IAB Payroll Processing & Administration 2 — Questions and Answers
Question 1: An employer must deposit payroll taxes using the Electronic Federal Tax Payment System (EFTPS). Which deposit schedule applies to an employer whose total tax liability in the lookback period was $50,000 or less?
- Next-day depositor
- Monthly depositor (Correct answer)
- Semi-weekly depositor
- Quarterly depositor
Correct answer: Monthly depositor
Employers with $50,000 or less in payroll tax liability during the lookback period are classified as monthly depositors and must deposit by the 15th of the following month.
Question 2: Which form is used to report wages paid and taxes withheld to each employee at the end of the calendar year?
- Form 941
- Form W-4
- Form W-2 (Correct answer)
- Form 1099-NEC
Correct answer: Form W-2
Form W-2 (Wage and Tax Statement) is provided to each employee and filed with the Social Security Administration to report annual wages and withheld taxes.
Question 3: Garnishments deducted from employee paychecks for child support orders are classified as what type of payroll deduction?
- Voluntary pre-tax deduction
- Voluntary post-tax deduction
- Involuntary deduction (Correct answer)
- Employer contribution
Correct answer: Involuntary deduction
Child support garnishments are involuntary deductions because they are legally mandated by a court order, not elected by the employee.
Question 4: What is a pay stub required to show under most state laws?
- Employee's Social Security number in full
- Gross pay, deductions, and net pay (Correct answer)
- Employer's federal tax ID number
- Year-to-date 401(k) balance
Correct answer: Gross pay, deductions, and net pay
Most state pay stub laws require disclosure of gross earnings, itemized deductions (taxes, benefits, garnishments), and the resulting net pay so employees can verify their compensation.
Question 5: Which of the following correctly describes a Section 125 Cafeteria Plan deduction for an employee's health insurance premium?
- Post-tax, subject to FICA
- Pre-tax, exempt from federal income tax and FICA (Correct answer)
- Pre-tax, subject to FICA only
- Post-tax, exempt from state income tax only
Correct answer: Pre-tax, exempt from federal income tax and FICA
Under IRC Section 125, employee health insurance premiums paid through a cafeteria plan are excluded from federal income tax and FICA taxes, reducing both employee and employer tax burdens.
Question 6: When must employers provide employees with their Form W-2 for the prior calendar year?
- By December 31 of the tax year
- By January 31 of the following year (Correct answer)
- By February 28 of the following year
- By April 15 of the following year
Correct answer: By January 31 of the following year
Employers must furnish Form W-2 to employees by January 31 following the close of the calendar year so employees can meet early tax filing deadlines.
Question 7: A salaried, exempt employee earns $78,000 per year and is paid bi-weekly. What is the gross pay per paycheck?
- $1,500.00
- $3,000.00 (Correct answer)
- $6,500.00
- $3,250.00
Correct answer: $3,000.00
Bi-weekly pay means 26 pay periods per year; $78,000 ÷ 26 = $3,000.00 gross per paycheck.
IAB Payroll Processing & Administration 2
An employer must deposit payroll taxes using the Electronic Federal Tax Payment System (EFTPS).
Which deposit schedule applies to an employer whose total tax liability in the lookback period was $50,000 or less?