Question 1

Which of the following deductions cannot be taken on a pre-tax basis?
A) Cafeteria plan
B) Garnishments
C) Health insurance
D) Retirement plan

Accepted Answer

Garnishments are deductions taken from an employee's wages to satisfy a legal obligation, such as child support or unpaid taxes. They cannot be taken on a pre-tax basis because they are not considered a voluntary benefit or contribution. The other options listed (cafeteria plan, health insurance, and retirement plan) are all voluntary benefits or contributions that can be taken on a pre-tax basis.

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 employees and employers, and it is mandatory for all employees.

Question 3

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

Question 4

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

Amity's 401(k) contribution is $60 (3% of $2,000). Her taxable income for Federal income taxes is $2,000 - $60 = $1,940.

Question 5

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

Accepted Answer

The wage-bracket method is simpler and easier to use for employers, but the percentage method can be more precise, especially for higher income levels or more complex tax situations.

Question 6

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 use pre-tax dollars to pay for certain qualified expenses, such as medical expenses, dependent care expenses, and certain insurance premiums. Tuition expenses, meal expenses, and moving expenses may not be included in a Section 125 plan unless they meet certain IRS guidelines for eligibility.

Question 7

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 answer of Which of the following guidelines does the...

Question 8

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 choose which state's income tax laws to use for employee taxation purposes. The state where the employee physically works determines the state income tax that applies to their wages. However, the firm may be required to withhold state taxes for multiple states if employees work in different states.

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 type of retirement plan where the employer sets up a tax-favored individual retirement account (IRA) to which both the employer and employee can make contributions.

Question 10

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 one of the factors used in determining the amount of Federal income tax to be withheld from an employee per pay period. Other factors include the employee's income and the number of withholding allowances they claim on their W-4 form. Date of birth and prior year's tax return are not factors used in determining withholding, and while annual salary is a factor, it alone does not determine the withholding amount.

Question 11

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 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

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 is responsible for collecting the federal withholding tax from the employee's paycheck and depositing it with the IRS. Therefore, the employer plays the role of collector and depositor.

Question 14

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 15

Which Act extended health care benefits to employee dependents until age 27?
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 included a provision that allows children to stay on their parent's health insurance plan until age 26. This provision includes dependent children who are married, not living with their parents, attending school, or financially dependent on their parents.

Question 16

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

Accepted Answer

Charitable contributions are made after taxes have already been deducted from an individual's paycheck, and are considered voluntary deductions.

Question 17

If a firm has fewer than 100 employees,which of the following is true?
A) It may not offer an ESOP.
B) It is not required to offer disability insurance.
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 defined contribution plan, which is a retirement savings plan that allows employees and employers to contribute to the plan. Offering an ESOP is not prohibited for small firms but it may not be feasible due to administrative complexities. An employer is not required to offer disability insurance as long as it complies with federal and state laws regarding discrimination. An employer is not required to match employee contributions to federal income tax.

Question 18

Health Savings Accounts may not be used as pre-tax deductions for which type of costs?
A) Child medical expenses
B) Gasoline expenses
C) Long-term care expenses
D) Prescription expenses

Accepted Answer

Health Savings Accounts (HSAs) can only be used as pre-tax deductions for eligible medical expenses. Gasoline expenses do not qualify as an eligible medical expense. Child medical expenses, long-term care expenses, and prescription expenses do qualify as eligible medical expenses.

Question 19

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 withheld, while post-tax deductions are taken out after taxes are withheld.

Question 20

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

Accepted Answer

Claiming more allowances on your W-4 form will reduce the amount of Federal income tax withheld from your paycheck. This is because allowances represent the amount of income that you expect to take as deductions, such as for dependents or mortgage interest, and reduce your taxable income. Therefore, more allowances mean less taxable income and less tax to withhold.

Quiz 4: Employee Net Pay and Pay Methods

Which of the following deductions cannot be taken on a pre-tax basis?

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

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.

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

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

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.

Which of the following best describes a SEP?

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?

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.

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

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

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 27?

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

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

Health Savings Accounts may not be used as pre-tax deductions for which type of costs?

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

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