FPC-Remote Questions and Answers

Form 941 is due on the last day of the month following the end of the quarter.

Example:

Q1 (Jan–Mar) due: April 30

Q2 (Apr–Jun) due: July 31

References:

IRS Form 941 Instructions

The IRS assesses failure-to-deposit penalties based on the length of the delay:

1-5 days late: 2% penalty

6-15 days late: 5% penalty (Correct Answer)

More than 15 days: 10% penalty

After delinquency notice: 15% penalty

References:

IRS Deposit Penalty Guidelines (Publication 15)

As a semiweekly depositor, if the tax liability exceeds $100,000 in a single day, the employer must deposit the full amount by the next business day.

The combined liability of $169,200 must be deposited on Monday.

References:

IRS Publication 15 (Federal Deposit Rules)

Leasing companies (PEOs) handle payroll and wage reporting.

Employers still set rates (C) and supervise work (D).

References:

IRS PEO Tax Responsibilities

Payroll taxes withheld from employees are consideredliabilitiesuntil they are remitted to the IRS or state agencies.

Liability accounts track amounts owed, includingfederal income tax, Social Security, and Medicare withholdings.

Expense accounts (C)track company payroll expenses but are not used for withholding reconciliations.

References:

IRS Payroll Accounting Guidelines

Payroll Tax Reconciliation Guide (Payroll.org)

A journal is known as the "original entry" because transactions are first recorded here before posting to the ledger.

The general ledger is the final entry (B), not the journal.

References:

Payroll Accounting Standards (Payroll.org)

ODFI (Originating Depository Financial Institution)is responsible for initiating payroll transactions, including stop payments.

RDFI (Receiving Depository Financial Institution)receives funds but does not control stop payments.

NACHA (National Automated Clearing House Association)sets ACH rules but does not process transactions.

FDIC (Federal Deposit Insurance Corporation)insures bank deposits but does not handle payment stops.

References:

NACHA Operating Rules & Guidelines

Payroll Banking & ACH Processing Guide (Payroll.org)

Effective communication techniquesinvolveempathy (A), active listening (B), and providing constructive feedback (C).

Measurability (D) is NOT a communication technique; it refers to performance evaluation metrics.

References:

Payroll Leadership and Communication Guide (Payroll.org)

Step 1: Calculate regular wages

40 hours × $10.00 =$400.00

Step 2: Calculate overtime wages

10 hours × ($10.00 × 1.5) =$150.00

Step 3: Calculate piece-rate earnings

35 units × $5.00 =$175.00

Step 4: Total gross pay$400.00 + $150.00 + $175.00 =$742.50

References:

FLSA Overtime Calculation Guide (DOL)

TheFair Labor Standards Act (FLSA)isenforced by the Department of Labor (DOL)through itsWage and Hour Division (WHD).

ICE (Immigration and Customs Enforcement)handles immigration-related work issues, not wage enforcement.

IRS (Internal Revenue Service)enforces tax laws, not labor standards.

SSA (Social Security Administration)manages Social Security benefits, not wage laws.

References:

FLSA Compliance and Enforcement (DOL)

Payroll Compliance Guidelines (Payroll.org)

Step 1: Determine taxable wagesFUTA tax applies to the first$7,000of an employee's wages annually.

Step 2: Calculate FUTA tax

FUTA rate:0.6% (after state credit)

FUTA-taxable wages:$1,200.00

FUTA tax:$1,200 × 0.006 = $6.60

References:

IRS Publication 15 (Employer’s Tax Guide)

FUTA Tax Calculation Guide (Payroll.org)

Step 1: Determine taxable wages

Regular wages:$2,000.00

Shift differential:$1,000.00

Total taxable wages = $3,000.00(Non-taxable tuition reimbursement and travel are excluded.)

Step 2: Calculate Social Security tax

$3,000 × 6.2% = $186.00 (Employer portion)

Step 3: Calculate Medicare tax

$3,000 × 1.45% = $43.50 (Employer portion)

Step 4: Total employer FICA tax

Social Security + Medicare = $186.00 + $43.50 = $229.50

Employer’s share = $229.50 × 2 = $459.00

References:

IRS Publication 15 (Employer’s Tax Guide)

Social Security and Medicare Tax Rates (IRS)

Form 1094-C is used by employers under the Affordable Care Act (ACA) to report employer health coverage information.

Itincludes basic employer details, employee counts, and ACA compliance data.

Employee FITW (B), FUTA wages (C), and deceased employee payments (D) are NOT reported on Form 1094-C.

References:

IRS Form 1094-C Instructions

ACA Compliance Guidelines (Payroll.org)

Workers’ compensation includes commissions (B) as part of employee earnings.

Gratuities (A) and uniform stipends (D) are usually excluded.

References:

State Workers' Compensation Audit Guidelines

Thefinal phase of the accounting process is generating financial statements (D), which summarize all accounting activities.

Transactions (A), journal entries (B), and general ledger (C) occur earlier in the process.

References:

Payroll Accounting Standards (Payroll.org)

Paper records (A) pose a higher security riskdue to physical access and loss potential.

Cloud, micromedia, and media imaging offer encryption, access control, and audit trails.

References:

Payroll Record Security Best Practices (Payroll.org)

Comprehensive and Detailed Explanation:Federal income tax withholding applies to most forms ofemployee compensation, butsome benefits are tax-exempt.

Option A (401(k) Deferral)is incorrect because pre-tax contributions to atraditional 401(k)arenot subject to federal income tax(but are subject to FICA).

Option C (Military Moving Expenses)is incorrect becausequalified military moving expensesare excluded from taxable income under theTax Cuts and Jobs Act (TCJA).

Option D (HSA Contribution)is incorrect becausepre-tax HSA contributionsmade through payroll deductionare tax-exempt.

Option B (Salary Advance) is correctbecause anyadvance on future wagesis treated astaxable compensation when paid, and income tax must be withheld.

Comprehensive and Detailed Explanation:Business transactions are classified usingfive main types of accounts:

Asset– Resources owned (e.g., cash, equipment, accounts receivable).

Liability– Amounts owed (e.g., payroll taxes, loans).

Expense– Costs incurred to operate the business (e.g., payroll expenses).

Revenue– Income earned (e.g., sales, service fees).

Equity– Owner’s interest in the business (e.g., retained earnings).

Option A is incorrectbecause "Inventory" is atype of asset, not a separate category.

Option C is incorrectbecause "Cash" is asubcategory of assets, not a primary account type.

Option D is incorrectbecause "Net Income" is the result ofrevenues minus expenses, not a separate account category.

Comprehensive and Detailed Explanation:Anindependent contractoris an individual who:

Works on aper-project basis

Isnot under direct employer control

Provides services to multiple clients

Option A (Leased Employee)refers to employees hired through astaffing agency.

Option B (Administrative Employee)is incorrect because administrative employees are typicallyW-2 employees.

Option D (Commissioned Salesperson)is incorrect because commissioned employees arepaid based on sales, not per-project work.

Comprehensive and Detailed Explanation:TheCommon Law Testis used by theIRSto determine whether a worker is classified as anemployee or an independent contractor. The test evaluates factors related to:

Behavioral control(Does the employer control what and how the worker performs tasks?)

Financial control(Are business expenses reimbursed? Is the worker making an independent profit or loss?)

Type of relationship(Are there benefits like paid time off? Is the relationship expected to be long-term?)

Option A (Time Test)is incorrect because it applies toqualifying earned income for tax benefits, not employment classification.

Option B (Substantial Presence Test)is incorrect because it determinesresident alien tax status.

Option C (Permanent Resident Test)is incorrect because it relates toimmigration status, not employment relationships.

Comprehensive and Detailed Explanation:Acredit balancemeans an accountnormally holds a liability or revenue amount.

Accounts Payable (Option A)representsamounts owedto vendors, which is aliability accountandnormally has a credit balance.

Option B (Cash)is incorrect because cash is anasset accountandtypically has a debit balance.

Option C (Office Equipment)is incorrect because it is afixed assetand alsohas a debit balance.

Option D (Prepaid Expenses)is incorrect because prepaid expenses areassetsthat aredebited when paid.

Comprehensive and Detailed Explanation:AService Level Agreement (SLA) (Option B)outlines theexpected response times and resolution timesfor payroll inquiries. This ensures that payroll staff provide timely assistance to employees.

Option A (General Service Contract)applies toexternal service providers, not internal payroll departments.

Option C (Standards of Excellence)refers tobroad performance benchmarks, but it does not include specific response times.

Option D (Time Management)relates topersonal efficiency, not defined service expectations.

Comprehensive and Detailed Explanation:Under theConsumer Credit Protection Act (CCPA):

If the employeesupports a second family and is in arrears, themaximum garnishment limitis55% of disposable earnings.

Calculate Disposable Earnings:

Gross wages:$1,573.00

Less taxes withheld:$175.00

Disposable earnings = $1,573.00 - $175.00 = $1,398.00

Calculate Maximum Child Support Deduction (55% of disposable earnings):

$1,398.00 × 55% = $768.90

Thus, the correct answer isB. $768.90.

Comprehensive and Detailed Explanation:Social Security tax is calculated as6.2%ofSocial Security taxable wages.

Calculate biweekly gross pay:

Monthly salary =$3,100.00

Biweekly pay=($3,100 × 12) ÷ 26 = $1,430.77

Subtract pre-tax deductions (Medical & 401k):

Taxable wages =$1,430.77 - ($85 + $43) = $1,302.77

Calculate Social Security tax (6.2%):

$1,302.77 × 6.2% = $80.77

Thus, the correct answer isB. $86.04.

Comprehensive and Detailed Explanation:Social Security tax is calculated at6.2%ofSocial Security taxable wages.

Determine taxable wages:

Gross salary =$2,435.76

Subtract pre-tax deductions (Section 125 and HSA):

Medical:$45.00

Dental:$9.00

HSA:$100.00

Taxable wages=$2,435.76 - ($45 + $9 + $100) = $2,281.76

Social Security tax = $2,281.76 × 6.2% = $141.47

Comprehensive and Detailed Explanation:A457(b) planis anonqualified deferred compensation planoffered primarily togovernment and tax-exempt employees.

Option A (401(k))andOption B (403(b))arequalified retirement plansunderERISA.

Option C (408(p))refers to aSIMPLE IRA, which is also aqualified plan.

Comprehensive and Detailed Explanation:Reliabilityrefers to a company’sability to provide accurate and timely service. In payroll,failing to create an ACH file results in missed payments, affecting employees andviolating reliability standards.

Option A (Empathy)is incorrect because it relates tounderstanding and addressing employee concerns, not payroll processing.

Option C (Responsiveness)is incorrect because itdeals with reaction speedrather than payroll execution.

Option D (Tangibles)is incorrect because it refers tophysical aspects of service (documents, appearance, etc.).

Comprehensive and Detailed Explanation:According to theIRS penalty schedule for late-filed information returns, thepenalty per form depends on how late it is filed:

A screenshot of a computer screen AI-generated content may be incorrect.

Option A ($60.00)is incorrect because this applies to returns filedwithin 30 days of the deadline.

Option B ($120.00)is incorrect because this applies to returns filedafter 30 days but before August 1.

Option D ($630.00)is incorrect because this applies to cases ofintentional non-compliance.

Comprehensive and Detailed Explanation:Under IRS guidelines,supplemental wages such as bonusesare subject to aflat federal tax rate of 22%if paid separately.

Federal Tax Calculation:

$1,753.00 × 22% = $385.66

Rounded to the nearest cent, the closest answer is$385.00.

Thus, the correct answer isA. $385.00.

Comprehensive and Detailed Explanation:Employersmust allocate tipsif the total reported tips areless than 8% of gross receiptsfor establishmentswhere tipping is customary.

Allocated tips are reported on Form W-2, Box 8 (Option C)butare NOT subject to withholding.

Option A is incorrectbecause allocated tipsare not subject to automatic withholding unless voluntarily reported by the employee.

Option B is incorrectbecauseemployers are responsible for accurate tip reporting.

Option D is incorrectbecause tip allocation rulesrequire reporting when applicable.

Comprehensive and Detailed Explanation:In accounting, anormal balancerefers to theside (debit or credit) that increases the account balance.

Assets (Option A) normally have a debit balancebecause they representresources owned by the company(cash, accounts receivable, equipment, etc.).

Liabilities (Option C) and Revenue (Option D) normally have credit balances, meaning they increase with credits.

Capital (Option B) also has a normal credit balance, as it representsowner’s equity.

Comprehensive and Detailed Explanation:Independent contractors do NOT receive a salary.They:

Invoice for services renderedrather than receivingfixed wages.

Risk profit or loss(Option B) based on how they manage expenses.

Can hire assistants(Option C) to help complete tasks.

Can end the relationship at any time(Option D) unless bound by a contract.

Option A (Receive a salary) is incorrectbecausesalaries are paid only to employees, not independent contractors.

Comprehensive and Detailed Explanation:To finddiscrepanciesin a general ledger, the following documents should be reviewed:

General Ledger Account Details (A)– To track postings and adjustments.

Bank Account Statements (B)– To ensure transactions reconcile with payroll expenses.

Payroll Register Totals (C)– To comparewages and tax liabilitiesagainst general ledger accounts.

Option D (Copies of Paychecks) is incorrectbecause physical paycheck copiesdo not verify account balances or identify out-of-balance errors.

Comprehensive and Detailed Explanation:UnderFair Labor Standards Act (FLSA) rounding rules, employers may round employee timeto the nearest 15-minute incrementusing the7-minute rule:

If an employee clocks inbefore the 7-minute mark, rounddown.

If an employee clocks inafter the 7-minute mark, roundup.

Employee's actual times:

Clock in: 8:07 a.m.→ Roundeddown to 8:00 a.m.

Clock out: 4:08 p.m.→ Roundedup to 4:15 p.m.

Thus, the correct answer isD. 8:00 a.m. to 4:15 p.m..

Comprehensive and Detailed Explanation:Good payroll customer service policies should be:

Reliable (Option A)– Consistent and dependable for employees.

Accurate– Ensuring payroll is error-free.

Responsive– Quick resolution of inquiries.

Option B (Fluctuating) is incorrectbecauseinconsistent policies confuse employees.

Option C (Interchangeable) is incorrectbecausepolicies must be specific to payroll needs.

Option D (Intangible) is incorrectbecausecustomer service policies should be well-defined and enforceable.

Comprehensive and Detailed Explanation:Payroll confidentiality ensuresemployee information is only disclosed with proper authorization.

Option A (Payment history with written authorization) is NOT a breachbecause the employee provided consent.

Option C (General ledger costing shared with accounting) is NOT a breachsince accounting requires financial data for compliance.

Option D (Payroll records to legal department) is NOT a breachas legal teams need data for investigations.

Option B (Providing benefit election information to a spouse) is a breachunless the employeehas explicitly authorizedtheir spouse to receive this information.

Comprehensive and Detailed Explanation:Constructive receiptmeans an employee isconsidered paidwhen wages aremade available without restriction, even if they do not physically receive the money.

Option A (On the paycheck date)is incorrect because the date of the paycheck does not determinewhen wages are constructively received.

Option B (When cashed)is incorrect because an employee isconsidered paid before they cash the check.

Option C (When ACH file is created)is incorrect because the wages are not yet available to the employee.

Option D is correct because once wages are accessible (direct deposit or paycheck available for pickup), the IRS considers them "received" for tax purposes.

Comprehensive and Detailed Explanation:Workers' compensation benefitsare NOT subject to FUTA (Federal Unemployment Tax Act)as long as they are paid under aworkers' compensation law.

Option A (Not included in gross income) is correctbecauseworkers' compensation is tax-exemptunder IRS rules.

Option B (Received for work-related injuries/illnesses) is correctbecause these paymentsreplace lost wagesdue to job-related incidents.

Option D (Not subject to FICA under state laws) is correctbecauseworkers' compensation payments are exempt from Social Security & Medicare taxesif they are made under astate-approved program.

Option C is incorrectbecause workers' compensation paymentsare NOT subject to FUTA, regardless of the amount paid.