Fundamental Payroll Certification Fundamental Payroll Employment Taxes and Withholding 5

Question 1

An employee receives a $500 moving expense reimbursement in 2024. How is this treated for payroll tax purposes?

Accepted Answer

Included in taxable wages and subject to both FICA and income tax withholding

Answer

Since the Tax Cuts and Jobs Act of 2017 suspended the moving expense exclusion (except for military), employer moving expense reimbursements are taxable wages subject to FICA and income tax withholding.

Question 2

Which formula correctly calculates the employee's net pay?

Accepted Answer

Gross pay minus pre-tax deductions minus taxes minus post-tax deductions

Answer

Net pay equals gross pay reduced by pre-tax deductions (which lower taxable wages), then reduced by all applicable taxes, then reduced by any post-tax deductions.

Question 3

Which of the following accurately describes 'backup withholding'?

Accepted Answer

A 24% withholding rate applied to certain payments like interest and dividends when a TIN is missing or incorrect

Answer

Backup withholding at the rate of 24% is required on certain reportable payments (interest, dividends, etc.) when the payee fails to provide a valid TIN or the IRS notifies the payer of an incorrect TIN.

Question 4

What is the Medicare tax rate withheld from an employee's wages (excluding the Additional Medicare Tax)?

Accepted Answer

1.45%

Answer

The employee Medicare tax rate is 1.45% on all wages, with no wage base limit, and the employer matches this amount.

Question 5

An employer discovers they under-deposited payroll taxes by $300 in Q1. What is the IRS safe harbor rule that may prevent a penalty?

Accepted Answer

The shortfall is less than the greater of $100 or 2% of the required deposit

Answer

The IRS safe harbor rule states that a deposit shortfall will not be penalized if it does not exceed the greater of $100 or 2% of the required deposit amount.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Fundamental Payroll Employment Taxes and Withholding 5