Fundamental Payroll Certification Fundamental Payroll Paycheck Calculation Methods 5 — Questions and Answers
Question 1: A creditor garnishment order requires withholding 25% of an employee's disposable earnings of $700 per week. Federal law limits the garnishment to 25% of disposable earnings OR the amount by which disposable earnings exceed 30× the federal minimum wage ($7.25), whichever is LESS. What is the maximum garnishment?
- $175.00 (Correct answer)
- $82.50
- $117.50
- $700.00
Correct answer: $175.00
25% of $700 = $175; disposable earnings exceeding 30 × $7.25 ($217.50) = $700 − $217.50 = $482.50; the lesser amount is $175, so the maximum garnishment is $175.
Question 2: A child support withholding order requires 60% of an employee's disposable earnings. The employee supports no other family. Under the CCPA, the maximum percentage allowed for child support withholding is:
- 25%
- 50%
- 60% (Correct answer)
- 65%
Correct answer: 60%
For child support and alimony, the CCPA allows up to 60% of disposable earnings if the employee does not support another family, and up to 65% if more than 12 weeks in arrears.
Question 3: An employee has a voluntary Roth 401(k) contribution of $400 per pay period. How does this affect FICA and federal income tax withholding?
- Reduces both FICA and FIT taxable wages
- Reduces FIT taxable wages only
- Does not reduce FICA or FIT taxable wages (Correct answer)
- Reduces FICA taxable wages only
Correct answer: Does not reduce FICA or FIT taxable wages
Roth 401(k) contributions are made on an after-tax basis, so they do not reduce federal income taxable wages or FICA wages.
Question 4: After computing gross pay and subtracting all pre-tax deductions, which taxes are deducted in the correct order to arrive at net pay?
- FIT → State IT → Local IT → Employee FICA
- Employee FICA → FIT → State IT → Local IT
- Employee FICA and FIT simultaneously → State/Local taxes → voluntary deductions → garnishments (Correct answer)
- Garnishments → FICA → FIT → post-tax deductions
Correct answer: Employee FICA and FIT simultaneously → State/Local taxes → voluntary deductions → garnishments
By convention, mandatory taxes (FICA and FIT) are computed on gross taxable wages and withheld together, followed by state/local taxes, then post-tax voluntary deductions, and finally garnishments in priority order.
Question 5: An employee's paycheck shows gross pay of $4,000, pre-tax deductions of $300, employee FICA of $286.65, FIT withholding of $420, and post-tax deductions of $100. What is the net pay?
- $2,893.35 (Correct answer)
- $2,993.35
- $3,293.35
- $2,893.65
Correct answer: $2,893.35
$4,000 − $300 (pre-tax) − $286.65 (FICA) − $420 (FIT) − $100 (post-tax) = $2,893.35.
Question 6: A federal tax levy served on an employer requires withholding from an employee's wages. Unlike a creditor garnishment, an IRS levy:
- Is limited to 25% of disposable earnings
- Has no CCPA cap and takes priority over most other garnishments (Correct answer)
- Must be approved by the employee before withholding
- Can be ignored if a child support order is already in place
Correct answer: Has no CCPA cap and takes priority over most other garnishments
An IRS tax levy is not subject to the CCPA percentage limits and generally takes priority, though it must coexist with child support orders depending on timing.
Question 7: An employer is required to deposit the employee's share of FICA taxes along with:
- The employee's FIT withholding only
- The employer's matching FICA contribution (Correct answer)
- The employer's FUTA tax
- Post-tax deductions collected from employees
Correct answer: The employer's matching FICA contribution
Employers must deposit both the employee's share of FICA taxes withheld and the employer's matching share of FICA taxes at the same time.
Fundamental Payroll Certification Fundamental Payroll Paycheck Calculation Methods 5
A creditor garnishment order requires withholding 25% of an employee's disposable earnings of $700 per week.
Federal law limits the garnishment to 25% of disposable earnings OR the amount by which disposable earnings exceed 30× the federal minimum wage ($7.25), whichever is LESS.
What is the maximum garnishment?