Fundamental Payroll Certification Practice Test, Exams of Business Economics

Download Fundamental Payroll Certification Practice Test and more Exams Business Economics in PDF only on Docsity! Fundamental Payroll Certification Practice Test Employee - Anyone who preforms a service for you, if you can control what work is accomplished and how it is accomplished. Common-law Employee - A worker whose services are preformed under common-law rules for an employer is his or her employee if that employer controls what and how the job will be done. Independent contractor - A payer has control of the work done by this type of worker and not the means and methods of finishing the job. Statutory employee - Workers come under common law rules and are independent contractors by statute for certain employment tax purposes if they fall within any one of several categories. Examples of statutory employees - 1. drivers delivering laundry or dry cleaning, vegetables, fruit or baked goods, beverages (other than milk) or meat, if driver is paid commission or is your agent. 2. a life insurance sales agent who works full time and whose main business includes selling life insurance or annuity contracts, or both; mainly for one particular life insurance company. 3. an individual who works at home on employer-supplied goods on work that is specified, and that must be returned to the employer. Statutory non-employee - Fall under two categories: Real estate agents and direct sellers. 1. all payments for their services as direct sellers are directly related to sales instead of working certain number of hours 2. written contract guides what services they perform and specifies that for federal tax purposes. 8/80 Rule - An exemption from the requirement that overtime be computed on a workweek basis for hospitals and nursing homes. 8/80 Rule - An employer is not required to compute overtime pay unless the employee works more than eight hours in a day or works more than 80 hours in a 14-day period. - for hospitals and nursing homes. Biweekly rate of pay - The regular rate of pay. Calculated by taking the annual salary should be divided by the number of weeks to be paid and multiplied by 2. Overtime - Fair Labor Standards Act (FLSA) requires that all nonexempt employees be paid 1 1/2 times their regular rate of pay for all hours worked over 40 in one week. Hours worked - All time an employee is required to be on duty, whether on the employer's premises or at a prescribed workplace. All time an employee is suffered or permitted to work whether or not required to do so. Workweek - Defined by the FLSA as a fixed, recurring period of 168 consecutive hours (7 days X 24 hours). Need not coincide with the calendar week or payroll period. May begin any day of the week at any hour of the day. Each week stands alone. Public safety employees exception - An exception to the FLSA's overtime requirement where Firefighters and police officers have a work period lasting from 7 to 28 consecutive days, no overtime pay or compensatory time off is due until the ratio of the number of hours worked to the number of days in the work period exceeds the ratio of 212 hours to 28 days (171 hours to 28 days for law enforcement officers) Regular rate of pay Includes - Base pay for all hours worked, Non discretionary bonuses, Fair market value of noncash compensation, Shift premiums, Production bonuses, Cost-of-living adjustments, Retroactive pay, All payments not specifically excluded by law. Regular rate of pay excludes - Reimbursed business expenses, Discretionary bonuses, Employer benefit plan contributions, Vacation/holiday/sick pay for unworked hours, gifts on special occasions, Overtime in excess of FLSA requirement, stock options. Non-discretionary bonus - If the bonus is not determined each week but at a later date, the bonus must be allocated to each workweek it was earned for the regular rate of pay calculation. Discretionary bonus - If, before the work is preformed, the contract or bonus plan says that the bonus will be paid as a "percentage of total earnings," then the bonus satisfies the overtime requirements and no re- computation is necessary. Portal-to-Portal Act of 1947 - The beginning of a work day is when an employee commences his or her principal activities. The work day ends when an employee ceases his or her principal activities. Principal Activities - All activities that are so closely related as to be indispensable to its performance. Most commonly used in computerized payroll systems. There is no limit on the amount of the wages to which this method is applied. Found in Circular E A-207 - A-209 Steps to Calculating Federal Income Tax with the Percentage Method - Step 1 Refer to table of withholding allowances for this method. Multiply the biweekly amount given in the table by the number of allowances the employee claims on Form W-4 Step 2 Gross wages - Amount of allowances = Adjusted wages Step 3 Refer to the appropriate percentage table Step 4 Adjusted wage - Threshold amount = Excess amount Step 5 Amount of tax + (Excess amount x Percentage) = Total withholding Supplemental wages - include any payment of wages by an employer that is not regular wages. Social Security Tax Rate - Employee: 6.2% Employer: 6.2% Medicare Tax Rate - Employee: 1.45% Employer: 1.45% Taxable Compensation - Back pay awards, Bonuses, Commissions, Company Vehicle(personal use), Dismissal and severance pay or final vacation pay, Employer transit passes, Employer-paid parking greater than $255/month, Fringe benefits, gifts, giftcards, prizes and awards, Group legal services, Group- term life insurance over $50,000, Nonaccountable reimbursed business expenses, Noncash fringe benefits unless excluded by IRS, Sick pay and disability benefits, nonqualified moving expenses, Overtime pay, Regular Wage, Tips. Nontaxable Compensation - Dependant child care assistance (up to $5,000) under a Section 129 plan, Company vehicle (business use only), De minimis fringes, Disability benefits(employee contribution), Educational assistance for job-related courses (no limit), Group-term life insurance premiums under $50,000. Medical/dental/health plans (employer contributions), No-adiditional-cost fringe benefits, qualified employee discounts on employer goods/services, Qualified moving expenses, Qualified transportation fringe benefits, Reimbursed business expenses, Working condition fringe benefits which would be deductible if paid by employee, Non-job related education assistance up to $5,250, Long-term care insurance, HSA, Workers compensation benefits/ When are wages taxable? - When they're paid, not when they are earned. Voluntary Deductions - Require employee authorization. Authorization can be written or electronic. They are last priority after required deductions. Involuntary Deductions - are called wage attachments. Involuntary Deductions Priorities - 1. Child support orders 2. Chapter XIII bankruptcy orders 3. Other federal agency garnishments 4. Federal tax levies 5. State tax levies 6. local tax levies 7. Creditor garnishments 8. Student loan garnishments 668-W - Notice of Levy on Wages, Salary, and Other income 668-D - Release of Levy/Release of Property from Levy Child Support Withholding Limits - If an employee supports a second family, the amount withheld cannot exceed 50% of the employees disposable earnings. If the employee does not support a second family, the amount withheld cannot exceed 60% of the employee's disposable earnings. Disposiable Earnings - equal all of an employee's earnings after deducting taxes. Required deductions include federal, state and local taxes. Creditor Garnishment - invloves a court order to attach the employee's earnings in order to pay off a debt which the employee incurred. Creditor Garnishment Federal Limits - The Consumer Credit Protection Act limits the amount of disposable earnings that can be garnished by creditors in a week. The withholding required by a garnishment cannot exceed the lessor of: 25% of the employee's disposable pay The amount by which the employee's disposable pay for the week exceeds 30 times the federal minimum wage Student Loans - Higher Education Act allows garnishment of employees' wages to repay delinquent student loans. Student loan garnishments are subject to following restrictions: 1. If the garnishment is issued by a state guarantee agency, no more than 15% of an employee's disposable earnings may be garnished to satisfy a delinquent student loan unless the employee consents in writing to a higher percentage 2. Employees may not be discharged or otherwise discriminated against because of a garnishment order to repay a student loan. 3.Employees must receive at least 30 days' notice before withholding begins and must be given a chance to work out a repayment schedule with the agency guaranteeing the loan to avoid garnishment. Bankruptcy Orders - is governed by the federal Bankruptcy Code. Multiple Withholding Orders - When an amount is deducted for attachments with priority, the amount deducted will reduce the deduction available for attachments with a lower priority. State Income Taxes - This type of taxes are calculated by applying the wage-bracket or percentage method to the employee's taxable wage, using tables similar to the federal tables. Some states calculate taxes as a flat percentage of the employee's wages. Local taxes - Know your local requirements Deceased Employees - Wages paid after death are not subject to federal income tax. Gross Net Calculation - Once the employee's total wages have been calculated and tax withholding and other deductions have been determined, the employer can pay the employee the difference - The employee's net pay. Gross-up - The taxes are paid by the employer are included in the employee's taxable income. Calculating Gross-up - Step 1 100% - Tax % (Federal/State/Local Taxes except Social Security) = Net % Step 2 Payment + [(SS Wage Base - Prior Year-to-date payments)x 6.2%]/ Net% = Gross Amount of Earnings Step 3 Check by calculating Gross to Net Pay De Minimis (Minimal) Fringe Benefits - So small in value that it is unreasonable or administratively impractical for the employer to account for them. SS-4 -