proposal, that may be a good indication that its products are not right for the job.
True
T/F: 12. The value of employer-provided group-term life insurance up to $50,000 is excluded from an employee's federal taxable income.
True
T/F: 13. If the employer's FUTA tax liability for the fourth quarter is $500 or less, payment can be sent in with the employer's Form 940 by the due date of the form.
True
T/F: 13. Most states require employers to contact employees in an attempt to keep unclaimed wages from becoming abandoned.
True
T/F: 13. State child support withholding laws may impose lower limits on the amount that may be withheld than federal law.
True
T/F: 13. The IRS requires that machine-readable records be kept at least until the expiration of the statute of limitations for the tax year to which they relate.
True
T/F: 14. An RFP can be used to design an in-house payroll system
True
T/F: 14. For state income tax purposes, nonresidents are taxed only on their income from state sources.
True
T/F: 14. If an employee is rehired by an employer 75 days after being terminated, the employer must report the employee as a new hire.
True
T/F: 14. Pension recipients may claim a certain number of withholding allowances on Form W-4P to be used in calculating the amount to withhold.
True
T/F: 14. State law may allow employers to charge the employee an administrative fee for processing a wage garnishment order each pay period.
True
T/F: 14. The minimum retention period for state unemployment insurance records differs from state to state.
True
T/F: 15. A credit against FUTA tax is available for state unemployment tax paid by the employer.
True
T/F: 15. A system edit is a warning or alert built into the system that checks for errors.
True
T/F: 15. For federal tax purposes, same-sex couples are considered to be married if they were married in a state, territory, or foreign country where same-sex marriage was legal at that time.
True
T/F: 15. If an employer fails to withhold child support for the amount required by the notice to withhold, it is liable for the full amount not withheld, up to the state and federal maximums.
True
T/F: 15. If positive or negative feedback is to be useful, it must be given as soon as possible after the behavior has occurred.
True
T/F: 16. If an employer receives more than one child support withholding order for an employee, state law governs how they must be handled.
True
T/F: 16. To qualify for the normal credit against FUTA tax liability, the state law requiring payment of state unemployment taxes must be certified by the U.S. Department of Labor as complying with federal requirements regarding the joint federal/state program.
True
T/F: 16. Under the Family and Medical Leave Act, employees returning from leave are entitled to their previous job or one that is equivalent with no loss of pay or benefits that had accrued before the leave.
True
T/F: 17. An employer that changes its classification of a worker from independent contractor to employee may still claim Section 530 protection for the period before the change in treatment.
True
T/F: 17. If a meal and incidental expense (M+IE) per diem allowance is used, the amount deemed substantiated is the lesser of the per diem allowance or the federal M+IE rate for the locality of travel.
True
T/F: 17. The essential purpose of sick pay is to replace the wages of an employee who cannot work because of a non job-related illness or injury.
True
T/F: 17. The substantial presence test has nothing to do with the alien's intent to stay in the U.S.
True
T/F: 18. An IRS agent conducting an employment tax audit must give the employer written notice of the availability of the Section 530 protections.
True
T/F: 18. As soon as an employee's wage payments from an employer for 2020 reach $137,700, the employer must stop withholding social security tax from the employee's wages for the rest of the year.
True
T/F: 18. The Portal-to-Portal Act of 1947 generally states that travel time spent commuting from home to work and work to home is not considered compensable work time.
True
T/F: 18. When employees perform services all in one state, the employer pays unemployment taxes to that state.
True
T/F: 2. Before you can select a new system, you must document in detail what your current system can and cannot do.
True
T/F: 2. The goal of a shared services environment is to have employees' payroll and benefits questions answered with one phone call.
True
T/F: 2. Where the employer's sick pay plan is self-insured, the employer must withhold federal income tax based on the employee's Form W-4 when payments are made to the employee.
True
T/F: 20. If an employee works for more than one employer, each employer is liable for withholding and paying the employee's share of social security and Medicare taxes.
True
T/F: 20. Payments received as workers' compensation benefits are not included in an employee's gross income and are not subject to social security, Medicare, or FUTA taxes.
True
T/F: 20. Public sector employees' wages are exempt from creditor garnishment unless provided otherwise by state law.
True
T/F: 21. A car salesman who receives a $1,000 award for having the top sales for the month must have this amount included in his income.
True
T/F: 21. Dollar amounts should be entered on Form W-2 without commas or dollar signs.
True
T/F: 22. If employees choose to take cash instead of purchasing benefits with their flex dollars under a cafeteria plan, the payments are wages subject to federal income tax withholding and social security, Medicare, and FUTA taxes.
True
T/F: 22. In most states, the base period for claiming unemployment benefits is the first four calendar quarters out of the five preceding the quarter during which the employee first filed the claim for benefits.
True
T/F: 23. Payroll expenses are accrued when the payroll period ending date and the accounting period ending date do not coincide.
True
T/F: 23. The FLSA requires employers to pay tipped employees a cash wage of at least $2.13 per hour.
True
T/F: 24. Dismissal pay is included in a terminated employee's income and is subject to federal income tax withholding and social security, Medicare, and FUTA taxes.
True
T/F: 24. One of the most important aspects of a payroll manager's responsibilities is keeping on top of current developments in the payroll field.
True
T/F: 24. The amount contributed to a §401(k) plan through elective deferrals is a pre-tax contribution that reduces the employee's income subject to federal income tax withholding.
True
T/F: 25. An employer with secondary worksites in a state totaling 8 employees are not required to file a multiple worksite report.
True
T/F: 25. Businesses that must file 250 or more 2020 Forms 1099-MISC are required to file them electronically.
True
T/F: 25. One method of reducing phantom employees is the physical payout.
True
T/F: 26. Blank checks should never be stored in the same place as the check signing machine.
True
T/F: 27. If the employee does not maintain adequate records of miles driven, the business standard mileage rate cannot be used in reimbursing the employee for local business travel.
True
T/F: 28. Wages paid to a deceased employee's estate or legal representative after the employee dies but in the year of death are subject to social security, Medicare, and FUTA taxes.
True
T/F: 3. A program that allows two systems to share data is called an interface.
True
T/F: 3. Employees whose paychecks are mailed by their employer are not constructively paid when the paychecks are mailed unless the employees have the option of picking up their checks at the office on the day they are mailed.
True
T/F: 3. The current demands of the American workplace make it necessary for managers to tailor their management workstyle to fit different jobs and different employees.
True
T/F: 3. U.S. citizens and resident alien employees working for companies outside the U.S. may exclude certain housing costs from their gross income.
True
T/F: 4. An employer may provide transit passes valued at up to $270 in a month to its employees in 2020 without including the fair market value of the benefits in their income.
True
T/F: 4. Business Process Outsourcing is the outsourcing of end-to-end business processes and functions.
True
T/F: 4. Employers that withhold and pay federal income, social security, and Medicare taxes must maintain records according to the Internal Revenue Code.
True
T/F: 4. If an employee receives wages from more than one employer and only one receives a notice of levy, the employer must determine the exempt amount in the usual way unless the IRS notifies the employer that the exempt amount should be reduced because the other wages are not subject to levy.
True
T/F: 4. New employers can obtain an EIN immediately when applying online.
True
T/F: 4. Pre-tax contributions by the employee are considered to be employer contributions when determining the taxable value of a benefit.
True
T/F: 5. A worker who is regularly paid on a weekly basis may receive 53 wage payments in a year.
True
T/F: 5. An accountant who provides bookkeeping and payroll services to several local businesses and works at her own office is an independent contractor.
True
T/F: 5. An employee cannot have a foreign tax home if he or she regularly lives in the U.S.
True
T/F: 5. Employers are entitled to a 10-day filing extension for Form 941 if they have deposited all payroll taxes when due throughout the quarter.
True
T/F: 5. Employers that enter into an agreement with their employees to pay them a fixed weekly wage even though their hours vary from week to week are operating under a fluctuating workweek.
True
T/F: 5. The value of an employee's personal use of a company-provided vehicle is taxable income to the employee.
True
T/F: 5. Withholding for a federal tax levy must continue until a release is received from the IRS because interest continues to accumulate on the amount that remains due after each levy payment is made.
True
T/F: 6. A disadvantage of using a service provider is that it may not have the programming personnel needed to timely meet a user's changing individual needs.
True
T/F: 6. Before implementing a plan, the payroll manager must know what it will cost to achieve the stated goals.
True
T/F: 6. Employees on foreign assignments expected to last more than one year are on indefinite assignment and maintain a foreign tax home.
True
T/F: 6. FLSA wages include the fair market value of facilities such as board and lodging.
True
T/F: 6. The goal of a voluntary contribution is to increase the employer's reserve ratio to the next higher bracket on the state's unemployment rate table which corresponds to the next lower tax bracket.
True
T/F: 6. The responsibility for determining the employment status of an individual who performs services rests with the employer.
True
T/F: 6. The trend today is for a company to maintain one employee master file that includes payroll, human resources, and benefits information.
True
T/F: 6. Under a direct deposit system, the employees' wages are deposited by electronic funds transfer (EFT) into their personal accounts in one or more financial institutions.
True
T/F: 6. Under a flexible spending arrangement, medical expenses are incurred when the medical care is provided, not when the employee is billed or pays for the care.
True
T/F: 6. When an employer-provided vehicle is used for business-related purposes, it is a working condition fringe benefit.
True
T/F: 7. Form 940 is considered to be timely filed if it is sent on or before the due date via the U.S. mail or a designated private delivery service.
True
T/F: 7. If an independent contractor timely provides the employer with a correct Taxpayer Identification Number, there will be no backup withholding.
True
T/F: 7. Orders to withhold wages for child support take priority over all other garnishments or attachments issued against the employee's wages except for tax levies received by the employer before the child support withholding order was issued.
True
T/F: 7. The FLSA requires overtime pay at 1.5 times the employee's regular hourly rate of pay.
True
T/F: 7. The Family and Medical Leave Act of 1993 is administered and enforced by the Department of Labor's Wage and Hour Division.
True
T/F: 7. When an employee requests federal income tax withholding on sick pay, Form W-4S directs the third party to withhold a flat dollar amount.
True
T/F: 8. A new EIN is necessary if a new corporation emerges from a consolidation that does not qualify as a reorganization.
True
T/F: 8. An employee can be a bona fide resident of a foreign country even though he or she intends to return to the U.S. at the end of the foreign assignment.
True
T/F: 8. On payday, the RDFI is responsible for crediting the employee's account when direct deposit is used as a method of payment.
True
T/F: 8. Problem solving includes the ability to trace reconciling problems back to the source and decide on appropriate corrections.
True
T/F: 8. States can set their own state taxable wage base for state unemployment insurance as long as it is at least equal to the FUTA wage base for that year.
True
T/F: 8. The FLSA does not require employers to keep records in any particular form.
True
T/F: 8. When valuing vehicles, if the employer uses a special valuation method, the employee must also use the same rule or the general valuation method.
True
T/F: 9. An employee cannot receive advance payments of the Earned Income Credit based on wages paid after December 31, 2010.
True
T/F: 9. An in-house computer system is only as good as the software that is run on it.
True
T/F: 9. Foreign earned income is considered to be income in the year it was earned, not in the year in which it is paid.
True
T/F: 9. Regulation E establishes the basic rights, requirements and liabilities for the protection of employees being paid through EFT.
True
T/F: 9. Revenue can be obtained in the form of cash or accounts receivable.
True
T/F: If a self-insured health insurance plan is discriminatory, only those reimbursements and benefits that discriminate in favor of highly compensated employees are taxable and only to the highly compensated employees receiving the benefit.
True
9. List six types of supplemental wage payments.
Types of payments that are treated as supplemental wage payments include: • Reported tips • Overtime pay • Bonuses • Back pay • Commissions • Payments made under reimbursement or other expense allowance arrangements that are made under a nonaccountable plan • Nonqualified deferred compensation payments included in wages • Noncash fringe benefits • Sick pay paid by a third party as an agent of the employer • Amounts includible in gross income under IRC §409A • Income recognized on the exercise of a nonstatutory stock option • Wages imputed for health coverage of someone who is not a spouse, dependent, or adult child under age 27 of an employee • Wages recognized on the lapse of restrictions on restricted property transferred from an employer to an employee
2. Under the FLSA, what are the differences between enterprise coverage and individual employee coverage?
Under enterprise coverage, all the employees of a business are covered by the FLSA so long as at least two employees of the business are engaged in interstate commerce or involved in the production of goods or services for interstate commerce, and the business has annual gross sales of at least $500,000. Individual employees can be covered even if the business is not a covered enterprise if the employee is engaged in interstate commerce or the production of goods for interstate commerce.
2. Define the shortfall rule for semiweekly depositors.
Under the "shortfall" rule, employers are not penalized for depositing a small amount less than the entire amount of their deposit obligation. An employer satisfies its deposit obligation if the shortfall is no more than the greater of $100 or 2% of the entire amount due and the shortfall is made up by the appropriate "make-up" date
8. When a client company contracts with a certified PEO, who is responsible for withholding and/or paying federal income, social security, Medicare, and FUTA taxes on the wages the PEO pays to the employees at the client's worksite?
Under the Certified Professional Employer Organization program, a certified PEO may assume the responsibility for withholding and/or paying federal income, social security, Medicare, and FUTA taxes on the wages the PEO pays to the employees at the client's worksite.
13. How do employers determine if employees are resident or nonresident aliens?
Under the Internal Revenue Code, an alien qualifies as a resident if he or she meets either one of two tests—the lawful permanent resident test or the substantial presence test. Otherwise, the alien is a nonresi- dent alien.
11. What changes were enacted by OBRA '93 to make sure that both insurers and employers in each state comply in carrying out medical child support orders?
Under these requirements, each state's laws must: • Prohibit insurers from denying medical insurance under a parent's coverage to a child because the child was born out of wedlock, is not a dependent on the parent's income tax return, or does not live with the parent or in the insurer's service area • Where a qualified medical child support order exists, require insurers and employers to allow the parent to enroll the child without restrictions, and to enroll the child themselves if the parent does not do it • Where a qualified medical child support order exists, require employers to withhold the employee's share of health insurance premiums and pay it to the insurer • Require insurers to make it easier for custodial parents to submit and collect on claims where the non- custodial parent's insurer carries the child's coverage • Permit state Medicaid agencies to garnish an employee's wages so the state can be reimbursed for payments made to the employee on behalf of a child who is eligible for Medicaid
5. What are the penalties for not paying FUTA tax timely?
Unless there is reasonable cause and no willful neglect, late payment of tax owed as shown on Form 940 results in an "addition to tax," the amount of which depends on how late the payment is made. The amounts are: • 5% of any unpaid tax shown on the return (after accounting for credits) for each month or fraction of a month that the payment is late, up to a maximum of 25% • An additional 0.5% per month of any unpaid tax that is not shown on the return but for which the IRS has issued a notice and demand, if the tax is not paid within 21 calendar days of the notice and demand (10 business days if the amount is at least $100,000), up to a maximum of 25%
13. What procedure should be followed for the retrieval and destruction of records?
Whatever method an employer uses to create and preserve its employment and payroll records, it should have a policy governing record retention, retrieval, and destruction. The written policy should clearly state how long records are to be retained (and how the containers should be labeled), how they can be retrieved (especially important if records are stored off site), and when and how they should be disposed of.
13. When faced with a claim for unemployment benefits, what should the employer do?
When faced with a claim for unemployment benefits, the employer should: • Be complete and truthful in listing the grounds for an employee's termination when responding to forms and notices from the unemployment benefits agency • Document any and all evidence of misconduct that may be needed to challenge a claim for benefits • Respond to notices and requests for information within the time frame allowed • Detail any final payments made to terminated employees, since they may disqualify the employee, at least temporarily • Urge the unemployment agency to make sure the claimant is looking for work
2. What are the criminal penalties for FLSA recordkeeping violations?
Willful violations of the recordkeeping requirements can bring a criminal penalty of up to $10,000 and/or imprisonment for up to 6 months, although a jail sentence can be imposed only for second and subsequent convictions.
11. Sandra works 32 hours per week, is a nonexempt employee, and is paid a semimonthly salary of $1,000. In one workweek, Sandra worked 42 hours. Calculate her total earnings for the week.
Yearly earnings: $1,000 x 24 = $24,000 Hours worked in a year: 52 weeks x 32 hours = 1,664 Regular rate of pay: $24,000 ÷ 1,664 = $14.42 Regular pay: $14.42 x 42 hours = $605.64 Overtime hours: 42 - 40 = 2 Overtime premium rate: $14.42 x .5 = $7.21 Overtime premium pay: $7.21 x 2 = $14.42 Total earnings: $605.64 + $14.42 = $620.06
10. Jim is a nonexempt employee who is paid a monthly salary of $1,500 and normally works 40 hours per workweek. Last week Jim worked 49 hours. Calculate his total earnings for the workweek.
Yearly earnings: $1,500 x 12 months = $18,000 Hours worked in a year: 52 weeks x 40 hours = 2,080 Regular rate of pay: $18,000 ÷ 2,080 = $8.65 Regular pay: $8.65 x 49 hours = $423.85 Overtime hours: 49 - 40 = 9 Overtime premium rate: $8.65 x .5 = $4.33 Overtime premium pay: $4.33 x 9 = $38.97 Total earnings: $423.85 + $38.97 = $462.82
5. Does an employer have to withhold child support from payments to independent contractors?
Yes. Payments to independent contractors constitute property subject to a child support withholding order.
7. If an employee receives a bonus of $2,000 when her year-to-date wages are $50,000, and the employer pays the taxes, are the taxes considered taxable income? What method is used to determine the amount of taxes the employer will pay?
Yes. The method allowed by the IRS is called "grossing-up."
1. An employee who is injured away from work on July 24, 2020, receives $1,000 per month in disability payments from a third party for 10 calendar months beginning August 1, 2020. The employer has paid 60% of the disability insurance premiums, and the employee paid 40% through an after-tax payroll deduction. a. Calculate the amount of the payments that are subject to social security and Medicare taxes. b. Calculate the amount of the payments that are subject to federal income tax withholding.
a. $1,000 x 6 months x 60% = $3,600 b. $1,000 x 10 months x 60% = $6,000
1. Ruth's Shop had a FUTA taxable payroll of $14,000 for the first quarter of 2020. What is the FUTA tax liability for the first quarter? Was Ruth's Shop required to make a deposit of FUTA tax by May 1, 2020? Why?
a. $14,000 x .006 = $84 b. No, because the liability did not exceed $500.
5. During 2020, Rachel Roberts is paid a salary of $50,000. She participates in a §401(k) plan that allows employees to elect to defer up to 15% of their annual compensation but does not allow catch-up contributions. a. What is the maximum amount of her salary Rachel can defer to the §401(k) plan on a tax-deferred basis? b. If Rachel's salary was $150,000, instead of $50,000, what is the maximum amount that she could defer to the §401(k) plan on a tax-deferred basis?
a. $7,500 — the lesser of 15% x $50,000 ($7,500) or $19,500 (annual dollar limit effective for 2020). b. $19,500 — the lesser of 15% x $150,000 ($22,500) or $19,500 (annual dollar limit effective for 2020).
2. The Boulder Company has a taxable payroll for 2019 for FUTA and state unemployment tax of $70,000. The SUTA tax rate in the state in which the Boulder Company does business is 3.2%, the state is not a credit reduction state, and Boulder paid its entire SUTA tax liability by January 31, 2020. Calculate: a. Net FUTA tax liability for 2019 $_____________________ b. Net SUTA tax liability for 2019 $_____________________ c. Total unemployment tax liability $_____________________
a. $70,000 x .006 = $420 b. $70,000 x .032 = $2,240 c. $420 + $2,240 = $2,660
11. Employee Sam qualifies for the foreign housing cost exclusion under the physical presence test for all of 2021, spending $26,250 on reasonable housing expenses. On January 1, 2021, the maximum foreign earned income exclusion was $108,700. What is Sam's foreign housing cost exclusion for 2021? a. $8,858 b. $26,250 c. $17,392 d. $108,700
a. $8,858
4. a. An employee earns $30,000 per year, and the company provides group-term life insurance of three times the employee's salary. How much of the insurance coverage is subject to taxation? b. Using the above example, if the employee is 46 years old as of December 31, 2020, what rate is used to compute the imputed monthly income for 2020?
a. $90,000 - $50,000 = $40,000 b. $.15 per $1,000 of the taxable value of the coverage
2. An employee who is injured away from work on March 19, 2020, receives $900 per month in disability payments from a third party for 7 calendar months beginning April 1, 2020. The employer paid two-thirds of the disability premiums, and the employee paid the rest through an after-tax payroll deduction. a. Calculate the amount of the payments that are subject to social security and Medicare taxes. b. How much would be reported as federal wages on the employee's Form W-2, Box 1? c. How much of the payments would be reported on the employee's Form W-2, Box 12, Code J?
a. $900 x 6 months x 2/3 = $3,600 b. $900 x 7 months x 2/3 = $4,200 c. $900 x 7 months x 1/3 = $2,100
15. Under federal law what is the maximum amount of an employee's "disposable earnings" that can be garnished to repay a debt to a creditor? a. 25% b. 27% c. 50% d. 65%
a. 25%
15. For how many weeks can unemployment benefits generally be collected without an extension? a. 26 weeks b. 38 weeks c. 40 weeks d. 52 weeks
a. 26 weeks
15. If an employer uses prenotification to test the employee's banking information before initiating direct deposit, how long before any actual pay is sent through the ACH network must the prenotification be sent? a. 3 banking days b. 2 weeks c. 6 banking days d. 6 calendar days
a. 3 banking days
4. All of the following methods are used to determine an employer's state unemployment insurance experience rate except: a. Age ratio b. Reserve ratio c. Benefit ratio d. Benefit wage ratio
a. Age ratio
3. How many years must an employer keep the authorization agreement for direct deposit after revocation by the employee? a. At least two years b. At least one year c. There is no retention requirement d. At least three years
a. At least two years
7. If a pay period ends August 22, employees are paid August 29, and the payroll tax deposit is due September 15, when should the payroll expenses be recorded? a. August 22 b. August 23 c. August 29 d. September 15
a. August 22
21. On Form W-2, what box is used to report wages, tips, and other compensation? a. Box 1 b. Box 10 c. Box 12 d. Box 14
a. Box 1
12. Which of the following deductions is not a voluntary deduction? a. Child support b. Charitable contributions c. Credit union deductions d. Life insurance premiums
a. Child support
23. What code is entered in Box 12 of Form W-2 when the value of group-term life insurance over $50,000 is reported? a. Code C b. Code D c. Code E d. Code F
a. Code C
5. How are marketable securities classified? a. Current assets b. Tangible assets c. Intangible assets d. Current liabilities
a. Current assets
6. Employer Gail Winters and her employees are subject to social security, Medicare, FUTA and SUTA taxes. During the payroll period ending January 8, 2021, her employees earned wages of $30,000, all of which is taxable. The federal income tax withheld amounted to $4,500. The employer pays FUTA tax of $180 and SUTA tax of $810. a. Journalize the payroll for the payroll period ending January 8, 2021. b. Journalize and record the employer's payroll taxes on January 8, 2021. c. Journalize and record the payment of wages to the employees on January 15, 2021.
a. Date: Jan 10, 2020 Item 1. Wages/salaries expense - Debit 2. Social security tax payable - Credit 3. Medicare tax payable - Credit 4. Federal income tax payable - Credit 5. Wages/salaries payable - Credit b. Date: Jan 10, 2020 Item 1. Payroll taxes expense - Debit 2. Social security tax payable - Credit 3. Medicare tax payable - Credit 4. FUTA tax payable - Credit 5. SUTA tax payable - Credit c. Date: Jan 17, 2020 Item Wages/salaries payable - Debit Cash - Debit
4. a. David Christensen receives a salary of $10,500 each month. On September 3, 2021, David's employer receives a Form 668-W stating that a federal tax levy was being issued against David's wages for $30,000. David claims married filing jointly with 2 dependents on Part 3 of the form. As of September 3, 2021, David had the following deductions: Federal income tax: $1,200.00 State income tax: 307.20 Local income tax: 204.80 Social security tax: 647.90 Medicare tax: 151.53 §401(k) plan (2% of salary): 210.00 Health insurance (pre-tax): 50.00 Total: $2,771.43 What amount of David's wages per pay period is subject to the tax levy? $_____________________ b. On November 1, 2021, David gave his employer a new Form 668-W, Part 3 claiming married with 3 dependents. He also increases his elective deferral in the §401(k) plan to 4% of his salary. His health insurance deduction increases from $50 to $70 because of a premium increase. As a result, his deductions have changed to the following amounts: Federal income tax: $1,065.00 State income tax: 300.30 Local income tax: 200.20 Social security tax: 646.66 Medicare tax: 151.24 §401(k) plan (4% of salary): 420.00 Health insurance (pre-tax): 70.00 Total: $2,853.40 What amount of David's wages is now subject to tax levy as a result of the changes? $_____________________ c. What is David's net pay as a result of these changes? $_____________________
a. David's take-home pay: $7,728.57 ($10,500 - $2,771.43) Exempt amount: - 2,808.33 (Taken from 2021 table) Amount subject to levy: $4,920.24 b. David's new take-home pay: $7,856.60 ($10,500 - $2,853.40 + $210.00) Exempt amount: -3,166.66 (Taken from 2021 table) Amount subject to levy: $4,689.94 Note: David's §401(k) deduction changed from $210 to $420 when he changed his elective deferral rate from 2% to 4%. His health insurance deduction increased from $50 to $70 when the premiums were raised. In figuring David's take-home pay, the employer cannot deduct the $210 increase in the §401(k) deduction because it was the result of a voluntary increase. The $20 increase in the health insurance deduction may be counted because it was the result of an increase in the cost of coverage, not a change in coverage chosen by the employee. c. David's net pay after changes: Net pay = Exempt amount - §401(k) deduction increase Net pay = $3,166.66 - $210.00 = $2,956.66
15. For 2020, how much can employees receive in advance EIC payments? a. Employees cannot receive advance EIC payments in 2020. b. $1,826 c. $1,750 d. $1,830
a. Employees cannot receive advance EIC payments in 2020.
7. Sarah Simmons has an annual salary of $38,000. She is paid semimonthly, and she contributes $125 per month on a pre-tax basis to her employer's cafeteria plan and 5% of her salary on a pre-tax basis to a §401(k) plan. Assuming that Sarah has not reached the social security and FUTA taxable wage limits, calculate the following for the current pay period: a. Federal income taxable wages b. Social security taxable wages c. Medicare taxable wages d. FUTA taxable wages
a. Federal income taxable wages: Gross wages ($38,000 ÷ 24)=$1,583.33 Cafeteria plan ($125 ÷ 2)=- 62.50 §401(k) plan ($1,583.33 x .05)=- 79.17 Taxable wages: $1,441.66 b. Social security taxable wages: Gross wages ($38,000 ÷ 24)=$1,583.33 Cafeteria plan ($125 ÷ 2)=-62.50 Taxable wages: $1,520.83 c. Medicare taxable wages: Gross wages ($38,000 ÷ 24)=$1,583.33 Cafeteria plan ($125 ÷ 2)=- 62.50 Taxable wages: $1,520.83 d. FUTA taxable wages: Gross wages ($38,000 ÷ 24)=$1,583.33 Cafeteria plan ($125 ÷ 2)=- 62.50 Taxable wages: $1,520.83
8. Timothy White is paid $3,760 per month. He contributes 7.5% of his salary before taxes to a §401(k) plan and 2% to an after-tax investment. The company matches his pre-tax contribution. He also participates in the company's cafeteria plan and contributes $75 per month before taxes. Assuming Timothy has not reached the social security and FUTA taxable wage limits, calculate the following for the current pay period: a. Federal income taxable wages b. Social security taxable wages c. Medicare taxable wages d. FUTA taxable wages
a. Federal income taxable wages: Gross wages=$3,760.00 Cafeteria plan=- 75.00 §401(k) plan ($3,760 x .075)=- 282.00 Taxable wages: $3,403.00 b. Social security taxable wages: Gross wages=$3,760.00 Cafeteria plan=-75.00 Taxable wages: $3,685.00 c. Medicare taxable wages: Gross wages=$3,760.00 Cafeteria plan=-75.00 Taxable wages: $3,685.00 d. FUTA taxable wages: Gross wages=$3,760.00 Cafeteria plan=-75.00 Taxable wages: $3,685.00
9. What form is completed by new employers when requesting an EIN? a. Form SS-4 b. Form SS-5 c. Form SS-8 d. Form W-9
a. Form SS-4
14. What is the term for the income tax an employee would have paid if the employee had remained in the U.S. rather than taking a foreign assignment? a. Hypothetical tax b. Excise tax c. Equalization tax d. Gift tax
a. Hypothetical tax
3. Where does the employer send Form 1099-MISC? a. IRS b. SSA c. USCIS d. Wage and Hour Division
a. IRS
3. Don earns $600 per week in 2020, claims single and makes no entries on Steps 2-4 on his 2020 Form W-4, and contributes $25 per week to his employer's cafeteria plan for medical and dental insurance. Using the percentage method, Publication 15-T, Worksheet 1, Don's federal income tax withholding if the contribution is after-tax is $39.59. If the contribution is pre-tax, Don's FITW is $36.59. The social security tax rate is 6.2%, the Medicare tax rate is 1.45%, and the state tax rate is 10% of the amount withheld for federal income taxes. a. If Don's contribution is pre-tax, calculate his net pay for the week. b. If Don's contribution is after-tax, recalculate his net pay for the week.
a. If the contribution is pre-tax: Regular wages = $600.00 Medical and dental = - 25.00 FITW = - 36.59 Soc. Sec. ($600 - 25) x 6.2% = - 35.65 Medicare ($600 - 25) x 1.45% = - 8.34 SITW $36.59 x 10% = - 3.66 Net Pay: $490.76 b. If the contribution is after-tax: Regular wages = $600.00 FITW = - 39.59 Soc. Sec. ($600 x 6.2%) = - 37.20 Medicare ($600 x 1.45%) = - 8.70 SITW ($39.59 x 10%) = - 3.96 Medical and dental = - 25.00 Net Pay: $485.55
8. What law requires Form I-9 to be retained? a. Immigration Reform and Control Act of 1986 b. Civil Rights Act of 1964 c. Age Discrimination in Employment Act 1967 d. Americans with Disabilities Act of 1990
a. Immigration Reform and Control Act of 1986
11. What financial statement shows the net income or net loss of a business? a. Income statement b. Balance sheet c. Statement of owner's equity d. Statement of cash flow
a. Income statement
19. What visa is available to students or teachers on an exchange program? a. J-1 b. L-1 c. O-1 d. P-1
a. J-1
6. Where are business transactions first recorded? a. Journal b. General ledger c. Trial balance d. Balance sheet
a. Journal
7. Blare Textiles electronically files all of its 2021 information returns—1,400 Forms W-2—on time with the SSA, 30 of which contain incorrect information. Corrections were filed on May 10. a. How many returns are subject to penalty? __________ b. What is the penalty? $__________
a. No penalty is imposed for 10 of the failures to provide correct information (i.e., the greater of 10 or 0.5% x 1,400 = 7). Late returns subject to penalty: 30 - 10 = 20 b. 20 x $110 = $2,200 since the corrections were made more than 30 days after the due date (January 31) but before August 1.
6. World Wide Express electronically files all of its 2021 information returns—2,600 Forms W-2—on time with the SSA, 40 of which contain incorrect information. Corrections were filed on May 30. a. How many returns are subject to penalty? __________ b. What is the penalty? $__________
a. No penalty is imposed for 13 of the failures to provide correct information (i.e., the greater of 10 or 0.5% x 2,600 = 13). Late returns subject to penalty: 40 - 13 = 27 b. 27 x $110 = $2,970 since the corrections were made more than 30 days after the due date (January 31) but before August 1.
11. What must an employer do after learning that a Form W-4 submitted by a current employee is invalid? a. Not implement the Form W-4 b. Withhold as if the employee were single with zero allowances c. Inform the IRS d. Make the necessary corrections
a. Not implement the Form W-4
10. Each of the following behaviors is an example of affiliation other than: a. Not including employees in lunch and after-work activities b. Putting employees on project teams and task forces c. Encouraging employees to join and participate in professional organizations d. Providing employees with networking opportunities
a. Not including employees in lunch and after-work activities
3. When each transaction is described by a business document that proves the transaction did occur, which accounting concept is being applied? a. Objectivity b. Cost c. Matching d. Business entity
a. Objectivity
9. All of the following items are needed for web-enablement except: a. PCs with extensive memory b. Sufficient internet infrastructure c. Web-enabling tools d. HRMS application expertise
a. PCs with extensive memory
3. What is the final test before going "live" with a new system? a. Parallel test b. Spot test c. Stress test d. Conversion test
a. Parallel test
17. What is an IRS decision on how the tax laws apply to a set of facts involving a single taxpayer called? a. Private Letter Ruling b. News Release c. Revenue Ruling d. Revenue Procedure
a. Private Letter Ruling
1. What method is used by the majority of states to determine an employer's experience rate for its contribution to state unemployment insurance? a. Reserve ratio b. Benefit ratio c. Benefit wage ratio d. Payroll stabilization
a. Reserve ratio
2. What is the name of the federal law that required the IRS to make significant changes to Form W-4 for 2020? a. Tax Cuts and Jobs Act b. Protecting Americans From Tax Hikes Act of 2015 c. Continuing Appropriations Act, 2020 d. Setting Every Community Up for Retirement Enhancement Act of 2019
a. Tax Cuts and Jobs Act
19. A single employee with two children (one age 12 and one age 19 and in college) earns $43,000 in 2020. The employee enters amounts in the left hand column of Step 3 of a 2020 Form W-4 that do not add up to the total entered for Step 3. Which of the following is correct concerning the Form W-4? a. The employer may ask if the differing numbers were intentional, but will withhold based on the amount reported for Step 3 (or based on a new Form W-4, if one is submitted) b. The employer will require the employee to amend the form so that the amounts in the left hand column match the amount reported for Step 3 c. The employer will disregard the Form W-4 and withhold as single with no adjustments in Steps 2, 3, or 4 d. The employer will notify the IRS of the error by submitting a copy of the Form W-4
a. The employer may ask if the differing numbers were intentional, but will withhold based on the amount reported for Step 3 (or based on a new Form W-4, if one is submitted)
13. XYZ Corporation, a semiweekly depositor, has a payroll tax liability of $65,000 on the first Thursday in December 2021. When must the liability be deposited? a. The following Wednesday b. The following Friday c. The 15th of the following month d. With the quarterly Form 941
a. The following Wednesday
6. What are the three parts of the ABC test, and what is the test used to determine?
a. The three parts of the ABC test are: • The worker is free from control or direction in performing the work both by agreement and in reality (Absence of control). • The work is performed outside the usual course of the company's business or away from any of the employer's facilities (Business—unusual and/or away). • The worker is customarily engaged in an independent trade, occupation, or business (Customarily independent contractor). b. The ABC test is used by many states to determine a worker's status as an employee or independent contractor under state unemployment insurance laws.
3. What must occur for the payroll department to achieve its goal? a. There must be a plan b. Planning will not help c. Read the daily astrology page d. Roaming around solves all goal achievement needs
a. There must be a plan
5. You are instructed to issue a bonus to employee Sean in the net amount of $4,500 and to tax it as supplemental wages. The following tax rates apply: FIT—22%, SIT—5%, Social Security—6.2%, Medicare—1.45%. a. Calculate this check if Sean is $15,000 short of reaching the social security wage limit. b. Calculate this check if Sean is $1,500 short of reaching the social security wage limit.
a. Total tax % = 22% + 5% + 6.2% + 1.45% = 34.65% Gross-up % = 100% - 34.65% = 65.35% Gross earnings = $4,500 ÷ .6535 = $6,886.00 To check: FITW = 22% x $6,886.00 = $1,514.92 SITW = 5% x $6,886.00 = $344.30 Soc. Sec. = 6.2% x $6,886.00 = $426.93 Medicare = 1.45% x $6,886.00 = $99.85 $6,886.00 - $1,514.92 - $344.30 - $426.93 - $99.85 = $4,500.00 b. Soc. Sec. tax on $1,500 = .062 x $1,500 = $93 Total to be grossed-up = $4,500 + $93 = $4,593 Total tax % = 22% + 5% + 1.45% = 28.45% Gross-up % = 100% - 28.45% = 71.55% Gross earnings = $4,593 ÷ .7155 = $6,419.29 To check: FITW = 22% x $6,419.29 = $1,412.24 SITW = 5% x $6,419.29 = $320.97 Soc. Sec. = 6.2% x $1,500 = $93.00 Medicare = 1.45% x $6,419.29 = $93.08 $6,419.29 - $1,412.24 - $320.97 - $93.00 - $93.08 = $4,500.00
9. When an employer receives Form 668-W from the IRS, when must the employer begin to withhold and remit? a. With the first payment of wages after receipt of Form 668-W b. Within 14 days after receipt of Form 668-W c. Within 30 days after receipt of Form 668-W d. Within 30 days after receipt of Form 668-W or the first date of payment of wages, whichever is later
a. With the first payment of wages after receipt of Form 668-W
4. Match the following retirement plans with the section of the IRC that applies to each: TITLE: a. Simplified Employee Pensions b. Employee-Funded Plans c. Deferred Compensation Plans for Public Sector and Tax-Exempt Groups d. Tax-Sheltered Annuities e. Cash or Deferred Arrangements f. Qualified Pension and Profit Sharing Plans g. SIMPLE Individual Retirement Accounts MATCHING: §501(c)(18)(D) §457(b) §408(p) §401(a) §408(k) §403(b) §401(k)
a. §408(k) b. §501(c)(18)(D) c. §457(b) d. §403(b) e. §401(k) f. §401(a) g. §408(p)
3. Casey Company has five employees with earnings for 2019 as follows: David Bates $23,500 John Smith $27,000 Doreen Saunders $24,500 William Jones $21,000 Sam Frazer $21,000 The state unemployment tax rate is 5.4% on the first $7,000 in wages paid to each employee, the state is not a credit reduction state, and Casey paid all its SUTA tax liability by January 31, 2020. Calculate the following amounts for Casey Company: a. FUTA tax before state tax credit $_____________________ b. SUTA tax $_____________________ c. FUTA tax after state tax credit $_____________________
a.$7,000 x 5 x 6.0% = $2,100 b. $7,000 x 5 x 5.4% = $1,890 c. $2,100 - $1,890 = $210
17. In 2020, Wilson Corporation had three employees. Two of the employees worked full time and earned salaries of $25,000 each. The third employee worked only part time and earned $3,000. The employer timely paid state unemployment tax equal to 5.4% of each employee's wages up to the state's wage base. How much FUTA tax is due from Wilson Corporation for 2020, after the credit for state unemployment taxes is taken? a. $0 b. $102 c. $136 d. $918
b. $102
17. For 2020, what is the social security tax wage base? a. $132,900 b. $137,700 c. $128,400 d. $200,000
b. $137,700
10. An employer's FUTA taxable wages for the first quarter of 2020 amount to $35,000. What is the employer's FUTA tax liability for the quarter? a. $2,100 b. $210 c. $0 d. $42
b. $210
16. In 2020, an employee claims single with $500 entered in Step 3 and $250 entered in Step 4(c) on a 2020 Form W-4, and is paid $1,100 on the 1st and 15th of each month. Using the percentage method (Publication 15-T, Worksheet 1), how much federal income tax must be withheld from each wage payment? a. $40.94 b. $290.94 c. $61.17 d. $311.17
b. $290.94
10. An employee has a 2018 Form W-4 on file claiming single and one withholding allowance and is paid $550 every Friday in 2020. Using Publication 15-T, Worksheet 3 (wage bracket method), how much federal income tax must be withheld? a. $34 b. $44 c. $58 d. $54
b. $44
16. Cherise Pitts has two employees who are paid $17,000 and $5,000, respectively, during 2020. If Cherise timely pays 5.4% of their wages for state unemployment tax, what is the amount of her 2020 FUTA tax liability after the state tax credit is taken? a. $0 b. $72 c. $720 d. $96
b. $72
4. An employee subject to a student loan garnishment loses her job and gets another one six months later. How long is it before the garnishment can be reinstated? a. 6 months from her date of reemployment b. 12 months from her date of reemployment c. 9 months from her date of reemployment d. No grace period is allowed
b. 12 months from her date of reemployment
3. If a payer receives a "B" notice from the IRS, how long does the payer have to send a copy to the payee along with Form W-9, Request for Taxpayer Identification Number and Certification? a. 30 days b. 15 days c. 10 days d. 5 days
b. 15 days
10. What percentage of the maximum foreign earned income exclusion is used to determine the base housing amount? a. 14% b. 16% c. 18% d. 30%
b. 16%
16. Employee Ben, an alien, is present in the U.S. for 155 days during the current year, 123 days during the first preceding year, and 144 days in the second preceding year. How many days is Ben present in the U.S. during the current year under the substantial presence test? a. 150 days b. 220 days c. 223 days d. 365 days
b. 220 days
6. How long are FUTA tax records normally required to be retained? a. 3 years b. 4 years c. 5 years d. Indefinitely
b. 4 years
15. Adjustments for fractional cents are reported on what line of Form 941? a. 8 b. 7 c. 4 d. 9
b. 7
4. Which of the following facts does not indicate the intent to meet the bona fide residence test? a. Purchase of a home or signing a long-term lease in a foreign country b. A temporary assignment of up to three months c. Involvement in the cultural and social life of a foreign country d. The type of visa or residence permit secured by the employee
b. A temporary assignment of up to three months
5. What system is designed to eliminate the time taken to punch in and out and to write and sign information on timecards, as well as the errors that such procedures can cause? a. Software system b. Automated time and attendance system c. In-house system d. Time-sharing system
b. Automated time and attendance system
18. What account is credited for child support withheld? a. Child support expense b. Child support payable c. Accounts payable d. Payroll taxes expense
b. Child support payable
13. A manager building a successful team must deal with employees who have different personal styles. Each of the following styles is represented on a team other than: a. Contributors b. Controllers c. Collaborators d. Communicators
b. Controllers
10. When a company purchases a computer on credit for $2,500, which of the following journal entries is made? a. Debit assets and debit liabilities b. Debit assets and credit liabilities c. Credit assets and debit liabilities d. Credit assets and credit owner's equity
b. Debit assets and credit liabilities
6. Who pays FUTA tax? a. Employees only b. Employers only c. Both employees and employers d. Statutory nonemployees only
b. Employers only
25. What is the transmittal form that accompanies each Form 1099 series if the forms are filed on paper? a. Form W-3 b. Form 1096 c. Form 8109 d. Form 1099-R
b. Form 1096
3. Which of the following forms is used by the employee to report tips to the employer? a. Form 8821 b. Form 4070 c. Form 8027 d. Form 1099-MISC
b. Form 4070
3. On what form must employers covered by FUTA report their liability? a. Form 945 b. Form 940 c. Form W-3 d. Form 941
b. Form 940
17. What form must be filed to report and explain corrections to amounts previously reported on Form 941? a. Form 941-M b. Form 941-X c. Form 944-X d. An amended Form 941
b. Form 941-X
6. Which of the following forms must be completed to obtain a social security number? a. Form SS-4 b. Form SS-5 c. Form SS-8 d. Form W-9
b. Form SS-5
7. Employees' paychecks are mailed from their corporate office on Monday for a Thursday payday. Because of a natural disaster in the area no mail will be delivered until Saturday, when the employees are not at work. So the employees can get paid during this week, the employer wires cash wages to the employees on Friday. The checks arrive at the office on Monday. When are the wages considered paid? a. Thursday b. Friday c. Saturday d. Monday
b. Friday
16. The Employer's Tax Guide, Circular E is found in which IRS Publication? a. IRS Pub. 12 b. IRS Pub. 15 c. IRS Pub. 18 d. IRS Pub. 37
b. IRS Pub. 15
9. Which of the following states allows employers to use the federal Form W-4 to calculate state income tax withholding? a. Arizona b. Idaho c. Michigan d. North Carolina
b. Idaho
14. Which of the following is NOT an employee benefit of using paycards to pay employee wages? a. Eliminating check cashing fees b. Increased risk of paycheck theft c. Protection from loss because paycard can be replaced d. No time or geographic limitations on funds access
b. Increased risk of paycheck theft
8. Which of the following accounts describes the legal obligation of a business to pay its debts? a. Asset b. Liability c. Owner's equity d. Expenses
b. Liability
12. Which of the following features is a possible disadvantage of the direct deposit system to the employer? a. Direct deposit b. Loss of float c. Check printing cost d. Check storage cost
b. Loss of float
2. All of the following features are disadvantages of using a service provider for processing your payroll except: a. Lack of control over security b. Low fixed costs c. No control over breakdowns d. Responsibility for filing errors
b. Low fixed costs
7. All of the following features are advantages of an in-house payroll system except: a. Convenient access b. Low fixed costs c. Scheduling flexibility d. System security
b. Low fixed costs
6. Which of the following systems is least likely to interface with payroll? a. Human Resources b. Marketing c. Benefits d. Accounting
b. Marketing
1. When revenue and expenses are recorded in the same accounting period, which accounting concept is being applied? a. Business entity b. Matching c. Realization d. Continuing concern
b. Matching
2. Which of the following entities is a foreign country for purposes of qualifying for the §911 exclusions? a. Puerto Rico b. Mexico c. Guam d. Virgin Islands
b. Mexico
11. How frequently are new employers that anticipate having an annual tax liability of more than $1,000 required to make withheld federal income and employment tax deposits? a. Semiweekly b. Monthly c. The next banking day d. Quarterly
b. Monthly
9. What is the due date for depositing FUTA taxes for the third quarter? a. September 30 b. October 31 c. November 30 d. December 31
b. October 31
2. The employer prepares an automated file of direct deposit records that indicates where its employees' pay is to be deposited. What is the name of the financial institution where this file is then sent? a. Automated Clearing House b. Originating Depository Financial Institution c. Nacha d. Receiving Depository Financial Institution
b. Originating Depository Financial Institution
4. All of the following facts and circumstances would be typical of an independent contractor except: a. Works off site b. Paid by the hour c. Furnishes own tools d. Sets own work hours
b. Paid by the hour
1. What is the main objective of any payroll system? a. Prepare internal reports b. Provide for compliance with federal, state, and local withholding, depositing, and reporting requirements c. Accurately paying employees in a restricted time frame on payday d. Maintain adequate records of all data and transactions
b. Provide for compliance with federal, state, and local withholding, depositing, and reporting requirements
20. What is a decision by the IRS on how a section of the IRC is to be applied to a certain given set of facts called? a. Revenue Procedure b. Revenue Ruling c. News Release d. Private Letter Ruling
b. Revenue Ruling
20. During 2020, a corporate officer is paid a semimonthly salary of $9,500 on the 15th and last day of the month. How much social security and Medicare taxes should be withheld from the officer's August 31 paycheck (i.e., 16th pay period)? a. Social Security $0.00, and Medicare $0.00 b. Social Security $0.00, and Medicare $137.75 c. Social Security $85.50, and Medicare $137.75 d. Social Security $589.00, and Medicare $137.75
b. Social Security $0.00, and Medicare $137.75
1. What program does the Social Security Administration provide to verify employees' social security numbers? a. Immigration Reform and Control Act b. Social Security Number Verification Service c. New Hire Reporting d. Online TIN Verification
b. Social Security Number Verification Service
8. Which of the following payments is not foreign earned income? a. Professional fees b. Social security benefits c. Tax reimbursements d. Cost of living allowances
b. Social security benefits
9. Which of the following laws governs unclaimed wages? a. Federal wage-hour laws b. State escheat laws c. Equal employment opportunity laws d. Labor relations laws
b. State escheat laws
4. What is a warning or alert called that is built into the system that checks for errors and either corrects the error or notifies the operator that something may be wrong? a. Monitor edit b. System edit c. Control edit d. Procedure edit
b. System edit
14. Northwestern Shipping Corp. accumulates a payroll tax liability on the Friday before Labor Day of $131,640. When is the deposit due? a. The Friday before Labor Day b. The following Tuesday c. The following Wednesday d. The following Friday
b. The following Tuesday
7. When must a semiweekly depositor with a Friday payday deposit its employment tax liability if the amount of the liability is $90,000? a. The following Tuesday b. The following Wednesday c. The following Thursday d. The following Friday
b. The following Wednesday
4. What is the Medicare wage base for 2020? a. $132,900 b. There is no limit on taxable Medicare wages. c. $137,700 d. $200,000
b. There is no limit on taxable Medicare wages.
8. What are the due dates for Form W-2? a. To employees by Jan. 31 and to SSA by the last day of February (March 31 if filed electronically) b. To employees and SSA by Jan. 31 c. To employees and IRS by Feb. 28 d. To employees by Jan. 31 and to IRS by Feb. 28
b. To employees and SSA by Jan. 31
2. What do situational leadership proponents emphasize? a. Using a style that comes naturally b. Whatever style fits the demands of the particular job c. Payroll department edicts d. Company edicts
b. Whatever style fits the demands of the particular job
2. What is the threshold for requiring employers to report to employees their charitable contributions made through payroll deductions during a calendar year so the employee may claim the contribution on a personal income tax return? a. more than $3,000 in total deductions for the year b. any amount deducted during the year c. more than $250 deducted from a single paycheck d. more than $600 in total deductions for the year
b. any amount deducted during the year
13. When an employer receives a federal tax levy for an employee who is paid on a one-time basis or a recurring but irregular basis, how is the exempt amount from levy determined? a. the employee is entitled to the weekly exempt amount for the entire time to which the payment is attributable b. the employee is entitled to the weekly exempt amount for each week to which the payment is attributable c. the employee is entitled to the daily exempt amount for each day to which the payment is attributable d. the employee is entitled to the monthly exempt amount for the entire time to which the payment is attributable
b. the employee is entitled to the weekly exempt amount for each week to which the payment is attributable
1. What is the maximum amount that can be excluded from gross income under the foreign earned income exclusion for 2021? a. $107,600 b. $200,000 c. $108,700 d. Cannot exclude income earned abroad
c. $108,700
12. During 2021, Matt qualified for the foreign housing cost exclusion under the physical presence test for 335 days, spending $20,000 on reasonable housing expenses. The maximum foreign earned income exclusion on January 1, 2021, was $108,700. What was Matt's base housing amount for 2021? a. $17,392.00 b. $2,608.00 c. $15,962.75 d. $15,218.00
c. $15,962.75
11. An employer paid $2,000 of its $3,000 2019 state unemployment tax liability by January 31, 2020 and the remainder when it filed its 2019 Form 940 a week later. What is the employer's normal credit against FUTA liability for 2019? a. $900 b. $2,700 c. $2,900 d. $3,000
c. $2,900
22. Employer-provided dependent care assistance must be reported in Boxes 1, 3, and 5 of Form W-2 when the assistance exceeds what amount? a. $2,000 b. $3,000 c. $5,000 d. $7,500
c. $5,000
8. An employer's wages subject to FUTA tax liability for the first three quarters of 2020 are $35,000, $30,000 and $28,000 respectively. How much FUTA tax must be deposited in the third quarter? a. $58 b. $744 c. $558 d. $668
c. $558
10. How long must an employer maintain records it is required to keep under the Family and Medical Leave Act? a. 4 years b. 6 years c. 3 years d. 1 year
c. 3 years
11. Under the CCPA, what is the maximum amount that can be withheld from an employee's wages for spouse or child support when the employee is supporting another family and is not in arrears for the support owed? a. 50% of gross pay b. 50% of take-home pay c. 50% of disposable pay d. 55% of disposable pay
c. 50% of disposable pay
7. Under the CCPA, what is the maximum amount that can be withheld from an employee's wages for spouse or child support when the employee is not supporting another family and is 15 weeks in arrears for the support owed? a. 65% of gross pay b. 60% of disposable pay c. 65% of disposable pay d. 55% of disposable pay
c. 65% of disposable pay
4. If the records required by the FLSA are maintained at a central location, how soon after a Department of Labor request must the employer make them available? a. 24 hours b. 48 hours c. 72 hours d. 10 days
c. 72 hours
1. According to Nacha, what was the portion of the U.S. workforce that had their pay directly deposited in 2016? a. 90% b. 25% c. 82% d. 74%
c. 82%
8. All of the following aspects of a job may be delegated except: a. Authority b. Responsibility c. Accountability d. Job tasks
c. Accountability
11. Which of the following steps must an employer take before initiating an International ACH Transaction (IAT)? a. Contact the Office of Foreign Assets Control to let them know about the IAT b. No steps need to be taken c. Add coding to the transaction that identifies it as an IAT d. Contact the RDFI to let them know that an IAT is being processed
c. Add coding to the transaction that identifies it as an IAT
19. Which of the following individuals is performing as a manager? a. A door-to-door salesperson b. A person repairing a machine c. An individual checking the quality of work performed by others d. An individual deciding which of two assigned tasks to do next
c. An individual checking the quality of work performed by others
5. Each of the following individuals would be classified as an employee except: a. Controller of a company b. College professor c. Attorney (solo practitioner) d. City police officer
c. Attorney (solo practitioner)
5. If a monthly depositor accumulates $100,000 in tax liability on any day during a month, how does this affect the employer's depositor status? a. Remains monthly b. Becomes semiweekly for the rest of the year c. Becomes semiweekly for the rest of the current year and all of next year d. Becomes a one-day depositor for the rest of the year
c. Becomes semiweekly for the rest of the current year and all of next year
2. When the same accounting concepts are applied in the same way in each accounting period, which accounting concept is being applied? a. Objectivity b. Continuing concern c. Consistency d. Business entity
c. Consistency
19. To satisfy federal, state, and local taxing agency requirements, which copies of the Form W-2 must the employee receive by January 31? a. Copies A, B, & C b. Copies B, C, & 1 c. Copies B, C, & 2 d. Copies B, 1, & 2
c. Copies B, C, & 2
1. When depositing withheld income and employment taxes, what method of deposit must be used by an employer? a. Form 8109 b. Mailing through the U.S. Postal Service c. EFTPS d. Delivering a check to a financial institution
c. EFTPS
14. In what account is the payment of salaries and wages recorded? a. Asset b. Liability c. Expense d. Revenue
c. Expense
8. Which of the following laws and regulations does not regulate EFT? a. Regulation E b. Title IX of the Consumer Credit Protection Act c. Fair Labor Standards Act d. Electronic Fund Transfer Act
c. Fair Labor Standards Act
5. If all the following withholding orders are received at the same time, which must the employer deduct first? a. Creditor garnishment b. Student loan garnishment c. Federal tax levy d. State tax levy
c. Federal tax levy
14. Other than the employee's name, address, and SSN, and the employer's name, address, and EIN, federal law requires that a new hire report must include the employee's: a. Date of birth b. Health insurance coverage c. First day of work for pay d. Starting salary or hourly rate of pay
c. First day of work for pay
5. What form is filed to claim bona fide resident status? a. Form 1042 b. Form 2442 c. Form 2555 d. Form 1116
c. Form 2555
1. What form does an employer receive from the IRS to levy on an employee's salary? a. Form 668-D b. Form 916 c. Form 668-W d. Form 2159
c. Form 668-W
1. Which of the following forms may be completed and submitted to the IRS to determine the employment status of an individual for federal income and employment tax purposes? a. Form SS-4 b. Form SS-5 c. Form SS-8 d. Form W-9
c. Form SS-8
8. Which form is completed by recipients of pension and annuity payments to determine the amount of federal income tax to withhold? a. Form W-4 b. Form W-4S c. Form W-4P d. Form 1099-R
c. Form W-4P
13. Which of the following is NOT an employer benefit of using paycards to pay employee wages? a. Reduced costs for off-cycle checks b. All employees are eligible for electronic pay c. Increased escheat issues d. Increased employee productivity because of less time spent cashing paychecks
c. Increased escheat issues
6. What is the Form 941 tax deposit lookback period for calendar year 2021? a. July 1, 2018-June 30, 2019 b. Jan. 1, 2018-Dec. 31, 2018 c. July 1, 2019-June 30, 2020 d. Jan. 1, 2020-Dec. 31, 2020
c. July 1, 2019-June 30, 2020
12. On May 31, a monthly depositor's payroll tax liability is $15,000. When is the deposit due? a. June 7 b. June 1 c. June 15 d. June 30
c. June 15
9. FUTA and SUTA taxes payable are what types of accounts? a. Owner's equity b. Assets c. Liabilities d. Net worth
c. Liabilities
13. With which of the following countries does the U.S. not have a totalization agreement? a. Belgium b. Finland c. New Zealand d. Sweden
c. New Zealand
20. Employers wishing to bring aliens of extraordinary ability in the arts, sciences, education, or athletics to the U.S. seek what visa? a. B-1 b. H-1 c. O-1 d. Q-1
c. O-1
6. Once an employee has given authorization for EFT and the employer creates electronic pay transactions for deposit, where does the employer send them? a. ACH b. RDFI c. ODFI d. Nacha
c. ODFI
14. An employer has decided to change from an old to a new payroll system. In implementing the new system, both the old and the new system are maintained during the testing period. What is this changeover technique called? a. Debugging b. Pilot testing c. Parallel testing d. Back-up system conversion
c. Parallel testing
14. What is the prime factor that employers can use in determining to which state an employee should be "allocated" for unemployment insurance purposes? a. Location of base of operations b. Location of employee's residence c. Place where the work is localized d. Place of direction or control
c. Place where the work is localized
7. Under the EFT system, what participating party receives the individual transactions and posts them to the customers'/employees' accounts? a. ODFI b. ACH c. RDFI d. Nacha
c. RDFI
15. What is a common name for a journal? a. Record of final entry b. Record of secondary entry c. Record of original entry d. Record of cross-reference
c. Record of original entry
11. Each of the following actions is considered a good guideline when conducting meetings except: a. Plan b. Prepare c. Start with a meal d. Control the time
c. Start with a meal
1. Each of the following conditions is a fundamental dimension that grows out of principle-centered leadership except: a. Security b. Wisdom c. Tenacity d. Guidance
c. Tenacity
4. All of the following resources are available within the company except: a. Employees in the payroll department b. Other departments c. The local bank's funds d. Company funds
c. The local bank's funds
14. Each of the following objectives is considered to be a valid reason why companies conduct performance evaluations except: a. To provide documentation for salary increase decisions b. To determine which employees are promotable c. To fire employees who conflict with other employees d. To encourage employees' personal growth and development
c. To fire employees who conflict with other employees
15. What income earned by resident aliens is subject to federal income tax? a. U.S. income b. Foreign income c. World-wide income d. Unearned income
c. World-wide income
18. An employee worked for three employers by August 20, 2020. The employee earned $46,000, $48,000, and $62,000 respectively from each employer. What is the total amount of social security and Medicare taxes that should have been withheld from the employee's wages? a. $10,148.40 b. $9,191.40 c. $9,730.80 d. $11,934.00
d. $11,934.00
3. What is the maximum that a temporary foreign assignment can realistically be expected to last for purposes of excluding employee business expense reimbursements from income? a. 3 months b. 6 months c. 9 months d. 12 months
d. 12 months
20. When an employee leaves employment before the end of the calendar year and requests Form W-2 in writing, how long does the employer have to send it? a. 10 days from the request b. 15 days from the request c. 20 days from the request d. 30 days from the request
d. 30 days from the request
5. Under the Walsh-Healey Public Contracts Act, how long must a separate log of occupational injuries and illnesses be kept? a. 2 years b. 3 years c. 4 years d. 5 years
d. 5 years
5. What state uses the payroll stabilization method to determine an employer's state unemployment tax rate? a. Minnesota b. Michigan c. Arkansas d. Alaska
d. Alaska
13. Auditors are often concerned with whether RFPs for new computer systems are well formulated. Which of the following items should typically be included in a request for proposal? a. The hardware configuration b. An emphasis on software rather than hardware c. Detailed specifications of the current workload d. An emphasis on the tasks to be performed rather than specific hardware capabilities
d. An emphasis on the tasks to be performed rather than specific hardware capabilities
17. Foreign students receiving scholarships or fellowships are not exempt from federal income tax withholding when holding what visa? a. F-1 b. J-1 c. M-1 d. B-1
d. B-1
12. What is the difference between the debits and credits to an account called? a. Single-entry b. Double-entry c. Cross-footing d. Balance
d. Balance
21. Which of the following is not a payroll department internal control? a. Segregation of duties b. Physical payouts c. Computer edits d. Balancing accounts
d. Balancing accounts
2. Under the FLSA, which of the following records must be kept for more than two years from the last date they were in effect? a. Wage rate tables b. Piece rate tables c. Work time schedules establishing the hours and days of employment d. Collective bargaining agreements
d. Collective bargaining agreements
18. Managers are involved in all of the following processes as part of their managerial responsibilities other than: a. Planning b. Organizing c. Directing d. Completing tasks
d. Completing tasks
14. Which of the following laws restricts states in their regulation of creditor garnishments? a. Fair Labor Standards Act b. Omnibus Budget Reconciliation Act of 1993 c. Family Support Act of 1988 d. Consumer Credit Protection Act
d. Consumer Credit Protection Act
9. Which of the following costs is not a reasonable housing expense? a. Occupancy taxes b. Fees paid for securing a house c. Furniture rental d. Cost of domestic labor
d. Cost of domestic labor
20. What journal entry is made to record the deposit of federal income tax? a. Debit payroll taxes expense, credit federal income tax payable b. Debit cash, credit federal income tax payable c. Credit payroll taxes expense, debit cash d. Debit federal income tax payable, credit cash
d. Debit federal income tax payable, credit cash
5. Where does the hiring process begin? a. Decision not to fill a position b. Decision not to create a position c. Decision not to analyze a job d. Decision to terminate the incumbent
d. Decision to terminate the incumbent
13. If an employer has made timely deposits of its full FUTA tax liability, what is the Form 940 due date? a. January 10 b. January 15 c. January 31 d. February 10
d. February 10
4. Distributions from retirement plans and payments of matured annuity, endowment, and life insurance contracts must be reported on what form? a. Form W-2P b. Form W-2 c. Form W-3 d. Form 1099-R
d. Form 1099-R
18. What form is used to request a credit for overpaid taxes? a. Form 941 b. Form 843 c. Form 940 d. Form 941-X
d. Form 941-X
2. When an employer has been unable, after a reasonable effort, to deliver an employee's copies of Form W-2, how long must it keep those copies or be able to reproduce the electronic file containing the employee's W-2 information? a. Five years b. Three years c. Two years d. Four years
d. Four years
10. What form is used to report backup withholding? a. Form 941 b. Form 944 c. Form 943 d. From 945
d. From 945
18. Which of the following visas is an immigrant visa? a. B-1 b. F-1 c. H-1 d. I-551
d. I-551
7. Where should negative feedback be given? a. Where everyone can benefit from hearing it b. Negative feedback should never be given c. Directly to the human resources department d. In private to the worker
d. In private to the worker
11. All of the following behaviors are common mistakes to avoid when selecting a new system except: a. Making decisions without sufficient input b. Failing to consider all the costs associated c. Not considering future company needs regarding expansion and downsizing d. Including personnel from all related departments on the project team
d. Including personnel from all related departments on the project team
13. What effect does revenues have on accounts? a. Increasing expenses b. Decreasing liabilities c. Decreasing owner's equity d. Increasing owner's equity
d. Increasing owner's equity
13. If a pension recipient fails to complete Form W-4P, what withholding status must be used by the payer to calculate withholding? a. Single, with 0 allowances b. Single, with 1 allowance c. Married, with 0 allowances d. Married, with 3 allowances
d. Married, with 3 allowances
9. Which of the following agencies made it necessary for Nacha to adopt rules creating special requirements for International ACH Transactions? a. Internal Revenue Service b. Federal Reserve Board c. Department of State d. Office of Foreign Assets Control
d. Office of Foreign Assets Control
9. What is the most successful strategy for motivating employees? a. Taking notice of negative behavior only b. Not providing positive feedback c. Realizing an employee is not a "team player" d. Rewarding an employee's positive behavior
d. Rewarding an employee's positive behavior
4. In the modern audit process how does testing occur? a. Checking every transaction b. Checking those transactions indicated by the company c. Checking similar transactions to the last audit d. Sampling
d. Sampling
8. All of the following features are disadvantages of an in-house computer system except: a. High fixed costs b. Additional staffing c. Sufficient secure space needed d. Scheduling flexibility
d. Scheduling flexibility
12. A newly hired employee who is married with two children fails to complete Form W-4 by his first payday. What withholding status does the employer use when calculating the employee's withholding? a. Married filing jointly, with $4,000 entered in Step 3 b. Married filing jointly, with 3 allowances c. Single or married filing separately, with the checkbox in Step 2(c) checked d. Single or married filing separately, with no entries in Steps 2, 3, or 4
d. Single or married filing separately, with no entries in Steps 2, 3, or 4
