Fundamental Payroll Certification Fundamental Payroll Year-End Processing and Reporting 2

Question 1

What is the primary purpose of year-end payroll reconciliation?

Accepted Answer

To verify that payroll register totals match tax return and W-2 amounts

Answer

Year-end reconciliation confirms that wages and taxes on quarterly Form 941s and annual W-2s agree with the company's payroll register totals.

Question 2

Which form is used to correct errors on a previously issued and filed Form W-2?

Accepted Answer

Form W-2c

Answer

Form W-2c (Corrected Wage and Tax Statement) is the designated IRS form for correcting errors on a previously issued W-2.

Question 3

What does Box 1 on Form W-2 represent?

Accepted Answer

Wages, tips, and other compensation subject to federal income tax withholding

Answer

Box 1 reports federal taxable wages, tips, and other compensation after reducing gross pay by pre-tax deductions such as 401(k) contributions and pre-tax health insurance premiums.

Question 4

What is 'imputed income' in the context of year-end payroll processing?

Accepted Answer

The taxable fair market value of non-cash fringe benefits added to an employee's gross wages

Answer

Imputed income is the fair market value of non-cash benefits — such as employer-provided group term life insurance over $50,000 — that must be included in an employee's taxable wages at year-end.

Question 5

During year-end reconciliation, which two data sources are most commonly compared to verify payroll accuracy?

Accepted Answer

Quarterly Form 941 totals versus annual payroll register totals

Answer

The sum of wages and taxes reported on the four quarterly Form 941s should equal the annual payroll register totals and match the W-2 summary on Form W-3.

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Practice Test

Fundamental Payroll Certification Fundamental Payroll Year-End Processing and Reporting 2