Payroll Processing and Administration Flashcards
7 cards from real CPM 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 Processing and Administration flashcards as text
Under the IRS accountable plan rules, which requirement must be met for employee expense reimbursements to be excluded from taxable wages?
Answer: Expenses must have a business connection, be substantiated, and excess amounts returned within a reasonable time
An accountable plan requires a business connection, adequate substantiation, and return of any excess reimbursement within a reasonable period.
What is the FUTA credit reduction, and when does it apply?
Answer: A reduction in the FUTA tax rate for timely state unemployment tax payments, applied when a state has an outstanding federal loan for more than two years
Credit reduction reduces the normal 5.4% FUTA credit for employers in states that have not repaid federal unemployment loans within two years, increasing net FUTA tax.
An employee submits a new Form W-4 claiming exempt from withholding. What action must the employer take?
Answer: Honor the exempt claim and stop withholding federal income tax effective that pay period
Employers must honor a valid exempt W-4 claim and cease federal income tax withholding; the IRS may later issue a lock-in letter if the claim is questionable.
A payroll department processes a manual off-cycle check for a terminating employee. Which tax reporting concern is most critical to address?
Answer: The check's wages and taxes must be included in the same quarter's Form 941 as regular payroll
Off-cycle checks are not separately reported; all wages paid in the quarter, including manual checks, are reported together on Form 941 for that quarter.
Which of the following is an example of a pre-tax deduction that reduces an employee's federal income tax withholding base but NOT their FICA tax base?
Answer: 401(k) elective deferral contribution
401(k) deferrals reduce federal income tax withholding but are still subject to FICA; Section 125 deductions reduce both FIT and FICA bases.
An employer in a credit reduction state has a FUTA taxable payroll of $200,000. If the credit reduction is 1.5%, what is the additional FUTA tax owed due to the credit reduction?
Answer: $3,000
The additional FUTA tax from credit reduction is $200,000 × 1.5% = $3,000 on top of the standard FUTA calculation.
What is the correct definition of 'disposable earnings' for the purpose of federal wage garnishment under CCPA?
Answer: The amount remaining after legally required deductions such as taxes, Social Security, and Medicare
Disposable earnings under CCPA are the amount left after deductions required by law (taxes, FICA), not all voluntary deductions.