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Payroll Tax Compliance Flashcards

7 cards from real CPP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Payroll Tax Compliance flashcards as text

  1. Which of the following wages is exempt from FUTA tax?

    Answer: Wages paid to a spouse employed by the business owner's sole proprietorship

    Wages paid to a spouse working in a spouse-owned sole proprietorship are specifically exempt from FUTA under IRC Section 3306.

  2. What is the wage base limit for Social Security (OASDI) taxes in payroll tax compliance planning?

    Answer: It is adjusted annually by the SSA based on national average wage index

    The Social Security wage base is announced annually by the Social Security Administration and increases each year based on wage inflation.

  3. An employer issues a $500 gift card to each employee for the holidays. How is this treated for payroll tax purposes?

    Answer: It is taxable wages subject to income tax withholding and FICA

    Cash-equivalent gifts such as gift cards are always considered taxable wages and cannot qualify as de minimis fringe benefits regardless of value.

  4. What is a Credit Reduction State in the context of FUTA?

    Answer: A state that borrowed federal unemployment funds and has not fully repaid them, reducing the 5.4% SUTA credit

    If a state borrows from the federal unemployment trust fund and fails to repay by November 10, employers in that state face a reduced FUTA credit, increasing their net FUTA liability.

  5. Which IRS form is used to correct errors made on a previously filed Form 941?

    Answer: Form 941-X

    Form 941-X, the Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, is used to correct errors on a previously filed Form 941.

  6. Under the Lookback Rule, a new employer with no prior tax history is classified as which type of depositor?

    Answer: Monthly depositor

    New employers with no prior filing history are automatically classified as monthly depositors until their tax liability history establishes a different schedule.

  7. What penalty applies when an employer willfully fails to collect or pay over payroll taxes?

    Answer: 100% of the unpaid trust fund taxes (Trust Fund Recovery Penalty)

    The Trust Fund Recovery Penalty (TFRP) equals 100% of the unpaid withheld taxes and can be assessed personally against responsible individuals.