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MASTERING PAYROLL TESTBANK Section 1EMPLOYEES V. NONEMPLOYEES 1. Backup withholding tax applies: a. when a new employee does not submit a Form W4 b. when an independent contractor fails to submit a TIN c. to statutory employees d. to common law employees 2. Which of the following could be a statutory employee? a. a licensed real estate agent b. a direct seller c. a life insurance sales agent who deal primarily with one carrier d. an independent contractor 3. Al, walks in off the street, says the grounds could use some sprucing up, and offers to do it for $8 an hour. Management gives him a try for 6 months. He is told to come in Monday-Friday, from 9 a.m.1 p.m., use the company's garden tools and check in with the maintenance supervisor who will tell him what to do. Your company: a. can pay Al as an independent contractor and issue a 1099 at year end b. must pay him as an employee, withhold appropriate taxes and issue a W2 at year end c. can choose a. or b., depending on your company's policy d. can opt to treat Al as a temp 4. If you do not know whether a new worker is an employee or an independent contractor: a. you must treat the worker as an employee b. you must treat the worker as an independent contractor c. you may seek a determination from the IRS on classifying the person, but until the IRS responds you must treat the worker as an employee d. you may seek a determination from the IRS on classifying the person, but until the IRS responds you must treat the worker as an independent contractor 5. Which of the following could be a statutory nonemployee? a. a licensed real estate agent b. an independent contractor c. a fulltime travelling salesperson d. a life insurance sales agent who deals primarily with one carrier 6. A homecare companion sitter is: a. a commonlaw employee b. a statutory employee c. a statutory nonemployee d. an independent contractor Testbank 1 Mastering Payroll American Institute of Professional Bookkeepers, 2010 7. Which of the following workers is subject to FICA, but not FITW? a. a commonlaw employee b. a statutory employee c. a statutory nonemployee d. an independent contractor 8. Which of the following is responsible for paying 100% of the FICA tax? a. a commonlaw employee b. a statutory employee c. a leased employee d. an independent contractor 9. On which of the following does an employer not pay FUTA tax? a. a commonlaw employee b. a statutory employee c. an independent contractor d. none of the above 10. In July 2010, Oxon, Inc receptionist Ling takes a week's vacation and her daughter Hua fills in for her. Hua is: a. a commonlaw employee b. a statutory nonemployee c. an independent contractor d. a temp agency referral Section 2FEDERAL AND STATE WAGEHOUR LAW 1. The frequency and method of distributing the payroll is regulated by: a. the U.S. Department of Labor, Wage and Hour Division b. the Internal Revenue Service c. the states d. by employee-employer negotiation 2. If the state law minimum wage is higher or lower than the federal one, the employer must use: a. the state minimum wage b. the federal minimum wage because federal law is \"senior\" to state law c. the minimum wage most favorable to the employee d. the minimum wage most favorable to the employer 3. A retail business that began operations in 1997 must abide by federal wagehour law if gross annual sales are: a. $0 or more b. $362,500 or more c. $250,000 or more d. $500,000 or more Testbank 2 Mastering Payroll 4. What to do with the final paycheck never claimed by a terminated employee is covered by: a. state wagehour law b. escheat law c. the enterprise coverage test d. federal wagehour law 5. A retail business that began operations in 1987 must abide by federal wagehour law if gross annual sales are: a. $0 or more b. $362,500 or more c. $250,000 or more d. $500,000 6. A dry cleaning establishment that began operations in 2004 must abide by federal wagehour law if gross annual sales are: a. $0 or more b. $362,500 or more c. $250,000 or more d. $500,000 or more 7. A nonretail business that began operations in 1985 must abide by federal wagehour law if gross annual sales are: a. $0 or more b. $362,500 or more c. $250,000 or more d. $500,000 or more 8. A nonretail business that began operations in 1995 must abide by federal wagehour law if gross annual sales are: a. $0 or more b. $362,500 or more c. $250,000 or more d. $500,000 or more . 9. Super Dry Cleaners started up January 1, 1990. As of May 1, 2010, sales are $350,000. What is the minimum hourly wage Super Dry must pay its employees during 2010? a. $2.13 b. $5.85 c. $6.55 d. $7.25 10. UpCo employee Rachel quits and moves. UpCo wants to give Rachel her final paycheck but cannot find her. UpCo must turn over the check to the state under: a. the claim of right Testbank 3 Mastering Payroll b. c. d. FLSA escheat law the principle of constructive receipt Testbank 4 Mastering Payroll Section 3 PAYING EMPLOYEES UNDER FEDERAL LAW 1. An employee paid $8 an hour works 50 hours one workweek. How much premium pay is due the employee under federal law? a. $80 b. $40 c. $120 d. $160 2. On May 1, 2010, a distributor starts up in a state with a minimum wage of $7.00. What minimum hourly wage must the company pay employees? a. $6.00 b. $7.00 c. $5.85 d. $7.25 3. Suzy is paid $576 weekly for a 32hour workweek. If she works 37 hours one week, and 32 hours the next, what is her total pay for the two workweeks? a. $1,152 b. $1,242 c. $1,287 d. None of the above 4. Joey's monthly salary is $2,000. If Joey works a 40hour workweek, what is his hourly rate under federal law? a. $10.75 b. $11.54 c. $12.50 d. $13.63 5. Shashi is paid every two weeks at a rate of $7.60 an hour. If she works 42 hours one first week and 36 hours the next, what are her total gross wages for the two weeks? a. $575.20 b. $592.80 c. $600.40 d. $608.00 6. To be exempt from federal wagehour law, an administrative employee must have: a. a title that includes the word \"manager\" b. a minimum salary of $370 a week c. the power to hire and fire personnel under his/her supervision d. active responsibility for establishing and enforcing company policy 7. Juanita normally works M-F. One week, she works Monday-Wednesday (24 hours in total), is out Thursday for an unpaid personal day and is out sick Friday, but is paid 8 hours' sick pay. Saturday she works 8 hours, and Sunday 8 hours. If her pay rate is $8.00 an hour, how much pay must she be paid for the week under federal law? a. $320.00 Testbank 5 Mastering Payroll b. c. d. $352.00 $384.00 $416.00 8. Marcie works 40 hours M-F, clocking in at 8 a.m. and out at 5 p.m. Friday evening her boss calls and asks her to travel to a temporary work site Saturday, stay over and work Sunday. On Saturday, she leaves her house at 11 a.m. and arrives at her destination at 8 p.m. How many hours' travel pay is Marcie due for Saturday? a. 0 hours b. 6 hours c. 8 hours d. 9 hours 9. If Mark earns $380 a week for a 38hour workweek, what is his hourly rate of pay? a. $10.00 b. $9.50 c. $38.00 d. none of the above 10. Lee works 34 hours Monday-Thursday, and 8 hours Friday, a national holiday. If she is paid $10.00 an hour, what is her pay for the week? a. $400 b. $410 c. $420 d. $430 11. Jane is paid $1,000 every other week. If her normal workweek is 36 hours, her hourly rate of pay is: a. $12.50 b. $12.82 c. $13.89 d. $20.84 12. Under federal law, what are gross wages for the week for an employee paid $10 an hour who works 37 hours, as follows: 8 hours each on Monday, Wednesday and Sunday, and 13 hours on Friday? a. $370 b. $385 c. $395 d. $410 13. Your firm pays 3 employees as follows: Factory Worker Sales employee Executive Testbank $24/hour $20/hour $50/hour 6 Mastering Payroll One workweek, each employee works 42 hours. For this workweek, what is the total premium pay for your firm? a. $44 b. $24 c. $94 d. No premium pay is due for overtime under federal law Section 4EMPLOYMENT RECORDS AND PAYROLL RECORDKEEPING 1. Which of the following documents would prove both identity and authorization to work in the U.S.? a. School ID with photo and driver's license b. Birth certificate and Social Security card c. Unexpired U.S. passport d. None of the above 2. On February 5, 2009, Marty submits a W4 to you. On February 10, 2010, she submits another W4 with different information. You should retain the first W4 until: a. April 15, 2014 b. April 15, 2015 c. February 5, 2014 d. February 5, 2015 3. IRS rules require that employee resumes and employment applications be retained for: a. 3 years from date of hire b. 4 years from date of hire c. 4 years from the April 15th following the tax year to which the document pertains d. no specified period 4. To obtain a Social Security card, an individual should submit: a. Form SS4 b. Form SS5 c. Form W4 d. None of the above 5. To prove identity for the I9, an employee could present: a. a Social Security card b. a birth certificate c. a school ID with photo d. a U.S. citizen identification card 6. Robert starts work Monday, January 4, and works all week. By what date should his Form I9 be completed? a. January 7 Testbank 7 Mastering Payroll b. c. d. 7. January 8 January 9 January 6 Which of the following forms must be completed for every new employee? a. Form W9 b. Form SS4 c. Form I9 d. Form 1099 Testbank 8 Mastering Payroll Section 5EMPLOYEE DATA; FORM W4 AND STATE WITHHOLDING ALLOWANCE CERTIFICATES 1. New employee Ranjan submits a W4 claiming 3 allowances and requesting that an additional $300 per pay period be withheld. His employer should: a. reject the W4 and use single with zero allowances until Ranjan submits a correct W-4 b. advise Ranjan that if he wants more withheld, he should claim more allowances rather than stipulate a specific amount c. accept the W4 as submitted d. send the W4 to the IRS 2. Cindy's is paid on the 15th and last day of the month. If, on February 4, 2010, Cindy submits a revised W4, her employer must implement the changes by the payroll period ending on: a. February 15, 2010 b. February 28, 2010 c. March 15, 2010 d. March 31, 2010 3. An employer should not accept a W4 if: a. page 2 of the worksheet is not completed and signed b. the employee requests that a fixed percentage of pay be withheld c. the employee submits more than one change within the same tax year d. all of the above 4. Devon's employer pays him every Friday. On April 23, 2010, Devon submits a revised W4 to his employer. The employer is required to implement the changes by the payroll period ending on: a. Friday, May 7, 2010 b. Friday, May 14, 2010 c. Friday, May 21, 2010 d. Friday, May 28, 2010 5. Copies of the W4 are normally be submitted to the IRS: a. annually with Form 940 b. with Form 941 c. with a transmittal Form W3 d. only upon request Section 6HOW EMPLOYERS WITHHOLD AND DEPOSIT FEDERAL TAXES 1. Which of the following should be withheld from an employee's paycheck in the year that a bonus is paid? a. Both FIT and FICA Testbank 9 Mastering Payroll b. c. d. FIT only FICA only FIT, FICA and FUTA 2. HapCo, which opened for business June 7, 2010, has accumulated 941 taxes payable of $60,000 as of June 30, which it deposits July 15, 2010. a. HapCo's deposit was late b. HapCo will be a semiweekly depositor in 2011 c. HapCo will remain a monthly depositor until June 2011 d. none of the above 3. GrabCo withholds from an employee's pay: $100 FICA, $200 FITW, $50 SIT and a $40 contribution to a 401k. The employer's 941 tax liability for the pay period for this employee is: a. $100 b. $200 c. $400 d. $450 4. A semiweekly depositor's payday falls on Wednesday, July 3. If Thursday, July 4 is a legal holiday, the due date for 941 taxes is: a. Tuesday, July 13 b. Wednesday, July 14 c. Thursday, July 15 d. Friday, July 16 5. For the 12month period ending June 30, 2010, WidCo has 941 tax liabilities of $46,880. On April 23, 2010, WidCo had deposited $120,000 in Form 941 tax liabilities. WidCo: a. remains a monthly depositor for 2010 but is a semiweekly depositor for 2011 b. is a semiweekly depositor for 2011 and 2012 c. must make deposits within one banking day for the rest of 2010 d. is a semiweekly depositor for the remainder of 2010 and all of 2011 6. As of November 22, 2010, Lulu's yeartodate wages are $105,300. Her gross paycheck for the next payday in December is for $4,500. How much FICA tax should the employer withhold from this payment? a. $344.25 b. $93.00 c. $158.25 d. $316.50 7. Marvel started up this year and has deposited $76,500 in 941 taxes. If Marvel incurs a $12,000 payroll tax liability on Monday, June 7, by what date must its next payroll tax deposit be made? a. Friday, June 11 b. Tuesday, June 8 Testbank 10 Mastering Payroll c. d. Friday, July 30 Friday, July 15 8. Fangli, a semiweekly depositor, pays employees every Friday. If Monday, May 26, is Memorial Day, Fangli must deposit its 941 taxes for the pay period ending on May 23 by: a. Tuesday, May 27 b. Wednesday, May 28 c. Thursday, May 29 d. Friday, May 30 9. Which of the following helps an employer determine an employee's FITW? a. IRS Publication 15 b. Form 941 instructions c. Form W2 instructions d. Form 940 instructions 10. FIT need not be withheld if the employee: a. works for your firm one day a week or less b. works for your firm part time (1 day a week) and only when called c. is a student hired only for the summer d. none of the above are exempt from FIT 11. Frieda's 2009 yeartodate FICA taxable wages are $99,300. On December 24, 2009, she receives a $10,000 bonus. How much FICA tax should be withheld on the bonus? a. $765.00 b. $610.00 c. $620.00 d. $573.75 12. John is married and paid weekly. On his W4, he takes no exemptions but requests that an additional $50 of FIT be withheld each pay period. On June 30, his gross pay is $545. According to the weekly withholding table below, select the amount of FIT that should be withheld from John's paycheck? MARRIED Persons - WEEKLY Payroll Period (For Wages Paid in 2010) If the wages are - And the no. of withholding allowances claimed is - 0 1 2 3 4 At least But less than 520 530 530 540 29 30 19 20 12 13 5 6 0 0 540 550 550 560 32 33 21 23 14 15 7 8 0 1 Testbank 5 The amount of income tax to be withheld is ... ... ... ... ... 11 Mastering Payroll 560 a. b. c. d. 570 35 24 16 9 2 ... $32 $21 $82 $14 Section 7FEDERAL EMPLOYMENT REPORTING FORMS AND DUE DATES 1. Clara's taxable income for 2010 is $70,000. On her W2, FUTA tax withheld is: a. $0 b. $56 c. $434 d. $560 2. QuikCo's FUTA tax liability at the end of first quarter is $480, at the end of the second quarter, $100. What is the latest date that first quarter taxes can be paid without incurring a late penalty? a. April 30 b. July 10 c. July 31 d. August 10 3. Form 941, Schedule B is used: a. by startups that accumulate at least $50,000 their first year b. by companies that had at least $50,000 in 941 liabilities in the lookback period c. by companies that triggered the onebankingday rule the prior year d. both b. and c 4. Which of the following accompanies a payment of a paper Form 945 taxes? a. Form 940 b. Form 8109 c. Form 941 d. Form 943 5. Form W2 shows: a. FICA withheld b. FICA and FUTA withheld c. FICA and FIT withheld d. FICA, FUTA, and FIT withheld 6. If a departing employee asks you for a W2, you must provide it: Testbank 12 Mastering Payroll a. b. c. d. by January 15 of the year following the year of termination or within 30 days of the departing employee's request at the company's option within 30 days of the date of termination by the earlier of January 31 of the year following the year of termination or 30 days of the departing employee's request within 60 days of the departing employee's request 7. Under IRS regulations, documents substantiating amounts reported on Form 940 for year ended December 31, 2009, should be retained until: a. December 31, 2012 b. January 31, 2013 c. December 31, 2013 d. January 31, 2014 8. On Form 8109, the \"tax period\" refers to: a. the calendar month when the taxes were withheld b. the quarter when the taxes were withheld (generally, the quarter in which the wages were paid) c. the period of time covered from the first date of withholding to the last covered by the completed 8109 being submitted d. the quarter for which the deposit is made 9. FUTA taxes: a. are used to manage the state unemployment insurance system b. are both withheld from the employee and also paid by the employer c. start when total employee monthly wages reach $1,500 d. are paid by all organizations, profit or nonprofit 10. FUTA taxes are computed: a. semiweekly b. monthly c. quarterly d. annually 11. If Good Company deposited its federal employment taxes timely and in full this year, its Form 941 due date for August wages is: a. September 30 b. October 31 c. November 10 d. November 30 12. Jack made $108,700 in 2010 and paid $5,235 in FIT. What amounts were reported on the W2 in boxes 3, 4, and 6, respectively? a. $106,800.00; $6,739.40; $1,548.60 b. $106,800.00; $6,621.60; $1,576.15 c. $108,700.00; $6,621.60; $1,548.60 d. $108,700.00; $6,739.40; $1,576.15 Testbank 13 Mastering Payroll 13. The lookback period for Form 945 taxes for 2010 is: a. July 1, 2007June 30, 2008 b. July 1, 2008June 30, 2009 c. January 1, 2008December 31, 2008 d. January 1, 2009December 31, 2009 14. A former employee requesting a W2 should be provided with: a. Copy A, Copy 1 and Copy 2 b. Copy B, Copy 2 and Copy 3 c. Copy A, Copy 2 and Copy 3 d. Copy B, Copy C and Copy 2 15. The thirdquarter 2010 Form 940 is normally due: a. September 30, 2010 b. October 31, 2010 c. November 30, 2010 d. January 31, 2011 16. An employer must provide a 2010 W2 to an employee by: a. March 31, 2011 b. February 15, 2011 c. January 31, 2011 d. February 29, 2011 17. Most states require W2s to be remitted to the state by: a. January 15 b. January 31 c. February 15 d. February 28 Section 8WHEN WAGES BECOME TAXABLE 1. Wages are taxable: a. when paid b. when constructively received c. when Form 941 is submitted d. as of the date on the paycheck 2. In 2010, Sarah receives a wage advance of $2,000 that she fully intends to repay in 2010. Her biweekly gross pay is $2,500. On her paycheck on June 11, 2010, Sarah has $500 withheld to repay part of the advance. Her employer should withhold from the June 11 paycheck FICA tax of: a. $191 b. $155 c. $153 d. $124 3. Salary advances that are repaid in the same year: a. must follow the claim of right rule Testbank 14 Mastering Payroll b. c. d. are not permitted under tax law reduce taxable wages generally increase the employer's FUTA tax 4. On the December 31, 2009 payday, Jo is out sick. Prior to this $3,000 paycheck, her 2009 taxable wages were $107,000. If Jo picked up her paycheck January 4, 2010, how much FICA should Jo's employer have withheld? a. $43.50 b. $186.00 c. $229.50 d. None of the above 5. On December 31, 2009, Tom received a $500 paycheck dated January 4, 2010. If Tom's 2009 taxable wages were $51,000, how much FICA should have been withheld from this paycheckand on which year's W2 should the wages have been included? a. $38.25, 2009 b. $38.35, 2010 c. $31.00, 2009 d. $31.00, 2010 6. On July 15, 2010, Cy receives a $200 salary advance. On December 15, 2010, he repays it by having it withheld from his gross wages of $765. How much of the $765 is taxable wages? a. $965.00 b. $765.00 c. $565.00 d. $521.78 7. On January 4, 2010, Tom is paid for the pay period ending December 31, 2009. Prior to December 31, Tom had FICA withheld on $110,000. How much FICA should be withheld from this $450 paycheck for the pay period ending December 31, 2009and on which year's W2 should it be included? a. $36.53, 2009 b. $34.43, 2009 c. $36.53, 2010 d. $34.43, 2010 8. If an employee asks you to date the last paycheck that you hand out in 2010 as \"2011,\" you should: a. agree to defer the pay, but withhold FICA and FIT in 2010 b. agree to defer the pay, but obtain written acknowledgement from Zeke that he may be subject to the \"claimofright rule.\" c. agree to defer the pay, but let Zeke know that he will be subject to the \"claimofright rule.\" d. refuse to postdate the check Testbank 15 Mastering Payroll 9. Wages earned in 2009 but paid in 2010 had Social Security tax withheld at the rate of: a. 1.20% b. 1.45% c. 6.20% d. 7.65% Section 9 OTHER REPORTING RULES 1. Forms 1099 are due to recipients by: a. January 15 b. January 31 c. February 15 d. February 28 2. Paper Forms 1099 submitted are due to the IRS by: a. January 15 b. January 31 c. February 15 d. February 28 3. Form 1099MISC is used to report payments for rents, commissions, fees and nonemployee compensation that total: a. $600 or more b. more than $0 c. $400 or more d. $10 or more 4. If paper Forms 1099 are filed, what is the correct transmittal form? a. There is no transmittal form b. Form 1095 c. Form 1096 d. Form 1097 5. Forms 1099 filed electronically are due to the IRS by: a. January 31 b. February 28 c. March 15 d. March 31 Section 10 PAYROLL ENTRIES 1. How long does the IRS require employers to keep the payroll register for the pay period ended October 31, 2010? a. October 31, 2013 b. April 15, 2014 c. April 15, 2016 d. April 15, 2015 Testbank 16 Mastering Payroll 2. You record the following payroll for your accrual basis calendar year employer for the week ended December 31, to be paid January 5: Gross salary Withholdings: Social Security tax Medicare tax Federal income tax State income tax Net pay $200,000 $ 7,400 2,900 36,000 10,000 (56,300) $143,700 You will: a. debit Salaries Payable for $143,700 b. debit Salary Expense for $143,700 c. debit Salary Expense for $200,000 d. credit Salary Payable for $200,000 3. Which of the following are costs incurred by the employer? a. employee contributions to pension plan and SITW b. FUTA payable and FICA withheld c. health insurance and FITW d. FUTA payable and employer FICA 4. Your firm pays half its employees' hospitalization insurance premiums, remitting payment on the 30th of each month. If, for the pay period ending April 15, 2010, you withhold $2,700 for the employee's share of the premiums for that month, then on April 30, 2010, you will: a. debit Hospitalization Insurance Expense for $2,700 b. debit Hospitalization Insurance Withheld for $2,700 c. debit Hospitalization Insurance Expense for $5,400 d. debit Hospitalization Insurance Withheld for $5,400 5. Which of the following is not included in the journal entry for employer payroll tax expense? a. FICA Employer b. FICA Employee c. FUTA Payable d. SUI Payable 6. Which of the following is included in the journal entry for employee salaries and deductions? a. FICA Employer b. FICA Employee c. FUTA Payable d. SUI Payable 7. Which of the following is not included in the journal entry for remittance of employer 941 taxes? a. FICA Employer Testbank 17 Mastering Payroll b. c. d. FITW Payable FUTA Payable FICA Employee 8. Which of the following is not included in the journal entry for employee salary expense and deductions? a. FICA Employee b. FITW Payable c. FUTA Payable d. Health Insurance/Employee Contribution 9. Which of the following is not included in the journal entry for employee salary expense and deductions? a. FICA Employee b. FITW Payable c. Union Dues/Employee Contribution d. Health Insurance Payable Testbank 18