FPC Exam Chapter 1 UPDATED A Exam
Questions and CORRECT Answers
Challenges of payroll - CORRECT ANSWER - Complexity, Communication, Technology,
Accuracy
The Payroll Process - CORRECT ANSWER - Employee > Payroll > Government >
Employee
Types of Workers - CORRECT ANSWER - Exempt employees, nonexempt employees,
independent contractors.
Common Law Test - CORRECT ANSWER - A widely used method for determining
employee status:
How independent is the worker?
How much control can be exercised over the worker?
Who has the right to control the worker?
Reasonable Basis Test - CORRECT ANSWER - Exceptions to the common Law Test
- consistently treated worker or similar workers as independent contractors and filed Form 1099-
NEC tax returns
- longstanding practice of treating similar workers as ICs.
- Judicial precedent
- IRS published ruling
- Private Letter Ruling
- Past IRS employment tax audit that did not disallow worker's treatment as independent
contractor
- Guidance from attorney or CPA
,Penalty for misclassification of workers - CORRECT ANSWER - Employer may be held
liable for employment taxes for that worker and also subject to penalties.
$676 - $5,404 for each worker hired for a first offense • $5,404 - $13,508 for a second offense •
$$8,106 - $27,018 for more than two offenses.
Employers that fail to comply with the verification requirements (paperwork violations) can be
fined $272 - $2,701 for each person.
U.S. The Immigration Reform and Control Act of 1986 (IRCA) - CORRECT ANSWER -
Requires employers to verify employees' eligibility for employment in the U.S. Key provisions:
- employer sanctions
- antidiscrimination
- verification of eligibility
Form I-9 Due Date and Retention - CORRECT ANSWER - Section 1: completed no later
than first day of employment
The rest: Completed within the first 3 days of employment
Retention: 3 years from date of hire, or one year from date of termination, whichever is later.
E-Verify - CORRECT ANSWER - Internet-based verification system through the
Department of Homeland Security (DHS) that allows employers to verify the employment
eligibility of their employees.
Employer responsibility for IRS notice of incorrect SSN/name - CORRECT ANSWER -
Make up to two annual solicitations for the correct SSN by December 31 of the year they
received IRS notice.
SSNVS SSN verification requirements - CORRECT ANSWER - - FEIN
- Employee's last name, first name, and middle initial (if applicable)
- Employee's SSN
, - Employee's date of birth (optional; if provided, enter it in MMDDYYY format)
IRS Advice for SSN Compliance - CORRECT ANSWER - 1. ask for proof of SSN
through their SS card
2. maintain W-4 copies
3. document subsequent solicitation for new W-4
4. maintain accurate records of SSN and name provided in payroll records.
5. remind workers to report name changes and provide copy of the new ssc
6. validate SSN on W-4 using SSNVS
7. remind employees to verify accuracy when they receive W-2s
8. note that ITIn can not be used to report employee's earnings
Form SS-5 - CORRECT ANSWER - Application for a Social Security Card
Methods for obtaining SSN - CORRECT ANSWER - - file form SS-5
- have an SSA representative file an application electronically through the Social Security
Number Application Process (SSNAP)
New Hire Reporting requirements - CORRECT ANSWER - what:
- The employee's name, address, SSN, and date employment began
- The employer's name, address, and FEIN
where/when:
- to the state, within 20 calendar days of the date of hire.
- If employer reports new hires magnetically or electronically, it must send at least two
transmissions each calendar month which are 12-16 days apart
who:
Questions and CORRECT Answers
Challenges of payroll - CORRECT ANSWER - Complexity, Communication, Technology,
Accuracy
The Payroll Process - CORRECT ANSWER - Employee > Payroll > Government >
Employee
Types of Workers - CORRECT ANSWER - Exempt employees, nonexempt employees,
independent contractors.
Common Law Test - CORRECT ANSWER - A widely used method for determining
employee status:
How independent is the worker?
How much control can be exercised over the worker?
Who has the right to control the worker?
Reasonable Basis Test - CORRECT ANSWER - Exceptions to the common Law Test
- consistently treated worker or similar workers as independent contractors and filed Form 1099-
NEC tax returns
- longstanding practice of treating similar workers as ICs.
- Judicial precedent
- IRS published ruling
- Private Letter Ruling
- Past IRS employment tax audit that did not disallow worker's treatment as independent
contractor
- Guidance from attorney or CPA
,Penalty for misclassification of workers - CORRECT ANSWER - Employer may be held
liable for employment taxes for that worker and also subject to penalties.
$676 - $5,404 for each worker hired for a first offense • $5,404 - $13,508 for a second offense •
$$8,106 - $27,018 for more than two offenses.
Employers that fail to comply with the verification requirements (paperwork violations) can be
fined $272 - $2,701 for each person.
U.S. The Immigration Reform and Control Act of 1986 (IRCA) - CORRECT ANSWER -
Requires employers to verify employees' eligibility for employment in the U.S. Key provisions:
- employer sanctions
- antidiscrimination
- verification of eligibility
Form I-9 Due Date and Retention - CORRECT ANSWER - Section 1: completed no later
than first day of employment
The rest: Completed within the first 3 days of employment
Retention: 3 years from date of hire, or one year from date of termination, whichever is later.
E-Verify - CORRECT ANSWER - Internet-based verification system through the
Department of Homeland Security (DHS) that allows employers to verify the employment
eligibility of their employees.
Employer responsibility for IRS notice of incorrect SSN/name - CORRECT ANSWER -
Make up to two annual solicitations for the correct SSN by December 31 of the year they
received IRS notice.
SSNVS SSN verification requirements - CORRECT ANSWER - - FEIN
- Employee's last name, first name, and middle initial (if applicable)
- Employee's SSN
, - Employee's date of birth (optional; if provided, enter it in MMDDYYY format)
IRS Advice for SSN Compliance - CORRECT ANSWER - 1. ask for proof of SSN
through their SS card
2. maintain W-4 copies
3. document subsequent solicitation for new W-4
4. maintain accurate records of SSN and name provided in payroll records.
5. remind workers to report name changes and provide copy of the new ssc
6. validate SSN on W-4 using SSNVS
7. remind employees to verify accuracy when they receive W-2s
8. note that ITIn can not be used to report employee's earnings
Form SS-5 - CORRECT ANSWER - Application for a Social Security Card
Methods for obtaining SSN - CORRECT ANSWER - - file form SS-5
- have an SSA representative file an application electronically through the Social Security
Number Application Process (SSNAP)
New Hire Reporting requirements - CORRECT ANSWER - what:
- The employee's name, address, SSN, and date employment began
- The employer's name, address, and FEIN
where/when:
- to the state, within 20 calendar days of the date of hire.
- If employer reports new hires magnetically or electronically, it must send at least two
transmissions each calendar month which are 12-16 days apart
who:
