CPP CERTIFIED PAYROLL PROFESSIONAL
EXAM SCRIPT 2026 VERIFIED SOLUTION
MANUAL
◉What are the two categories for Statutory Nonemployees? Answer:
1. Real Estate Agents
2. Direct Sellers
◉What are the 4 categories of Statutory Employees? Answer: 1.
Agent/commission drivers
2. Full Time Life Insurance Agents
*exempt from FUTA ONLY if all earnings are from commissions
3. Homemakers
*Works away from ERs location
-Assembles items at home
-Stuffs evelopes at home
-Type transcripts at home
4. Traveling/City Salespersons
,◉What is Common Law Test? Answer: Employer Control: The more
control, the more likely an employee.
-Who does it?
-What is done?
-How does it get done?
-When does it get done?
-Who furnishes tools, supplies, work location?
-Who sets salary rate?
◉What is Reasonable Basis Test? Answer: Even though a worker
meets the definition of an employee under the common law test, an
employer may treat a worker as an independent contractor exempt
from federal payroll tax laws if it has a reasonble basis.
◉List the factors for the Reasonable Basis Test. Answer: 1. Court
decisions, published IRS rulings, IRS technical advice or a private
letter ruling from the IRS or,
2. A past IRS audit of the employer or,
3. A longstanding, recognized practice in the employers industry
that treats workers in similar situations as independent contractors.
, ◉What is a temporary help agency employee? Answer: Temp
workers are hired, screened and trained by the temp help agency to
provide services for clients. They are employees of the temp agency
which sets their wages and has sole right to hire and fire. The agency
is alsor responsible for all payroll taxes.
◉What is a leased employee? Answer: Leased employees are hired,
trained, and qualified by a leasing company which provides workers
for a client company. The client pays a fee to the leasing company to
cover the cost of payroll, benefits, etc... Responsibility for payroll
taxes depends on the degree of control exercised by the client over
the employees work and which entity has control over the payment
of their wages.
◉When leasing an employee or using a temp agency, what should
you know about the overall company that you are dealing with to
avoid having to pay any withholding or employment taxes? Answer:
Employers should make sure they are dealing with a financially
secure and reputable company before entering into a contract, since
the temp agency or leasing company's financial failure could lead to
the client company becoming liable for any withholding or
employement taxes that remain unpaid.
◉What are the three parts of the ABC test? Answer: 1. (Absence
Control): Free from control via agreement and in reality.
2. (Business- unusual and/or away): performed outside the usual
course of company business or away from employers facility
EXAM SCRIPT 2026 VERIFIED SOLUTION
MANUAL
◉What are the two categories for Statutory Nonemployees? Answer:
1. Real Estate Agents
2. Direct Sellers
◉What are the 4 categories of Statutory Employees? Answer: 1.
Agent/commission drivers
2. Full Time Life Insurance Agents
*exempt from FUTA ONLY if all earnings are from commissions
3. Homemakers
*Works away from ERs location
-Assembles items at home
-Stuffs evelopes at home
-Type transcripts at home
4. Traveling/City Salespersons
,◉What is Common Law Test? Answer: Employer Control: The more
control, the more likely an employee.
-Who does it?
-What is done?
-How does it get done?
-When does it get done?
-Who furnishes tools, supplies, work location?
-Who sets salary rate?
◉What is Reasonable Basis Test? Answer: Even though a worker
meets the definition of an employee under the common law test, an
employer may treat a worker as an independent contractor exempt
from federal payroll tax laws if it has a reasonble basis.
◉List the factors for the Reasonable Basis Test. Answer: 1. Court
decisions, published IRS rulings, IRS technical advice or a private
letter ruling from the IRS or,
2. A past IRS audit of the employer or,
3. A longstanding, recognized practice in the employers industry
that treats workers in similar situations as independent contractors.
, ◉What is a temporary help agency employee? Answer: Temp
workers are hired, screened and trained by the temp help agency to
provide services for clients. They are employees of the temp agency
which sets their wages and has sole right to hire and fire. The agency
is alsor responsible for all payroll taxes.
◉What is a leased employee? Answer: Leased employees are hired,
trained, and qualified by a leasing company which provides workers
for a client company. The client pays a fee to the leasing company to
cover the cost of payroll, benefits, etc... Responsibility for payroll
taxes depends on the degree of control exercised by the client over
the employees work and which entity has control over the payment
of their wages.
◉When leasing an employee or using a temp agency, what should
you know about the overall company that you are dealing with to
avoid having to pay any withholding or employment taxes? Answer:
Employers should make sure they are dealing with a financially
secure and reputable company before entering into a contract, since
the temp agency or leasing company's financial failure could lead to
the client company becoming liable for any withholding or
employement taxes that remain unpaid.
◉What are the three parts of the ABC test? Answer: 1. (Absence
Control): Free from control via agreement and in reality.
2. (Business- unusual and/or away): performed outside the usual
course of company business or away from employers facility
