Payroll tax withholding, FICA, and payroll journal entry concepts tested on the Fundamental Payroll Certification exam.
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- What does FICA stand for?
- Federal Insurance Contributions Act
- What is the current Social Security tax rate for employees?
- 6.2% of wages
- What is the current Medicare tax rate for employees?
- 1.45% of wages
- What is the Social Security wage base limit for 2025?
- Approximately $168,600
- At what income level does the additional Medicare tax apply?
- $200,000 for single filers, $250,000 for married filing jointly
- What does FUTA stand for?
- Federal Unemployment Tax Act
- What is the federal unemployment tax rate under FUTA?
- 6.0% of the first $7,000 of wages per employee per year
- What does SUTA stand for?
- State Unemployment Tax Act
- Who pays FUTA taxes?
- The employer only
- What is the purpose of Form W-4?
- To determine how much federal income tax should be withheld from employee wages
- Define a payroll deduction.
- An amount subtracted from gross pay to arrive at net pay
- What is the difference between gross pay and net pay?
- Gross pay is total earnings before deductions; net pay is what remains after all deductions
- In a payroll journal entry, what accounts are typically debited when recording employee wages?
- Payroll expense accounts (Salaries and Wages Expense or similar)
- In a payroll journal entry, what account is credited for employee federal income tax withholding?
- Federal Income Tax Payable
- In a payroll journal entry, what account is credited for employee FICA taxes withheld?
- FICA Taxes Payable (or separate accounts for Social Security Payable and Medicare Payable)