Payroll Processing & Compliance Flashcards

An employee claims exempt from federal income tax withholding on their W-4. Under what condition is this allowed?

Answer: They had no tax liability last year and expect none this year

Exempt status is valid only when the employee had zero federal tax liability in the prior year and expects none in the current year.

Which IRS form must employers use to deposit federal payroll taxes electronically?

Answer: EFTPS

The Electronic Federal Tax Payment System (EFTPS) is the required method for electronically depositing federal payroll taxes.

A semi-weekly depositor's payroll falls on Wednesday. By which day must the federal payroll tax deposit be made?

Answer: The following Friday

For semi-weekly depositors, payrolls paid Wednesday through Friday must be deposited by the following Friday.

Which of the following fringe benefits is generally excluded from an employee's gross income for federal income tax purposes?

Answer: Group-term life insurance up to $50,000

Employer-provided group-term life insurance coverage up to $50,000 is excluded from an employee's gross income under IRC Section 79.

Under the FLSA, what is the maximum tip credit an employer may claim against the federal minimum wage for tipped employees in 2024?

Answer: $2.13 per hour

The federal tip credit maximum is $5.12, reducing the cash wage floor to $2.13 per hour, which has remained unchanged since 1991.

An employee earns $200,000 in wages. Which payroll tax requires the employer to withhold an Additional 0.9% from this employee?

Answer: Medicare tax

The Additional Medicare Tax of 0.9% applies to wages exceeding $200,000 (single filers) and is withheld only by the employer, with no employer match.

Which document must an employer provide to each employee by January 31 showing prior-year wages and tax withholdings?

Answer: Form W-2

Employers must furnish Form W-2 (Wage and Tax Statement) to each employee by January 31 of the following year.