Mixed Deck — All Fundamental Payroll Certification Topics Flashcards

Which copy of Form W-2 must be filed with the Social Security Administration?

Answer: Copy A

Copy A of Form W-2 (the red-ink version or its electronic equivalent) must be submitted to the Social Security Administration.

Under the FLSA, an employer and employee agree to pay a salary that covers all hours worked, regardless of how many. This arrangement is known as:

Answer: Fluctuating workweek method

The fluctuating workweek method allows overtime to be paid at a 0.5 multiplier on the regular rate, which decreases as hours increase, provided the salary is fixed and the agreement is clear.

An employer provides a 42-year-old employee with a $150,000 group-term life insurance policy and pays the entire premium. Based on IRS regulations, what is the value of the coverage that is subject to FICA taxes?

Answer: $100,000

The IRS allows the cost of the first $50,000 of employer-provided group-term life insurance coverage to be excluded from an employee's income. The cost of coverage exceeding $50,000 is considered a taxable benefit and must be included in the employee's wages for tax purposes. Therefore, the taxable portion of the coverage is $100,000 ($150,000 total coverage - $50,000 exclusion).

Which of the following statements best describes the purpose of Form W-3, Transmittal of Wage and Tax Statements?

Answer: It is a summary form that totals all information from the individual Forms W-2 and is filed with the Social Security Administration.

Form W-3 is a transmittal form that summarizes the total earnings, Social Security wages, Medicare wages, and withholdings for all employees as reported on their individual Forms W-2. It serves as a cover sheet when the employer sends Copy A of all employee Forms W-2 to the Social Security Administration (SSA).

Which of the following pieces of information is reported and reconciled on Form 941, Employer's QUARTERLY Federal Tax Return?

Answer: Total quarterly wages paid and federal income, Social Security, and Medicare taxes withheld

Form 941 is used by employers to report the total wages paid, federal income tax withheld, and both the employee and employer portions of Social Security and Medicare taxes for a calendar quarter. FUTA taxes are reported annually on Form 940, SUI is reported to the state, and W-2 data is submitted annually on Form W-3.

A Health Savings Account (HSA) can only be opened by an employee enrolled in which type of health plan?

Answer: High-Deductible Health Plan (HDHP)

HSA eligibility requires enrollment in a qualified High-Deductible Health Plan (HDHP) as defined by the IRS.

What is the minimum age for an employee to be exempt from FLSA child labor restrictions for non-hazardous work?

Answer: 16

Employees aged 16 and older may perform any non-hazardous job for unlimited hours under FLSA.

In payroll, 'imputed income' refers to:

Answer: The taxable value of non-cash benefits included in gross income

Imputed income is the fair market value of non-cash benefits or perks that must be added to an employee's taxable wages.

An auditor selects a sample of payroll checks and traces them back to approved timesheets and pay rates. This procedure is known as:

Answer: Vouching

Vouching involves working backward from the output (checks) to source documents (timesheets, pay rates) to verify existence and authorization.

According to the Internal Revenue Service (IRS), for how long must an employer keep records related to employment taxes after the date the tax is due or is paid, whichever is later?

Answer: At least 4 years.

The IRS requires employers to keep all records of employment taxes, such as FICA and federal income tax withholding, for a minimum of four years after filing the 4th quarter for the year.

Which of the following is reported in Box 12 of Form W-2 using Code DD?

Answer: Cost of employer-sponsored health coverage

Code DD in Box 12 of Form W-2 reports the cost of employer-sponsored health coverage under an employer-sponsored plan.

A 'reciprocity agreement' between two states means that:

Answer: Employees working across state lines pay income tax only to their state of residence

A state reciprocity agreement allows residents who work in a neighboring state to have income tax withheld only for their home state, avoiding double-state taxation.

Under the CCPA, what is the maximum garnishment percentage of disposable earnings for child support when the employee IS supporting another spouse or dependent and is NOT in arrears?

Answer: 50%

CCPA allows up to 50% of disposable earnings for child support when the employee supports a current spouse or dependent and is not more than 12 weeks in arrears.

An employee contributes $500 per pay period to a traditional 401(k). For FICA tax purposes, this contribution is:

Answer: Subject to both Social Security and Medicare taxes

Traditional 401(k) elective deferrals reduce federal income tax withholding but are still subject to FICA (Social Security and Medicare) taxes.

When onboarding a new hire into a payroll system, which document establishes the number of federal income tax withholding allowances?

Answer: Form W-4

Form W-4 (Employee's Withholding Certificate) tells the employer how much federal income tax to withhold from the employee's paycheck.

An employer deducts the cost of a mandatory uniform from a non-exempt employee's wages. Under the FLSA, this deduction is illegal if it causes the employee's wage to fall below:

Answer: The federal minimum wage

Deductions that reduce an employee's effective hourly rate below the federal minimum wage in any workweek violate the FLSA.

Which control helps prevent a single payroll employee from both authorizing payroll and disbursing funds?

Answer: Dual authorization or segregation of duties

Segregation of duties requires that different individuals authorize payroll and actually release the funds, reducing the risk of fraud.

Under the FLSA's administrative exemption, which of the following best describes the 'discretion and independent judgment' requirement?

Answer: The employee must make decisions on matters of significance, not just apply established guidelines

Discretion and independent judgment means the employee compares and evaluates possible courses of action and makes decisions that genuinely affect the business, not just following set procedures.

The Additional Medicare Tax of 0.9% applies to wages exceeding what threshold for a single filer?

Answer: $200,000

Employers must withhold the 0.9% Additional Medicare Tax on wages paid to an employee exceeding $200,000 in a calendar year, regardless of filing status.

Which payroll record retention period is required by the FLSA for basic payroll records such as time cards and wage rate tables?

Answer: 2 years

The FLSA requires that records used to compute wages, such as time cards and piece-rate tables, be kept for at least 2 years.