Mixed Deck — All CPM Topics Flashcards

When a payroll system vendor announces end-of-life (EOL) for a product, what is the MOST critical risk for a company that does not upgrade?

Answer: The system will no longer receive security patches or compliance updates

After EOL, vendors stop releasing security patches and tax/compliance updates, leaving the company exposed to security vulnerabilities and the risk of processing payroll with outdated tax tables.

After a garnishment order is fully satisfied, what must the employer do?

Answer: Immediately cease withholding and notify the employee

Once the debt is paid in full and the garnishment is satisfied, the employer must stop all withholding and should inform the employee that the order has been fulfilled.

Which regulation requires payroll systems handling electronic health benefit deductions to maintain specific data privacy safeguards?

Answer: HIPAA

HIPAA (Health Insurance Portability and Accountability Act) requires that payroll and HR systems protecting health-related benefit information maintain specific privacy and security safeguards.

Which of the following correctly describes the accrual of vacation pay under GAAP?

Answer: Vacation pay must be accrued as it is earned if it is probable and estimable

GAAP requires accrual of compensated absences such as vacation pay when the obligation is probable and the amount can be reasonably estimated.

Under IRS regulations, what is the maximum contribution limit for a Health Flexible Spending Account (Health FSA) employee salary reduction in 2024?

Answer: $3,200

For 2024, the IRS health FSA salary reduction contribution limit is $3,200 per employee.

What is the primary purpose of a Summary Plan Description (SPD) in benefits administration?

Answer: To inform participants of their rights and benefits under an ERISA plan

ERISA requires plan administrators to provide an SPD that clearly explains plan benefits, eligibility, and participant rights.

Form 8919 is used by workers who believe they were misclassified as independent contractors. What is its primary purpose?

Answer: To compute and report the employee's share of Social Security and Medicare taxes on unreported wages

Form 8919 allows workers who were incorrectly classified as contractors to calculate and pay only their employee share of Social Security and Medicare taxes on the wages.

If an employee fails to return the exemption statement (Part 3 of Form 668-W) within three business days, how should the employer treat the levy?

Answer: Withhold as if the employee is single with zero exemptions

If the employee does not return the exemption form, the employer must withhold as if the employee is married filing separately with one exemption — effectively single with zero, using the lowest exempt amount.

What is the primary ethical obligation of a CPM professional when a conflict of interest arises during multi-state nexus & reciprocity activities?

Answer: Disclose the conflict to all relevant parties and recuse from the decision if necessary

The primary ethical obligation when a conflict of interest arises in multi-state nexus & reciprocity is to disclose it to all relevant parties and, if necessary, recuse from the decision. This maintains professional integrity and stakeholder trust.

An employee receives a $5,000 bonus paid separately from their regular paycheck. The employer chooses the flat rate withholding method. What federal income tax rate applies?

Answer: 22%

The optional flat rate for supplemental wages (when paid separately and total supplemental wages do not exceed $1 million) is 22% for federal income tax withholding.

For NQSO exercises paid as supplemental wages (separately from regular wages), the mandatory flat federal income tax withholding rate is:

Answer: 22%

The mandatory flat supplemental withholding rate is 22% for supplemental wages up to $1 million in a calendar year, including NQSO spread income.

When auditing payroll for a multistate employer, the auditor finds that the company applies the resident state's income tax withholding rules to all employees regardless of where they work. What issue does this create?

Answer: Incorrect state income tax withholding based on work-state sourcing rules, creating potential tax liability for employees and the employer

State income tax withholding is generally based on the state where work is performed (source state), not solely the employee's residence, so applying only residency rules creates withholding errors.

Which data encryption standard is most commonly required for payroll data transmitted over the internet?

Answer: TLS (Transport Layer Security)

TLS (Transport Layer Security) is the industry standard protocol for encrypting payroll and other sensitive data transmitted over the internet.

In the context of flsa overtime & exemption rules, what role does continuous professional development play for CPM practitioners?

Answer: It ensures practitioners remain current with evolving standards, technologies, and best practices

Continuous professional development is essential in flsa overtime & exemption rules because it ensures CPM practitioners remain current with evolving standards, technologies, and best practices, maintaining competency throughout their careers.

Which 1099 form replaced Form 1099-MISC Box 7 for reporting non-employee compensation starting in tax year 2020?

Answer: 1099-NEC

The IRS reintroduced Form 1099-NEC in 2020 specifically to report non-employee compensation, moving it out of 1099-MISC Box 7.

Which of the following is a key payroll compliance concern when an employee's FMLA leave spans two calendar years?

Answer: The employer must apply its chosen 12-month FMLA measuring method consistently; leave taken in year one counts against that year's entitlement, and a new entitlement begins in year two

The employer must use its chosen 12-month measuring method (calendar year, rolling backward, fixed year, etc.) consistently, with leave allocated to the year in which it was taken.

When reconciling year-end W-2s for a multi-state employee, the total of all state wages reported in Box 16 across all states:

Answer: May exceed Box 1 federal wages if states use different wage bases or allocation methods

Some states source wages differently (e.g., convenience-of-the-employer rules), so total state wages across all W-2 entries can legally exceed federal Box 1 wages.

Backup withholding is applied at what flat rate on reportable payments when a payee fails to provide a valid TIN?

Answer: 24%

Backup withholding is required at a flat 24% rate when a payee fails to furnish a correct taxpayer identification number (TIN) to the payer.

Which states have no state income tax, eliminating the need for state income tax withholding?

Answer: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming

Nine states currently have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Which type of payroll system deployment model stores all data and software on the vendor's remote servers?

Answer: Cloud-based (SaaS)

A cloud-based or SaaS (Software as a Service) payroll system stores all data and applications on the vendor's remote servers, accessible via the internet.