Understanding Your Paycheck

Ready to test your knowledge? You'll have ten multiple choice questions to answer. Click on each question to reveal the question and multiple choice answers. After you've completed answering all ten questions, click "Grade Me!" at the end of the quiz to see how you did.

Question 1

If you are paid on a "bi-weekly" basis, how many paychecks will you receive during a full year of employment?

(A) 26	Correct Incorrect
(B) 24	Correct Incorrect
(C) 12	Correct Incorrect
(D) 52	Correct Incorrect

When an individual is paid on a bi-weekly pay schedule, it means that they are paid every other week, or every two weeks. Typically, the employer selects a fixed day of the week and issues paychecks every other week on that day. If you are paid on a bi-weekly basis, you will receive 26 paychecks during the standard calendar year (52 weeks per year, divided by two).

Question 2

Which of the following forms will you likely be required to complete when starting a new job?

(A) W-4 Form	Correct Incorrect
(B) Form 1099	Correct Incorrect
(C) W-2 Form	Correct Incorrect
(D) All of the above	Correct Incorrect

New employees typically complete a W-4 form so that their new employer knows how much tax to withhold from the new employees paycheck each pay period. This form provides information to the employer on the number of tax exemptions, marital status and dependent information, which help determine the amount of tax to be withheld. The W-2 form is issued to employees at the start of each year to show the earnings and amount of tax withheld in the previous year. This information is used when filing federal and state income taxes. Form 1099 is used to report income other than wages, salaries and tips. There are multiple variants of this form, based on the type of income the individual is reporting.

Question 3

To claim a child as a 'dependent', which of the following conditions DO NOT have to be met?

(A) The person must be your child, step child, adopted child, foster child, brother or sister, or a descendant of one of these (for example, a grandchild or nephew)	Correct Incorrect
(B) The person must have the same residence as you do for at least half of the year.	Correct Incorrect
(C) The person in question did not provide more than half of his or her own support during the year.	Correct Incorrect
(D) The person must be under 18 years of age.	Correct Incorrect

According to the Internal Revenue Service, there is no age limit on claiming a child as a dependent if the child meets the qualifying relative test. To meet this test, the child must be younger than the filer, be younger than 19 years of age or be a student and younger than 24 years. Children of any age can be claimed as a dependent if they are permanently and totally disabled.

Question 4

Which of the following terms represents your paycheck amount BEFORE any taxes and other deductions are taken out?

(A) Payday!	Correct Incorrect
(B) Pre-Processed Pay.	Correct Incorrect
(C) Net Pay.	Correct Incorrect
(D) Gross Pay.	Correct Incorrect

An individual´s gross pay is their total compensation, including wages, salaries, commissions, tips, bonuses, and any other type of earnings for that paycheck period. It is also the total amount reported before any payroll deductions are made. Typical deductions include FICA taxes, income tax withholding, health insurance premiums paid by the employee, contributions to the employees retirement account and other types of deductions. Net pay is the amount received by the employee after deductions are withheld or paid out of their gross pay.

Question 5

For 2013, the maximum taxable earnings amount for Social Security (OASDI) taxes is:

(A) $113,700	Correct Incorrect
(B) $250,000	Correct Incorrect
(C) $75,400	Correct Incorrect
(D) $135,500	Correct Incorrect

By statute, the tax rate for Social Security, or OASDI (Old Age, Survivors and Disability Insurance) taxes is set at 6.2 percent, for both the employer and the employee. Individuals who are self-employed will pay the combined rate of 12.4 percent. Social Security taxes do work off of a maximum wage base which limits the amount of Social Security taxes paid each year by both employees and employers. It is adjusted each year by the Social Security Administration. For the calendar year 2016, that maxium wage base is the first $118,500 of income.

Question 6

What government programs do your "FICA" taxes fund?

(A) Unemployment Insurance	Correct Incorrect
(B) Social Security and Medicare	Correct Incorrect
(C) Aid to Families with Dependent Children (AFDC)	Correct Incorrect
(D) All of the above.	Correct Incorrect

FICA stands for the Federal Insurance Contributions Act that requires taxes be withheld for Social Security and Medicare.

Question 7

Who is responsible for paying unemployment taxes?

(A) You.	Correct Incorrect
(B) Your employer.	Correct Incorrect
(C) You and your employer jointly and equally.	Correct Incorrect
(D) The Federal Government.	Correct Incorrect

Unemployment Insurance is a joint federal and state program that is financed by employer payroll taxes. Generally, employers must pay both state and Federal unemployment taxes if wages that employees receive pass a threshold amount of if employees work more than a certain number of weeks in a calendar year.

Question 8

You may only claim "Head of Household" status for tax-filing purposes on your W-4 form if you:

(A) You are unmarried and pay more than 50% of the costs of keeping up a home for yourself and your dependent(s) or other qualifying individuals.	Correct Incorrect
(B) If you are married and are the sole provider or source of income for your family.	Correct Incorrect
(C) If you own a home, regardless of your marital status or number of dependents.	Correct Incorrect
(D) All of the above.	Correct Incorrect

The Internal Revenue service recognizes five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. To qualify as a Head of Household, you must be unmarried (or considered unmarried on the last day of the tax filing year), your spouse didn´t live in your home the last 6 months of the tax year, you paid for more than half the cost of keeping up your home and that home was the primary residence of your child, stepchild or foster child for 6 months or greater during that year. You also must be able to claim an exemption for that child.

Question 9

Which of the following are deducted from your paycheck on a pre-tax basis?

(A) 401(k) plan contributions.	Correct Incorrect
(B) Health Savings Account contributions.	Correct Incorrect
(C) Medical insurance premiums.	Correct Incorrect
(D) All of the above.	Correct Incorrect

Pre-tax payroll deductions lower an employees taxable wages and are subtracted from gross wages before tax withholding is calculated. Typically, health insurance, life insurance, flexible spending accounts and retirement contributions are all considered pre-tax payroll deductions that will lower an employees tax liability.

Question 10

By federal law, companies with U.S. employees are required to send each employee his or her W-2 form, which shows income earned in the prior year, by what date in the next calendar year?

(A) January 31	Correct Incorrect
(B) April 15	Correct Incorrect
(C) July 4	Correct Incorrect
(D) March 1	Correct Incorrect

According to the Internal Revenue Service, every employer engaged in a trade or business who pays $600 or more in employee compensation for the year must file a Form W-2 for each employee. Copies of the W-2 form must be mailed out to employees no later than January 31 of the next calendar year.

	Correct	Incorrect
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