Client Advisory Services Flashcards
7 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Client Advisory Services flashcards as text
A client's employee is subject to both a child support withholding order and a creditor garnishment. Which obligation takes priority under federal law?
Answer: The child support withholding order, regardless of receipt date
Federal law under Title III of the Consumer Credit Protection Act and CCPA give child support and alimony orders priority over other garnishments.
When a client terminates an employee who has an outstanding payroll advance, what is the correct payroll treatment?
Answer: The employer may deduct the outstanding balance from the final paycheck subject to state law limits
Employers may generally recover outstanding advances from the final paycheck, but state wage payment laws may restrict deductions below minimum wage.
A client wants to provide employees with a $150 monthly transit pass benefit. How should this be treated for payroll tax purposes?
Answer: Excluded from income up to the monthly IRS transit benefit limit
Employer-provided transit passes are excluded from income up to the IRS qualified transportation fringe benefit monthly limit (e.g., $315/month in 2024).
A payroll advisor is helping a client calculate the Additional Medicare Tax. Who is responsible for withholding the 0.9% Additional Medicare Tax?
Answer: The employer must withhold it once wages to an employee exceed $200,000 in the calendar year
Employers must withhold the 0.9% Additional Medicare Tax on wages paid to an individual employee exceeding $200,000 in a calendar year; there is no employer match.
Which IRS form must a client file to report backup withholding on payments made to vendors who failed to provide a valid TIN?
Answer: Form 945
Form 945 is used to report and remit backup withholding and other nonpayroll federal income tax withholding to the IRS.
A client's employee works in a state with no income tax but lives in a state that has income tax. Where should the client withhold state income tax?
Answer: Generally in the resident state, since the work state has no tax to withhold
When the work state has no income tax, the employer typically withholds for the employee's resident state, which taxes its residents on all income.
A client is audited and assessed a Trust Fund Recovery Penalty. Against whom can the IRS assess this penalty?
Answer: Any responsible person who willfully failed to collect or pay over trust fund taxes
The Trust Fund Recovery Penalty can be assessed against any responsible person—officer, owner, bookkeeper, or payroll manager—who willfully failed to pay trust fund taxes.