Payroll Processing & Administration Flashcards

Which payroll tax is NOT subject to a wage base limit?

Answer: Medicare tax

Medicare tax applies to all covered wages with no annual wage base ceiling, unlike Social Security and FUTA which have annual caps.

An independent contractor is paid $650 for services. Which form must the business issue to report this payment?

Answer: Form 1099-NEC

Form 1099-NEC must be issued to independent contractors paid $600 or more for nonemployee compensation during the year.

What does the term 'net pay' represent in payroll processing?

Answer: Gross wages minus all withholdings and deductions

Net pay is the amount an employee actually receives after all mandatory and voluntary deductions are subtracted from gross wages.

How long must employers generally retain payroll records under federal law?

Answer: 3 years

The FLSA requires employers to keep payroll records for at least 3 years, though some records must be retained for 2 years.

Which of the following correctly describes the FUTA tax?

Answer: Paid solely by the employer on the first $7,000 of each employee's wages

FUTA (Federal Unemployment Tax Act) tax is paid only by employers and applies to the first $7,000 of each employee's wages at a net rate of 0.6% after credits.

A new employee fails to submit a Form W-4. What withholding rate should the employer apply?

Answer: The rate for single filer with no adjustments

If an employee does not provide a W-4, the employer must withhold as if the employee is single with no other adjustments.

What is the Medicare surtax rate applied to wages above $200,000 for a single filer under the Affordable Care Act?

Answer: 0.9%

An additional 0.9% Medicare surtax applies to wages exceeding $200,000 ($250,000 for married filing jointly), which employers must withhold.