Fundamental Payroll Certification Fundamental Payroll Employment Taxes and Withholding 4 — Questions and Answers
Question 1: An employer pays supplemental wages of $8,000 combined with regular wages without identifying them separately. What withholding method must be used?
- The flat 22% supplemental rate
- The aggregate method using the employee's current W-4 (Correct answer)
- The optional flat rate of 37%
- No withholding is required on supplemental wages
Correct answer: The aggregate method using the employee's current W-4
When supplemental wages are not separately identified from regular wages, the employer must use the aggregate method, adding the supplemental pay to the regular wages and withholding based on the combined total.
Question 2: Which of the following workers is generally considered an independent contractor and not subject to employer payroll tax withholding?
- A worker whose hours and methods are controlled by the company
- A worker who provides services using their own tools and sets their own schedule (Correct answer)
- A worker who receives employer-provided training and equipment
- A worker who performs services integral to the company's core business
Correct answer: A worker who provides services using their own tools and sets their own schedule
A worker who controls their own schedule and uses their own tools is typically classified as an independent contractor, exempt from payroll tax withholding.
Question 3: What is the purpose of IRS Form 945?
- Report FUTA taxes annually
- Report federal income tax withheld from non-payroll payments such as pensions and gambling winnings (Correct answer)
- Report FICA taxes on agricultural workers
- Reconcile quarterly 941 filings at year-end
Correct answer: Report federal income tax withheld from non-payroll payments such as pensions and gambling winnings
Form 945 is filed annually to report federal income tax withheld from non-payroll payments including pensions, annuities, IRAs, and backup withholding.
Question 4: Under the special accounting rule for fringe benefits, an employer may treat benefits provided in the last how many months of the year as provided in the following year?
- 1 month
- 2 months
- 3 months (Correct answer)
- 6 months
Correct answer: 3 months
Employers may use the special accounting rule to treat fringe benefits provided in the last 2 months of the calendar year as paid in the next calendar year for FICA and income tax withholding purposes.
Question 5: The Trust Fund Recovery Penalty (TFRP) can be assessed against which individuals?
- Only the company's CEO
- Any person responsible for collecting and paying trust fund taxes who willfully fails to do so (Correct answer)
- Shareholders of the company regardless of payroll involvement
- Only employees who caused the shortfall
Correct answer: Any person responsible for collecting and paying trust fund taxes who willfully fails to do so
The TFRP applies to any 'responsible person' — anyone with authority to collect, account for, or pay trust fund taxes — who willfully fails to do so.
Question 6: Which of the following is NOT subject to FUTA tax?
- Cash wages paid to household employees totaling $1,000 or more in a quarter
- Wages paid to corporate officers
- Wages paid to a sole proprietor's spouse working in the business
- Payments to independent contractors (Correct answer)
Correct answer: Payments to independent contractors
Payments to independent contractors are not subject to FUTA tax because independent contractors are not employees.
Question 7: When must employers provide employees with their Form W-2 for the prior year?
- By December 31 of the tax year
- By January 31 of the following year (Correct answer)
- By February 15 of the following year
- By March 15 of the following year
Correct answer: By January 31 of the following year
Employers must furnish Form W-2 to employees by January 31 of the year following the tax year being reported.
Fundamental Payroll Certification Fundamental Payroll Employment Taxes and Withholding 4
An employer pays supplemental wages of $8,000 combined with regular wages without identifying them separately.
What withholding method must be used?