CAT Payroll Processing & Administration 4

Question 1

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

Accepted Answer

Medicare tax

Answer

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

Question 2

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

Accepted Answer

Form 1099-NEC

Answer

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

Question 3

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

Accepted Answer

Gross wages minus all withholdings and deductions

Answer

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

Question 4

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

Accepted Answer

3 years

Answer

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

Question 5

Which of the following correctly describes the FUTA tax?

Accepted Answer

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

Answer

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.

(CAT) Certified Accounting Technician Practice Test

(CAT) Certified Accounting Technician Practice Test

CAT Payroll Processing & Administration 4