CPM Federal & State Tax Withholding 3

Question 1

An employer receives a lock-in letter (IRS Notice 2800C) for an employee. What must the employer do?

Accepted Answer

Withhold at the rate specified in the notice and disregard any W-4 claiming a lower withholding

Answer

A lock-in letter instructs the employer to withhold at a specific rate regardless of any W-4 the employee submits claiming a lower amount, until the IRS releases the lock.

Question 2

What is the nonresident alien withholding adjustment added to wages before using the standard withholding tables?

Accepted Answer

An additional amount per pay period specified in Publication 15, based on payroll frequency

Answer

Nonresident aliens must add a specific additional amount (per Publication 15 instructions) to their wages before applying the standard withholding tables to account for their different tax situation.

Question 3

For federal income tax withholding purposes, which of the following is NOT considered a supplemental wage?

Accepted Answer

Regular hourly wages paid on the normal payday

Answer

Regular wages paid on the normal payday are not supplemental wages; supplemental wages include bonuses, commissions, overtime, and severance when paid separately.

Question 4

Which form must employers file annually to reconcile federal income tax withholding and FICA taxes?

Accepted Answer

Form W-3

Answer

Form W-3 is the transmittal form filed with the SSA that reconciles all W-2 forms issued and summarizes total wages and taxes withheld for the year.

Question 5

What is backup withholding, and at what rate is it applied?

Accepted Answer

Withholding at 24% on payments to payees who fail to provide a correct TIN

Answer

Backup withholding at 24% applies to certain payments such as interest, dividends, and non-employee compensation when the payee fails to provide a correct taxpayer identification number.

(CPM) Certified Payroll Manager Practice Test

(CPM) Certified Payroll Manager Practice Test

CPM Federal & State Tax Withholding 3