Payroll and Taxation Quiz

What happens when an employee’s earnings exceed the social security tax base?

• The tax rate increases

• The employee is taxed more heavily

• No more social security tax is deducted

• Medicare tax also stops

What determines the amount of income tax withheld from an employee's earnings?

• Total number of work hours

• Number of withholding allowances

• Amount of Medicare tax paid

• State where they live

Who generally has more income tax withheld from their paycheck?

• Someone with two jobs

• A single person

• A married employee

• A retired employee

Who pays social security tax?

• Only employees

• Only employers

• Both employees and employers

• Only the federal government

Why do businesses use payroll records?

• To report health insurance coverage

• To track employee birthdays

• To report earnings and prepare payroll reports

• To compare salaries between companies

Who approves qualified retirement plans?

• Each individual business

• The state legislature

• The Internal Revenue Service

• An act of Congress

What is the first step in preparing a payroll?

• Calculating net pay

• Recording tax deductions

• Determining the number of hours or days worked

• Printing checks

What is true about the investment income in a Roth IRA when withdrawn?

• It is fully taxable

• It is taxed at a reduced rate

• It is not subject to federal income taxes

• It must be withdrawn early

What do payroll taxes withheld from employees represent for the employer?

• A company asset

• A personal loan

• A liability until paid

• A donation

What happens when an employee claims more withholding allowances?

• More income tax is withheld

• There is no change

• Less income tax is withheld

• They are penalized