FPC Practice Exam 188 Questions with Verified Answers,100% CORRECT

FPC Practice Exam 188 Questions with Verified Answers Cafeteria plan are authorized by what Internal Revenue Code Section? A. 125 B. 401k C. 403b D. 457b - CORRECT ANSWER a. 125 all of the following are tax implications of a cafeteria plan except: a. no income tax withholding b. no social security and medicare tax withholding c. must withhold income, social security, and medicare taxes d. no form W2 reporting - CORRECT ANSWER C. must withhold income, social security, and medicare taxes One of the options in an employee's cafeteria benefit plan is a dependent care flexible spending account. He earmarked $100 per month to the account to pay for child care but spend only $1000 by the end of the plans grace period. at the end of the grace period, what happens to the $200 left in the account? a. the amount is forfeited b. it will be added to his taxable income c. he can use it to "buy" ab additional benefit d. it ill carry over to the next year - CORRECT ANSWER A. the amount is forfeited Prior to beginning work for a company, a chemical engineer signed a contract stating that she agreed to work as an independent contractor. she performs all her duties in the companys laboratories, works under the companys direction, and maintains regular office hours. what is her status? a. independent contractor under common law b. independent contractor under reasonable basis test c. employee - CORRECT ANSWER C. employee do not assume that the employer has fulfilled its responsibilities and is free from penalty simply by having a worker sign a contract stating he is a 1099. individuals do not have a right to waive their ee status in a contract. A retired safety inspector for the company was rehired as a consultant when the company expanded its plant operations. the retired employee was a natural choice. the tasks he undertook as a consultant were the same as the ones he performed before retirement. paid monthly, he has agreed to work under the direction of his old boss until the new plant facilitates are fully operational? What is his status? a. independent contractor under common law b. independent contractor under reasonable basis test c. employee - CORRECT ANSWER C. employee consultants are generally treated as independent contractors. however, when an ex ee is performing the same or similar job as before retirement, it is unlikely that he qualified as a 1099 after termination a receptionist has agreed to work afternoons at the company until the company can find a full time replacement. what is the receptionists status? a. independent contractor under common law b. independent contractor under reasonable basis c. employee - CORRECT ANSWER C. employee whether or not an ee is full time or part time or works a few weeks or a lifetime for the company is not relevant her. she is an employee. All of the following types of employees are classified as exempt from the FLSAs min wage and OT requirements except: a. professional b. outside salesperson c. administrative d. computer repairman - CORRECT ANSWER D. computer repairman a computer repairman does not perform the duties required to qualify as an exempt computer professional a waitress is paid $2.25 per hour and she receives $225 in tips during the week. She works 4o hours per week. Which of the following is true? a. her employer is allowed to reduce her cash wage to no less than $2.13 per hour b. her base pay must be increase to $4.5 per hour after a 90 day training period. c. she must be paid $5.12 per hour by her employer d. her base salary must be raised to $3 per hour to comply with fed min wage requirements. - CORRECT ANSWER A. her employer is allowed to reduce her cash wage to no less than $2.13 per hour her employer can claim the full federal tip credit because she receives tips and with her tips, is paid more than the current federal minimum wage purposes, her employer must pay her at least $2.13 per hour and her hourly rate plus tips must equal at least the current federal min wage if a state sets the minimum wage at a rate greater than the federal minimum wage, the state minimum wage must be paid to workers in that state - true -false - CORRECT ANSWER TRUE tips can be counted toward the employees minimum wage - CORRECT ANSWER TRUE an employee works 40 hours per week as a fry cook. during the week, she substitutes for one of the waitresses and reports $5 per week in tips. can her employer pay her $2.13 per hour? - yes - no - CORRECT ANSWER no because she isnt making $30 a month. the tip credit can be used to reduce the minimum wage only if the employee regularly receives tips and documents receiving more than $30/month employers who provide paid vacation leave must count the hours of paid time off when determining if the employee must receive an overtime premium when the total hours worked in a week exceed 40. true false - CORRECT ANSWER false only hours worked count toward determining whether overtime premiums must be paid under the FLSA the FLSA requires immediate payment of an employees final paycheck upon termination true false - CORRECT ANSWER FALSE however, most states impose time limits governing when an employees final paycheck must be paid to the employee an employee's parking garage is 2 blocks away from his downtown office. it costs $275/month to rent a stall there, but the employee doesn't mind because its convenient and his employer reimburses him 100% of the cost. How much of his monthly parking is taxable? - CORRECT ANSWER $15. remember: employer-provided parking is nontaxable up to $260/month a retail sales clerk took advantage of the company's employee discount program to purchase clothes at 10% off the normal retail price. this service represents: a. taxable compensation b. a qualified employee discount c. a working condition fringe d. a no-additional cost service - CORRECT ANSWER b. a qualified employee discount Last month, an employee emailed her mother on the company's email, photocopied fliers for her church picnic at work and used her work computer to update her resume. These services represent: a. taxable compensation b. de minimis fringes c. working condition fringes d. no-additional cost services - CORRECT ANSWER b. de minimis fringes True of false: if an employee dies and a final payment is made, the employer continues to withhold taxes as if the employee is still alive. - CORRECT ANSWER FALSE- no federal taxes are withheld if the amounts are paid after the year of death, no SS and medicare are withheld and no reporting is done on the W2. Instead it is reported on _______ misc. - CORRECT ANSWER 1099-misc if the amounts are paid during the same year the employee dies, _______ and ______ must be withheld and reported on the W2. FIT is not reported on W2. - CORRECT ANSWER Social security and medicare must be withheld Percentage method practice: an employee who is married with 4 allowances earns a biweekly salary of $1500. Calculate his federal income tax using the percentage method. - CORRECT ANSWER Find Net/Adjusted Wages (after deduction for withholding allowances) §$161.50 x 4 = $646.00 Gross wages - Allowances = Adjusted Wages (Net Wages) §$1500.00 - $646.00 = $854.00 Apply Percentage Table (Appendix) §Net Wages over $454.00 but not over $1,200.00 Adjusted Wages - Threshold Amount = Excess Amount §$854.00 - $454.00 = $400.00 Amount of Tax + (Excess Amount x Percentage) = Total Withholding §0.00 + ($400.00 x 10%) = $40.00 Calculate the total compensation for an electrician who worked 44 hours last week. In addition to his regular wage of $10/hour, the electrician was paid $50 for supervising a trainee. What is the electricians total weekly compensation? - CORRECT ANSWER Step 1: 44 hours x $10/ hour = $440 + $50= $490 regular pay Step 2: $490/44 hours = $11.14 regular rate of pay Step 3: $11.14 x 5 = $5.57 overtime premium rate Step 4: $5.57 x 4 hours = $22.28 premium pay for overtime Step 5: $490 + $22.28 = $512.28 total compensation An employee works 38 hours in a workweek, takes 8 hours sick time, and receives bonus check for productivity. How many overtime hours should he be paid? - CORRECT ANSWER NONE doesn't include sick pay, holiday pay, vacation pay, jury duty pay, or similar pay for unworked hours A server is paid $2.25/ hour and receives tips which average $150/week. She works 40 hours per week. Which of the following is true? - CORRECT ANSWER $2.25 x 40 hrs = $90 $90 + $150 = $240 now the minimum wage is $7.25 so $7.25 x 40= $290 ee must receive at least $290, so $290 - $240 = $50 so the employer owes an extra $50 Therefore, the employer must raise the ee's salary to $3.50/ hour for this pay period the FLSA requires that time worked on saturday be paid at overtime rates and time worked on sunday be paid at double time rates - CORRECT ANSWER FALSE under the FLSA, overtime premiums must be paid only when the employee works more than 40 hours in a workweek. If a state wage and hour law requires that a nonexempt employee be paid an overtime premium when the employee works more than 8 hours in a day and the employee works the following schedule, how many overtime hours must the employee be paid? sun-5 mon-7 tues-6 weds-8 thurs-10 fri-8 sat-6 a.0 b.2 c.10 d.14 - CORRECT ANSWER c. 10 the employee has worked 50 hours in the week and must be paid the overtime premium on the greater of the hours over 40 or more than 8 hours per day. in this case, it would be 10 overtime hours Last week, a high school teacher spent 40 hours in the classroom, worked 10 hours grading papers and was required to put in another 8 hours on saturday at the school sponsored science fair. under the FLSA, what overtime hours, if any, must the teacher be paid? a. time and a one half for 0 hours b. time and a one half for 8 hours c. time and a one half for 10 hours d. time and a one half for 18 hours - CORRECT ANSWER A. teachers are exempt under the professional exemption only nonexempt ees must be paid overtime during thanksgiving week, a nonexempt employee was paid for the following hours: sun- none mon- 10 hours worked tues- 10 hrs work weds- 8 hr sicks day thurs- 8 hr holiday fri-8 hr vacation sat- 8 hr work How many overtime hours, if any, did the ee work? a. 0 hours b. 4 hours c. 12 hours - CORRECT ANSWER a. 0 hours overtime is based on time worked, not time compensated. the ee physically worked 28 hours that workweek. When must overtime be paid? a. each week b. with the next payroll c. as soon as practically possible - CORRECT ANSWER c. overtime is paid with the next regular payday, however, if overtime can not be paid with the next regular payday due to administrative reasons it can be delayed until the next payday a nonexempt employee working at a hospital can work more than 40 hours in a week and not be paid overtime true false - CORRECT ANSWER true 8/80 rule and 14 day period All of the following types of compensation are included in calculating an employees regular rate of pay for overtime purposes except: a. shift premiums b. production bonus of $15 c. 4 hours paid but not worked d. 4% cost of living adjustment - CORRECT ANSWER c. 4 hours paid but not worked only hours physically worked are included in the regular rate of pay overtime calculation under the FLSA 2. What type of pay is included in the regular rate of pay calculation? a. discretionary bonuses b. paid sick leave c. paid vacation leave d. production bonuses - CORRECT ANSWER d. production bonuses the FLSA excludes paid time off and discretionary bonuses from the regular rate of pay calculation all of the following types of payments are included in the regular rate of pay calculation except: a. a production bonus to be paid in June which the employer announced in jan b. an agreement with the union to pay one half of one weeks salary to workers with over 5 years of services c. a traditional $50 gift certificate which the firm has paid for the past 5 years during holiday season d. shift differential for working the 4pm to midnight shift - CORRECT ANSWER c. a traditional $50 gift certification during holiday season if a bonus paid during the holiday season or on other occasions is a gift, it may be excluded from regular rate of pay even if it is paid with regularity and employees come to expect it. to be excluded, the employer must retain discretion over whether the bonus is paid and amount. preannouncements of union agreements make the bonus nondiscretionary. An employee worked for 30 hours on his regular shift at $10 per hour and 16 hours on the late night shift at $12 per hour. in addition, he earned a production bonus of $50. what is his total weekly compensation? - CORRECT ANSWER $577.34 step 1: 30x$10=$300 16x$12= $192 $300+$192+$50=$542 regular pay Step 2: $542/ 46 hours = $11.78 per hour regular rate of pay step 3: $11.78 x 0.5 = overtime premium rate $5.89 step 4: $5.89 x 6 OT hours = $35.34 premium pay for overtime step 5: $542 + $35.34 = $577.34 total weekly compensation All of the following are reasons payroll keeps records except: a. compliance with laws b. demonstrate accuracy of paychecks c. demonstrate security of payroll d. periodic reporting - CORRECT ANSWER C. security of payroll records are used to determine compliance, calculate pay, and produce reports An employer maintains the following information in its employee master file: hire date, termination date, payment date, regular rate of pay, additions/deductions from pay, frequency of payments. name 2 other records that must be kept in order to calculate overtime pay. - CORRECT ANSWER To comply with FLSA requirements for wage and hour repoting, you must also keep data on the following: - hours worked/day -hours worked/week -workweek -overtime hours/pay -shift bonys An employer maintains its employee master file in computer files. which of the following statements is true? a. under federal law, the employer is required to keep a backup of these records b. employment records must be kept for 7 years c. there is no federal requirement to update the data monthly - CORRECT ANSWER c. there is no federal requirement to update the data monthly while records should be current, no federal regulations mandate update monthly updating however it is in the companys best interest. most employment data must be kept for only 3 years. all of the following types of records can be combined with payroll data in an integrated system except: a. personnel b. benefits c. purchasing d. human resources - CORRECT ANSWER c. purchasing integrated databases include payroll, benefits, and other human resources data how long must you retain each of the following records in your files? - proof of tax deposits - form I9 - copies of your quarterly tax returns - wage and hour records - employee time cards - canceled checks -name/address occupation for each ee -work time schedule -form w4 -total wages and tips -overtime info -log of injuries on the job - CORRECT ANSWER -proof of tax deposits: 4 years -form 19: 3 years after date of hire of 1 year after date of termination, whichever is later -copies of quarterly tax returns: 4 years -wage and hour recors: 3 years - employee time cards: 2 years - canceled checks: 4 years - name/address/occ: 3 years -work time schedule: 2 years -form W4: at least 4 years after the date the last return was filed using the info on the w4 -total wages and tips: 4 years -overtime info: 3 years -log of injuries on the job (OSHA): 5 year How long should employers keep payroll records beyond legal requirements a. 2 years b. 3 years c. 4 years d. as long as the company needs the records - CORRECT ANSWER d. as long as the company needs the records the amount of federal income tax that is withheld from an employees regular wages is determined by a formula that uses all of the following items except: a. employees taxable wages b. pay period c. a flat rate d. filing status - CORRECT ANSWER c. a flat rate only when paying a supplemental wage can an employer use the optional flat rate method to calculate federal income tax Which of the following events would require an employee to fill out an amended form w4 within 10 days of its occurrence? a. employee becomes legally separated from his or her spouse who was claimed as a dependent b. employees spouse quits job to stay home with a new baby c. death of a spouse d. adoption of a kid - CORRECT ANSWER a. employee becomes legally separated from his or her spouse who was claimed as a dependent when an employees circumstances result in reduced income tax liability (such as when a child is adopted or a spouse stops working) less tax is withheld; an employee can fill out a new w4 at any time. however, when circumstances create an increased income tax liability, the employee must fill out a new w4 within 10 days. An employee was recently married. the employer pays on the 15th and last day of every month. on June 10, the employee submitted a revised W4. When must you change the amount of his withholding? a. on his june 15th paycheck b. on his june 30th paycheck c. on his july 15th paycheck d. on his july 31 paychecl - CORRECT ANSWER C. on his july 15th paycheck must reflect the change in a withholding no later than the first payroll period ending on or after the 30th day from the date you received the amended form W4 An employee is married with one child. His beginning salary is $1,000 semimonthly. because of an unexpected business trip, the employee fails to submit a 2020 form W4 by his first payday. what withholding status must the employer use for his first paycheck? a. single/married filing separately, no entries in steps 2,3,4 b. married filing jointly, no entries in steps 2,3,4 c. single/married filing separately, entry in step 3 for one dependent d. married filing jointly, entry in step 3 for one dependent - CORRECT ANSWER a. single/married filing separately no entries in steps 2,3,4 Under what conditions can an employee claim exemption from withholding on form W4? a. receiving overtime pay b. had no tax liability last year and expects no tax liability this year c. anticipates receiving a bonus d. an employee takes her first job - CORRECT ANSWER b. had no tax liability last year and expects no tax liability this year employees claiming exempt must owe no federal income tax both for the prior year and the current year as no tax will be withheld. all employees must complete a new form w4 each year true false - CORRECT ANSWER false resident aliens are generally subject to the same federal tax withholdings as US citizens true false - CORRECT ANSWER true resident aliens are generally subjected to federal income tax, withholding and ss and medicare taxes on the same basis as US citizens an employee claims exempt from withholding on his form W4. to continue the exempt status for the next year, a new form W4: a. must be filed by dec 31 b. must be filed by feb 15 of the following year c. is not necessary d. is invalid if the employee claims more than 10 dependents - CORRECT ANSWER b. must be filed by feb 15 of the following year the exempt status expires on feb 15 of the following year. a computerized payroll system can help a payroll dept accomplish all of the following tasks except: a. compliance w laws and regulations b. producing timely, accurate paychecks c. record retention d. recognize changes in laws and regulations - CORRECT ANSWER d. payroll professionals must research the constantly changing laws and regulations to ensure the payroll system remains in compliance If you need very rapid response time with minimal lag between input and output into your computer system, look for: a. batch processing b. remote entry processing c. real time processing d. network processing - CORRECT ANSWER c. real time processing name 3 systems that commonly need to be interfaced with the payroll computer system - CORRECT ANSWER -general ledger - benefits - human resources -time and attendance - cost accounting -bank checking accounts -direct deposit name 2 key advantages of automated interfacing - CORRECT ANSWER - data is entered once, reducing labor time - less chance of error than with manual systems - allows information to be shared on an as needed basis -more timely exchange of data between systems - more accurate data exchange name 2 key advantages of integrated databases - CORRECT ANSWER help reduce data integrity issues, eliminate timing issues, eliminate the need for sending data from one system to another name 2 key features found in systems providing employee self service - CORRECT ANSWER - ability to update person data - ability to view and print pay statements - ability to view and print w2 forms the integrity of the data can be verified by: a. balancing and reconciliation b. system edits c. validity checks - CORRECT ANSWER a. balancing and reconciliation checking inputs or outputs against predetermined constraints is called: a. internal control b. validity edit c. system safeguard d. parallel test - CORRECT ANSWER b. validity edit one way to check for errors is to build validity edits into the system. the system automatically checks to make certain all inputs and outputs are within normally accepted ranges payroll tax liability accounts should be reconciled at least weekly true false - CORRECT ANSWER false reconciliations of liability accounts should occur at least monthly every month, all of the following records are reconciled EXCEPT: a. payroll liability accounts b. master record of payments c. payroll bank checking account d. validity edits - CORRECT ANSWER d. validity edits monthly account reconciliation helps validate the integrity of the info in your payroll system payroll documentation accomplishes all of the following EXCEPT: a. provide uniformity b. simplify training c. ensure procedures are followed d. provide a reference tool - CORRECT ANSWER c. ensure procedures are followed payroll management is entrusted with ensuring procedures are followed when system generated tools do not agree to batch control totals, what must occur? a. continue processing b. finding the cause and correcting the error c. delay finding the error until more time is available d. document the difference and continue processing - CORRECT ANSWER b. finding the cause and correcting the error name one way payroll managers can increase security through stricter internal control of the payroll staff - CORRECT ANSWER dont have one person run be assigned to any task which of the following is the best method of guarding against phantom employees? a. monthly bank reconciliation b. validity edits c. physical payout d. audit trails - CORRECT ANSWER c. physical payout have auditors physically hand out checks to each employee and require identification name 2 items that should be documented in the payroll dept - CORRECT ANSWER payroll policies procedures system and software user manuals employee job descriptions file descriptions all of the following issues are concerns of external auditors except: a. safeguarding of the firms financial assets b. risks to the companys financial well being c. efficiency of payroll procedures d. material misstatements of financial statements - CORRECT ANSWER c. efficiency of payroll procedures in order to set up dd of payroll, you need which 3 pieces of info? - CORRECT ANSWER type of account (checking/savings) routing # account # what is the correct chronological sequence for the following events associated with DD? 1. company creates ACH file 2. employee receives deposits in his or her bank accounts 3. company collects employee info 4. originating financial institution transmits data 5. settlement through ACH - CORRECT ANSWER 3, 1, 4, 5, 2 All of the following regulate payments made by DD EXCEPT: a. consumer financial protection bureau b. NACHA C. State laws d. local laws - CORRECT ANSWER d. local laws the consumer financial protection bureaus regulation E allows the use of electronic funds transfer. NACHA provides the operational rules for EFT. state laws facilitate the payment process which of the following employee benefits is nontaxable compensation? a. company vehicle (personal use) b. gifts, prizes awards c. company vehicle (business use) d. moving expense - CORRECT ANSWER c. company vehicle (business use) of these, only the business use of a company vehicle is a nontaxable. the tax treatment of certain fringe benefits (like company vehicles, educational assistances, thirs party sick pay, or GTLI) can get complicated. unless otherwise specific, fringe benefits are taxable which of the following employee benefits is taxable compensation? a. workers compensation benefits b. health savings account c. sick pay d. qualified transportation fringes - CORRECT ANSWER c. sick pay of these, sick pay is taxable. the other benefits are excluded from income by law an employee's most recent pay period began on Dec 15, 2020 and ended on dec 31, 2020. the employee was paid on jan 7, 2021. in what year are his wages earned between dec 15, 2020 and dec 31 2020, included in his taxable wages? - CORRECT ANSWER 2021 wages are included in taxable income when paid on date an employee was sick the last week in december. his paycheck, dated dec 31, 2020 was held for him until he returned to work on Jan 6, 2021. these wages are taxable: a. in 2020 b. in 2021 - CORRECT ANSWER a. in 2020 since the employees paycheck was available in 2020, according to the concept of constructive receipt, these wages are taxable in 2020. in what part of a 2020 form w4 does an employee claim dependents? a. step 3 b. writing below step 4c c. step 2 d. dependents are not claimed on form W4 - CORRECT ANSWER A. step 3 All of the following are supplemental wages EXCEPT: a. salary b. bonus c. commission d. fringe benefits - CORRECT ANSWER a. salary When using the Optional Flat Rate Method, which of the following items is considered when making the calculation? a. taxable wages b. pay frequency c. filing status d. number of dependents - CORRECT ANSWER a. taxable wages when using the optional flat rate, only the taxable wages is used in the calculation. When paying supplemental wages, when must the aggregate withholding method be used? a. when no income tax is withheld from regular wages for the current or preceding year b. when the employee claims more than 10 dependents c. when the employee doesnt complete a form W4 d. when the employee claims heads of household - CORRECT ANSWER a. the IRS requires the use of the aggregate method where no income tax has been withheld in the current of preceding year When an employee is overpaid and the repayment occurs in the same year, the repayment requested is the employee's a. net overpayment b. gross overpayment c. gross overpayment minus social security and medicare tax d. gross overpayment minus federal income tax - CORRECT ANSWER a. net overpayment when an employee is overpaid and the repayment occurs in the same year, the repayment requested is the employee's net overpayment what form must a penisioner file to have input into the amount of federal income tax withheld? a. w4 b. w4P c. w4s d. w9 - CORRECT ANSWER b. W4P when an employee begins to receive social security benefits, the employer no longer needs to withhold social security and medicare taxes. true false - CORRECT ANSWER FALSE in 2020, an employer must pay social security tax on an employees wages up to: a. 127,200 b. $128,400 c. 132,900 d. 137,700 - CORRECT ANSWER D. $137,700 what is the employer's social security tax rate in 2020? a. 1.45% b. 6.2$ c. 7.65% d. 12.4% - CORRECT ANSWER 6.2% A voluntary deduction must be: a. authorized by the employee b. deducted without the employee's permission c. changed to what the employer needs to deduct - CORRECT ANSWER a. authorized by the employee required deductions must take precedence over voluntary deductions true false - CORRECT ANSWER TRUE involuntary deductions have priority over other deductions all of the following deductions are involuntary deductions EXCEPT: a. wage assignment b. tax levy c. child support d. creditor garnishment - CORRECT ANSWER a. wage assignment what does an employer use to calculate the amount to withhold for an IRS tax levy? a. disposable pay b. net pay c. take home pay d. taxable wages - CORRECT ANSWER c. take home pay The IRS requires the employees take home pay to be used when calculating the levy deduction when does an employer stop deducting a federal tax levy from an employee's wages? a. the amount on the levy is reached b. The IRS issues a form 668-D c. the employee asks that the levy deduction be stopped - CORRECT ANSWER b. The IRS issues a form 668-D what does an employer use to calculate the amount to withhold for a child support withholding order? a. disposable pay b. net pay c. take home pay d. taxable wages - CORRECT ANSWER a. disposable pay the employees disposable pay (all earning-deductions required by law) is used to determine the maximum child support withholding an employee earns $1,000 weekly. his deductions are $174 for federal income tax, $62 for social security tax, and $14.50 for medicare tax. He is not supporting another family and has never been in arrears in his child support payments. What is the maximum child support payment that can be withheld from his wages? a. $600 b. $500 c. $449.70 d. $500.18 - CORRECT ANSWER c. $449.70 if the employee has no second family and is not in arrears, the maximum deduction is 60% of disposable pay. the employee's disposable pay is $749.50 (1,.50). therefore, the maximum child support payment is $449.70(749.50x.60) the federal minimum wage is used when figuring the amount to withhold for a creditor garnishment true false - CORRECT ANSWER TRUE however, in some states the states minimum wage is used when an employee lives and works in the same state, the employer withholds income tax for that state. true false - CORRECT ANSWER TRUE for a payment after the employee's death in the year of the death, what taxes, if any, will be withheld? a. federal income tax only b. social security and medicare taxes only c. both federal income and social security and medicare taxes d. no taxes will be withheld - CORRECT ANSWER b. social security and medicare taxes only the social security act requires withholding social security and medicare taxes from wages paid in the year of an employees death. these wages are paid to the employees estate or beneficiary are are reported on form W2. for a payment after the employees death in the year AFTER the death, what taxes, if any, will be withheld? a. federal income tax only b. social security and medicare taxes only c. federal income and social security and medicare taxes d. no taxes will be withheld - CORRECT ANSWER d. no taxes will be withheld An employee belongs to a professional organization. when his company pays his dues, the payment is: a. taxable compensation b. de minimis fringes c. a working condition fringe d. a no-additional cost service - CORRECT ANSWER C. a working condition fringe dues to professional organizations are tax free as working condition fringe benefits An employer provides an employee $300 each month in bus tokens so she can commute to work. How much of this expense is taxable? a. $135 b. $270 c. $280 d. $300 - CORRECT ANSWER b. $270 employer provided tokens for public transportation commuting expenses are nontaxable up to $270 per month for 2020. What federal taxes, if any, must the salesperson's employer withhold for his personal use of the company vehicle? a. social security and medicare tax only b. federal income tax only c. federal income tax, social security tax, and medicare tax d. no taxes are required to be withheld - CORRECT ANSWER a. social security and medicare tax only if the employee is notified by Jan 31, the employer is not required to withhold federal income tax. Social secuirty tax and medicare tax must be withheld for the employee's personal use of the vehicle for her 10 years of service, an employee was given a gold necklace valued at $100. Which of the following is true? a. the gift must be included in her taxable compensation b. the gift is tax free c. only social security and medicare tax should be withheld on the fair market value of the award d. only federal income tax should be withheld on the fair market value of the award - CORRECT ANSWER b. the gift is tax free most prizes and awards are taxable wages, but one exception is qualified awards for length of service or safety all of the following deferred compensation plans limit the employee to making a deferral contribution of $19,500 in 2020 except: a. 401k b. 403b c. 457b d. nonqualified - CORRECT ANSWER d. nonqualified under which type of plans are employee contributions subject to social security and medicare taxes? a. 401k only b. 403b only c. 457b only d. 401k, 403b, and 457b - CORRECT ANSWER d. all of the above all of the following features are present in a qualified plan except: a. discriminator in favor of highly compensated employees b. written documentation c. benefits for employees d. the right to benefits is nontrasferrable - CORRECT ANSWER a. discrimination in favor of highly compensated employees an employer may provide all of the following features in a 401k plan except: a. matching contributions b. lower ceilings on contributions c. higher benefits for highly compensated employees d. catch up contribution - CORRECT ANSWER c. higher benefits for highly compensated employees a superintendent of schools who will be 49 years of age on Dec 31 2020 earns $100,000. his school district has a 403b plan. what is the maximum that he can contribute to this plan before taxes in 2020? a. $19,000 b. $19,500 c. $25,000 d. $26,000 - CORRECT ANSWER b. 19,500 not 50 years or older so cant contribute more an employee earns $40,000 annually. claiming single with no entries on lines 2,3, or 4 on her 2020 form W4, she contributes $6,000 annually to her 401k. How much must be withheld for federal income tax, social security, and or medicare tax on contribution? a. $0 b. $459 c. $918 d. $1,779 - CORRECT ANSWER b. $459 you must withhold social security and medicare tax ONLY from 401k contribution employee SS tax on $6,000 is $372 (6,000x6.2%). medicare tax is $87(6,000x 1.45%) 372 +87 = $459 the owners of a company want to set up a retirement program for themselves, but do not want to make contributions on behalf of their employees. all of their employees are under age 30. What can they do? a. establish only a 401k plan that restricts eligibility to employees over age 30. b. set up nonqualified deferred compensation plan only c. establish only a 401k plan that restricts eligibility to employees over age 30, and set up a nonqualified deferred compensation plan. d. establish a 403b plan for all employees - CORRECT ANSWER b. set up a nonqualified deferred compensation plan only can discriminate on behalf of key executives which of the following plans applies only to employees of public schools, colleges and universities, and public charities? a. 401k b. 403b c. 457b d. both b and c - CORRECT ANSWER b. 403b plan payroll must withhold federal income tax from: a. contributions to 401k plans b. contributions to 457b plans c. contributions to nonqualified deferred compensation plans d. contributions to ROTH 401k plans - CORRECT ANSWER d. contributions to Roth 401k plans are subject to withholding for federal income tax, social security tax, and medicare tax which plan is specifically set up for government employees? a. 401k plan b. 457b plan c. 403b plan d. nonqualified deferred compensation plan - CORRECT ANSWER b. 457 b plans cover employees of state, county, and local governments what benefits can be provided in a section 125 cafeteria plan? a. scholarships b. discounts c. medical insurance d. commuter vans - CORRECT ANSWER c. medical insurance One of the options in an employee's cafeteria benefit plan is a dependent care flexible spending account. He earnmarked $100 per month to the account to pay for child care but spent only $1000 by the end of the plans grace period. At the end of the grace period, what happens to the $200 left in the account? a. the amount is forfeited b. it will be added to his taxable income c. he can use it to buy an additional benefits d. it will carry over to the next year - CORRECT ANSWER a. the amount will be forfeited an employer contributes $200 per month to an employee cafeteria plan. the pretax medical/dental package that she has chosen costs $250 per month. she contributes the extra $50 for this benefit plan. payroll must withhold: a. social security tax and medicare tax from only the employee contribution b. social security tax, medicare tax, and federal income tax from only the employee contribution c. no tax from either the employee or employer contribution d. social security tax and medicare tax from only the employer contribution - CORRECT ANSWER c. no tax from either the employee or employer contribution both the employers contribution $200 per month and the employees contribution $50 per month, to the cafeteria benefit plan are in pretax dollars. do not withhold any taxes. an employer contributes $175 per month to an employee's cafeteria plan. since her husband has medical/dental coverage through his employer, she wants to take the $175 per month in cash. which of the following statements is true? a. this option is not available; if the amount is not spent, it is lost b. the $175 becomes taxable income c. only social security tax and medicare tax are withheld from the $175 per month. d. the $175 is a tax free benefit to her. - CORRECT ANSWER b. the $175 becomes taxable income benefits converted to cash are added to an employers taxable income. federal income tax, social security tax, and medicare tax must be withheld from the sum. the use it or lose it rule applies only to a flexible spending account. at the beginning of the year, an employee elected to buy group term life insurance as part of his benefit package through his companys cafeteria benefit plan. in may he took out an individual life insurance policy. since he no longer needs group coverage, he wants to replace the insurance option with increase contributions to his 401k plans. is this possible? a. yes, if both GTL and the 401k plan are part of the same cafeteria benefit program, he can switch b. yes but he will have to pay taxes on the amount. c. no - CORRECT ANSWER c. no once selected, benefits cannot be changed or added to during the plan year (except for a change in family status) a record of the daily transaction of a business is: a. balance sheet b. journal c. ledger d. chart of accounts - CORRECT ANSWER b. journal the journal is a chronological record of transactions, in order of their occurence a record of the business transactions by account is found in the: a. balance sheet b. journal c. ledger d. chart of accounts - CORRECT ANSWER c. ledger record of business transactions by account what is normal accounting flow? - CORRECT ANSWER transaction -- journal -- ledger -- financial statements a financial transaction is first posted in your organizations: a. chart of accounts b. ledger c. journal d. balance sheet - CORRECT ANSWER c. journal the first place a transaction is recorded in which type of account (asset, liability, expense or revenue) would each of the following entries appear? a. a new payroll computer b. purchase of computer paper c. money in a payroll checking account d. wages paid to employees e. ss tax and medicare tax withheld but not deposited f. employer cost of group term life insurance g. office furnitue h. deposit of employer portion of social security tax and medicare tax i. mortgage on the addition to your building - CORRECT ANSWER a. a new payroll computer: ASSET b. purchase of computer paper: EXPENSE c. money in a payroll checking account: ASSET d. wages paid to employees: EXPENSE e. ss tax and medicare tax withheld but not deposited: LIABILITY f. employer cost of group term life insurance: EXPENSE g. office furniture: ASSET h. deposit of employer portion of social security tax and medicare tax: EXPENSE i. mortgage on the addition to your building: LIABILITY how would each of the following be posted? a. increase in asset account b. decrease in liability account c. increase an expense account d. decrease an asset account e. increase a revenue account - CORRECT ANSWER a. debit b. debit c. debit d. credit e. credit would each of the following entries be posted in the account as a debit (DR) or credit (CR)? a. purchase of a desk in an asset account b. purchase of stationary in an expense account c. withdrawal from a payroll checking account d. employer contributions to a 401k plan in an expense account e. state income tax withheld but not deposited in a liability account f. federal income tax withheld but not paid in a liability account g. mortgage payment in a liability account - CORRECT ANSWER a. debit b. debit c. credit d. debit e. credit f. credit g. debit an employee going to the payroll department to ask a question about his paycheck. when he arrives, the desks are unattended, files are open, desk tops are covered with paper, and the floor has stacks of reports askew. Which customer service principle could be improved in this payroll department? a. reliability b. responsiveness c. assurance d. empahty e. tangibles - CORRECT ANSWER e. tangibles tangibles are the physical appearance of the department. tangibles can have an effect on employee's perception of how effective the department is. 2. a plant supervisor met with the payroll department to schedule a special pay run that would accomodate the shutdown for the holidays. after payroll committed to the date, it realized that to meet this deadline would require working a weekend. Which customer service principle will be compromised if the deadline is not met? a. reliability b. responsiveness c. assurance d. empathy e. tangibles - CORRECT ANSWER a. reliability on thurs, an employee receives news of a family emergency that requires him to take a flight home that evening. payday is not until friday at 3pm, but he needs his paycheck to pay for the flight. when he contacts the payroll dept and explains his situation, he is told that a check will be ready for him when he stops by. Which principle of the customer service has the payroll dept exhibited? a. reliability b. responsiveness c. assurance. d. empathy e. tangibles - CORRECT ANSWER d. rmpathy You receive a penalty notice from a government agency. the info is not readily available. what should you do first? a. conduct a thorough investigation and send the report to the agency. b. ignore the letter because it will take time to location the information. c. send a short letter to the agency stating that the issues is being reviewed. d. call the agency and tell them you plan to location the info and send it in a few months. - CORRECT ANSWER c. these notices must be responded to as quickly as possible. penalty notices will continue to accrue interest and other fees if the notice is not handled promptly. even a short letter to the agency stating that the issue is being reviewed can reduce the penalties that may be assessed. effective feedback, whether positive or negative, should be given as soon as possible after an incident true true - CORRECT ANSWER True you receive a letter of inquiry concerning an employee. What should you do? a. follow your companys policy on the release of employee info b. ignore the letter becuase its the employees issue c. send a short letter to the agency stating that the issue is being reviewed. d. call the requested and tell them you plan to locate the info and send it in a few months.` - CORRECT ANSWER a. follow company policy privacy of employee info should be a top priority of the payroll manager, but not necessarily a top priority of the payroll staff. true false - CORRECT ANSWER false every member of the payroll dept should be cognizant of the importance of protecting employee info at all times Internal control procedures include all of the following except: a. system interfaces b. rotation of duties c. segregating jobs d. account reconciliation - CORRECT ANSWER a. system interfacing Which of the following is not a benefit of segregating job duties? - CORRECT ANSWER limit access to the payroll system Which of the following is NOT a reason to reconcile the payroll bank account every month? - CORRECT ANSWER to identify phantom employees Actions that control the staff in order to protect the company against fraud include all of the following except: a. physical payouts b. rotate assignemtns c. segregate job duties d. restrict system access - CORRECT ANSWER a. physical payouts A validity edit in the payroll system verifies the system: - CORRECT ANSWER is operating within allowable ranges A record of the financial transactions by account is a: a. balance sheet b. ledger c. journal d. chart of accounts - CORRECT ANSWER b. ledger what entry would be posted as a debit? - CORRECT ANSWER increase in an asset account equation for a balance sheet - CORRECT ANSWER owners equity = assets - liabilities How would an increase to an asset account be posted? - CORRECT ANSWER DEBIT Assume that a deposit is due on Weds, but this is a non-banking day. to be considered made timely, the employers deposit of federal payroll taxes must be made on or before the close of business on: a. tuesday b. thursday c. monday d. friday - CORRECT ANSWER B. THURSDAY a company is a monthly depositer for 2020. on payday, the company accumulates a payroll tax liability of $101,000. the payroll tax deposits for this liability must be made: a. on or before the following wednesday b. on or before the following friday c. by the next business day d. by the 15th the following month - CORRECT ANSWER c. by the next buisness day a company filed paper form W2 with the SSA on April 15. this action will result in penalties of: - CORRECT ANSWER $110 per form W2 the statue of limitation for correcting a form 941 is: a. due date of 941 form for quarter in which error was discovered b. april 15 following the year error was discovered c.. whenever discovered, up to 7 years d. april 15 3 years after the close of tax year error was made - CORRECT ANSWER d. april 15, three years after the close of tax year error was made which of the following records must be kept for 4 years: a. OSHA records b. time cards c. voided payroll checks d. hours worked - CORRECT ANSWER c. voided payroll checks when a payroll department does not respond promptly to a penalty notice from a governmental agency against an employee, this is an example of: a. poor problem solving b. breaching confidentiality c. lack of compliance d. responding to higher priorities - CORRECT ANSWER a. poor problem solving all of the following are payroll control procedures EXCEPT: a. external audits b. edits c. system selection d. security - CORRECT ANSWER c. system selection An employee's monthly income is insufficient to pay for all of his deductions. the deductions were issued and received by the employer in the following order: $60 in creditor garnishments, $125 direct payment for his mortgage, $300 for child support, $105 federal tax levy. Which deduction has SECOND priority? - CORRECT ANSWER FEDERAL TAX LEVY A company is located in a state with no state or local income taxes. when grossing up holiday bonuses for employees who have already earned more than $137,700 but less than $175,000 the payroll department should divide the amount of the bonus by what percentage? a. 75% b. 76.55% c. 71.55% d. 67.35% - CORRECT ANSWER b. 76.55% because...22% (FIT)+1.45% (medicare) =23.45% 100%-23.45%= 76.55% no +6.2% bc makes more than threshhold 137.7k an external audit: - CORRECT ANSWER allows objective assessment of the financial statements Which of the following is true regarding payroll tax deposits? a. employers are penalized for failing to deposit 100% of their tax liability by the due date. b. employers with accumulated payroll taxes under $2500 for a month can deposit the amount due with their quarterly tax return. c. employers accumulating a tax liability of more than $50,000 in the lookback period file schedule B with form 941. d. employers must withhold taxes on noncash fringe benefits at least quarterly. - CORRECT ANSWER c. employers accumulating a tax liability of more than $50,000 in the lookback period file schedule b with form 941 What advantages does a payroll checking account provide? a. prevents fraud b. facilitates reconciliations c. ensures that reconciliations are completed in a timely manner d. ensures that checks are issued correctly - CORRECT ANSWER B. facilitates reconciliations Which of the following amounts is used when calculating an employee's gross up? a. disposable income b. take home pay c. gross income d. net pay - CORRECT ANSWER d. net pay Which of the following statements is correct regarding section 125 plans? a. employees working 10 hours a week or more must be included in the companys section 125 plan b. any benefits received in cash are not taxed c. at the end of the plan year, employees receive cash payments for amounts remaining d. benefits can be changed during the plan year if there is a qualified change in status - CORRECT ANSWER d. benefits can be changed during the plan year if there is a qualified change in status What authority controls the frequency with which employees must be paid? a. state laws b. FLSA rules c. Local laws d. IRS rules - CORRECT ANSWER a. state laws All of the following statements about FLSA overtime regulations are true EXCEPT: a. a bonus paid under a union contract is included in the regular rate of pay b. a holiday bonus, paid at the discretion of the employer is excluded from the regular rate of pay c. the weeks regular rate of pay must include shift premiums d. employers must pay overtime when employees work more than 8 hours in a workday. - CORRECT ANSWER D. employers must pay overtime when employees work more than 8 hours in a workday payroll documentation accomplishes all of the following goals EXCEPT: a. ensuring uniformity b. providing a reference tool c. ensuring that procedures are followed d. simplifying training - CORRECT ANSWER c. ensuring that procedures are followed All of the following statements are correct regarding online processing EXCEPT: a. the data is changed immediately b. the system is interactive c. the operator can communicate with the system as the fata is being processed d. the data to be processed may be abtched - CORRECT ANSWER c. the operator can communicate with the system as the fata is being processed What is a general ledger? a. a summary of transactions by date b. the first place transactions are recorded c. a chronological record of daily transactions d. a record of transactions by account - CORRECT ANSWER d. a record of transactions by account An employee works from midnight to 8am on a company paid holiday but does not work more than 40 hours during the workweek. under the FLSA, the employee must be paid: a. double time for working the holiday b. time and one half for working the holiday c. a shift differential for working the late night shift d. at least the federal minimum wage - CORRECT ANSWER D. at least the federal minimum wage Which of the following statements about the FLSA overtime requirements is correct? a. an employer may establish one workweek for clerical employees and another for assembly workers b. an employer's workweek must coincide with the calendar week c. employers must pay overtime when employees work more than 8 hours in a workday d. employer must pay overtime for hours worked on federal holidays - CORRECT ANSWER a. an employee may establish one workweek for clerical employees and another for assembly workers when should an employer remind employees to complete an amended Form W4 if their filing status or filing circumstances have changed? a. it is not the employers responsibility b. by december 31 of each year c. on an employees anniversary date with the employer d. by dec 1 of each year - CORRECT ANSWER D. by december 1 of each year If an employee provides an invalid form w4, the employer must: a. accept the form until the employee completes a new form. b. implement the form and notify the IRS c. refuse to accept the form d. implement the form as is - CORRECT ANSWER C. refuse to accept the form Under the FLSA, an employee's workday is defined as: a. entire time spent on the job site b. time recorded on the employees time sheet c. time the employee is performing principal activities d. scheduled shift - CORRECT ANSWER c. time the employee is performing principal activities An exempt employee under the FLSA is exempt from: a. minimum wage only b. federal income tax withholding c. both minimum wage and overtime d. overtime payments only - CORRECT ANSWER c. both minimum wage and overtime Under the FLSA, what type of pay is included in a nonexempt employee's regular rate of pay calculation? a. paid vacation leave b. paid sick leave c. discretionary bonuses d. production bonuses - CORRECT ANSWER d. production bonuses an employee who files an exempt form W4 is exempt from the withholding of: a. federal income tax only b. social security tax only c. medicare tax only d. all taxes - CORRECT ANSWER A. federal income tax only when does an exempt W4 expire? a. at the end of each quarter b. Feb 15 of next year c. it continues as long as the ee is subject to ss tax d. dec 31 each year - CORRECT ANSWER B. Feb 15 of the next year When making a supplemental wage payment to an employee whose supplemental YTD wages exceed $1,000,000 what tax rate is used to calculate federal income tax withholding? a. 6% b. 22% c. 24% d. 37% - CORRECT ANSWER D. 37% because.... Which of the following plans can discriminate in favor of highly compensation employees? a. section 125 plans b. defined contribution plans c. 401k plans d. nonqualified deferred compensation plans - CORRECT ANSWER d. nonqualified deferred compensation plans How frequently must an employer include noncash fringe benefits in an employee's income? a. each pay period b. quarterly c. semiannually d. annually - CORRECT ANSWER d. annualy A semiweekly depositor has a liability of $79,000 from Weds payday and a liability of $50,000 from Friday's payday. The deposit is due by the: a. next monday b. next weds c. next friday d. 15th of the month - CORRECT ANSWER A. next monday FUTA taxes of more than $500 on wages paid in the first quarter must be deposited no later than: a. march 31 b. april 15 c. april 30 d. may 1 - CORRECT ANSWER c. april 30 a semiweekly depositor that has a payroll tax liability of $50,000 from a Monday payroll must deposit the liability by: a. tues b. weds c. thurs d. fri - CORRECT ANSWER D. Friday When an employee has a legal name change, what does the IRS require the employer to see before reporting the new name on the form W2? - CORRECT ANSWER A corrected social security card accounting data beings with a transaction. this information is first posted: a. on the income statement b. in the general ledger c. in the chart of accounts d. in the journal - CORRECT ANSWER d. in the journal salaries earned but not yet paid in the current month must be recorded as: a. debit to salary payable b. credit to salary expense c. debit to cash d. debit to salary expense - CORRECT ANSWER d. debit to salary expense When supplemental wages are paid at the same time as regular wages, how are withholding taxes computer? a. withholding on supplemental wages is taxed separately b. withholding taxes are based on the total of the wages and supplemental wages c. supplemental wages are not subject to withholding taxes d. supplemental wages are taxed at a different withholding rate - CORRECT ANSWER b. withholding taxes are based on the total of the wages and supplemental wages what is the effect on an employees income when the employer pays that employees share of social security and medicare taxes on a fringe benefit? a. there is no change b. the taxes paid by the employer are considered income to the employee c. the amount of the fringe benefit is included in the employees income d. there are no ss or medicare taxes on fringe benefits - CORRECT ANSWER c. the amount of the fringe benefit is included in the employees income which tax withholidng method uses the average earnings for one pay period to determine the withholding per pay period? a. percentage method b. quarterly averaging method c. annualizing wage method d. none of the above - CORRECT ANSWER annualizing wage method uses the average earning for one pay period multiplied by the total number of pay periods in the year to calculate the total withholding allowance for the year. the quarterly averaging methid takes the estimated earning for a quarter and divides that value by a number of pay periods in the quarter. what happens to an employees payroll check if that employee dies without a will? - CORRECT ANSWER the legal heirs must file the proper state claims form when an employee is terminated, by when must the employer issue the final payroll check? - CORRECT ANSWER immediately upon termination for how long must an employer retain unemployment tax records? - CORRECT ANSWER 4 years after income tax filing Under what condition would an employer be required to allocate tips to employee? - CORRECT ANSWER when 10 or more staff work on a typical day. allocated tips are an avergae of all tips received spread across all employees under social security regulations, how long must an employer retain payroll docs? - CORRECT ANSWER 5 calendar years under the flsa, how long must an employer preserve time sheets or other docs that provide a record of employees work hours or work accomplished? - CORRECT ANSWER two years which type of compensation is reported on form w2? - CORRECT ANSWER prizes, such as vacations, awarded for outstanding work when using the percentage method for withholding federal income tax, what must be subtracted from gross income to determine the amount of tax to be deducted? - CORRECT ANSWER allowances first subtracting the allowances from gross income and then multiplying by the percentage value provided on the federal percentage method withholding table A section 125 cafeteria plan allows employees to choose from how many benefits - CORRECT ANSWER B. two or more allows ees to use a portion of their paychecks, on a pre tax bases, to pay for insurance premiums, medical expenses and dependent care expenses. which deduction is not subtracted from gross earnings when calculating disposable earnings for a garnishment? - CORRECT ANSWER retirement savings contributions amount that can be garnished is based on ees disposable income, which is the gross wages minus amounts for ss, medicare, and the ees share of any state unemployment insurance. deductions that cannot be deducted from gross income for garnishment purposes include union dues, health insurance, and retirement savings contributions. which situation must exist for an individual to claim an additional withholding allowance to reduce tax withholding? - CORRECT ANSWER the employee is single with one job. individuals are allowed an exemption for each dependent; someone who relies on the taxed individual for support and who falls within certain relationship, support, residency, and age requirements the purpose of the earned income credit is to... - CORRECT ANSWER reduce taxable income! a state tax credit which has the effect of decreasing federal income taxes deducted from an employees wages. which type of report does not originate from the employees earning record? a. taxable wages for each ee b. calc of the appropriate tax rates c. a report of form 1099 earnings d. payroll analysis report - CORRECT ANSWER c. a report of 1099 earnings of the following types of accumulators, which one accumulates values over a period of time? a. segment accumulator b. balance accumulator c. compunding accumulator d. composite accumulator - CORRECT ANSWER b. balancing accumulator an accumulator is an element in a payroll system that keeps a cumulative total of a specified payroll deduction or earning. a balance accumulator includes totals for several calculation periods that span a period of time such as a month or a year ago. which types of documents must be stored separately from all other types of payroll records? - CORRECT ANSWER a. garnishment reports. all documentation relating to any garnishments against ees must be kept in a separate locked cabinet. which type of thirs party arrangement for payroll processing has an employment tax liability? - CORRECT ANSWER d. form 2678 agent act as the employer, assumes joint responsibility with the employer for SS, medicare, and federal income tax withholding.. files return using the agent's EIN. both form 8655 reporting agents and payroll service providers perform payroll services for one or more employers.