CPP CERTIFIED PAYROLL PROFESSIONAL EXAM ACTUAL EXAM
400 QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS)
Counseling is appropriate when:
a. salaries have been frozen.
b. introducing a new procedure.
c. explaining tax law changes.
d. orienting new employees. - ANSWER: a. salaries have been frozen.
In addition to the accuracy-related penalty for underpayment of taxes, if the
underpayment of taxes is due to fraud, the IRS may asses an additional penalty of: -
ANSWER: 75%
If an employer's total tax liability for the lookback period is $75,000.00, a tax liability
less than $100,000 must be deposited no later than: - ANSWER: Wednesday or
Friday under the semiweekly rules.
A company has accrued $23,665.00 of vacation pay to a liability account. When
employees are paid the vacation amount due, the entries to the vacation liability
account will be recorded as a: - ANSWER: debit to the liability account.
Under the FLSA, when a highly compensated exempt employee receives less than
$100,000.00 in compensation during the year, the employer may: - ANSWER: within
one month after the end of the year, make a final payment to the employee to
reach $100,000.00 in annual compensation.
Cafeteria plans and other flexible benefit plans are generally funded by either of the
following mechanisms: - ANSWER: "flex dollars" or "flex credits", salary reduction,
or after tax contributions.
IRC §125 Cafeteria plans are generally funded by all of the following mechanisms
EXCEPT:
a. flex dollars".
b. COBRA.
c. after-tax employee contributions.
d. salary reduction. - ANSWER: b. COBRA.
Form W-4S allows the third-party sick pay provider to withhold federal income tax
based on: - ANSWER: a flat amount.
A National Medical Support Notice requires an employer to: - ANSWER: honor the
qualified medical child support order.
,An employee with year-to-date wages of $25,000.00 was disabled for four months
and was paid $6,200.00 by a third-party insurer. The disability plan premiums are
paid entirely by the employer. No Form W-4S was provided to the insurer. Calculate
the amount of federal income, social security, and Medicare taxes the third party
payer must withhold. - ANSWER: $474.30 - Social security and Medicare taxes are
withheld for six calendar months after the employee's last day of work.
If an employer sells or transfers its business: - ANSWER: Form 941 must be filed by
both the previous and current owners for the quarter during which the sale took
place. Each employer must report only the wages it paid and taxes it withheld.
If an employer goes out of business, completion of Part 3 of Form 941 is required
with the final date it paid wages. This action also accelerates the date the Forms W-2
are due to SSA to: - ANSWER: the end of the second month following the quarter
the business closed.
An employee earns $1,000.00 semimonthly. Deductions include $235.00 for federal
income, social security, Medicare, and state taxes and $300.00 in child support.
Calculate the amount that can be deducted for a creditor garnishment. - ANSWER:
Under the CCPA for a creditor garnishment, an employer must withhold the lesser
of 25% of the employee's disposable earnings or the difference between the
employee's disposable earnings and 30 times the minimum wage to satisfy the
creditor garnishment. If an employee has an involuntary deduction with a higher
priority deduction than the CCPA limit for creditor garnishments, nothing will be
withheld.
What is a Lock-In letter? - ANSWER: A letter from the IRS that requires the
employer to change the with holdings for federal tax.
How long do IRS Payroll records need to be saved? - ANSWER: 4 years after the tax
returns due date. (ie 940, 941, W-2 and W-3)
What is the allowable tip credit? - ANSWER: No more than $5.12 per hour
Minimum wage for tipped employees - ANSWER: $2.13 per hour (combined with
tips must equal $7.25)
Social Security Wage Tax Limit - ANSWER: $132,900
What is the Mandatory Flat Rate for supplemental pay? - ANSWER: Exceeding $1
Million is 37%
What is the Optional Flat Rate for Supplemental Pay? - ANSWER: Not Exceeding $1
Million is 22%
If form W-4 is incomplete, the employer must: - ANSWER: Reject the form
, Under the FLSA, an employee wort time ends when the employee: - ANSWER: ceases
performing principal activities
When an employee wants to continue her exempt status the next year, she must file
a new W-4 form by: - ANSWER: February 15.
Counseling is appropriate when: - ANSWER: an employee feels insecure about work
performance.
What is the definition of Imputed Income? - ANSWER: Taxable value of noncash
benefits the employee recieves.
What must be specified at the time of the employees election to defer into a non-
qualified plan? - ANSWER: the time and form of distributions
Schedule R (Form 941) is used to: - ANSWER: allocate the aggregate information
reported on Form 941 by an agent to each client.
The Primary purpose of batch controls is to: - ANSWER: validate entry accuracy
When is form 1042-S required to be provided to the IRS? - ANSWER: March 15th
457b - ANSWER: Employee pre-tax dollars diverted into investment account for
governmental employees
Under the IRS Rules, an employer's 401(k) plan may meet the ADP nondiscrimination
testing requirements by matching: - ANSWER: 100% of elective deferrals to 3% of
compensation and
50% of deferrals over 3% to 5% of compensation
The FLSA's minimum salary for exempt employees does not apply to: - ANSWER:
attorneys, physicians and teachers.
A nonresident alien wishing to claim an exemption from income tax on wages paid
by the employer based on a home country income tax treaty must provide the
employer with Form: - ANSWER: 8233
An employee's primary job duties include managing a department with three full-
time employees. Under the FLSA, the employee is an exempt: - ANSWER: executive
employee.
Form 1042 must be provided to the IRS by: - ANSWER: March 15
Which type of plan allows special catch-up contributions beyond the deferred limit in
the employee's final three years before normal retirement age? - ANSWER: 457(b)
Training, hiring, and delegating are components of: - ANSWER: Staffing
400 QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED
ANSWERS)
Counseling is appropriate when:
a. salaries have been frozen.
b. introducing a new procedure.
c. explaining tax law changes.
d. orienting new employees. - ANSWER: a. salaries have been frozen.
In addition to the accuracy-related penalty for underpayment of taxes, if the
underpayment of taxes is due to fraud, the IRS may asses an additional penalty of: -
ANSWER: 75%
If an employer's total tax liability for the lookback period is $75,000.00, a tax liability
less than $100,000 must be deposited no later than: - ANSWER: Wednesday or
Friday under the semiweekly rules.
A company has accrued $23,665.00 of vacation pay to a liability account. When
employees are paid the vacation amount due, the entries to the vacation liability
account will be recorded as a: - ANSWER: debit to the liability account.
Under the FLSA, when a highly compensated exempt employee receives less than
$100,000.00 in compensation during the year, the employer may: - ANSWER: within
one month after the end of the year, make a final payment to the employee to
reach $100,000.00 in annual compensation.
Cafeteria plans and other flexible benefit plans are generally funded by either of the
following mechanisms: - ANSWER: "flex dollars" or "flex credits", salary reduction,
or after tax contributions.
IRC §125 Cafeteria plans are generally funded by all of the following mechanisms
EXCEPT:
a. flex dollars".
b. COBRA.
c. after-tax employee contributions.
d. salary reduction. - ANSWER: b. COBRA.
Form W-4S allows the third-party sick pay provider to withhold federal income tax
based on: - ANSWER: a flat amount.
A National Medical Support Notice requires an employer to: - ANSWER: honor the
qualified medical child support order.
,An employee with year-to-date wages of $25,000.00 was disabled for four months
and was paid $6,200.00 by a third-party insurer. The disability plan premiums are
paid entirely by the employer. No Form W-4S was provided to the insurer. Calculate
the amount of federal income, social security, and Medicare taxes the third party
payer must withhold. - ANSWER: $474.30 - Social security and Medicare taxes are
withheld for six calendar months after the employee's last day of work.
If an employer sells or transfers its business: - ANSWER: Form 941 must be filed by
both the previous and current owners for the quarter during which the sale took
place. Each employer must report only the wages it paid and taxes it withheld.
If an employer goes out of business, completion of Part 3 of Form 941 is required
with the final date it paid wages. This action also accelerates the date the Forms W-2
are due to SSA to: - ANSWER: the end of the second month following the quarter
the business closed.
An employee earns $1,000.00 semimonthly. Deductions include $235.00 for federal
income, social security, Medicare, and state taxes and $300.00 in child support.
Calculate the amount that can be deducted for a creditor garnishment. - ANSWER:
Under the CCPA for a creditor garnishment, an employer must withhold the lesser
of 25% of the employee's disposable earnings or the difference between the
employee's disposable earnings and 30 times the minimum wage to satisfy the
creditor garnishment. If an employee has an involuntary deduction with a higher
priority deduction than the CCPA limit for creditor garnishments, nothing will be
withheld.
What is a Lock-In letter? - ANSWER: A letter from the IRS that requires the
employer to change the with holdings for federal tax.
How long do IRS Payroll records need to be saved? - ANSWER: 4 years after the tax
returns due date. (ie 940, 941, W-2 and W-3)
What is the allowable tip credit? - ANSWER: No more than $5.12 per hour
Minimum wage for tipped employees - ANSWER: $2.13 per hour (combined with
tips must equal $7.25)
Social Security Wage Tax Limit - ANSWER: $132,900
What is the Mandatory Flat Rate for supplemental pay? - ANSWER: Exceeding $1
Million is 37%
What is the Optional Flat Rate for Supplemental Pay? - ANSWER: Not Exceeding $1
Million is 22%
If form W-4 is incomplete, the employer must: - ANSWER: Reject the form
, Under the FLSA, an employee wort time ends when the employee: - ANSWER: ceases
performing principal activities
When an employee wants to continue her exempt status the next year, she must file
a new W-4 form by: - ANSWER: February 15.
Counseling is appropriate when: - ANSWER: an employee feels insecure about work
performance.
What is the definition of Imputed Income? - ANSWER: Taxable value of noncash
benefits the employee recieves.
What must be specified at the time of the employees election to defer into a non-
qualified plan? - ANSWER: the time and form of distributions
Schedule R (Form 941) is used to: - ANSWER: allocate the aggregate information
reported on Form 941 by an agent to each client.
The Primary purpose of batch controls is to: - ANSWER: validate entry accuracy
When is form 1042-S required to be provided to the IRS? - ANSWER: March 15th
457b - ANSWER: Employee pre-tax dollars diverted into investment account for
governmental employees
Under the IRS Rules, an employer's 401(k) plan may meet the ADP nondiscrimination
testing requirements by matching: - ANSWER: 100% of elective deferrals to 3% of
compensation and
50% of deferrals over 3% to 5% of compensation
The FLSA's minimum salary for exempt employees does not apply to: - ANSWER:
attorneys, physicians and teachers.
A nonresident alien wishing to claim an exemption from income tax on wages paid
by the employer based on a home country income tax treaty must provide the
employer with Form: - ANSWER: 8233
An employee's primary job duties include managing a department with three full-
time employees. Under the FLSA, the employee is an exempt: - ANSWER: executive
employee.
Form 1042 must be provided to the IRS by: - ANSWER: March 15
Which type of plan allows special catch-up contributions beyond the deferred limit in
the employee's final three years before normal retirement age? - ANSWER: 457(b)
Training, hiring, and delegating are components of: - ANSWER: Staffing
