CPS Tax Planning & Compliance 4

Question 1

A state has a reciprocal agreement with a neighboring state. How does this affect income tax withholding for a resident who works in the neighboring state?

Accepted Answer

The employer withholds income tax only for the employee's state of residence

Answer

Under a reciprocal agreement, the employer withholds income tax only for the state where the employee lives, not the state where the work is performed.

Question 2

What is the employer's penalty for intentionally failing to file correct information returns such as W-2s?

Accepted Answer

$630 per return with no annual maximum

Answer

For intentional disregard of filing requirements, the penalty is $630 per return (indexed for inflation) with no annual maximum cap.

Question 3

An employer uses the aggregate method for supplemental wage withholding. What does this involve?

Accepted Answer

Adding supplemental wages to the most recent regular wages and withholding as if it were a single payment

Answer

The aggregate method combines supplemental and regular wages from the most recent payroll period and computes withholding on the total as one payment.

Question 4

Under IRC Section 125, which of the following is a qualifying benefit that can be offered through a cafeteria plan?

Accepted Answer

Dependent care flexible spending account

Answer

Dependent care flexible spending accounts are a qualified benefit under Section 125 cafeteria plans and reduce employees' taxable income.

Question 5

Which form must an employer file annually to report FUTA tax?

Accepted Answer

Form 940

Answer

Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, is filed annually to report and reconcile federal unemployment tax liability.

(CPS) Certified Payroll Specialist Practice Test

(CPS) Certified Payroll Specialist Practice Test

CPS Tax Planning & Compliance 4