Deck 5: Unemployment Compensation Taxes

Question 1

Which of the following federal withholding allowance scenarios will have the highest income tax?
• Single, 5 allowances
• Married, 0 allowances
• Married, 3 allowances
• Single, 1 allowance

Answer 1

Single, 1 allowance

Question 2

Which of the following statements is/are true about Social Security tax deductions from gross pay? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• The wage base is $132,900.
• The tax is computed on all earnings.
• The tax rate is 6.0%.
• Section 125 deductions are not subject to Social Security tax.

Answer 2

The wage base is $132,900.

Question 3

Which are steps in the net pay computation process? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Compute taxes to be withheld.
• Report fringe benefit balances.
• Compute gross pay.
• Update employee records.

Answer 3

Compute taxes to be withheld.

Question 4

How are income taxes and FICA taxes applied to gross-up pay? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Subtract the sum of the income tax rate and FICA tax rate from 100 percent.
• Compute the sum of the income tax and FICA tax rates.
• Divide the net pay by the net tax rate.
• Multiply the gross pay by the sum of the income tax and FICA tax rates.

Question 5

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

Question 6

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.

Question 7

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.

Question 8

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

Question 9

Federal income tax, Medicare tax, and Social Security tax amounts withheld from employee pay are computed based on gross pay, less pre-tax deductions, and deducted to arrive at net pay.

Question 10

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

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.

Question 12

Why do employers use checks as an employment payment method?
• Paying employees by check requires the employer to keep currency on the premises.
• Paying employees by check offers a level of security of employee payments.
• Paying employees by check allows the employer flexibility with its bank accounts.
• Paying employees by check increases the complexity of the payroll process.

Question 13

Which of the following states do not have state income tax deducted from employee pay? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Montana
• New Hampshire
• Maine
• Alaska

Question 14

Which of the following statements is/are true about Medicare tax? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Additional Medicare tax is withheld for employees who earn more than $150,000 annually.
• Employers match all Medicare taxes withheld.
• The Medicare tax rate is 1.45%.
• All employee earnings less pre-tax deductions are subject to Medicare tax.

Question 15

Which payroll-specific tool is used to facilitate computation of net pay?
• Payroll Register
• Form I-9
• Employee Information Form
• Supervisor Payroll Report

Question 16

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

Question 17

Computation of net pay involves deducting mandatory and voluntary deductions from gross pay.

Question 18

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? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Date of birth
• Period salary
• Marital status
• Prior year's tax return

Question 19

What role does the employer play regarding an employee's federal withholding tax?
• Collector and verifier
• Verifier and reporter
• Collector and depositor
• Reporter and depositor

Question 20

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

Question 21

Nickels Company is located in West Virginia has employees who live in Ohio, Florida, Tennessee, and West Virginia. For which state(s) should the company collect and remit state income tax? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Florida
• Ohio
• West Virginia
• Tennessee

Question 22

The purpose of paycards as a pay method is to .
• promote debit card use as a means of economic stimulus
• prevent employees from opening bank accounts
• protect payroll processes against embezzlement
• promote accessibility and portability of employee compensation

Question 23

The factors that determine an employee's federal income tax are .
• Pay frequency, number of dependents, taxable pay, and marital status
• Marital status, birth date, taxable pay, and pay frequency
• Number of children, pay frequency, marital status, and gross pay
• Marital status, number of withholdings, taxable pay, and pay frequency

Question 24

What is a disadvantage to using paycards as a method of transmitting employee compensation?
• Ease of paying traveling employees.
• Convenience of retrieving pay disbursements.
• Acceptance of paycards at many locations.
• Potential withdrawal and point-of-sale limitations.

Question 25

The purpose of the wage base used for the Social Security tax is .
• to determine when to start withholding the tax from an employee's pay
• to determine the amount of Social Security tax to withhold from an employee's pay
• to establish a maximum salary level for application of the tax to employee pay
• to compute the total amount of Social Security tax that a firm must pay

Question 26

The percentage method of determining an employee's Federal income tax deductions .
• allows payroll accountants to determine Federal income tax for the firm itself
• is used to promote complexity in payroll practices
• is less accurate than the results gained from using the wage-bracket method
• is used primarily for high wage earners and computerized payroll programs

Question 27

The annual payroll tax guide that the IRS distributes is called .
• The IRS tax guide
• Publication 15
• Circular 15
• Publication E

Question 28

State and Local Income Tax rates .
• are paid by the employer to the Federal government
• differ among states and localities
• are mandated by Federal law
• exist at the same level in every state

Question 29

Post-Tax Deductions are amounts .
• That are only mandatory deductions like garnishments and union dues
• That are voluntarily chosen by the employee
• That Include both mandatory and voluntary deductions
• That the employer chooses to withhold after assessing the employee's tax liability

Question 30

The percentage of the Medicare tax withholding .
• changes every year in response to industry needs
• is the same for every employee, earning less than $200,000
• is subject to change based on the firm's profitability
• is always the same for both employer and employee

Question 31

Best practices for paying employees by check include which of the following? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
• Maintenance of a separate checking account for payroll purposes.
• Keeping a single check register for the firm's checking accounts.
• Logging the number, amount, and purpose of each check used.
• Establishing an unclaimed property account for uncashed checks.

Question 32

From the employer's perspective, which of the following is a challenge of paying employees by direct deposit?
• Employee self-maintenance of personnel records.
• Secure processing of employee compensation.
• Reduction in payroll processing costs.
• Vulnerability of data to computer attacks.

Question 33

When a payroll check is subject to escheatment, who handles the distribution of the money?
• The IRS.
• The employee.
• The state laws.
• The company.

Question 34

Which body issued Regulation E to protect consumers from loss of deposited funds?
• Department of Homeland Security
• Internal Revenue Service
• American Banking Association
• Federal Deposit Insurance Corporation

Question 35

What is an advantage of direct deposit from the employee's perspective?
• Long processing times for pay disbursements.
• Secure access to compensation.
• The requirement to have a bank account.
• Access to payroll data on non-secured website.

Question 36

Which of the following payment methods is growing in popularity among employees?
• Check
• Paycard
• Cash
• Direct Deposit