CPB / BookKeeping Payroll and Tax Reporting Questions and Answers — Questions and Answers
Question 1: A business client has failed to deposit their payroll taxes for a pay period. The total amount due was $10,000. They paid the full amount 12 calendar days after the due date. According to IRS penalty rates, what would be the failure-to-deposit penalty?
- 2% of the unpaid deposit
- 5% of the unpaid deposit (Correct answer)
- 10% of the unpaid deposit
- 15% of the unpaid deposit
Correct answer: 5% of the unpaid deposit
The IRS imposes a tiered penalty for late payroll tax deposits. For deposits that are 6 to 15 calendar days late, the penalty is 5% of the unpaid amount.
Question 2: Which of the following is the correct due date for an employer to file Form 941, Employer's QUARTERLY Federal Tax Return, for the second quarter (April 1 - June 30)?
- June 30
- July 15
- August 31
- July 31 (Correct answer)
Correct answer: July 31
Form 941 is due by the last day of the month that follows the end of the quarter. For the second quarter ending June 30, the deadline is July 31.
Question 3: An employer is calculating their Federal Unemployment Tax Act (FUTA) liability. The FUTA tax rate is 6.0% on the first $7,000 of wages paid to each employee. If the employer is in a state with a certified unemployment program and has made all state unemployment tax payments on time, what is the maximum credit they can receive against their FUTA tax, and what is the effective FUTA tax rate?
- A 6.0% credit, resulting in a 0% effective rate.
- A 0.6% credit, resulting in a 5.4% effective rate.
- A 5.4% credit, resulting in a 0.6% effective rate. (Correct answer)
- The credit varies by state and cannot be determined from the information given.
Correct answer: A 5.4% credit, resulting in a 0.6% effective rate.
Employers who pay their state unemployment taxes in a timely manner are eligible for a credit of up to 5.4% against their FUTA tax. This reduces the effective FUTA tax rate to 0.6% (6.0% - 5.4%).
Question 4: A small construction company hires a specialized welder for a single, two-week project. The company provides the welding equipment and materials, specifies the exact hours the welder must work on-site, and dictates the sequence of the welding tasks. For payroll tax purposes, how should this welder most likely be classified?
- Statutory Employee
- Independent Contractor
- Common-Law Employee (Correct answer)
- Statutory Nonemployee
Correct answer: Common-Law Employee
The key factor in determining worker status is the degree of control the business has over the worker. Because the company controls how, when, and where the work is done, and provides the tools, the welder would be classified as a common-law employee, requiring the company to withhold and pay employment taxes.
Question 5: What is the annual deadline for employers to furnish Form W-2, Wage and Tax Statement, to their employees and file Copy A with the Social Security Administration (SSA)?
- February 28
- April 15
- January 31 (Correct answer)
- March 31
Correct answer: January 31
Employers are required to furnish W-2s to employees and file them with the Social Security Administration by January 31 of the year following the calendar year the wages were paid.
Question 6: Which of the following forms is used by employers to transmit Forms W-2, Wage and Tax Statements, to the Social Security Administration when filing by mail?
- Form 940
- Form 941
- Form W-4
- Form W-3 (Correct answer)
Correct answer: Form W-3
Form W-3, Transmittal of Wage and Tax Statements, is a summary form that must accompany the paper filing of Copy A of Form W-2 to the Social Security Administration. It summarizes the total earnings, Social Security wages, Medicare wages, and tax withholdings for all employees.
CPB / BookKeeping Payroll and Tax Reporting Questions and Answers
A business client has failed to deposit their payroll taxes for a pay period.
The total amount due was $10,000.
They paid the full amount 12 calendar days after the due date.
According to IRS penalty rates, what would be the failure-to-deposit penalty?