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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 correctly describes backup withholding on payments reported on Form 1099?

    Answer: 24% must be withheld when a payee fails to provide a valid TIN or is flagged by the IRS

    Backup withholding at 24% is required when the payee does not furnish a correct TIN or the IRS notifies the payer that withholding is required.

  2. An employer pays a $10,000 bonus to an employee who has already received over $1 million in supplemental wages this year. What withholding rate applies to the bonus?

    Answer: 37%

    Supplemental wages exceeding $1 million in a calendar year are subject to mandatory flat withholding at the 37% rate.

  3. Which of the following is a 'responsible person' who could be held liable for the Trust Fund Recovery Penalty?

    Answer: A bookkeeper who has authority to sign checks and direct tax payments

    A responsible person is anyone with the authority and duty to collect and pay over trust fund taxes, which can include bookkeepers with check-signing authority.

  4. What is the maximum FUTA credit an employer can claim against the 6.0% gross FUTA rate when timely paying SUTA?

    Answer: 5.4%

    Employers who pay their state unemployment taxes on time receive up to a 5.4% credit, reducing the effective net FUTA rate to 0.6%.

  5. How does the IRS define a 'payroll tax deposit shortfall' under the accuracy of deposits rule?

    Answer: A deposit that is less than 98% of the tax liability for the period

    The IRS considers a deposit a shortfall if it is less than 98% of the required deposit, but allows a safe harbor if the shortfall is made up by a specified makeup date.

  6. Which employees are generally exempt from FICA taxes?

    Answer: Nonresident alien students on F-1 visas working on-campus under their visa terms

    Nonresident alien students in F-1 status performing services allowed under their visa are exempt from FICA taxes under IRC Section 3121(b)(19).

  7. An employer that fails to file Form W-2s by the required deadline faces penalties based on:

    Answer: How late the forms are filed, with higher penalties for longer delays and intentional disregard

    W-2 late filing penalties are tiered by how many days late the forms are, with the highest penalty tier applying to intentional disregard of the filing requirement.