State and Local Tax Compliance Flashcards
6 cards from real Fundamental Payroll Certification practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 State and Local Tax Compliance flashcards as text
How many U.S. states have no state income tax on employee wages as of 2024?
Answer: 9
Nine states impose no income tax on wages: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire.
Which document do employees in most states complete to determine the amount of state income tax to withhold from their wages?
Answer: A state-specific withholding certificate
Most states require employees to complete a state-specific withholding certificate (similar to the federal W-4) to calculate state income tax withholding.
In most states, State Unemployment Insurance (SUI) taxes are paid by:
Answer: Employers only
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.
After applying the maximum FUTA credit of 5.4% for timely state unemployment tax payments, what is the net FUTA tax rate?
Answer: 0.6%
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%.
State Disability Insurance (SDI) programs requiring mandatory employee payroll deductions exist in which group of states?
Answer: California, New York, and New Jersey (among others)
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.
When an employee works in multiple states, how does the payroll department determine which state's income tax to withhold?
Answer: By analyzing reciprocity agreements and state nexus rules
Multi-state tax situations require analysis of interstate reciprocity agreements and nexus rules to determine the correct withholding obligations in each state.
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