Payroll Administration & Taxation 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 Payroll Administration & Taxation flashcards as text
An employee works in State A but lives in State B, which have a reciprocity agreement. Where should the employer withhold state income tax?
Answer: State B, the employee's state of residence
Under a reciprocity agreement, income tax is withheld only for the employee's state of residence, not the state where work is performed.
What triggers the Additional Medicare Tax withholding requirement for an individual employee?
Answer: Wages exceeding $200,000 from the employer
Employers must withhold the 0.9% Additional Medicare Tax once an individual employee's wages exceed $200,000 from that employer, regardless of filing status.
A company acquires another business and takes over its employees. Under the successor employer rules, how is the FICA wage base handled?
Answer: The successor may count wages paid by the predecessor toward the FICA wage base for the year
Under successor employer rules, the acquiring company can credit wages paid by the predecessor toward the Social Security and Medicare wage bases for the calendar year.
What is the correct treatment of employer contributions to a qualified 401(k) plan for FICA purposes?
Answer: Excluded from FICA wages when made as employer contributions
Employer contributions to qualified retirement plans are excluded from employees' FICA wages.
Which IRS safe harbor allows employers to avoid the trust fund recovery penalty when a payroll tax deposit error is corrected?
Answer: The $100 or 2% de minimis safe harbor for deposit shortfalls
The IRS provides a safe harbor for deposit shortfalls that are $100 or less, or 2% or less of the required deposit amount, if corrected by specific deadlines.
Under the constructive receipt doctrine, when must an employee report income earned but not yet received?
Answer: When it is made available without substantial restriction, even if not physically received
Constructive receipt means income is taxable when it is credited to the employee's account or made available without substantial restriction, not only when physically received.
A payroll administrator discovers that Social Security taxes were under-withheld from an employee's wages earlier in the year. What is the correct corrective action?
Answer: File Form 941-X to correct the error and collect the under-withheld amount from the employee or absorb it
Employers must file Form 941-X to correct prior-period FICA errors and either collect the under-withheld employee share or absorb it as an employer expense.