FPC Practice questions and Correct
Answers Latest updated 2025-2026
GRADED A+
cafeteria plans are authorized by what Internal Revenue Code Section?
A. 125
B. 401k
C. 403b
D. 457b - CORRECT ANSWERS a. 125
all of the following are tax implications of a cafeteria plan except:
a. no income tax withholding
b. no social security and medicare tax withholding
c. must withhold income, social security, and medicare taxes
d. no form W2 reporting - CORRECT ANSWERS C. must withhold income, social
security, and medicare taxes
One of the options in an employee's cafeteria benefit plan is a dependent care flexible
spending account. He earmarked $100 per month to the account to pay for child care
but spent only $1000 by the end of the plan's grace period. at the end of the grace
period, what happens to the $200 left in the account?
a. the amount is forfeited
b. it will be added to his taxable income
c. he can use it to "buy" an additional benefit
d. it will carry over to the next year - CORRECT ANSWERS A. the amount is forfeited
Prior to beginning work for a company, a chemical engineer signed a contract stating
that she agreed to work as an independent contractor. She performs all her duties in the
company's laboratories, works under the company's direction, and maintains regular
office hours. What is her status?
a. independent contractor under common law
b. independent contractor under reasonable basis test
c. employee - CORRECT ANSWERS C. employee
do not assume that the employer has fulfilled its responsibilities and is free from penalty
simply by having a worker sign a contract stating he is a 1099. individuals do not have a
right to waive their fee status in a contract.
A retired safety inspector for the company was rehired as a consultant when the
company expanded its plant operations. The retired employee was a natural choice.
The tasks he undertook as a consultant were the same as the ones he performed
,before retirement. paid monthly, he has agreed to work under the direction of his old
boss until the new plant facilities are fully operational? What is his status?
a. independent contractor under common law
b. independent contractor under reasonable basis test
c. employee - CORRECT ANSWERS C. employee
consultants are generally treated as independent contractors. However, when an ex ee
is performing the same or similar job as before retirement, it is unlikely that he qualified
as a 1099 after termination
a receptionist has agreed to work afternoons at the company until the company can find
a full time replacement. What is the receptionist's status?
a. independent contractor under common law
b. independent contractor under reasonable basis
c. employee - CORRECT ANSWERS C. employee
Whether or not an ee is full time or part time or works a few weeks or a lifetime for the
company is not relevant to her. she is an employee.
All of the following types of employees are classified as exempt from the FLSAs min
wage and OT requirements except:
a. professional
b. outside salesperson
c. administrative
d. computer repairman - CORRECT ANSWERS D. computer repairman
a computer repairman does not perform the duties required to qualify as an exempt
computer professional
A waitress is paid $2.25 per hour and she receives $225 in tips during the week. She
works 4o hours per week. Which of the following is true?
a. her employer is allowed to reduce her cash wage to no less than $2.13 per hour
b. her base pay must be increased to $4.5 per hour after a 90 day training period.
c. she must be paid $5.12 per hour by her employer
d. Her base salary must be raised to $3 per hour to comply with fed min wage
requirements. - CORRECT ANSWERS A. her employer is allowed to reduce her cash
wage to no less than $2.13 per hour
her employer can claim the full federal tip credit because she receives tips and with her
tips, is paid more than the current federal minimum wage purposes, her employer must
pay her at least $2.13 per hour and her hourly rate plus tips must equal at least the
current federal min wage
if a state sets the minimum wage at a rate greater than the federal minimum wage, the
state minimum wage must be paid to workers in that state
- true
,-false - CORRECT ANSWERS TRUE
tips can be counted toward the employees minimum wage - CORRECT ANSWERS
TRUE
an employee works 40 hours per week as a fry cook. During the week, she substitutes
for one of the waitresses and reports $5 per week in tips. Can her employer pay her
$2.13 per hour?
- yes
- no - CORRECT ANSWERS no
because she isn't making $30 a month. the tip credit can be used to reduce the
minimum wage only if the employee regularly receives tips and documents receiving
more than $30/month
Employers who provide paid vacation leave must count the hours of paid time off when
determining if the employee must receive an overtime premium when the total hours
worked in a week exceed 40.
true
false - CORRECT ANSWERS false
only hours worked count toward determining whether overtime premiums must be paid
under the FLSA
the FLSA requires immediate payment of an employee's final paycheck upon
termination
true
false - CORRECT ANSWERS FALSE
however, most states impose time limits governing when an employee's final paycheck
must be paid to the employee
an employee's parking garage is 2 blocks away from his downtown office. It costs
$275/month to rent a stall there, but the employee doesn't mind because it's convenient
and his employer reimburses him 100% of the cost. How much of his monthly parking is
taxable? - CORRECT ANSWERS $15.
remember: employer-provided parking is nontaxable up to $260/month
a retail sales clerk took advantage of the company's employee discount program to
purchase clothes at 10% off the normal retail price. This service represents:
a. taxable compensation
b. a qualified employee discount
c. a working condition fringe
d. a no-additional cost service - CORRECT ANSWERS b. a qualified employee discount
, Last month, an employee emailed her mother on the company's email, photocopied
fliers for her church picnic at work and used her work computer to update her resume.
These services represent:
a. taxable compensation
b. de minimis fringes
c. working condition fringes
d. no-additional cost services - CORRECT ANSWERS b. de minimis fringes
True or false: if an employee dies and a final payment is made, the employer continues
to withhold taxes as if the employee is still alive. - CORRECT ANSWERS FALSE- no
federal taxes are withheld
if the amounts are paid after the year of death, no SS and medicare are withheld and no
reporting is done on the W2. Instead it is reported on _______ misc. - CORRECT
ANSWERS 1099-misc
if the amounts are paid during the same year the employee dies, _______ and ______
must be withheld and reported on the W2. FIT is not reported on W2. - CORRECT
ANSWERS Social security and medicare must be withheld
Percentage method practice: an employee who is married with 4 allowances earns a
biweekly salary of $1500. Calculate his federal income tax using the percentage
method. - CORRECT ANSWERS Find Net/Adjusted Wages (after deduction for
withholding allowances)
§$161.50 x 4 = $646.00
Gross wages - Allowances = Adjusted Wages (Net Wages)
§$1500.00 - $646.00 = $854.00
Apply Percentage Table (Appendix)
§Net Wages over $454.00 but not over $1,200.00
Adjusted Wages - Threshold Amount = Excess Amount
§$854.00 - $454.00 = $400.00
Amount of Tax + (Excess Amount x Percentage) = Total Withholding
§0.00 + ($400.00 x 10%) = $40.00
Calculate the total compensation for an electrician who worked 44 hours last week. In
addition to his regular wage of $10/hour, the electrician was paid $50 for supervising a
trainee. What is the electricians total weekly compensation? - CORRECT ANSWERS
Step 1: 44 hours x $10/ hour = $440 + $50= $490 regular pay
Step 2: $490/44 hours = $11.14 regular rate of pay
Step 3: $11.14 x 5 = $5.57 overtime premium rate
Step 4: $5.57 x 4 hours = $22.28 premium pay for overtime
Step 5: $490 + $22.28 = $512.28 total compensation
Answers Latest updated 2025-2026
GRADED A+
cafeteria plans are authorized by what Internal Revenue Code Section?
A. 125
B. 401k
C. 403b
D. 457b - CORRECT ANSWERS a. 125
all of the following are tax implications of a cafeteria plan except:
a. no income tax withholding
b. no social security and medicare tax withholding
c. must withhold income, social security, and medicare taxes
d. no form W2 reporting - CORRECT ANSWERS C. must withhold income, social
security, and medicare taxes
One of the options in an employee's cafeteria benefit plan is a dependent care flexible
spending account. He earmarked $100 per month to the account to pay for child care
but spent only $1000 by the end of the plan's grace period. at the end of the grace
period, what happens to the $200 left in the account?
a. the amount is forfeited
b. it will be added to his taxable income
c. he can use it to "buy" an additional benefit
d. it will carry over to the next year - CORRECT ANSWERS A. the amount is forfeited
Prior to beginning work for a company, a chemical engineer signed a contract stating
that she agreed to work as an independent contractor. She performs all her duties in the
company's laboratories, works under the company's direction, and maintains regular
office hours. What is her status?
a. independent contractor under common law
b. independent contractor under reasonable basis test
c. employee - CORRECT ANSWERS C. employee
do not assume that the employer has fulfilled its responsibilities and is free from penalty
simply by having a worker sign a contract stating he is a 1099. individuals do not have a
right to waive their fee status in a contract.
A retired safety inspector for the company was rehired as a consultant when the
company expanded its plant operations. The retired employee was a natural choice.
The tasks he undertook as a consultant were the same as the ones he performed
,before retirement. paid monthly, he has agreed to work under the direction of his old
boss until the new plant facilities are fully operational? What is his status?
a. independent contractor under common law
b. independent contractor under reasonable basis test
c. employee - CORRECT ANSWERS C. employee
consultants are generally treated as independent contractors. However, when an ex ee
is performing the same or similar job as before retirement, it is unlikely that he qualified
as a 1099 after termination
a receptionist has agreed to work afternoons at the company until the company can find
a full time replacement. What is the receptionist's status?
a. independent contractor under common law
b. independent contractor under reasonable basis
c. employee - CORRECT ANSWERS C. employee
Whether or not an ee is full time or part time or works a few weeks or a lifetime for the
company is not relevant to her. she is an employee.
All of the following types of employees are classified as exempt from the FLSAs min
wage and OT requirements except:
a. professional
b. outside salesperson
c. administrative
d. computer repairman - CORRECT ANSWERS D. computer repairman
a computer repairman does not perform the duties required to qualify as an exempt
computer professional
A waitress is paid $2.25 per hour and she receives $225 in tips during the week. She
works 4o hours per week. Which of the following is true?
a. her employer is allowed to reduce her cash wage to no less than $2.13 per hour
b. her base pay must be increased to $4.5 per hour after a 90 day training period.
c. she must be paid $5.12 per hour by her employer
d. Her base salary must be raised to $3 per hour to comply with fed min wage
requirements. - CORRECT ANSWERS A. her employer is allowed to reduce her cash
wage to no less than $2.13 per hour
her employer can claim the full federal tip credit because she receives tips and with her
tips, is paid more than the current federal minimum wage purposes, her employer must
pay her at least $2.13 per hour and her hourly rate plus tips must equal at least the
current federal min wage
if a state sets the minimum wage at a rate greater than the federal minimum wage, the
state minimum wage must be paid to workers in that state
- true
,-false - CORRECT ANSWERS TRUE
tips can be counted toward the employees minimum wage - CORRECT ANSWERS
TRUE
an employee works 40 hours per week as a fry cook. During the week, she substitutes
for one of the waitresses and reports $5 per week in tips. Can her employer pay her
$2.13 per hour?
- yes
- no - CORRECT ANSWERS no
because she isn't making $30 a month. the tip credit can be used to reduce the
minimum wage only if the employee regularly receives tips and documents receiving
more than $30/month
Employers who provide paid vacation leave must count the hours of paid time off when
determining if the employee must receive an overtime premium when the total hours
worked in a week exceed 40.
true
false - CORRECT ANSWERS false
only hours worked count toward determining whether overtime premiums must be paid
under the FLSA
the FLSA requires immediate payment of an employee's final paycheck upon
termination
true
false - CORRECT ANSWERS FALSE
however, most states impose time limits governing when an employee's final paycheck
must be paid to the employee
an employee's parking garage is 2 blocks away from his downtown office. It costs
$275/month to rent a stall there, but the employee doesn't mind because it's convenient
and his employer reimburses him 100% of the cost. How much of his monthly parking is
taxable? - CORRECT ANSWERS $15.
remember: employer-provided parking is nontaxable up to $260/month
a retail sales clerk took advantage of the company's employee discount program to
purchase clothes at 10% off the normal retail price. This service represents:
a. taxable compensation
b. a qualified employee discount
c. a working condition fringe
d. a no-additional cost service - CORRECT ANSWERS b. a qualified employee discount
, Last month, an employee emailed her mother on the company's email, photocopied
fliers for her church picnic at work and used her work computer to update her resume.
These services represent:
a. taxable compensation
b. de minimis fringes
c. working condition fringes
d. no-additional cost services - CORRECT ANSWERS b. de minimis fringes
True or false: if an employee dies and a final payment is made, the employer continues
to withhold taxes as if the employee is still alive. - CORRECT ANSWERS FALSE- no
federal taxes are withheld
if the amounts are paid after the year of death, no SS and medicare are withheld and no
reporting is done on the W2. Instead it is reported on _______ misc. - CORRECT
ANSWERS 1099-misc
if the amounts are paid during the same year the employee dies, _______ and ______
must be withheld and reported on the W2. FIT is not reported on W2. - CORRECT
ANSWERS Social security and medicare must be withheld
Percentage method practice: an employee who is married with 4 allowances earns a
biweekly salary of $1500. Calculate his federal income tax using the percentage
method. - CORRECT ANSWERS Find Net/Adjusted Wages (after deduction for
withholding allowances)
§$161.50 x 4 = $646.00
Gross wages - Allowances = Adjusted Wages (Net Wages)
§$1500.00 - $646.00 = $854.00
Apply Percentage Table (Appendix)
§Net Wages over $454.00 but not over $1,200.00
Adjusted Wages - Threshold Amount = Excess Amount
§$854.00 - $454.00 = $400.00
Amount of Tax + (Excess Amount x Percentage) = Total Withholding
§0.00 + ($400.00 x 10%) = $40.00
Calculate the total compensation for an electrician who worked 44 hours last week. In
addition to his regular wage of $10/hour, the electrician was paid $50 for supervising a
trainee. What is the electricians total weekly compensation? - CORRECT ANSWERS
Step 1: 44 hours x $10/ hour = $440 + $50= $490 regular pay
Step 2: $490/44 hours = $11.14 regular rate of pay
Step 3: $11.14 x 5 = $5.57 overtime premium rate
Step 4: $5.57 x 4 hours = $22.28 premium pay for overtime
Step 5: $490 + $22.28 = $512.28 total compensation
