Fundamental Payroll Certification Fundamental Payroll Certification MCQ 5 — Questions and Answers
Question 1: An employer fails to deposit payroll taxes on time. The deposit is 6 days late. What is the IRS penalty rate?
- 2%
- 5% (Correct answer)
- 10%
- 15%
Correct answer: 5%
IRS late deposit penalties are 2% (1–5 days late), 5% (6–15 days late), 10% (over 15 days), and 15% if not paid within 10 days of an IRS notice.
Question 2: Which withholding method allows an employer to calculate federal income tax withholding based on an employee's annualized wages?
- Wage bracket method
- Percentage method
- Annualized wage withholding method (Correct answer)
- Supplemental flat-rate method
Correct answer: Annualized wage withholding method
The annualized wage withholding method converts a period's wages to an annual figure, calculates the annual tax, then divides the result by the number of pay periods.
Question 3: What is the Additional Medicare Tax rate imposed on wages exceeding $200,000 (single filer) under the Affordable Care Act?
- 0.45%
- 0.9% (Correct answer)
- 1.45%
- 2.35%
Correct answer: 0.9%
An additional 0.9% Medicare tax applies to wages over $200,000 for single filers ($250,000 for married filing jointly); employers must withhold this on wages over $200,000 per employee.
Question 4: A newly hired employee fails to submit a Form W-4. What withholding status must the employer apply?
- Married with 3 allowances
- Single with zero adjustments (Single, standard withholding) (Correct answer)
- Exempt from withholding
- The same status as their previous employee
Correct answer: Single with zero adjustments (Single, standard withholding)
If no valid W-4 is submitted, the IRS requires employers to withhold at the default rate: Single filing status with no adjustments.
Question 5: Under ERISA, a 401(k) plan must provide participants with a Summary Plan Description (SPD) within how many days of becoming eligible?
- 30 days
- 60 days
- 90 days (Correct answer)
- 120 days
Correct answer: 90 days
ERISA requires that participants receive an SPD within 90 days after becoming covered by the plan, or within 120 days after the plan is established.
Question 6: Which concept refers to the total cost of compensating an employee beyond their base wages, including benefits and employer payroll taxes?
- Gross wages
- Net pay
- Total compensation cost (burden rate) (Correct answer)
- Disposable earnings
Correct answer: Total compensation cost (burden rate)
The total compensation cost (or burden rate) includes gross wages plus employer-paid FICA, FUTA, SUTA, health insurance, retirement contributions, and other benefits.
Question 7: Which act requires employers with 100 or more employees to provide 60-day advance notice before a plant closing or mass layoff?
- COBRA
- WARN Act (Correct answer)
- ERISA
- HIPAA
Correct answer: WARN Act
The Worker Adjustment and Retraining Notification (WARN) Act requires covered employers to give 60 days' notice of qualifying plant closings or mass layoffs to affected employees.
Fundamental Payroll Certification Fundamental Payroll Certification MCQ 5
An employer fails to deposit payroll taxes on time.
The deposit is 6 days late.
What is the IRS penalty rate?