Fundamental Payroll Certification State and Local Tax Compliance

Question 1

How many U.S. states have no state income tax on employee wages as of 2024?

Accepted Answer

9

Answer

Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.

Question 2

Which document do employees in most states complete to determine the amount of state income tax to withhold from their wages?

Accepted Answer

A state-specific withholding certificate

Answer

Most states require employees to complete a state-specific withholding certificate (similar to the federal W-4) to calculate state income tax withholding.

Question 3

In most states, State Unemployment Insurance (SUI) taxes are paid by:

Accepted Answer

Employers only

Answer

In the majority of states, SUI taxes are paid entirely by the employer; a few exceptions include Alaska, New Jersey, and Pennsylvania, where employees also contribute.

Question 4

After applying the maximum FUTA credit of 5.4% for timely state unemployment tax payments, what is the net FUTA tax rate?

Accepted Answer

0.6%

Answer

The statutory FUTA rate of 6.0% is reduced by a 5.4% credit when state unemployment taxes are paid on time, resulting in an effective net rate of 0.6%.

Question 5

State Disability Insurance (SDI) programs requiring mandatory employee payroll deductions exist in which group of states?

Accepted Answer

California, New York, and New Jersey (among others)

Answer

Mandatory SDI programs exist in California, New York, New Jersey, Hawaii, Rhode Island, and Puerto Rico, providing partial wage replacement for non-work-related disabilities.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification State and Local Tax Compliance