CPM Federal & State Tax Withholding 2

Question 1

An employee claims 'Exempt' on their W-4. Under what condition is this status valid?

Accepted Answer

The employee had no federal income tax liability last year and expects none this year

Answer

Exempt status on a W-4 is valid only if the employee had zero federal income tax liability in the prior year and expects zero liability in the current year.

Question 2

Which IRS publication provides the income tax withholding tables used by employers?

Accepted Answer

Publication 15 (Circular E)

Answer

IRS Publication 15 (Employer's Tax Guide, also known as Circular E) contains the withholding tables and instructions employers use to determine federal income tax withholding.

Question 3

A supplemental wage payment of $1.5 million is made to an employee. How is withholding applied to the amount exceeding $1 million?

Accepted Answer

37% flat rate on the excess over $1 million

Answer

For supplemental wages exceeding $1 million in a calendar year, the excess over $1 million is mandatorily withheld at the highest marginal rate (37%).

Question 4

What is the purpose of IRS Form W-4P?

Accepted Answer

Withholding certificate for pension or annuity payments

Answer

Form W-4P is used by recipients of pensions, annuities, and other deferred compensation to direct payers on how much federal income tax to withhold.

Question 5

Under the aggregate method for supplemental wages, how is withholding calculated?

Accepted Answer

Add the supplemental and regular wages together and withhold as if it were one payment

Answer

The aggregate method combines supplemental and regular wages to determine the total withholding, then subtracts the tax already withheld on regular wages.

(CPM) Certified Payroll Manager Practice Test

(CPM) Certified Payroll Manager Practice Test

CPM Federal & State Tax Withholding 2