CPP Basic 5 — Questions and Answers
Question 1: What is the Consumer Credit Protection Act (CCPA) limit on creditor garnishments for an employee earning $600 per week in disposable earnings?
- $150 (Correct answer)
- $120
- $60
- $300
Correct answer: $150
For disposable earnings over $290/week, the CCPA limits creditor garnishment to 25% of disposable earnings; 25% × $600 = $150.
Question 2: Which of the following is an example of a pre-tax deduction that reduces an employee's federal taxable wages?
- Roth 401(k) contribution
- Traditional 401(k) contribution (Correct answer)
- Wage garnishment
- Union dues
Correct answer: Traditional 401(k) contribution
Traditional 401(k) contributions are made on a pre-tax basis, reducing the employee's federal taxable wages in the current period.
Question 3: How frequently must employers deposit FUTA taxes if their accumulated liability exceeds $500?
- Annually with Form 940
- Monthly
- Quarterly (Correct answer)
- Semiweekly
Correct answer: Quarterly
FUTA deposits are required quarterly when the undeposited FUTA liability exceeds $500; otherwise, any balance is paid when Form 940 is filed.
Question 4: An employer fails to withhold and remit payroll taxes. Under IRS Trust Fund Recovery Penalty (TFRP) rules, who can be held personally liable?
- Only the company's CEO
- Any responsible person who willfully failed to collect or pay over the taxes (Correct answer)
- The payroll service provider only
- No individual — only the corporate entity is liable
Correct answer: Any responsible person who willfully failed to collect or pay over the taxes
The TFRP can be assessed against any 'responsible person' who willfully failed to withhold or remit trust fund taxes, regardless of title.
Question 5: What is the Medicare tax rate for wages below the Additional Medicare Tax threshold for a single filer?
- 1.45% (Correct answer)
- 2.90%
- 0.9%
- 2.35%
Correct answer: 1.45%
The standard Medicare (HI) employee tax rate is 1.45%; the employer also pays 1.45%, for a combined rate of 2.9%.
Question 6: Which payroll schedule requires employers to deposit payroll taxes on the next banking day if their accumulated liability reaches $100,000?
- Monthly depositors only
- Semiweekly depositors only
- All employers regardless of deposit schedule (Correct answer)
- Only new employers in their first year
Correct answer: All employers regardless of deposit schedule
The $100,000 next-day deposit rule applies to all employers; once accumulated liability reaches this threshold on any day, it must be deposited the next business day.
Question 7: Which section of the Internal Revenue Code governs cafeteria plans that allow employees to choose between taxable and nontaxable benefits?
- IRC §401(k)
- IRC §125 (Correct answer)
- IRC §132
- IRC §129
Correct answer: IRC §125
IRC §125 governs cafeteria plans, which allow employees to select from a menu of qualified benefits and pay for them with pre-tax dollars.
CPP Basic 5
What is the Consumer Credit Protection Act (CCPA) limit on creditor garnishments for an employee earning $600 per week in disposable earnings?