CBS Payroll Processing & Administration 3 — Questions and Answers
Question 1: Which of the following is a correct statement about Supplemental Wage withholding using the flat rate method?
- The flat rate is 15% for all supplemental wages
- The flat rate is 22% for supplemental wages under $1 million (Correct answer)
- The flat rate equals the employee's regular withholding rate
- Supplemental wages are always exempt from FICA taxes
Correct answer: The flat rate is 22% for supplemental wages under $1 million
For 2024, the IRS flat withholding rate on supplemental wages (bonuses, commissions) up to $1 million is 22%.
Question 2: A new employee does not submit a Form W-4. Which withholding status must the employer apply?
- Married filing jointly with zero allowances
- Single with standard withholding at the highest rate (Correct answer)
- Exempt from withholding
- Married filing jointly at the highest rate
Correct answer: Single with standard withholding at the highest rate
If an employee fails to submit a W-4, the employer must withhold as if the employee is Single with no adjustments — the highest withholding rate.
Question 3: What distinguishes a Section 125 cafeteria plan benefit from a standard employee benefit for payroll tax purposes?
- It increases FICA taxable wages
- It reduces both federal income tax and FICA taxable wages (Correct answer)
- It is reported separately on the W-2 in Box 12 with code DD only
- It is subject to federal income tax but exempt from FICA
Correct answer: It reduces both federal income tax and FICA taxable wages
Section 125 cafeteria plan elections reduce gross wages subject to both federal income tax withholding and FICA (Social Security and Medicare) taxes.
Question 4: Under the Electronic Federal Tax Payment System (EFTPS), when is a monthly depositor required to deposit payroll taxes?
- By the 15th of the following month (Correct answer)
- Within 3 business days of payday
- By the last day of the month in which wages were paid
- By the next banking day after payday
Correct answer: By the 15th of the following month
Monthly depositors must deposit payroll taxes accumulated during a calendar month by the 15th of the following month.
Question 5: An employer pays the employee share of FICA taxes on behalf of an employee (gross-up arrangement). How are those employer-paid employee taxes treated?
- They are a non-taxable fringe benefit
- They are additional taxable wages to the employee (Correct answer)
- They reduce the employer's FUTA liability only
- They are deducted from the employee's net pay
Correct answer: They are additional taxable wages to the employee
When an employer pays the employee's share of FICA, those payments are treated as additional taxable wages subject to income tax and FICA.
Question 6: Which box on Form W-2 reports employer contributions to an employee's Health Savings Account (HSA)?
- Box 12, Code W (Correct answer)
- Box 12, Code DD
- Box 14
- Box 12, Code S
Correct answer: Box 12, Code W
Employer HSA contributions, including amounts contributed through a Section 125 plan, are reported in Box 12 with Code W.
Question 7: A semi-weekly depositor's payday falls on a Wednesday. By which day must the payroll tax deposit be made?
- The following Friday (Correct answer)
- The following Monday
- The following Wednesday
- The next banking day
Correct answer: The following Friday
Under semi-weekly deposit rules, taxes on wages paid Wednesday through Friday must be deposited by the following Friday.
CBS Payroll Processing & Administration 3
Which of the following is a correct statement about Supplemental Wage withholding using the flat rate method?