Payroll Processing & Administration Flashcards

An employee earns $3,200 bi-weekly. What is the correct annualized salary used for federal income tax withholding purposes?

Answer: $83,200

Bi-weekly pay periods (26 per year) × $3,200 = $83,200 annualized salary.

Under the Fair Labor Standards Act (FLSA), which of the following employees is classified as exempt from overtime pay requirements?

Answer: A salaried executive earning $684/week managing two or more employees

The FLSA executive exemption requires a salary of at least $684/week and management of two or more employees as a primary duty.

A company pays employees on a semi-monthly basis. How many payroll periods occur annually?

Answer: 24

Semi-monthly payroll occurs twice per month, resulting in 24 pay periods per year.

Which IRS form must an employer use to report annual wage and tax information for each employee?

Answer: Form W-2

Form W-2 (Wage and Tax Statement) is filed annually to report each employee's earnings and withholdings.

When an employee claims 'exempt' on their Form W-4, what does the employer do?

Answer: Withholds no federal income tax from the employee's wages

An 'exempt' W-4 claim means the employer withholds zero federal income tax, though FICA taxes still apply.

Which payroll record retention requirement does the IRS generally mandate for employment tax records?

Answer: 4 years

The IRS requires employers to retain employment tax records for at least 4 years after the tax is due or paid.

A garnishment order requires withholding 25% of an employee's disposable earnings. The employee's weekly disposable earnings are $480. Federal minimum wage is $7.25/hour (30× = $217.50). What is the maximum allowable garnishment?

Answer: $120.00

The CCPA limits garnishment to the lesser of 25% of disposable earnings ($120) or the amount exceeding 30× minimum wage ($262.50), so $120 applies.