CPB / BookKeeping Payroll and Tax Reporting 4 — Questions and Answers
Question 1: Which of the following fringe benefits is generally EXCLUDED from an employee's gross income?
- Cash bonuses
- Personal use of a company car
- Employer-paid health insurance premiums (Correct answer)
- Gift cards worth $50
Correct answer: Employer-paid health insurance premiums
Employer-paid health insurance premiums are excluded from employees' gross income under IRC Section 106.
Question 2: A tip-earning employee who receives more than $20 in tips during a month must report those tips to the employer by:
- The 10th day of the following month (Correct answer)
- The last day of the same month
- January 31 of the following year
- The next regularly scheduled payday
Correct answer: The 10th day of the following month
Employees who receive $20 or more in tips in a calendar month must report them to the employer by the 10th day of the following month.
Question 3: Under FLSA rules, which employees are generally EXEMPT from overtime pay requirements?
- Part-time hourly workers
- Employees earning at least $684/week in a bona fide executive role (Correct answer)
- All salaried employees regardless of duties
- Commission-based sales staff
Correct answer: Employees earning at least $684/week in a bona fide executive role
To qualify for the white-collar exemption, employees must earn at least $684 per week ($35,568/year) and meet the duties test for executive, administrative, or professional roles.
Question 4: What is the tax treatment of employer contributions to an employee's Health Savings Account (HSA)?
- Taxable as wages to the employee
- Excluded from income up to statutory limits (Correct answer)
- Subject to Social Security but not income tax
- Deductible by employee only if itemizing
Correct answer: Excluded from income up to statutory limits
Employer HSA contributions are excluded from the employee's gross income, wages, and FICA taxes, up to the annual contribution limits.
Question 5: A semi-weekly depositor has a payroll tax liability that arises on a Wednesday. By which day must the deposit be made?
- The following Monday
- The following Friday (Correct answer)
- The same Wednesday
- The following Wednesday
Correct answer: The following Friday
For semi-weekly depositors, liabilities arising on Wednesday, Thursday, or Friday must be deposited by the following Friday.
Question 6: Which form does an employer file to report FUTA taxes annually?
- Form 940 (Correct answer)
- Form 941
- Form 944
- Form W-2
Correct answer: Form 940
Form 940 (Employer's Annual Federal Unemployment Tax Return) is used to report FUTA taxes, due January 31 of the following year.
Question 7: An employee's W-4 claims 'Exempt' from withholding. What action must the employer take regarding the exemption claim each year?
- Honor it indefinitely until the employee submits a new W-4
- Require the employee to resubmit a new W-4 claiming exempt by February 15 (Correct answer)
- Begin withholding at the single zero-allowance rate
- Report the exemption claim to the IRS immediately
Correct answer: Require the employee to resubmit a new W-4 claiming exempt by February 15
A claim of exempt from withholding expires February 15 each year; the employee must submit a new W-4 by that date to continue the exemption.
CPB / BookKeeping Payroll and Tax Reporting 4
Which of the following fringe benefits is generally EXCLUDED from an employee's gross income?