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FPC Practice questions
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
- 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.
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 + $150 = $ now the minimum wage is $7.25 so $7.25 x 40= $ ee must receive at least $290, so $290 - $240 = $ so the employer owes an extra $ 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- mon- tues- weds- thurs- fri- sat- a.
b. c. 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
- 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. step 1: 30x$10=$ 16x$12= $
$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. 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
- wage and hour records
- employee time cards
- canceled checks -name/address occupation for each ee -work time schedule -form w -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 w -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 w 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
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
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?
- company creates ACH file
- employee receives deposits in his or her bank accounts
- company collects employee info
- originating financial institution transmits data
- 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
