For which of the following payments is the employer required to withhold federal
income taxes?
a. Advances made to sales personnel for traveling expenses
b. Tipped employees monthly tips of $120
c. Deceased persons wages paid to the estate
d. Minister of Presbyterian church
e. All of the above
The Wage and Hour Division allows the practice of recording an employees starting and
stopping time to:
a. the nearest five minutes.
b. the nearest tenth of an hour.
c. the nearest quarter of an hour.
d. all of the above.
e. none of the above.
Which of the following is not part of the social security program?
a. Federal Income Tax Law
b. Federal Old-Age and Survivors Trust Fund
c. Medicare
d. Self-Employment Contributions Act
e. All are part of the social security program.
NOTE: In the following problems, use the net FUTA tax rate of 0.6% on the first
$7,000 of taxable wages.
Michael Mirer worked for Dawson Company for six months this year and earned
$11,200. The other six months, he earned $6,900 working for McBride Company (a
separate company). The amount of FUTA taxes to be paid on Mirers wages by the two
companies is:
(a) Dawson Company
(b) McBride Company
Which of the following is not required by the FLSA?
a. Extra pay for work on holidays
b. Two weeks vacation pay after one year of service
c. Restriction on hours worked by a 17-year-old worker
d. All of the above are required.
e. None of the above is required.
FICA defines all of the following as employees except:
a. vice presidents.
b. partners.
c. superintendents.
d. full-time life insurance salespersons.
e. payroll managers.
Dismissal pay is considered taxable wages under FICA.
If the employer is tardy in paying the state contributions, the credit against the federal
tax is limited to what percent of the late payments that would have been allowed as a
credit if the contributions had been paid on time?
a. 6.2%
b. 90%
c. 5.13%
d. 20%
e. 0%
To curb the practice of employees filing false Forms W-4, the IRS requires that an
employer submit to the agency a copy of each Form W-4:
a. the IRS has requested in writing.
b. on which an employee, usually earning $180 each week at the time Form W-4 was
filed, now claims to be exempt from withholding.
c. on which an employee claims to be single but has 9 withholding allowances.
d. on which a married employee claims no withholding allowances.
e. on which a recently divorced employee claims 5 withholding allowances and
authorizes an additional $10 to be withheld each week.
Workers exempt from all of the FLSA requirements include:
a. employees paid by the hour.
b. clerk-typists earning less than $200 a week.
c. taxicab drivers.
d. motion picture theater employees.
e. none of the above.
Which of the following laws establishes the minimum wage?
a. Fair Labor Standards Act
b. Federal Income Tax Act
c. Federal Insurance Contributions Act
d. Federal Unemployment Tax Act
e. Fair Employment Laws
Those tasks that employees must perform and which include any work of consequence
performed for the employer are known as:
a. preliminary activities.
b. postliminary activities.
c. work activities.
d. principal activities.
e. none of the above.
The garnishment that takes priority over all others is:
a. a federal tax levy.
b. a government student loan.
c. a creditor garnishment.
d. an administrative wage garnishment.
e. a child support order.
Which of the following is not a factor considered in determining coverage of interstate
employees?
a. Location of base of operations
b. Place where work is localized
c. Location of companys payroll department
d. Location of employees residence
e. Location of place from which operations are controlled
NOTE: In this chapter and in all succeeding work throughout the course, unless
instructed otherwise, use the following rates, ceiling, and maximum taxes.
For rounding rules refer to page 2-33.
*Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to
self-employed.
On August 1, Huff (part-time waitress) reported on Form 4070 the cash tips of $158.50
that she received in July. During August, Huff was paid
wages of $550 by her employer.
Determine:
(a) The amount of social security taxes that the employer should withhold from Huffs
wages during August
(b) The amount of the employers social security taxes on Huffs wages and tips during
August
The entry made at the end of the accounting period to record wages incurred but unpaid
is:
a. Wages Expense
Wages Payable
b. Wages Expense
FICA Taxes PayableOASDI
FICA Taxes PayableHI
FIT Payable
Wages Payable
c. Wages Payable
Cash
d. Wages Expense
Cash
e. Wages Expense
Payroll Taxes
Wages Payroll
Insurance agents paid solely on a commission basis are not considered employees under
FUTA.
In calculating a gross-up amount of a bonus payment, an employer does not use the
OASDI/HI tax rates in the formula.
Carmen Gaetano worked 46 hours during this payweek. He is paid time-and-a-half for
hours over 40 and his pay rate is $17.90/hour. What was his overtime premium pay for
this workweek?
a. $107.40
b. $161.10
c. $50.70
d. $53.70
e. $26.85
Barr fails to make a timely deposit of FICA taxes and withheld income taxes until five
days after the due date. The penalty facing Barr is:
a. 2% of the undeposited taxes.
b. 5% of the undeposited taxes.
c. 10% of the undeposited taxes.
d. 25% of the undeposited taxes.
e. none of the above.
Form I-9, which is completed by each employee, deals with:
a. contributions to individual retirement accounts.
b. verification of employment eligibility.
c. eligibility for unemployment benefits.
d. eligibility for Medicare benefits.
e. none of the above.
Rest periods and coffee breaks may be required by all of the following except:
a. a union contract.
b. a state legislation.
c. a municipal legislation.
d. the FLSA.
e. none of the above.
If the employer has made timely deposits that pay the FUTA tax liability in full, the
filing of Form 940 can be delayed until:
a. December
b. February
c. February
d. February
e. March
The FLSA requires:
a. that employers use time cards to record the employees time worked.
b. that employers use the continental time system to record all time worked by
employees.
c. that employers keep records that show the hours each employee worked each
workday and each workweek.
d. that employees sign each clock card.
e. none of the above.
NOTE: In this chapter and in all succeeding work throughout the course, unless
instructed otherwise, use the following rates, ceiling, and maximum taxes.
For rounding rules refer to page 2-33.
*Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to
self-employed. Dee is paid $1,345 on November 8, 20–. Dee had cumulative
gross earnings, including overtime pay, of $117,200 prior to this pay.
(a) The amount of OASDI taxes to withhold from Dees pay
(b) The amount of HI taxes to withhold from Dees pay
Which of the following payments are taxable payments for federal unemployment tax?
a. Christmas gifts, excluding noncash gifts of nominal value
b. Caddy fees
c. Courtesy discounts to employees and their families
d. Workers compensation payments
e. Value of meals and lodging furnished employees for the convenience of the employer
NOTE: In the following problems, use the net FUTA tax rate of 0.6% on the first
$7,000 of taxable wages.
Niemann Company has a SUTA tax rate of 7.1%. The taxable payroll for the year for
FUTA and SUTA is $82,600.
(a) The amount of FUTA tax for the year is
(b) The amount of SUTA tax for the year is
Under the Equal Pay Act:
a. employers must pay a married male a higher wage rate than a single
female if both are performing equal work.
b. white-collar workers are exempt from its requirements.
c. wage differentials based on a seniority system are allowed.
d. if there is an unlawful pay differential, employers may reduce the
higher rate to equal the lower rate.
e. none of the above.
Note: Use the tables on the following pages to calculate the answers to the problems
listed.
Source: Internal Revenue Service.
Calculate the amount to withhold from the following employees using the biweekly
table of the percentage method.
(a) Kenneth Karcher (single, 1 allowance = $153.80), $895 wages
(b) Mary Kenny (married, 2 allowances = $307.60), $1,900 wages
(c)Thomas Carney (single, 0 allowances), $1,460 wages
Which of the following deposit requirements pertains to a semiweekly depositor who
has accumulated employment taxes of $17,500 on payday, Saturday, May 16, 20–?
a. No deposit is required until May 18, the next banking day.
b. The undeposited taxes should be carried over to the next payday on May 23.
c. The taxes must be deposited on or before Tuesday, May 19.
d. The taxes must be deposited on or before Friday, May 22.
e. None of the above.
NOTE: In this chapter and in all succeeding work throughout the course, unless
instructed otherwise, use the following rates, ceiling, and maximum taxes.
For rounding rules refer to page 2-33.
*Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to
self-employed. Crow earned $585.15 during the week ended March 1, 20–. Prior to
payday, Crow had cumulative gross earnings of $4,733.20.
(a) The amount of OASDI taxes to withhold from Crows pay
(b) The amount of HI taxes to withhold from Crows pay
For FUTA purposes, an employer must pay a higher FUTA tax rate on executives than
on nonsupervisory personnel.
An employer is required to submit a copy of the employees Form W-4 to the IRS if the
employee has claimed 15 or more withholding allowances.
Christmas gifts, excluding noncash gifts of nominal value, are taxable wages for
unemployment purposes.
An employer can use a credit card to pay the balance with Form 940 (under $500).
The entry to record the employers payroll taxes usually includes credits to the liability
accounts for FICA (OASDI and HI), FUTA, and SUTA taxes.
In order for the Walsh-Healey Public Contracts Act to protect laborers for contractors
who furnish materials to any agency of the United States, the contract amount must be
at least $10,000.
The FICA tax rates and taxable wage bases are exactly the same for the employee and
employer when the employee makes $200,000 or less.
NOTE: In all problems, unless instructed otherwise, compute the hourly and overtime
rates as follows:
1) Carry the hourly rate and the overtime rate to 3 decimal places and then round off to
2 decimal places (round the hourly rate to 2 decimal places before multiplying by one
and one-half to determine the overtime rate).
2) If the third decimal place is 5 or more, round to the next higher cent.
3) If the third decimal place is less than 5, drop the third decimal place.
Also, use the minimum hourly wage of $7.25 in solving these problems and all that
follow. Casey Klemons agreement (BELO plan) with his employer provides for a pay
rate of $16.50 per hour with a maximum of 50 hours. How much
would Klemons be paid for a week in which he worked 46 hours?
Services performed in the employ of a religious organization that is exempt from
federal income tax are also exempt from FUTA coverage.
NOTE: In this chapter and in all succeeding work throughout the course, unless
instructed otherwise, use the following rates, ceiling, and maximum taxes.
For rounding rules refer to page 2-33.
*Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to
self-employed. Fess receives wages totaling $74,500 and has net earnings
from self-employment amounting to $51,300. In determining her
taxable self-employment income for the OASDI tax, how much of her
net self-employment earnings must Fess count?
Once the journal entry for the payroll is complete, the information is posted to the
appropriate general ledger accounts.
Under the safe harbor rule, when employers deposit their tax liabilities, they may have a
shortfall of no more than $200 without incurring any penalty.
Exempt educational assistance includes payments for tools that employees keep after
they complete a course of instruction.
In the case of a part-time employee, the employer pays a FUTA tax on only the first
$3,500 of earnings (one-half the regular limit).
The employer is required by the FLSA to display a poster that informs employees of the
provisions of the law.
After completion of Form W-4, an employer must copy the employees social security
card and place it in the employees employment file.
The FLSA requires that workers receive overtime pay of twice the employees regular
hourly rate for hours worked on Sunday.
All employers of one or more persons must file an application for an identification
number.
Union Dues Payable is a liability account credited with the deductions made from union
members wages for their union dues.