CPP Payroll Tax Compliance 5

Question 1

Which of the following correctly describes backup withholding on payments reported on Form 1099?

Accepted Answer

24% must be withheld when a payee fails to provide a valid TIN or is flagged by the IRS

Answer

Backup withholding at 24% is required when the payee does not furnish a correct TIN or the IRS notifies the payer that withholding is required.

Question 2

An employer pays a $10,000 bonus to an employee who has already received over $1 million in supplemental wages this year. What withholding rate applies to the bonus?

Accepted Answer

37%

Answer

Supplemental wages exceeding $1 million in a calendar year are subject to mandatory flat withholding at the 37% rate.

Question 3

Which of the following is a 'responsible person' who could be held liable for the Trust Fund Recovery Penalty?

Accepted Answer

A bookkeeper who has authority to sign checks and direct tax payments

Answer

A responsible person is anyone with the authority and duty to collect and pay over trust fund taxes, which can include bookkeepers with check-signing authority.

Question 4

What is the maximum FUTA credit an employer can claim against the 6.0% gross FUTA rate when timely paying SUTA?

Accepted Answer

5.4%

Answer

Employers who pay their state unemployment taxes on time receive up to a 5.4% credit, reducing the effective net FUTA rate to 0.6%.

Question 5

How does the IRS define a 'payroll tax deposit shortfall' under the accuracy of deposits rule?

Accepted Answer

A deposit that is less than 98% of the tax liability for the period

Answer

The IRS considers a deposit a shortfall if it is less than 98% of the required deposit, but allows a safe harbor if the shortfall is made up by a specified makeup date.

CPP - Certified Payroll Professional Practice Test

CPP - Certified Payroll Professional Practice Test

CPP Payroll Tax Compliance 5