CAT Payroll Processing & Administration 3

Question 1

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

Accepted Answer

Employer-paid health insurance premiums

Answer

Employer-paid health insurance premiums are excluded from employees' gross income under Section 106 of the Internal Revenue Code.

Question 2

What document must employers provide to employees by January 31 each year summarizing annual wages and taxes withheld?

Accepted Answer

Form W-2

Answer

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

Question 3

An employee enrolls in a Section 125 cafeteria plan. How does this affect their federal income tax withholding?

Accepted Answer

It reduces taxable wages by the pre-tax contribution amount

Answer

Section 125 cafeteria plan contributions are made pre-tax, reducing the employee's taxable wages for federal income tax withholding purposes.

Question 4

Which form is used by employers to transmit Copy A of all Forms W-2 to the Social Security Administration?

Accepted Answer

Form W-3

Answer

Form W-3 (Transmittal of Wage and Tax Statements) is the cover sheet submitted with Copy A of all W-2 forms to the SSA.

Question 5

Under the FLSA, which category of workers is generally exempt from overtime pay requirements?

Accepted Answer

Executive, administrative, and professional employees meeting salary thresholds

Answer

The FLSA's white-collar exemptions apply to executive, administrative, and professional employees who meet specific salary and duties tests.

(CAT) Certified Accounting Technician Practice Test