IAB Payroll Processing & Administration 1 — Questions and Answers
Question 1: Which federal form must employees complete to indicate their withholding allowances for federal income tax purposes?
- Form W-2
- Form W-4 (Correct answer)
- Form 941
- Form 1099
Correct answer: Form W-4
Form W-4 (Employee's Withholding Certificate) is completed by employees to tell employers how much federal income tax to withhold from their paychecks.
Question 2: What is the current Social Security tax rate paid by employees on wages up to the wage base limit?
- 5.45%
- 6.20% (Correct answer)
- 7.65%
- 12.40%
Correct answer: 6.20%
Employees pay 6.20% Social Security tax on wages up to the annual wage base limit; employers match this amount for a combined rate of 12.40%.
Question 3: Form 941 must be filed with the IRS on what schedule?
- Annually
- Semi-annually
- Quarterly (Correct answer)
- Monthly
Correct answer: Quarterly
Form 941 (Employer's Quarterly Federal Tax Return) is filed quarterly to report wages paid, federal income tax withheld, and Social Security/Medicare taxes.
Question 4: Which of the following is NOT subject to FICA (Federal Insurance Contributions Act) taxes?
- Regular wages
- Overtime pay
- Employer-paid health insurance premiums (Correct answer)
- Bonuses
Correct answer: Employer-paid health insurance premiums
Employer-paid health insurance premiums are excluded from FICA taxes because they are not considered wages for Social Security and Medicare purposes.
Question 5: What is the Medicare tax rate withheld from employee wages?
- 1.25%
- 1.45% (Correct answer)
- 2.90%
- 3.80%
Correct answer: 1.45%
The employee Medicare tax rate is 1.45%; employers also pay 1.45%, for a combined rate of 2.90%, with no wage base limit.
Question 6: Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive overtime pay at what rate for hours worked over 40 in a workweek?
- 1.0 times the regular rate
- 1.25 times the regular rate
- 1.5 times the regular rate (Correct answer)
- 2.0 times the regular rate
Correct answer: 1.5 times the regular rate
The FLSA requires non-exempt employees to be paid at least 1.5 times (time-and-a-half) their regular rate of pay for all hours worked over 40 in a single workweek.
Question 7: Which payroll tax is paid solely by the employer and funds the federal unemployment insurance program?
- FICA
- FUTA (Correct answer)
- SUTA
- Medicare surcharge
Correct answer: FUTA
FUTA (Federal Unemployment Tax Act) is an employer-only tax; employees do not contribute to it, and the proceeds fund federal unemployment benefits.
IAB Payroll Processing & Administration 1
Which federal form must employees complete to indicate their withholding allowances for federal income tax purposes?