CPS Payroll Fundamentals 3 — Questions and Answers
Question 1: An employee claims exempt from federal income tax withholding on Form W-4. By what date must she submit a new W-4 each year to maintain exempt status?
- January 1
- February 15 (Correct answer)
- April 15
- December 31
Correct answer: February 15
A W-4 claiming exempt status expires on February 15 of the following year; a new form must be submitted by that date to continue the exemption.
Question 2: Which payroll tax deposit schedule applies to a new employer with no tax liability history?
- Monthly depositor (Correct answer)
- Semi-weekly depositor
- Next-day depositor
- Annual depositor
Correct answer: Monthly depositor
The IRS classifies new employers as monthly depositors until a lookback period establishes their tax liability history.
Question 3: Under FICA, the Additional Medicare Tax of 0.9% applies to wages exceeding what threshold for a single filer?
- $128,400
- $160,200
- $200,000 (Correct answer)
- $250,000
Correct answer: $200,000
Employers must withhold the Additional Medicare Tax of 0.9% on wages paid to an employee in excess of $200,000 in a calendar year, regardless of filing status.
Question 4: Which method allows employers to calculate federal income tax withholding using wage bracket tables for employees who have submitted a 2020 or later W-4?
- Annualized wage method
- Percentage method
- Wage bracket method (Correct answer)
- Supplemental flat-rate method
Correct answer: Wage bracket method
The wage bracket method uses IRS Publication 15-T tables that match pay period wages to withholding amounts based on the employee's W-4 information.
Question 5: What is the FUTA tax rate after the maximum allowable state unemployment tax credit?
- 6.0%
- 5.4%
- 0.6% (Correct answer)
- 1.45%
Correct answer: 0.6%
The gross FUTA rate is 6.0%, but employers in states with no outstanding federal loans receive a 5.4% credit, resulting in a net FUTA rate of 0.6%.
Question 6: A company pays a $500 spot bonus to an employee whose regular wages in the same paycheck are $2,000. Using the optional flat rate, how much federal income tax should be withheld from the bonus?
- $110.00 (Correct answer)
- $165.00
- $140.00
- $100.00
Correct answer: $110.00
The IRS supplemental wage flat rate is 22%; 22% × $500 = $110.00 federal income tax withheld from the bonus.
Question 7: Which document authorizes an employer to stop or reduce an employee's voluntary deduction such as health insurance?
- IRS levy notice
- Signed employee authorization or revocation form (Correct answer)
- Court-ordered garnishment
- Form 668-W
Correct answer: Signed employee authorization or revocation form
Voluntary deductions require employee consent; a signed authorization or revocation form from the employee is needed to start, change, or stop them.
CPS Payroll Fundamentals 3
An employee claims exempt from federal income tax withholding on Form W-4.
By what date must she submit a new W-4 each year to maintain exempt status?