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FPC Exam Chapter 1
Challenges to payroll correct answer 1. Complexity = Federal, state and local laws change frequently and must be incorporated into company policies
- Communication = clear, consise payroll information
- Technology = software, equipment and web-based applications can enhance payroll process (automatic time keeping, record storage and retrieval)
- Accuracy = employee's pay, tax filing, management of reports, etc. Employees vs. Independent Contractors correct answer Employees: Federal income tax, social security tax, medicare tax, state income tax and local income tax are with held by employer Independent Contractor: taxes are not withheld. They provide a taxpayer Identification number ( TIN) Who decides whether you are an employee or an Independent contractor? correct answer Designated by employer. Primary way to do this is by using the common law test EXCEPT when the employer can classify an employee as a independent contractor under the reasonable basis test The common law test correct answer 2 questions How independent is the employee? How much control can be exercised over the worker?
Basically, if the person works strictly for the company and gets paid by them only its an employee and if they make their own hours and can hire outside of the company its an independent contractor reasonable basis test correct answer Employers can classify a worker who meets the Common law test as an employee, instead as an independent contractor if:
- constantly treated as an IC and filed taxes as such
- longstanding, recognized practice in a significant segment of the employers industry of treating similar workers as ICs
- Have a judicial precedent
- ABle to demonstrate that the IRS ruled it ( published ruling or private letter ruling, previous audit)
- Received Guidance from attorney or CPA What happens when you have workers that aren't classified as EE or IC? correct answer Temporary Service agency, leasing companies or Professional Employer organizations (PEO) What are these companies responsible? correct answer paying, withholding, reporting, providing benefits. The company receiving the services contracts with these organizations rather than the employee What happens when you misclassify a worker correct answer Misclassifications represent a potential loss of revenue for all levels of govt so the IRS, department of labor, state unemployment agencies and other state and local govt agencies have come together to scope out and give sever penalties The immigration Reform and control act of 1986 (IRCA) correct answer requires employers to verify EE's eligibility for employment in the U.S What key provisions of the IRCA law affect employers? correct answer Employer Sanctions: Having knowledge that an employee is no longer authorized to work in the USA Anti-discrimination: the law prohibits discrimination in hiring or recruiting workers on the basis of national origin or citizenship.
QQ #3: Who has the responsibility to determine if the worker is an EE or IC? correct answer Even though he IRS and the SSA have stake in determining it is the ER responsibility QQ #4: Prior to beginning work for a company, a chemical engineer signed a contract stating that she agreed to works as an independent contractor. She performs all her duties in the compnay's lab, where she has full access to the companys testing equipment. SHe works under the companys direction and maintains regular office hours. What is her status? correct answer EE, you cant assume she is an IC just because her EE made her sign the contract, she cant actually waive that. She is behaving like an EE so she is one and the owner is subject to penalty Q #5 A retired safety inspector for the company was rehired as a consultant when the company expanded its plant operations. The retired EE 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 facilities are fully operational. What is his status? correct answer C. Employee: Consultants are generally treated as independent contractors. However, when an ex-employee is performing the same or a similar job as before retirement or termination, it is unlikely that he or she qualifies as an independent contractor A receptionist has agreed to work afternoons at the company until the company can find a full time replacement. What is the receptionists status? correct answer C. EE; 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 here. She is an EE FLSA (Fair Labor Standards Act of 1938) correct answer guarantees EE a minimum wage Requires ER to pay an OT premium Limits when minors can work Provides equal pay protection Administered by the wage and hour division of the US department of labor ( DOL)
Exempt vs. Non-exempt EE correct answer Exempt: Not covered by the FLSAs minimum wage and overtime requirements. This is based on the actual duties, responsibilities and level of discretionary authority Exempt EE positions ( White collar) correct answer Executives Administrative EE Professionals ( teachers, engineers, attorneys, highly skilled computer software occupants) Outside salespeople ( away from premise and selling ) ALSO,
- Various transportation workers—motor and rail carrier workers, taxicab drivers, seamen, airline employees
- Agricultural workers
- Hospital and nursing home workers
- Home companion care workers
- Public sector employees, firefighters, police officers, and others Federal Minimum Wage correct answer The federal minimum wage, effective since July 24, 2009, is $7.25 per hour. Employees under age 20 can be paid $4.25 per hour in their first 90 calendar days on the job. Federal government contractors must pay a minimum wage of $10.60 for hours worked in 2019. State minimum wage correct answer Some states have a different minimum, the ER has to pay the higher wage!
A nonexempt EE works in a state with a minimum wahe of $7.35 per hour, while living in a state with a minimum wage of $8.05. What is the minimum rate he must be paid correct answer b. He works in the $7.35 state where he lives is irreverent tips can be counted toward the EE minimum wage correct answer TRUE An EE works 40 hours per week as a fry cook. During the week, she substitutes for one of the waitresses and reports $5 per weeks in tips. Can her ER pay her $2.13 an hour correct answer NO. the tip credit can be used to reduce the min wage only if the EE regularly recieves tips and documents recieving more than $30.00 per month in tips ER who provide paid vacation leave must count the hours of paid time off when determining if the EE must recieve an OT premimum when the total hours worked in a week exceed 40 correct answer FALSE only hours worked count towards determining whether OT premiums must be paid under the FLSA The FLSA requires immediate payment of an EE final paycheck upon terminiation correct answer False but companies do impose a time limit Defining OT correct answer The Fair Labor Standards Act (FLSA) requires that all nonexempt employees be paid 1½ times their regular rate of pay for all hours worked over 40 in one week. ER RESPONSIBILITY 8/80 rule correct answer overtime for hospital/nursing home workers where they can use a 14 day period to compute overtime. Rules:
- they must agree to use the rule. the 14 day period can start at any time as ling as its 14 consecutive days of 24 hour period. Rule has to be used permanently
- ER must compute overtime in the most beneficial way for the EE whether its more than 8 hours in a day or 80 hours in the two weeks Firefighters and police officers exception correct answer work period lasting from 7 to 28 consecutive days where the ratio of hours and days worked have to be 212 hours to 29 days ( 171 hours to 28 days for law enforcement) see table for days aligned with ration hours
The FLSA requires that time worked on Saturday be paid at over-time rates and time worked on Sunday be paid at double time rates correct answer FALSE. only when the EE has worked more than 40 hours If a state wage and hour law requires that a nonexempt EE be paid an OT premium when the EE works more than 8 hours in a day and the EE works the following schedule ( Su; 5, M:7, Tu: 6, W:8, Th: 10 F: 8 S: 6) how many OT hours must the EE be paid? correct answer C. 10 hours becasue they worked 50 hours OT which is more than the 2 hours extra for 8+ hours a day. 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 OT hours, if any, must the teacher be paid correct answer a. 0 hours because they are exempt from OT An ER pays semimonthlu on the 15th and last day of eac Memorial day is may 31. a nonexempt EE worked the following hours correct answer zero becasue they arent required to pay OT for holidays and each work week stands on their own. ALSO, t the federal level you dont have to pay for extra hours worked in a day. During thanksgiving week, a nonexempt EE was paid for the following hours ( 28 hours worked the rest was vacation, sick, and holidays ALL time compensated) correct answer zero hours When must OT be paid? correct answer As soon as practically possible a nonexempt EE working at a hospital can work more than 40 hours in a week and not be paid OT correct answer True because nurses have their own 14 day period but if they work more than 8 hours in a day then it becomes OT Nondiscretionary bonus correct answer Any contractual or agreed upon bonus related to production, efficiency, attendance, quality, or another measure of performance must be included in regular rate of pay calculation. Discretionary bonus correct answer bonuses paid for services performed are not included in the ee regular rate of pay if the ER has the discretion whether or not to pay the bonus and how much
If a bonus paid during the holiday season or on other occasions is a gift, it may be exluded from the regular rate of pay even if it is paid regularly and EE comes to accept it. To be excluded the ER must retain discretion of whether or not he is going to give them the bonus An EE worked 30 hours on his regular shift at $10.00 and hour and 16 hours on the late night shift at $12/hr. in addition, he earned a production bonus of $50 what is his total weekly compensation. correct answer Answer is 577.34 ( did it right the first time! keep practicing because you had to use your notes a little) Portal to portal act of 1947 correct answer defines the term hours worked that appears in the FLSA Preliminary and postliminary things like changing or washing up can count as compensation if agreed on the contract clocking in and out, waiting in line to get through security or traveling to work is not integral parts of principal activities Donning and doffing: its not compensatible if you are putting on nonunique protective gear or changing into clothing as a conveinence to yourself. Call back and show up pay correct answer any hours paid for that arent physically worked are not included in calculating OT Waiting at work; waiting to be engaged vs engaged to be waiting correct answer when the EE is not allowed to do any personal business while waiting its engaged to be waiting which means it is calculated in OT, whereas if they can do whatever they want while waiting then is waiting to be engaged an thats not included Remedial Education correct answer can be asked to work an extra 10 hours if ER provides remedial education support without having to pay OT traveling for work outside of business hours does not have to be counted towards compensation correct answer TRUE
Master File correct answer required for federal income tax withholding, calculating unemployment tax, and overtime. Furthermore, without complete and accurate records, an employer has no way to verify whether an EE claim for back pay is verified. NO federal requirement as to how its kept. Should be kept up to date so that there are no issues and it is reliable. Record Retention correct answer 5 years- OSHA (Occupaton Safety and Health Administration) 4 years- internal revenue service (IRS)/Social Security Administration SSA 3 years- Family and medical leave Act (FMLA) 2 years- Fair labors standards act HIPAA basics correct answer The health insurance portability and accountability act of 1996 was principally designed to help EE and their families maintain health insurance when switching jobs Quiz 1.5 All of the following are reasons payroll keeps records except: correct answer a. compliance with laws b. Demonstrate accuracy of paychecks c. demonstrate security of payroll d. periodic reporting ANSWER: C records are used to determine compliance, calculate pay, and produce reports An employer maintains the following information in its EE master file:
- Hire date -Termination date -Payment date
- Copies of your quarterly tax returns
- wage and hour records
- EE time cards
- canceled checks
- name/address/occupation of EE
- work time schedule
- W-
- total wages and tips
- OT info
- log of injuries correct answer - proof of tax deposits ( 4 years)
- Form I-9 (3 years after hire or 1 year after termination)
- Copies of your quarterly tax returns ( 4 years)
- wage and hour records ( 3 years)
- EE time cards ( 2 years)
- canceled checks ( 4 years )
- name/address/occupation of EE ( 3 years FLSA 4 years for the IRS/SSA)
- work time schedule ( 2 years)
- W-4 ( at least 4 years after the last return)
- total wages and tips: ( 4years)
- OT info ( 3 years)
- log of injuries (5 years) HOw long should ER keep payroll records beyond legal requirments? a. 2 years b. 3 years c. 4 years. d. as long as the company needs the records correct answer D. why the hell not
What are the four things that are taken into account when determining the federal income tax withheld? correct answer - EE wages
- pay period frequency
- marital status ( W4)
- withholding allowances (W4) W-4 ( the EE's withholding allowance certificate) and W-4P ( withholding certificate for pension or annuity payments correct answer 1) whether to withhold taxes at the single or married rate
- how many withholding allowances are claimed
- whether the EE wants an additional amount withheld
- whether the EE is claiming to be exempt from withholding Should submit new ones when something changes, are not required to fill out every year just upon new hiring if not completed must file as if single with no allowances Death of a spouse does not affect withholding until the next year Notify EE by Dec 1 change has to happen before you can revise your W- withholding must be changed by the next payroll after the 30th day ER responsibilities correct answer - Ensuring that form W-4 is complete
- Withholding is claimed -Requesting that EE change forms when appropriate
- Record keeping
- Submitting the W-4 to IRS
Expatiates correct answer US citizens and US resident aliens who live and work outside of the US. they are generally subject to federal tax withholding unless it can be excluded under the internal revenue code Quiz 1.6 The amount of federal income tax that is withheld from an EE regular wages is determined by a formula that uses all of the following except: a. EE taxable wages b. Pay period c. a flat rate d. Marital status correct answer c. a flat rate can only be used when paying a supplemental wage Which if the following events would require an EE to fill out an amended form W-4 within 10 days of its occurrence? a. EE becaomes legally seperated from spouse who was claimed as an allowance b. EE spouse quits job to stay home with the new baby c. death of spouse d. Adoption of a child correct answer a. when you allowances decrease you have to do it within 10 days. increases you can do whenever and the death of a spouse will change in the following year An EE was recently married. the ER pays on the 15th and last day of every month. June 10, the EE submitted a revised W-4 changing his marital status and number of allowances from one to 4. 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 on his july 31 paychekc correct answer C. on his july 15th paycheck must reflect the change of your witholding no later than the first paycheck after 30 days
An EE is married with one child. His beginning salary is 1,000 semi monthly. Because of an unexpected business trip, the EE fails to submit his W-4 by his first payday. What will the withholding status be? correct answer Single no allowances Under what conditions can an EE claim exemption from withholding on W- a. Recieving OT pay b.had no tax liability last year and expects no tax liability this year c. anticipates to recieve a bonus d. an EE takes her first job. correct answer b. must owe no federal income tax previous year or the current year All EE must complete a new W-4 each year correct answer FALSE only if they want to stay exempt Resident aliens are generally subject to the same federal tac witholding as US citizens correct answer TRUE An EE claims exempt from withhilding on his W-4. To continue the exempt status for the next year, a new w-4 form correct answer must be filed by feb 15th, thats when it is expired
