CB Payroll and Taxes — Questions and Answers
Question 1: What is the primary purpose of the Federal Insurance Contributions Act (FICA)?
- To fund state unemployment benefits
- To fund Social Security and Medicare programs (Correct answer)
- To collect corporate income taxes
- To regulate minimum wage laws
Correct answer: To fund Social Security and Medicare programs
FICA is a U.S. law that requires employers and employees to contribute to Social Security and Medicare programs.
Question 2: Which form is used by employees to determine federal income tax withholding?
- Form 1099
- Form W-4 (Correct answer)
- Form W-2
- Form 941
Correct answer: Form W-4
The IRS Form W-4 allows employees to specify their tax withholding preferences for federal income tax purposes.
Question 3: What is the deadline for employers to issue Form W-2 to employees?
- December 31
- January 31 (Correct answer)
- April 15
- June 30
Correct answer: January 31
Employers must provide Form W-2 to employees by January 31st of the following year to report wages and tax withholdings.
Question 4: Which payroll tax is paid only by employers?
- FICA
- FUTA (Correct answer)
- Medicare tax
- Social Security tax
Correct answer: FUTA
FUTA (Federal Unemployment Tax Act) is an employer-paid tax used to fund unemployment benefits.
Question 5: What is the main purpose of Form 941?
- To report independent contractor payments
- To report quarterly payroll taxes (Correct answer)
- To file an annual tax return
- To apply for an employer identification number
Correct answer: To report quarterly payroll taxes
Form 941 is used by employers to report payroll taxes, including federal income tax and Social Security/Medicare withholdings, on a quarterly basis.
Question 6: Which of the following is an example of voluntary payroll deductions?
- Medicare tax
- 401(k) contributions (Correct answer)
- Social Security tax
- FUTA tax
Correct answer: 401(k) contributions
Retirement plan contributions, such as 401(k) deductions, are voluntary and taken out of an employee’s paycheck based on their election.
CB Payroll and Taxes
What is the primary purpose of the Federal Insurance Contributions Act (FICA)?