PAYROLL FUNDAMENTALS LATEST 2026 CORE EXAM
MANUAL QUESTIONS AND SOLUTIONS RATED A+
✔✔Circular E - ✔✔Employer's Tax Guide (IRS Publication 15). The basic IRS
reference. Provides explanation and illustration of an employer's federal tax withholding,
depositing, and reporting obligations. Circular E provides information relevant to all
employers, while Publication 15-A, Employer's Supplemental Tax Guide , is intended to
provide additional information required by larger employers.
✔✔Disposable earnings - ✔✔That portion of earnings remaining after deductions
required by law have been made; used to calculate the maximum amount of an
employee's wages subject to garnishment
✔✔Electronic funds transfer (EFT) - ✔✔The electronic movement of funds from one
bank account to another. Direct deposit of employees' paychecks is an example of EFT.
✔✔Exempt employees - ✔✔Generally, employees who are exempt from the minimum
wage and overtime provisions of the Fair Labor Standards Act
✔✔FICA - ✔✔The Federal Insurance Contributions Act which imposes employer and
employee taxes to fund the federal government's old-age, survivors, and disability
insurance (OASDI/Social Security) and health insurance (HI/Medicare) trust funds.
✔✔Gross-up - ✔✔The formula for determining the total taxable gross when the
employer pays the employee's share of tax
✔✔Noncash fringe benefits - ✔✔Benefits paid to employees in a form other than cash
(e.g., health insurance, company-provided vehicles, group-term life insurance)
✔✔Percentage method of withholding- - ✔✔A procedure for calculating the amount of
income tax to withhold from wages using mathematical formulas rather than simple
tables
✔✔Premium pay - ✔✔The portion of pay, over and above the regular hourly rate, paid
for overtime hours worked.
✔✔Pretax deduction - ✔✔A deduction from pay that reduces taxable wages
✔✔W-2 - ✔✔Wage and Tax Statement
✔✔W-4S - ✔✔Request for Federal Income Tax Withholding From Sick Pay
✔✔668-W - ✔✔Notice of Levy on Wages, Salary, and Other Income
, ✔✔941 - ✔✔Employer's Quarterly Federal Tax Return
✔✔Wage - ✔✔The amount paid to an employee for every hour worked
✔✔Salary - ✔✔A fixed annual(yearly) sum of money divided among equal pay periods
✔✔Biweekly - ✔✔employees are paid every two weeks. 26 times a year
✔✔Accounting Period - ✔✔the period of time covered in an income statement
✔✔Aggregate method - ✔✔method of withholding federal income tax from
supplemental wages in which the supplemental payment is combined with the regular
wages paid during the most recent payroll period.
✔✔Balance sheet - ✔✔a financial statement that presents the business's financial
position in terms of assets, liabilities and owner's equity as of a certain date
✔✔Asset - ✔✔resource acquired by a business that is consumed by the business
✔✔Employee identification number (EIN) - ✔✔the employer's account number with the
Internal Revenue
✔✔Disposable Earnings - ✔✔the part of the employee's earnings remaining after
deductions required by law
✔✔Customer Service - ✔✔in a payroll environment, customer service consists of
reliability, responsiveness, assurance, empathy and tangibles
✔✔EFTPS - ✔✔Electronic Federal Tax Payment System
✔✔Expense Account - ✔✔shows cost for goods and services consumed by the
company during an accounting period
✔✔FUTA - ✔✔Federal Unemployment Tax Act
✔✔Garnishment - ✔✔a legal proceeding authorizing an involuntary transfer of an
employee's wages to a creditor or to satisfy a debt
✔✔Net Pay - ✔✔the part of the employee's wages that remains after all deductions are
subtracted
✔✔OFDI - ✔✔Originating Depository Financial Institution
✔✔$7.25 - ✔✔Federal Minimum wage
MANUAL QUESTIONS AND SOLUTIONS RATED A+
✔✔Circular E - ✔✔Employer's Tax Guide (IRS Publication 15). The basic IRS
reference. Provides explanation and illustration of an employer's federal tax withholding,
depositing, and reporting obligations. Circular E provides information relevant to all
employers, while Publication 15-A, Employer's Supplemental Tax Guide , is intended to
provide additional information required by larger employers.
✔✔Disposable earnings - ✔✔That portion of earnings remaining after deductions
required by law have been made; used to calculate the maximum amount of an
employee's wages subject to garnishment
✔✔Electronic funds transfer (EFT) - ✔✔The electronic movement of funds from one
bank account to another. Direct deposit of employees' paychecks is an example of EFT.
✔✔Exempt employees - ✔✔Generally, employees who are exempt from the minimum
wage and overtime provisions of the Fair Labor Standards Act
✔✔FICA - ✔✔The Federal Insurance Contributions Act which imposes employer and
employee taxes to fund the federal government's old-age, survivors, and disability
insurance (OASDI/Social Security) and health insurance (HI/Medicare) trust funds.
✔✔Gross-up - ✔✔The formula for determining the total taxable gross when the
employer pays the employee's share of tax
✔✔Noncash fringe benefits - ✔✔Benefits paid to employees in a form other than cash
(e.g., health insurance, company-provided vehicles, group-term life insurance)
✔✔Percentage method of withholding- - ✔✔A procedure for calculating the amount of
income tax to withhold from wages using mathematical formulas rather than simple
tables
✔✔Premium pay - ✔✔The portion of pay, over and above the regular hourly rate, paid
for overtime hours worked.
✔✔Pretax deduction - ✔✔A deduction from pay that reduces taxable wages
✔✔W-2 - ✔✔Wage and Tax Statement
✔✔W-4S - ✔✔Request for Federal Income Tax Withholding From Sick Pay
✔✔668-W - ✔✔Notice of Levy on Wages, Salary, and Other Income
, ✔✔941 - ✔✔Employer's Quarterly Federal Tax Return
✔✔Wage - ✔✔The amount paid to an employee for every hour worked
✔✔Salary - ✔✔A fixed annual(yearly) sum of money divided among equal pay periods
✔✔Biweekly - ✔✔employees are paid every two weeks. 26 times a year
✔✔Accounting Period - ✔✔the period of time covered in an income statement
✔✔Aggregate method - ✔✔method of withholding federal income tax from
supplemental wages in which the supplemental payment is combined with the regular
wages paid during the most recent payroll period.
✔✔Balance sheet - ✔✔a financial statement that presents the business's financial
position in terms of assets, liabilities and owner's equity as of a certain date
✔✔Asset - ✔✔resource acquired by a business that is consumed by the business
✔✔Employee identification number (EIN) - ✔✔the employer's account number with the
Internal Revenue
✔✔Disposable Earnings - ✔✔the part of the employee's earnings remaining after
deductions required by law
✔✔Customer Service - ✔✔in a payroll environment, customer service consists of
reliability, responsiveness, assurance, empathy and tangibles
✔✔EFTPS - ✔✔Electronic Federal Tax Payment System
✔✔Expense Account - ✔✔shows cost for goods and services consumed by the
company during an accounting period
✔✔FUTA - ✔✔Federal Unemployment Tax Act
✔✔Garnishment - ✔✔a legal proceeding authorizing an involuntary transfer of an
employee's wages to a creditor or to satisfy a debt
✔✔Net Pay - ✔✔the part of the employee's wages that remains after all deductions are
subtracted
✔✔OFDI - ✔✔Originating Depository Financial Institution
✔✔$7.25 - ✔✔Federal Minimum wage
