Tax Reporting and Filing Flashcards

What is backup withholding and when does it apply to payroll?

Answer: A 24% federal tax withheld when a payee fails to provide a correct TIN or the IRS notifies the payer to withhold

Backup withholding at 24% applies when a payee fails to furnish a correct Taxpayer Identification Number or when the IRS issues a B-Notice requiring withholding.

Which ADP report is used to verify that the correct amount of federal income tax was withheld across all employees for the quarter?

Answer: Payroll Tax Liability Report

The Payroll Tax Liability Report in ADP summarizes all federal, state, and local tax withholdings and employer tax liabilities by period, enabling quarterly verification.

What is the purpose of IRS Form 8922 in the context of third-party sick pay?

Answer: To reconcile third-party sick pay wages and taxes that were reported under the employer's or insurer's EIN rather than the other party's EIN

Form 8922 reconciles third-party sick pay amounts and taxes when the employer and third-party payer split reporting responsibilities across different EINs.

In ADP, what triggers a new state tax registration requirement when a company expands to a new state?

Answer: Hiring an employee who works in or is a resident of a new state

Payroll nexus is typically created when an employer has an employee working in or residing in a state, requiring registration for state income and unemployment tax withholding.

What is the Electronic Federal Tax Payment System (EFTPS) and how does it relate to ADP?

Answer: A U.S. Treasury system for making federal tax deposits electronically; ADP uses it to deposit taxes on behalf of clients enrolled in its tax filing service

EFTPS is the IRS's official electronic tax payment system, and ADP SmartCompliance uses it to make timely federal tax deposits on behalf of client employers.

What action must a payroll specialist take in ADP when an employee claims exempt from federal income tax withholding on their W-4?

Answer: Set the employee's federal withholding to exempt in ADP and note that a new W-4 must be submitted by February 15 each year to maintain exempt status

Exempt status must be entered in ADP's W-4 configuration, and the IRS requires employees to submit a new W-4 by February 15 annually to renew exempt status.