Deck 4: Employee Net Pay and Pay Methods

Question 1

Which of the following deductions cannot be taken on a pre-tax basis?

A) Cafeteria plan
B) Garnishments
C) Health insurance
D) Retirement plan

Answer 1

B

Question 2

The regular Medicare tax deduction is 1.45% for employee and employer and must be paid by all employees.

Answer 2

True

Question 3

The use of paycards as a means of transmitting employee pay began in the 1990s with over-the-road drivers out of a need to transmit funds reliably on payday.

Answer 3

True

Question 4

Amity is an employee with a period gross pay of $2,000.She elects to have 3% of her gross pay withheld for her 401(k) contribution.What will be her taxable income be for Federal income taxes?

A) $2,000
B) $1,970
C) $1,940
D) $1,910

Question 5

The wage-bracket of determining Federal tax withholding yields more accurate amounts than the percentage method.

Question 6

Which of the following may be included as part of an employee's Section 125 "cafeteria" plan?

A) Medical expenses
B) Tuition expenses
C) Meal expenses
D) Moving expenses

Question 7

Which of the following guidelines does the IRS use to evaluate the tax treatment of supplemental health insurance?

A) If the income derived is taxable, then the cost is tax-free.
B) If the income derived is nontaxable, then the cost must be taxed.
C) If the income derived will be tax free, then the cost is also tax exempt.
D) If the income derived is taxable, then the cost is taxable.

Question 8

A firm has headquarters in Indiana,but has offices in California and Utah.For employee taxation purposes,it may choose which of those three states income tax laws it wishes to use.

Question 9

Which of the following best describes a SEP?

A) The employer or employee establishes and employer contributes to a tax-favorable IRA.
B) The employer establishes a tax-favorable IRA for the employee.
C) The employee rolls over an existing IRA to his or her employer and the current employer continues contributions.
D) The employer creates a taxable IRA to which the employee must make a defined contribution.

Question 10

Which of the following is used in the determination of the amount of Federal income tax to be withheld from an employee per pay period?

A) Date of birth
B) Annual salary
C) Marital status
D) Prior year's tax return

Question 11

Social Security tax has a wage base,which is the minimum amount an employee must earn before they will have the Social Security tax deduction.

Question 12

Federal income tax,Medicare tax,and Social Security tax amounts withheld from employee pay are matched by amounts paid by the employer.

Question 13

What role does the employer play regarding an employee's Federal withholding tax?

A) Collector and depositor
B) Reporter and depositor
C) Collector and verifier
D) Verifier and reporter

Question 14

Garnishments are court-ordered amounts that an employer must withhold from an employee's pre-tax pay and remit to the appropriate authority.

Question 15

Which Act extended health care benefits to employee dependents until age 27?

A) Health Insurance Portability and Affordability Act
B) Americans with Disabilities Act
C) Family Medical Leave Act
D) Affordable Care Act

Question 16

Charitable contributions are an example of post-tax voluntary deductions.

Question 17

If a firm has fewer than 100 employees,which of the following is true?

A) It may not offer an ESOP.
B) It is not required to offer disability insurance.
C) It must match employee contributions to Federal income tax.
D) It may offer a SIMPLE defined contribution plan.

Question 18

Health Savings Accounts may not be used as pre-tax deductions for which type of costs?

A) Child medical expenses
B) Gasoline expenses
C) Long-term care expenses
D) Prescription expenses

Question 19

Two classes of deductions exist: pre-tax and post-tax.

Question 20

The amount of Federal income tax decreases as the number of allowances increases.

Question 21

Natalia is a full-time exempt employee who earns $215,000 annually,paid monthly.Her year-to-date pay as of November 30 is $197,083.30.How much will be withheld from Natalia for FICA taxes for the December 31 pay date? (Social Security maximum wage is $118,500.Do not round interim calculations,only round final answer to two decimal points.)

A) $292.04
B) $394.79
C) $1,370.63
D) $421.04

Question 22

Wyatt is a full-time exempt music engineer who earns $130,000 annually and is paid semimonthly.As of November 15,his year-to-date gross pay was $113,750.07.How much will be withheld for FICA taxes for the November 30 pay date? (Social Security maximum wage is $118,500.Do not round interim calculations,only round final answer to two decimal points.)

A) $335.83
B) $414.37
C) $212.88
D) $373.04

Question 23

Adam is a part-time employee who earned $495.00 during the most recent pay period.He is married with two withholding allowances.Prior to this pay period,his year-to-date pay is $6,492.39.How much should be withheld from Adam's gross pay for Social Security tax?

A) $40.02
B) $30.69
C) $37.92
D) $28.46

Question 24

Melody is a full-time employee who earns $3,600 per month and is paid semimonthly.She is married with 1 withholding allowance (use the wage-bracket tables).She has a qualified health insurance deduction of $50 per pay period and contributes 3% to her 401(k),both of which are Identify Pre-Tax Deductions .What is her net pay? (Do not round interim calculations,only round final answer to two decimal points.)

A) $1,696.00
B) $1,524.27
C) $1,426.13
D) $1,394.87

Question 25

Olga earned $1,558.00 during the most recent weekly pay period.She is single with 2 withholding allowances.Using the percentage method,compute Olga's Federal income tax for the period.(Do not round intermediate calculations.Round final answer to two decimal places.)
$\begin{array}{c}\begin{array}{|l|}\hline\text {Payroll Period}\\\\\hline\text {Weekly}\\\text {Biweekly}\\\text {Semimonthly}\\\text {Monthly}\\\text {Quarterly}\\\text {Semiannually}\\\text {Annually}\\\text {Daily or miscellaneous (each day of the payroll }\\\text {period)}\\\hline\end{array}\begin{array}{r|}\hline\text {One Withholding}\\\text {Allowance}\\\hline\$ 76.90 \\ 153.80 \\ 166.70 \\ 333.30 \\ 1,000.00 \\2,000.00 \\ 4,000.00 \\\\ 15.40 \\\hline\end{array}\end{array}$

A) $259.15
B) $339.25
C) $295.65
D) $314.75

Question 26

Warren is a married employee with six withholding allowances.During the most recent biweekly pay period,he earned $9,450.00.Using the percentage method,compute Warren's Federal income tax.(Do not round interim calculations,only round final answer to two decimal points.) $\begin{array}{c}\begin{array}{|l|}\hline\text {Payroll Period}\\\\\hline\text {Weekly}\\\text {Biweekly}\\\text {Semimonthly}\\\text {Monthly}\\\text {Quarterly}\\\text {Semiannually}\\\text {Annually}\\\text {Daily or miscellaneous (each day of the payroll }\\\text {period)}\\\hline\end{array}\begin{array}{r|}\hline\text {One Withholding}\\\text {Allowance}\\\hline\$ 76.90 \\ 153.80 \\ 166.70 \\ 333.30 \\ 1,000.00 \\2,000.00 \\ 4,000.00 \\\\ 15.40 \\\hline\end{array}\end{array}$

A) $2,490.15
B) $2,156.90
C) $1,796.94
D) $1,602.25

Question 27

Caroljane earned $1,120 during the most recent pay biweekly pay period.She contributes 4% of her gross pay to her 401(k) plan.She is single and has 1 withholding allowance.Based on the following table,how much Federal income tax should be withheld from her pay?

A) $115.00
)
$106.00
C) $112.00
D) $109.00

Question 28

According to the Consumer Credit Protection Act,what is the maximum percentage of an employee's disposable earnings that may be withheld as part of a consumer credit garnishment?

A) 25%
B) 35%
C) 50%
D) 40%

Question 29

Andie earned $680.20 during the most recent weekly pay period.She is single with 3 withholding allowances and needs to decide between contributing 2.5% and $25 to her 401(k) plan.If she chooses the method that results in the lowest taxable income,how much will be withheld for Federal income tax (based on the following table)?

A) $58.00
B) $60.00
C) $48.00
D) $47.00

Question 30

Ross is a full-time employee who earns $42,000 annually,paid semimonthly.His Federal income tax is $155.00.What is the maximum amount that may be withheld from his pay for a child-support garnishment,assuming he is not in arrears? (Do not round interim calculations,only round final answer to two decimal points.)

A) $365.28
B) $730.56
C) $584.45
D) $876.68

Question 31

Trish earned $1,734.90 during the most recent semimonthly pay period.She is married and has 3 withholding allowances.Based on the following table,how much should be withheld from her gross pay for Federal income tax?

A) $92.00
B) $89.00
C) $95.00
D) $69.00

Question 32

Disposable income is defined as:

A) An employee's net pay less living expenses like rent and utilities.
B) An employee's taxable income less Understand Post-Tax Deductions.
C) An employee's gross pay less Identify Pre-Tax Deductions.
D) An employee's pay after legally required deductions have been withheld.

Question 33

Max earned $1,019.55 during the most recent semimonthly pay period.He is single with 1 withholding allowance.Using the following table,how much should be withheld for Federal income tax?

A) $118.00
B) $94.00
C) $96.00
)
$93)00

Question 34

Jeannie is an adjunct faculty at a local college,where she earned $680.00 during the most recent semimonthly pay period.She is single and has one withholding allowance.What is her Social Security tax for the pay period?

A) $48.02
B) $39.24
C) $44.18
D) $42.16

Question 35

Renee is a salaried exempt employee who earns an annual salary of $64,200,which is paid semimonthly.She is married with four withholding allowances.What is her total FICA tax liability per pay period? (Do not round interim calculations,only round final answer to two decimal points.)

A) $165.85
B) $38.79
C) $204.64
D) $409.28

Question 36

Julio is single with 1 withholding allowance.He earned $1,025.00 during the most recent semimonthly pay period.He needs to decide between contributing 3% and $30 to his 401(k) plan.If he chooses the method that results in the lowest taxable income,how much will be withheld for Federal income tax (based on the following table)?

A) $65.00
B) $87.00
C) $90.00
D) Both yield the same tax amount

Question 37

Julian is a part-time employee who earns $21.50 per hour.During the last biweekly pay period he worked 45 hours.He is single with one withholding allowance (use the wage-bracket table).What is his net pay? (Do not round interim calculations,only round final answer to two decimal points.)

A) $818.40
B) $797.18
C) $825.99
D) $802.49

Question 38

Steve is a full-time exempt employee at a local electricity co-operative.He earns an annual salary of $43,325 and is paid biweekly.What is his Social Security tax deduction for each pay period? (Do not round interim calculations,only round final answer to two decimal points.)

A) $123.95
B) $103.31
C) $98.67
D) $106.34

Question 39

Paolo is a part-time security guard for a local facility.He earned $298.50 during the most recent weekly pay period.He is married with four withholding allowances.What is his Medicare tax liability for the pay period?

A) $43.23
B) $10.54
C) $8.65
D) $4.33

Question 40

Ramani earned $1,698.50 during the most recent biweekly pay period.He contributes $100 to his 401(k) plan.He is married and claims 3 withholding allowances.Based on the following table,how much Federal income tax should be withheld from his pay?

A) $122.00
B) $107.00
C) $99.00
D) $84.00

Question 41

Janna is a salaried nonexempt employee who earns $30,000 for a standard 40-hour workweek and is paid biweekly.She is single with one withholding allowance.During the last pay period,she worked 5 hours of overtime.She contributes 3% of her gross pay to her 401(k) on a pre-tax basis and has a garnishment of 10% of her disposable income for a consumer credit garnishment.What is her net pay? (Use the wage-bracket method.Do not round interim calculations,only round final answer to two decimal points.)

A) $998.90
B) $913.90
C) $897.85
D) $1,086.96

Question 42

Tierney is a full-time nonexempt salaried employee who earns $990 per biweekly pay period.She is single with 1 withholding allowance and both lives and works in Maryland.Assuming that she had no overtime,what is the total of her Federal and state taxes for a pay period? (Use the wage-bracket tables.Maryland state income rate is 4.75%.Round final answers to 2 decimal places.)

A) $144.25
B) $141.03
C) $145.95
D) $140.78

Question 43

What is a disadvantage to using paycards as a method of transmitting employee compensation?

A) Convenience of retrieving pay disbursements.
B) Potential withdrawal and point-of-sale limitations.
C) Ease of paying traveling employees.
D) Acceptance of paycards at many locations.

Question 44

What is not a reason why an employee may elect to have additional Federal income tax withheld?

A) The employee has more than one job.
B) The employee's spouse is employed.
C) The employee wishes to reduce income tax liability.
D) The employee wants to satisfy prior years' tax obligations.

Question 45

Danny is a full-time exempt employee in Alabama,where the state income tax rate is 5%.He earns $78,650 annually and is paid semimonthly.He is married with four withholding allowances.His is health insurance is $100.00 per pay period and is deducted on a pre-tax basis.Danny contributes 5% of his pay to his 401(k).Assuming that he has no other deductions,what is Danny's net pay for the period? (Use the percentage method for the Federal income tax and the wage-bracket table for the state income tax.Do not round interim calculations,only round final answer to two decimal points.) $\begin{array}{c}\begin{array}{|l|}\hline\text {Payroll Period}\\\\\hline\text {Weekly}\\\text {Biweekly}\\\text {Semimonthly}\\\text {Monthly}\\\text {Quarterly}\\\text {Semiannually}\\\text {Annually}\\\text {Daily or miscellaneous (each day of the payroll }\\\text {period)}\\\hline\end{array}\begin{array}{r|}\hline\text {One Withholding}\\\text {Allowance}\\\hline\$ 76.90 \\ 153.80 \\ 166.70 \\ 333.30 \\ 1,000.00 \\2,000.00 \\ 4,000.00 \\\\ 15.40 \\\hline\end{array}\end{array}$

A) $2,351.71
B) $2,503.95
C) $2,829.35
D) $2,478.90

Question 46

From the employer's perspective,which of the following is not an advantage of having direct deposit?

A) Reduction in payroll processing costs.
B) Secure processing of employee compensation.
C) Vulnerability of data to computer attacks.
D) Employee self-maintenance of personnel records.

Question 47

Amanda is a full-time exempt employee who earns $84,000 annually.She is married with 1 deduction and is paid biweekly.She contributes $150.00 per pay period to her 401(k) and has pre-tax health insurance and AFLAC deductions of $50.00 and $75.00,respectively.Amanda contributes $25.00 per pay period to the United Way.What is her net pay? (Use the percentage method.Do not round intermediate calculations. Round final answers to 2 decimal places.) $\begin{array}{c}\begin{array}{|l|}\hline\text {Payroll Period}\\\\\hline\text {Weekly}\\\text {Biweekly}\\\text {Semimonthly}\\\text {Monthly}\\\text {Quarterly}\\\text {Semiannually}\\\text {Annually}\\\text {Daily or miscellaneous (each day of the payroll }\\\text {period)}\\\hline\end{array}\begin{array}{r|}\hline\text {One Withholding}\\\text {Allowance}\\\hline\$ 76.90 \\ 153.80 \\ 166.70 \\ 333.30 \\ 1,000.00 \\2,000.00 \\ 4,000.00 \\\\ 15.40 \\\hline\end{array}\end{array}$

A) $2,394.47
B) $2,193.60
C) $2,352.25
D) $2,605.44

Question 48

Manju is a full-time exempt employee living in Illinois who earns $43,680 annually and is paid biweekly.She is married with three withholding allowances.What is the total of her Federal and state income tax deductions for the most recent pay period? (Use the wage bracket tables.Illinois state income tax rate is 3.75%.Round final answer to two decimal points.)

A) $162
B) $122
C) $156
D) $166

Question 49

What is an advantage of direct deposit from the employee's perspective?

A) Long processing times for pay disbursements.
B) Secure access to compensation.
C) The requirement to have a bank account.
D) Access to payroll data on non-secured website.

Question 50

Which body issued Regulation E to protect consumers from loss of deposited funds?

A) Department of Homeland Security
B) Internal Revenue Service
C) American Banking Association
D) Federal Deposit Insurance Corporation

Question 51

Which of the following is true about cash as a method of paying employees?

A) Cash is the most secure payment method.
B) Cash is the most widely used payment method.
C) Cash is readily transferable and highly liquid.
D) Cash is the most convenient pay method for employers.

Question 52

Brent is a full-time exempt employee in Clark County,Indiana.He earns an annual salary of $48,000 and is paid semimonthly.He is married with 3 withholding allowances.His state income tax per pay period is $57.38,and Clark County income tax is $33.75 per pay period.What is the total of FICA,Federal,state,and local deductions per pay period,assuming no Pre-Tax Deductions? (Use the wage-bracket table to determine Federal taxes.Do not round intermediate calculations,only round final answer to two decimal points.)

A) $369.36
B) $306.13
C) $325.13
D) $378.13

Question 53

Jesse is a part-time nonexempt employee who earns $12.50 per hour.During the last biweekly pay period he worked 35 hours.He is married with zero withholding allowances,which means his Federal income tax deduction is $10.00,and has additional Federal tax withholding of $30 per pay period.What is his net pay? (Do not round interim calculations,only round final answer to two decimal points.)

A) $354.28
B) $374.03
C) $364.03
D) $378.03

Question 54

Why do employers use checks as an employment payment method?

A) Paying employees by check allows the employer flexibility with its bank accounts.
B) Paying employees by check increases the complexity of the payroll process.
C) Paying employees by check requires the employer to keep currency on the premises.
D) Paying employees by check offers a level of security of employee payments.

Question 55

Maile is a full-time exempt employee who earns $1,370.15 per biweekly payday.She is married with seven withholding allowances,so her Federal income tax is $0.She contributes 4% of her gross pay to her 401(k) and has her health insurance premium of $50 deducted on a pre-tax basis.She has $10 deducted per pay period for a Salvation Army contribution and has union dues of $40 per pay period.What is her net pay? (Do not round interim calculations,only round final answer to two decimal points.)

A) $1,160.53
B) $1,114.35
)35.35
C) $1,124.23
D) $1,137.93

Question 56

Vivienne is a full-time exempt employee in DeKalb County,Indiana,and is paid biweekly.She earns $39,000 annually,and is married with 2 withholding allowances.Her state income tax deduction is $44.46,and the DeKalb County income tax deduction is $19.62.What is the total amount of her FICA,Federal,state,and local taxes per pay period,assuming no Pre-Tax Deductions? (Use the wage-bracket table to determine the Federal tax deduction.Do not round intermediate calculations,only round final answer to two decimal points.)

A) $239.83
B) $320.83
C) $265.83
D) $273.83

Question 57

Which is not a best practice for paying employees by check?

A) Maintenance of a separate checking account for payroll purposes.
B) Keeping a single check register for the firm's checking accounts.
C) Logging the number, amount, and purpose of each check used.
D) Establishing an unclaimed property account for uncashed checks.

Question 58

Collin is a full-time exempt employee who earns $135,000 annually and has not yet reached the Social Security wage base.He is single with 1 withholding allowance and is paid semimonthly.He contributes 3% per pay period to his 401(k) and has pre-tax health insurance and AFLAC deductions of $150.00 and $25.00,respectively.Collin has a child support garnishment of $300.00 per pay period.What is his net pay? (Use the percentage method.Do not round interim calculations,only round final answer to two decimal points.) $\begin{array}{c}\begin{array}{|l|}\hline\text {Payroll Period}\\\\\hline\text {Weekly}\\\text {Biweekly}\\\text {Semimonthly}\\\text {Monthly}\\\text {Quarterly}\\\text {Semiannually}\\\text {Annually}\\\text {Daily or miscellaneous (each day of the payroll }\\\text {period)}\\\hline\end{array}\begin{array}{r|}\hline\text {One Withholding}\\\text {Allowance}\\\hline\$ 76.90 \\ 153.80 \\ 166.70 \\ 333.30 \\ 1,000.00 \\2,000.00 \\ 4,000.00 \\\\ 15.40 \\\hline\end{array}\end{array}$

A) $3,445.85
B) $3,712.19
C) $3,674.60
D) $3,585.14

Question 59

Which of the following payment methods is growing in popularity among employees?

A) Cash
B) Check
C) Direct Deposit
D) Paycard

Question 60

Which of the following is the correct sequence for computing net pay?

A) Compute gross pay then deduct withholding and add FICA taxes to obtain net pay.
B) Compute gross pay, compute FICA, deduct pre-tax amounts, and deduct taxes.
C) Compute gross pay, deduct taxes, and add voluntary deductions.
D) Compute gross pay, deduct pre-tax amounts, compute FICA, deduct taxes, and deduct post-tax amounts.

Question 61

The annual payroll tax guide that the IRS distributes is called __________________.

A) The IRS tax guide
B) Publication E
C) Circular 15
D) Publication 15

Question 62

Retirement fund contributions are considered Pre-Tax Deductions because ____________________.

A) Employees declare the funds on the personal tax return for the year
B) Employers are not liable for the taxes on this income
C) Contributors will pay tax on these funds once withdrawn during retirement
D) These funds are not considered disposable income

Question 63

The factors that determine an employee's Federal income tax are ____________________.

A) Marital status, birth date, taxable pay, and pay frequency
B) Number of children, pay frequency, marital status, and gross pay
C) Marital status, number of withholdings, taxable pay, and pay frequency
D) Pay frequency, number of dependents, taxable pay, and marital status

Question 64

Post-Tax Deductions are amounts ____________________________________.

A) That are voluntarily chosen by the employee
B) That the employer chooses to withhold after assessing the employee's tax liability
C) Includes both mandatory and voluntary deductions
D) Are only mandatory deductions like garnishments and union dues

Question 65

The purpose of paycards as a pay method is to ______________________________.

A) Prevent employees from opening bank accounts
B) Promote accessibility and portability of employee compensation
C) Protect payroll processes against embezzlement
D) Promote debit card use as a means of economic stimulus

Question 66

The percentage of the Medicare tax withholding _________________________.

A) Is the same for every employee, regardless of income
B) Is subject to change based on the firm's profitability
C) Changes every year in response to industry needs
D) Remains the same for all employees who earn less than $200,000

Question 67

State and Local Income Tax rates __________________________.

A) Exist at the same level in every state
B) Differ among states and localities
C) Are mandated by Federal law
D) Are paid by the employer to the Federal government

Question 68

The purpose of the wage base used for the Social Security tax is ______________________________.

A) To determine when to start withholding the tax from an employee's pay
B) To establish a maximum salary level after which the tax does not apply to the employee's pay
C) To determine the amount of Social Security tax to withhold from an employee's pay
D) To compute the total amount of Social Security tax that a firm must pay

Question 69

The percentage method of determining an employee's Federal income tax deductions __________________.

A) Is used to promote complexity in payroll practices
B) Allows payroll accountants to determine Federal income tax for the firm itself
C) Is used primarily for high wage earners and computerized payroll programs
D) Is less accurate than the results gained from using the wage-bracket method

Question 70

A retirement plan that allows employees to gain shares of ownership in their firm is called a(n) _____________.

A) IRA
B) ESOP
C) SIMPLE
D) 401(k)