CPS Payroll Administration & Taxation 3

Question 1

An employer pays an employee a $5,000 moving expense reimbursement in 2026. How is this taxed under current law?

Accepted Answer

Fully taxable as wages subject to all payroll taxes

Answer

The Tax Cuts and Jobs Act of 2017 suspended the moving expense exclusion for most employees through 2025, making reimbursements fully taxable wages.

Question 2

Which of the following correctly describes the 'accountable plan' rule for expense reimbursements?

Accepted Answer

Employee must have a business connection, substantiate expenses, and return any excess

Answer

An accountable plan requires business connection, adequate substantiation within a reasonable period, and return of excess advances.

Question 3

What is the maximum amount of employer-provided dependent care FSA benefits that can be excluded from an employee's income in 2024?

Accepted Answer

$5,000 ($2,500 if married filing separately)

Answer

The dependent care FSA exclusion limit is $5,000 per household ($2,500 for married filing separately).

Question 4

An employer fails to deposit payroll taxes on time. The failure-to-deposit penalty for deposits 6-15 days late is:

Accepted Answer

5% of the undeposited amount

Answer

The IRS penalty for deposits that are 6 to 15 days late is 5% of the undeposited tax amount.

Question 5

Which test does the IRS use FIRST to determine if a worker is an employee or independent contractor?

Accepted Answer

Behavioral control test

Answer

The IRS common-law test evaluates behavioral control first, examining whether the company controls how work is performed.

(CPS) Certified Payroll Specialist Practice Test