Fundamental Payroll Involuntary and Voluntary Deductions Questions and Answers

Question 1

An employee has a gross pay of $1,200.
Legally required deductions (federal, state, FICA taxes) total $250.
The employee also has voluntary post-tax deductions for union dues ($20) and a charitable contribution ($30).
For the purpose of calculating a creditor garnishment, what are the employee's disposable earnings?

Accepted Answer

$950

Answer

$900

Answer

$1,200

Answer

$930

Question 2

An employee is subject to a child support order. They do not support another spouse or child and are more than 12 weeks in arrears. According to the Consumer Credit Protection Act (CCPA), what is the MAXIMUM percentage of their disposable earnings that can be withheld?

Accepted Answer

65%

Answer

50%

Answer

60%

Answer

25%

Question 3

An employer receives a federal tax levy, a creditor garnishment, and a child support order for an employee. Which of these involuntary deductions generally has the highest priority?

Accepted Answer

Child support order

Answer

Creditor garnishment

Answer

Federal tax levy

Answer

Whichever order was received first

Question 4

Which of the following is a key characteristic of a voluntary wage assignment?

Accepted Answer

The employee can typically revoke it at any time.

Answer

It is mandated by a court order.

Answer

The CCPA's percentage limits always apply.

Answer

It takes priority over all court-ordered garnishments.

Question 5

Under the Consumer Credit Protection Act (CCPA), the amount of an employee's disposable earnings that can be garnished for an ordinary debt (not child support or taxes) is the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed:

Accepted Answer

30 times the federal minimum wage.

Answer

40 times the federal minimum wage.

Answer

50 times the federal minimum wage.

Answer

25 times the federal minimum wage.

Question 6

An employee enrolls in their company's 401(k) retirement plan and Section 125 health insurance plan. Which statement correctly describes the tax treatment of these voluntary deductions?

Accepted Answer

Both deductions are typically taken on a pre-tax basis, reducing taxable income.

Answer

Both deductions are taken after all taxes have been calculated.

Answer

The 401(k) is pre-tax, but the health insurance is post-tax.

Answer

The health insurance is pre-tax, but the 401(k) is post-tax.