CPB / BookKeeping Payroll and Tax Reporting 3 — Questions and Answers
Question 1: A worker is classified as an independent contractor but the IRS reclassifies them as an employee. Which form does the employer use to report uncollected FICA taxes in this situation?
- Form W-2c
- Form 1099-NEC
- Form SS-8
- Form 941-X (Correct answer)
Correct answer: Form 941-X
Form 941-X (Adjusted Employer's Quarterly Federal Tax Return) is used to correct previously filed Form 941s when workers are reclassified.
Question 2: Under the lookback period rule, a new employer with no prior tax history is classified as a:
- Monthly depositor (Correct answer)
- Semi-weekly depositor
- Next-day depositor
- Annual depositor
Correct answer: Monthly depositor
New employers with no prior tax history are automatically classified as monthly depositors for their first calendar year.
Question 3: Which payroll tax is NOT split equally between the employer and employee?
- Social Security tax
- Medicare tax
- Additional Medicare Tax (Correct answer)
- Both Social Security and Medicare
Correct answer: Additional Medicare Tax
The Additional Medicare Tax of 0.9% applies only to the employee on wages exceeding $200,000; there is no employer match.
Question 4: A cafeteria plan under Section 125 allows employees to pay for certain benefits with:
- Post-tax dollars only
- Pre-tax dollars, reducing taxable wages (Correct answer)
- Company matching funds
- Deferred compensation
Correct answer: Pre-tax dollars, reducing taxable wages
Section 125 cafeteria plans let employees pay qualified benefit premiums with pre-tax dollars, reducing their federal income tax and FICA taxable wages.
Question 5: When must a monthly depositor submit payroll tax deposits for the prior month's liabilities?
- The 10th of the following month
- The 15th of the following month (Correct answer)
- The last day of the current month
- The 25th of the following month
Correct answer: The 15th of the following month
Monthly depositors must deposit employment taxes accumulated during a calendar month by the 15th day of the following month.
Question 6: An employee receives a $5,000 bonus. Which withholding method uses a flat 22% federal income tax rate on supplemental wages up to $1 million?
- Aggregate method
- Percentage method
- Optional flat rate method (Correct answer)
- Wage bracket method
Correct answer: Optional flat rate method
The optional flat rate (supplemental rate) method withholds a flat 22% federal income tax on supplemental wages such as bonuses up to $1 million.
Question 7: What is the purpose of Form W-3 filed with the Social Security Administration?
- To report quarterly payroll taxes
- To summarize all W-2s submitted by an employer (Correct answer)
- To request a new Employer Identification Number
- To report tips received by employees
Correct answer: To summarize all W-2s submitted by an employer
Form W-3 (Transmittal of Wage and Tax Statements) is a summary transmittal form that accompanies all W-2 copies sent to the SSA.
CPB / BookKeeping Payroll and Tax Reporting 3
A worker is classified as an independent contractor but the IRS reclassifies them as an employee.
Which form does the employer use to report uncollected FICA taxes in this situation?