FPC Exam Questions and Answers with
Verified Solutions | Latest Updated 2026
When is a Federal ID number A Federal ID number is required if the
required for a business? business is
a partnership or corporation.
Do sole proprietors need a Federal Sole proprietors only need a Federal ID
ID number? number
if they have employees.
What do sole proprietors without Sole proprietors without employees use
employees use for their business? their
social security number for the business.
Can a social security number be No, it is not acceptable to use a social
used for payroll taxes and filings? security
number for payroll taxes and filings.
What must any business with Any business with employees must obtain
employees obtain? an
employer tax identification number (EID).
What is the purpose of an The EID is used to identify tax liabilities
employer and tax
tax identification number (EID)? credits, similar to a social security number.
,How can a Federal Tax ID Number A Federal Tax ID Number can be obtained
(FEIN) be obtained? from
the IRS online, by fax, by mail, or by phone
for
international applicants.
When is a state ID number A business must obtain a state ID number
required for the
for a business? state where their business is located and
for any
states where employees must live and pay
income tax.
Who sets the tax requirements Each state sets its own tax requirements
and and
regulations for state ID numbers? regulations.
What factors determine the taxes The taxes depend on the reciprocity
an employer is subjected to agreements
between states? between states.
When might a business need a A business might need a State Income Tax
State (SIT)
Income Tax (SIT) ID? ID if employees need to pay income tax to
both
the state they live in and the state they
work in.
What varies by state in the The process for obtaining State Tax ID
process Numbers
of obtaining a State Tax ID
Number?
, What can some states allow while Beginning to process payroll
waiting to be assigned a state ID
number?
What is the status called when you Applied for status
are waiting for a State Tax ID
Number?
Do all states have local No, not all states have local jurisdictions.
jurisdictions
for tax purposes?
When is an employer required to Generally, an employer is required to
withhold local taxes? withhold
local taxes for the jurisdiction in which the
business is located.
Some jurisdictions require ER to hold
taxes based
on EE's residence (lived-in local) instead
of or in
addition to the business location.
May need local ID tax number in this case
Can local tax withholding be based Yes, some jurisdictions require employers
on an employee's residence? to
withhold taxes based on the employee's
residence in addition to the business
location.
What may be needed if local taxes A local ID tax number may be needed in
are withheld based on an this
employee's residence? case.
Verified Solutions | Latest Updated 2026
When is a Federal ID number A Federal ID number is required if the
required for a business? business is
a partnership or corporation.
Do sole proprietors need a Federal Sole proprietors only need a Federal ID
ID number? number
if they have employees.
What do sole proprietors without Sole proprietors without employees use
employees use for their business? their
social security number for the business.
Can a social security number be No, it is not acceptable to use a social
used for payroll taxes and filings? security
number for payroll taxes and filings.
What must any business with Any business with employees must obtain
employees obtain? an
employer tax identification number (EID).
What is the purpose of an The EID is used to identify tax liabilities
employer and tax
tax identification number (EID)? credits, similar to a social security number.
,How can a Federal Tax ID Number A Federal Tax ID Number can be obtained
(FEIN) be obtained? from
the IRS online, by fax, by mail, or by phone
for
international applicants.
When is a state ID number A business must obtain a state ID number
required for the
for a business? state where their business is located and
for any
states where employees must live and pay
income tax.
Who sets the tax requirements Each state sets its own tax requirements
and and
regulations for state ID numbers? regulations.
What factors determine the taxes The taxes depend on the reciprocity
an employer is subjected to agreements
between states? between states.
When might a business need a A business might need a State Income Tax
State (SIT)
Income Tax (SIT) ID? ID if employees need to pay income tax to
both
the state they live in and the state they
work in.
What varies by state in the The process for obtaining State Tax ID
process Numbers
of obtaining a State Tax ID
Number?
, What can some states allow while Beginning to process payroll
waiting to be assigned a state ID
number?
What is the status called when you Applied for status
are waiting for a State Tax ID
Number?
Do all states have local No, not all states have local jurisdictions.
jurisdictions
for tax purposes?
When is an employer required to Generally, an employer is required to
withhold local taxes? withhold
local taxes for the jurisdiction in which the
business is located.
Some jurisdictions require ER to hold
taxes based
on EE's residence (lived-in local) instead
of or in
addition to the business location.
May need local ID tax number in this case
Can local tax withholding be based Yes, some jurisdictions require employers
on an employee's residence? to
withhold taxes based on the employee's
residence in addition to the business
location.
What may be needed if local taxes A local ID tax number may be needed in
are withheld based on an this
employee's residence? case.
