1. What does the term "FICA" stand for?
A. Federal Income Contribution Act
B. Federal Insurance Contributions Act
C. Fair Income Contribution Act
D. Federal International Compensation Act
Answer: B) Federal Insurance Contributions Act
Rationale: FICA refers to the Federal Insurance Contributions
Act, which mandates payroll taxes for Social Security and
Medicare.
2. Which of the following is required for compliance with the
Affordable Care Act (ACA) for employers with 50 or more full-
time employees?
A. Providing a retirement plan
B. Offering health insurance to full-time employees
C. Offering paid sick leave
D. Reporting income on a W-2 form
Answer: B) Offering health insurance to full-time employees
Rationale: Employers with 50 or more full-time employees are
required by the ACA to provide affordable health insurance to
their full-time employees or face penalties.
,3. What is the function of a payroll clearing account?
A. To record the employer’s payroll taxes
B. To temporarily hold payroll funds before they are distributed
C. To track the employee’s deductions
D. To calculate gross pay
Answer: B) To temporarily hold payroll funds before they are
distributed
Rationale: A payroll clearing account is used to hold funds
temporarily before they are distributed to employees or used for
taxes and deductions.
4. Which tax is typically withheld on wages and paid by both the
employee and employer?
A. Federal income tax
B. Medicare tax
C. State income tax
D. Social Security tax
Answer: D) Social Security tax
Rationale: Both employees and employers contribute equally to
Social Security tax, which funds the Social Security program.
5. What is the purpose of a Form I-9?
, A. To verify the employee's eligibility to work in the United
States
B. To report an employee's annual earnings to the IRS
C. To calculate the employee’s tax withholdings
D. To establish employee benefits eligibility
Answer: A) To verify the employee's eligibility to work in the
United States
Rationale: The I-9 form is used to verify that employees are
legally authorized to work in the U.S.
6. Which of the following payroll documents is filed annually with
the IRS?
A. W-4
B. W-2
C. I-9
D. 1099
Answer: B) W-2
Rationale: The W-2 form reports an employee's annual wages and
the taxes withheld, and it is filed with the IRS each year.
7. Which of the following would be included in a payroll journal
entry?
A. Federal Income Contribution Act
B. Federal Insurance Contributions Act
C. Fair Income Contribution Act
D. Federal International Compensation Act
Answer: B) Federal Insurance Contributions Act
Rationale: FICA refers to the Federal Insurance Contributions
Act, which mandates payroll taxes for Social Security and
Medicare.
2. Which of the following is required for compliance with the
Affordable Care Act (ACA) for employers with 50 or more full-
time employees?
A. Providing a retirement plan
B. Offering health insurance to full-time employees
C. Offering paid sick leave
D. Reporting income on a W-2 form
Answer: B) Offering health insurance to full-time employees
Rationale: Employers with 50 or more full-time employees are
required by the ACA to provide affordable health insurance to
their full-time employees or face penalties.
,3. What is the function of a payroll clearing account?
A. To record the employer’s payroll taxes
B. To temporarily hold payroll funds before they are distributed
C. To track the employee’s deductions
D. To calculate gross pay
Answer: B) To temporarily hold payroll funds before they are
distributed
Rationale: A payroll clearing account is used to hold funds
temporarily before they are distributed to employees or used for
taxes and deductions.
4. Which tax is typically withheld on wages and paid by both the
employee and employer?
A. Federal income tax
B. Medicare tax
C. State income tax
D. Social Security tax
Answer: D) Social Security tax
Rationale: Both employees and employers contribute equally to
Social Security tax, which funds the Social Security program.
5. What is the purpose of a Form I-9?
, A. To verify the employee's eligibility to work in the United
States
B. To report an employee's annual earnings to the IRS
C. To calculate the employee’s tax withholdings
D. To establish employee benefits eligibility
Answer: A) To verify the employee's eligibility to work in the
United States
Rationale: The I-9 form is used to verify that employees are
legally authorized to work in the U.S.
6. Which of the following payroll documents is filed annually with
the IRS?
A. W-4
B. W-2
C. I-9
D. 1099
Answer: B) W-2
Rationale: The W-2 form reports an employee's annual wages and
the taxes withheld, and it is filed with the IRS each year.
7. Which of the following would be included in a payroll journal
entry?
