MASTERING PAYROLL

TESTBANK
Section 1EMPLOYEES V. NONEMPLOYEES
1.

Backup withholding tax applies:

a. when a new employee does not submit a Form W-4
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 MondayFriday, from 9 a.m.1 p.m., use the companys
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 W-2 at year end
c. can choose a. or b., depending on your companys 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 full-time travelling salesperson
d. a life insurance sales agent who deals primarily with one carrier

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6.

A home-care companion sitter is:

a. a common-law employee
b. a statutory employee
c. a statutory nonemployee
d. an independent contractor

American Institute of Professional Bookkeepers, 2010

7.

Which of the following workers is subject to FICA, but not FITW?

a. a common-law 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 common-law 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 common-law employee
b. a statutory employee
c. an independent contractor
d. none of the above

10. In July 2010, Oxon, Inc receptionist Ling takes a weeks vacation and her
daughter Hua fills in for her. Hua is:
a. a common-law employee
b. a statutory nonemployee
c. an independent contractor
d. a temp agency referral
Section 2FEDERAL AND STATE WAGE-HOUR 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 employeeemployer 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

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b.
c.
d.

the federal minimum wage because federal law is senior to state law
the minimum wage most favorable to the employee
the minimum wage most favorable to the employer

3.

A retail business that began operations in 1997 must abide by federal

wage-hour 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

4.

What to do with the final paycheck never claimed by a terminated

employee is covered by:
a. state wage-hour law
b. escheat law
c. the enterprise coverage test
d. federal wage-hour law

5.

A retail business that began operations in 1987 must abide by federal

wage-hour 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 wage-hour 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

wage-hour 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

wage-hour law if gross annual sales are:
a. $0 or more

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b.
c.
d.

$362,500 or more
$250,000 or more
$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
b. FLSA
c. escheat law
d. the principle of constructive receipt

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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 32-hour 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.

Joeys monthly salary is $2,000. If Joey works a 40-hour 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 wage-hour 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

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7.

Juanita normally works MF. One week, she works MondayWednesday

(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
b. $352.00
c. $384.00
d. $416.00

8.

Marcie works 40 hours MF, 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 38-hour 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 MondayThursday, 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

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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

$24/hour
$20/hour
$50/hour

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 drivers 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 W-4 to you. On February 10,

2010, she submits another W-4 with different information. You should
retain the first W-4 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

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c.
d.

4 years from the April 15th following the tax year to which the
document pertains
no specified period

4.

To obtain a Social Security card, an individual should submit:

a. Form SS-4
b. Form SS-5
c. Form W-4
d. None of the above

5.

To prove identity for the I-9, 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 I-9 be completed?
a. January 7
b. January 8
c. January 9
d. January 6

7.

Which of the following forms must be completed for every new employee?
a. Form W-9
b. Form SS-4
c. Form I-9
d. Form 1099

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Section 5EMPLOYEE DATA; FORM W-4 AND STATE
WITHHOLDING ALLOWANCE CERTIFICATES
1.

New employee Ranjan submits a W-4 claiming 3 allowances and

requesting that an additional $300 per pay period be withheld. His
employer should:
a. reject the W-4 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 W-4 as submitted
d. send the W-4 to the IRS

2.

Cindys is paid on the 15th and last day of the month. If, on February 4,
2010, Cindy submits a revised W-4, 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 W-4 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.

Devons employer pays him every Friday. On April 23, 2010, Devon
submits a revised W-4 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 W-4 are normally be submitted to the IRS:

a. annually with Form 940
b. with Form 941
c. with a transmittal Form W-3
d. only upon request

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Section 6HOW EMPLOYERS WITHHOLD AND DEPOSIT FEDERAL
TAXES
1.

Which of the following should be withheld from an employees paycheck

in the year that a bonus is paid?
a. Both FIT and FICA
b. FIT only
c. FICA only
d. 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. HapCos 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 employees pay: $100 FICA, $200 FITW, $50
SIT and a $40 contribution to a 401k. The employers 941 tax liability for
the pay period for this employee is:
a. $100
b. $200
c. $400
d. $450

4.

A semiweekly depositors 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 12-month 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

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6.

As of November 22, 2010, Lulus year-to-date 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
c. Friday, July 30
d. 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 employees FITW?

a. IRS Publication 15
b. Form 941 instructions
c. Form W-2 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. Friedas 2009 year-to-date 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
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d.

$573.75

12. John is married and paid weekly. On his W-4, 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
Johns paycheck?
MARRIED Persons WEEKLY Payroll Period
(For Wages Paid in 2010)
If the wages are -

And the no. of withholding allowances claimed is

At least

But less
than

520
530

530
540

29
30

19
20

12
13

5
6

0
0

540
550
560

550
560
570

32
33
35

21
23
24

14
15
16

7
8
9

0
1
2

a.
b.
c.
d.

The amount of income tax to be withheld is ...

...
...
...
...
...

$32
$21
$82
$14

Section 7FEDERAL EMPLOYMENT REPORTING FORMS AND DUE

DATES
1.

Claras taxable income for 2010 is $70,000. On her W-2, FUTA tax
withheld is:
a. $0
b. $56
c. $434
d. $560

2.

QuikCos 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

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d.

August 10

3.

Form 941, Schedule B is used:

a. by start-ups 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 one-banking-day 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 W-2 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 W-2, you must provide it:
a. by January 15 of the year following the year of termination or within
30 days of the departing employees request at the companys option
b. within 30 days of the date of termination
c. by the earlier of January 31 of the year following the year of
termination or 30 days of the departing employees request
d. within 60 days of the departing employees 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)

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c.
d.
9.

the period of time covered from the first date of withholding to the
last covered by the completed 8109 being submitted
the quarter for which the deposit is made

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 non-profit

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 W-2 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
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 W-2 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 third-quarter 2010 Form 940 is normally due:
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a.
b.
c.
d.

September 30, 2010

October 31, 2010
November 30, 2010
January 31, 2011

16. An employer must provide a 2010 W-2 to an employee by:

a. March 31, 2011
b. February 15, 2011
c. January 31, 2011
d. February 29, 2011
17. Most states require W-2s 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
b. are not permitted under tax law
c. reduce taxable wages
d. generally increase the employers 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 Jos employer have
withheld?

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a.
b.
c.
d.

$43.50
$186.00
$229.50
None of the above

5.

On December 31, 2009, Tom received a $500 paycheck dated January 4,

2010. If Toms 2009 taxable wages were $51,000, how much FICA should
have been withheld from this paycheckand on which years W-2 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 years W-2 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 claim-of-right rule.
c. agree to defer the pay, but let Zeke know that he will be subject to
the claim-of-right rule.
d. refuse to postdate the check

9.

Wages earned in 2009 but paid in 2010 had Social Security tax withheld
at the rate of:
a. 1.20%

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b.
c.
d.

1.45%
6.20%
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

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d.
2.

April 15, 2015

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 employees 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

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b.
c.
d.

FICA Employee
FUTA Payable
SUI Payable

7.

Which of the following is not included in the journal entry for remittance
of employer 941 taxes?
a. FICA Employer
b. FITW Payable
c. FUTA Payable
d. 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

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