Question 1

If a firm has fewer than 100 employees,which of the following is true?
A) It must offer an ESOP.
B) Direct deposit of employee pay is mandatory.
C) It must match employee contributions to federal income tax.
D) It may offer a SIMPLE defined contribution plan.

Accepted Answer

If a firm has fewer than 100 employees, it may offer a SIMPLE (Savings Incentive Match Plan for Employees) defined contribution plan. ESOPs are not mandatory, direct deposit is not mandatory for any size firm, and firms are not required to match employee contributions to federal income tax.

Question 2

The regular Medicare tax deduction is 1.45% for employee and employer and must be paid by all employees.

Accepted Answer

The regular Medicare tax deduction is indeed 1.45% for both employee and employer, and it is mandatory for all employees to pay this tax.

Question 3

Health Savings Accounts may be used as pre-tax deductions for which type of costs (Select all that apply)?
A) Child medical expenses
B) Gasoline expenses
C) Long-term care expenses
D) Prescription expenses

Accepted Answer

A

Question 4

A firm has headquarters in Indiana,but has offices in California and Utah.For employee taxation purposes,it may choose which of those three states income tax laws it wishes to use.

Accepted Answer

A firm cannot simply choose which state's income tax laws to follow for its employees. The state in which an employee resides and works typically determines the applicable state income tax laws.

Question 5

What role does the employer play regarding an employee's federal withholding tax?
A) Collector and depositor
B) Reporter and depositor
C) Collector and verifier
D) Verifier and reporter

Accepted Answer

The employer plays the role of collector and depositor of the employee's federal withholding tax. The employer withholds the tax from the employee's wages and deposits it to the IRS on behalf of the employee.

Question 6

Charitable contributions are an example of post-tax voluntary deductions.

Accepted Answer

Charitable contributions are made after taxes are deducted from an individual's earnings. Therefore, they are considered post-tax voluntary deductions.

Question 7

Amity is an employee with a period gross pay of $2,000.She elects to have 3% of her gross pay withheld for her 401(k)contribution.What will be her taxable income be for federal income taxes?
A) $2,000
B) $1,970
C) $1,940
D) $1,910

Accepted Answer

The answer of Amity is an employee with a period...

Question 8

The wage-bracket of determining federal tax withholding yields more accurate amounts than the percentage method.

Accepted Answer

The percentage method is generally more precise because it calculates withholding based on exact percentages of an employee's income, allowing for more accurate adjustments for different income levels and filing statuses. The wage-bracket method, while simpler, uses predefined income ranges and can be less precise for individual circumstances.

Question 9

Which of the following best describes a SEP?
A) The employer or employee establishes and employer contributes to a tax-favorable IRA.
B) The employer establishes a tax-favorable IRA for the employee.
C) The employee rolls over an existing IRA to his or her employer and the current employer continues contributions.
D) The employer creates a taxable IRA to which the employee must make a defined contribution.

Accepted Answer

A SEP (Simplified Employee Pension) is a retirement savings plan that allows employers to establish an IRA (Individual Retirement Account) for their employees. The employer makes tax-deductible contributions to the employee's IRA, and the employee is responsible for managing the funds within the account. Therefore, choice A accurately describes a SEP, and is the best choice.

Question 10

Which of the following may be included as part of an employee's Section 125 "cafeteria" plan?
A) Medical expenses
B) Tuition expenses
C) Meal expenses
D) Moving expenses

Accepted Answer

Section 125 cafeteria plans typically allow employees to choose between receiving taxable cash compensation and using that compensation to pay for certain qualified benefits on a pre-tax basis, such as medical expenses. Tuition expenses, meal expenses, and moving expenses are not typically eligible for reimbursement under a Section 125 plan.

Question 11

The use of paycards as a means of transmitting employee pay began in the 1990s with over-the-road drivers out of a need to transmit funds reliably on payday.

Accepted Answer

The use of paycards did begin in the 1990s, particularly for over-the-road drivers, due to the need for reliable funds transmission on payday.

Question 12

Federal income tax,Medicare tax,and Social Security tax amounts withheld from employee pay are matched by amounts paid by the employer.

Accepted Answer

The answer of Federal income tax,Medicare tax,and Social Security tax...

Question 13

Which of the following guidelines does the IRS use to evaluate the tax treatment of supplemental health insurance?
A) If the income derived is taxable,then the cost is tax-free.
B) If the income derived is nontaxable,then the cost must be taxed.
C) If the income derived will be tax free,then the cost is also tax exempt.
D) If the income derived is taxable,then the cost is taxable.

Accepted Answer

The IRS generally allows the cost of supplemental health insurance to be tax-exempt if the benefits received from the insurance are also tax-free.

Question 14

Two classes of deductions exist: pre-tax and post-tax.

Accepted Answer

Pre-tax deductions are taken out of an employee's gross pay before taxes are calculated, while post-tax deductions are taken out after taxes have been calculated.

Question 15

Which of the following deductions may be taken on a pre-tax basis (Select all that apply)?
A) Cafeteria plan
B) Garnishments
C) Health insurance
D) Retirement plan

Accepted Answer

A cafeteria plan allows employees to choose from a variety of pre-tax benefits such as health insurance, dependent care assistance, and retirement plans. Health insurance premiums can generally be deducted on a pre-tax basis, as can contributions to retirement plans such as 401(k)s or IRAs. Garnishments are not pre-tax deductions, but rather court-ordered deductions from an employee's paycheck to pay off a debt or other financial obligation.

Question 16

Social Security tax has a wage base,which is the minimum amount an employee must earn before they will have the Social Security tax deduction.

Accepted Answer

The wage base for Social Security tax is actually the maximum amount of earnings subject to the tax, not the minimum.

Question 17

Which of the following is used in the determination of the amount of federal income tax to be withheld from an employee per pay period?
A) Date of birth
B) Annual salary
C) Marital status
D) Prior year's tax return

Accepted Answer

Marital status is used in the determination of the amount of federal income tax to be withheld from an employee per pay period through the use of the employee's Form W-4, which includes information about the employee's marital status and number of allowances claimed. This information is used to calculate the tax withholding based on the tax tables provided by the IRS. The other options (A, B, and D) are not typically used in this calculation.

Question 18

The amount of federal income tax decreases as the number of allowances increases.

Accepted Answer

Each allowance claimed reduces taxable income, which leads to a reduction in the amount of federal income tax owed. Therefore, the more allowances claimed, the lower the federal income tax.

Question 19

Garnishments are court-ordered amounts that an employer must withhold from an employee's pre-tax pay and remit to the appropriate authority.

Accepted Answer

Garnishments are indeed court-ordered amounts that an employer must withhold from an employee's wages, but they are typically taken from an employee's after-tax pay, not pre-tax pay.

Question 20

Which Act extended health care benefits to employee dependents until age 26?
A) Health Insurance Portability and Affordability Act
B) Americans with Disabilities Act
C) Family Medical Leave Act
D) Affordable Care Act

Accepted Answer

The Affordable Care Act (also known as Obamacare) extended health care benefits to employee dependents until age 26.

Quiz 4: Employee Net Pay and Pay Methods

If a firm has fewer than 100 employees,which of the following is true?

The regular Medicare tax deduction is 1.45% for employee and employer and must be paid by all employees.

Health Savings Accounts may be used as pre-tax deductions for which type of costs (Select all that apply) ?

A firm has headquarters in Indiana,but has offices in California and Utah.For employee taxation purposes,it may choose which of those three states income tax laws it wishes to use.

What role does the employer play regarding an employee's federal withholding tax?

Charitable contributions are an example of post-tax voluntary deductions.

Amity is an employee with a period gross pay of $2,000.She elects to have 3% of her gross pay withheld for her 401(k) contribution.What will be her taxable income be for federal income taxes?

The wage-bracket of determining federal tax withholding yields more accurate amounts than the percentage method.

Which of the following best describes a SEP?

Which of the following may be included as part of an employee's Section 125 "cafeteria" plan?

The use of paycards as a means of transmitting employee pay began in the 1990s with over-the-road drivers out of a need to transmit funds reliably on payday.

Federal income tax,Medicare tax,and Social Security tax amounts withheld from employee pay are matched by amounts paid by the employer.

Which of the following guidelines does the IRS use to evaluate the tax treatment of supplemental health insurance?

Two classes of deductions exist: pre-tax and post-tax.

Which of the following deductions may be taken on a pre-tax basis (Select all that apply) ?

Social Security tax has a wage base,which is the minimum amount an employee must earn before they will have the Social Security tax deduction.

Which of the following is used in the determination of the amount of federal income tax to be withheld from an employee per pay period?

The amount of federal income tax decreases as the number of allowances increases.

Garnishments are court-ordered amounts that an employer must withhold from an employee's pre-tax pay and remit to the appropriate authority.

Which Act extended health care benefits to employee dependents until age 26?