Payroll Fundamentals Flashcards

Which payroll concept describes the total compensation an employee earns before any deductions are taken?

Answer: Gross pay

Gross pay is total compensation before deductions, including base pay, overtime, bonuses, and other earnings.

An employee on a semimonthly pay schedule receives 24 paychecks per year. If annual salary is $60,000, what is each paycheck's gross amount?

Answer: $2,500

$60,000 ÷ 24 semimonthly periods = $2,500 per paycheck.

Which IRS form is used by an independent contractor to certify taxpayer identification and exempt status for backup withholding purposes?

Answer: Form W-9

Form W-9 is provided by independent contractors to employers to certify their TIN and claim exemption from backup withholding.

Under FUTA, what is the standard federal unemployment tax rate on the first $7,000 of each employee's wages?

Answer: 6.0%

The gross FUTA rate is 6.0% on the first $7,000 of wages, which can be reduced by up to 5.4% for timely state unemployment tax payments.

What payroll record retention period does the IRS recommend for employment tax records?

Answer: 4 years

The IRS recommends retaining employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.

Which of the following correctly describes the 'lookback period' for determining an employer's deposit schedule?

Answer: The 12 months ending June 30 of the prior year

The IRS lookback period is July 1 through June 30 of the year before the current calendar year, used to classify employers as monthly or semiweekly depositors.

A nonresident alien employee presents a Form W-8BEN claiming treaty benefits. What withholding rate applies to their wages if treaty reduces it to 15%?

Answer: The treaty rate of 15%

A valid income tax treaty claim on Form W-8BEN reduces withholding to the treaty rate (15% in this case) rather than the standard 30% NRA rate.