ACC 105 Chapter 5 Smartbook: Employee Net Pay & Pay Methods
Medicare taxes provide for:
health insurance coverage for individuals eligible to enroll in Medicare benefits
True or False: The wage-bracket method is useful for manual payroll preparation because the process of federal tax withholding is an absolute amount that will match the year-end tax forms.
False
True or false: Disposable income limits apply to union dues.
False
True or false: Paycards require employees to have a bank account.
False
To determine taxes to withhold using the __ method, the payroll clerk may use Publication 15-T.
Wage-Bracket
In 2020, Social Security taxes are calculated with a wage base of:
$137,700
In 2020, Social Security taxes have a maximum wage base of_.
$137,700
An employee earns $4,000 per week and contributes $150 to their 401(k) plan and $75 to United Way. What amount of employee's wages are subject to federal income taxes?
$3,850 ($4,000 - 150 = $3,850)
An employee earns $4,000 per week and contributes $150 to their 401(k) plan and $75 to United Way, a charity. What is the employee's FICA taxes for the period?
$306 ($4,000 x (.062 + .0145) = $306 Social Security Tax Rate = 6.2 Medicare Tax Rate = 1.45)
George had gross wages of $1,000, 401(k) deduction equal to 15% of gross wages and health insurance of $50. George's taxable income is $_.
$800 (1,000 x .15 = 150 150 + 50 = 200 1,000 - 200 = 800)
Employers issuing paper checks to employees should:
-use a dedicated payroll account -maintain an unclaimed property account -ensure sufficient funds are in the bank account
Highly compensated employees are subject to an additional 0.9% Medicare tax because of the __ Act.
Affordable Care
_ is a type of cryptocurrency that has gained popularity.
Bitcoin or Ethereum
If a firm operates in multiple states, state __ requirements may become more complex.
Income Tax
True or False: Most states have a state income tax.
True
The maximum garnishment for an employee is determined on:
disposable income
FICA taxes are imposed on _.
eligible wages
Manual calculations of payroll taxes using the wage-bracket method would:
estimate the amount for year end
Charitable contributions are:
paid by the employee and remitted by the employer
Post-tax deductions:
reduce employee net pay
After computing employee gross pay, the next step is to:
subtract pre-tax deductions
When an employer pays with cash, what information should the pay advice contain?
-Deductions -Gross pay -Net pay
Which of the following are more often employer-only taxes?
-Federal unemployment taxes -State unemployment taxes
Which of the following are potential indicators of payroll fraud?
-Handwritten additions to the paycheck -Changes in font type -Absence of the bank's or the recipient's address
When would a company use paycards for the payment of employees?
-If they have traveling workers -Large number of employees that do not have bank accounts
What are advantages of paying employees by check?
-Improved traceability -Simplicity of accounting records
Which of the following are disadvantages of paying employees by check?
-Increased risk of lost pay check -Increased reconciliation process
Internet technologies allow the transfer of funds for cryptocurrencies by:
-International payment without exchange rates -Transfers between wallets
Which of the following is true about the Social Security wage base?
-It usually changes annually -The tax rate is 6.2% of eligible wages
Which of the following are NOT determinates of federal withholding taxes on Form W-4 from 2019 or prior years?
-Job classification -Net pay
Mandatory tax deductions for all employees include the following:
-Medicare taxes -Federal income taxes -Social Security taxes
FICA taxes comprise which of the following:
-Medicare taxes. -Social Security taxes.
Daniel is a new employee looking at contributing to a 401(k) offered through the company. How will his contributions affect his tax liability?
-No change to FICA tax liability -Lower federal income tax
In addition to tracking hours and accurately compensating employees based on their marital status and withholdings, the employer must keep the employee's _ number in a _ file.
-Paycard -Secure
The purpose for using grossed-up pay is to:
-Satisfy tax liabilities -Achieve a predetermined net pay
Obtaining the employee's _ and _ averts problems associated with timely cash payments.
-Signature -Date
Which of the following are types of taxes employers would match?
-Social Security taxes -Medicare taxes
The following is true about state taxes on employees earnings:
-States tax rates may vary by wage levels. -State taxes follow similar guidelines as federal taxes. -States may apply a variety of additional taxes.
What are some reasons that employers may pay their employee's wages in cash?
-Temporary workers -High liquidity for employees
When would an employee want to have additional taxes withheld by their employer?
-When the employee has more than one job. -When the employee has additional income for which no income tax is withheld.
Court ordered garnishments can be for:
-child support -student loans -alimony
Information on local (city or county) taxes can be found through:
-city revenue department -county revenue department
Employees may choose to use direct deposit to:
-decrease wait time for access to their payroll -avoid losing the paycheck -avoid going to the bank
Charitable contributions are:
-deducted post-tax -reported on the employee's itemized tax return
The employer's role in federal income taxes is:
-depositor -reporter -collector
When using the wage-bracket method the payroll accountant needs to know:
-exemptions -marital status
Post-tax deductions are comprised of:
-mandatory withholdings -voluntary withholdings
Social Security taxes were designed to cover people for:
-retirement -disability -old age -illness
Employees may be subject to:
-state disability taxes. -state income taxes.
When using the wage-brack method in Publication 15-t, the payroll clerk identifies the:
-taxable income -marital status
Put the list in the correct processing order:
1. Determine Gross Pay 2. Determine Pre-Tax Deductions 3. Determine Federal Withholding Taxes 4. Determine Post-Tax Deductions
Under the percentage method, place the items in calculation order:
1. Gross Pay 2. Federal Taxable Wages 3. Withholding Allowance Deduction 4. Tiered Tax Rate
The combined rate for Social Security taxes in 2020 is:
12.4%
In 2020, Publication _ was issued for the sole purpose of income tax calculations.
15-T
The combined maximum Medicare tax rate for an individual earning more than $200,000 annually would be _.
2.35% (1.45% + 0.9% = 2.35%)
Unlike the use of paper checks or direct deposit for payroll disbursement, paycards do not require employees to have a __.
Bank Account
The __ may be liable for payroll check fraud until such activity is proven.
Check Issuer
During the first step of determining grossed-up pay, what computation must occur?
Compute the total percentage of mandatory taxes
What is a potential problem when using an electronic portal for employee access to pay records?
Computer Hacking
What item(s) was/were new on the Form 2020 W-4?
Dependents under 17
Timing of the employee repayment of an advance is determined by:
Employee agreement
Define escheatment.
Leaving a check uncashed
Employers may choose to use direct deposit to avoid:
Lost Paychecks
When using direct deposit, a best practice is to grant employees access to an __ to view their pay advice.
Online Portal
The repayment by an employee of an advance is treated as a _-tax deduction.
Post-tax
Until 2006, __ applied to funds on deposit in an FDIC-insured institution but has since been extended to paycards.
Regulation E
Which controls would improve accountability in cash payroll systems?
Signed receipts
An employer must withhold state income taxes when:
The state in which they operate has a state income tax
True or False: Social Security and Medicare can be higher than federal taxable income because of retirement contributions.
True
True or False: The new Form W-4 removes the withholding allowances and focuses on marital status, annual income, and dependents.
True
True or false: Paycards may be accessed anywhere that credit cards are accepted.
True
Employee deductions for union dues are considered:
Voluntary
The employee completes which form to identify the withholding information for federal income taxes?
W-4
The wage based for the additional Medicare tax is determined by the information on the employee's _.
W-4
Occupational privilege taxes may be imposed by:
local governments
Which of the following is correct regarding employer's withholding of state taxes:
the amount must be based on all wages earned within their state
The percentage method calculates withholding amounts based upon:
tiered income level
Once the employer has computed the employee's gross pay, the next step is:
to deducted mandatory, voluntary, and mandated amounts
