CPM Payroll Processing and Administration 2 — Questions and Answers
Question 1: An employee is paid semi-monthly. They work 95 hours in one pay period, including 15 hours of overtime. How should overtime be calculated?
- Pay OT only for hours over 80 in the semi-monthly period
- Pay OT for hours over 40 in each workweek within the pay period (Correct answer)
- Average hours across the two workweeks and pay OT if average exceeds 40
- No OT applies to semi-monthly pay schedules
Correct answer: Pay OT for hours over 40 in each workweek within the pay period
FLSA overtime is calculated on a workweek basis (over 40 hours), regardless of the pay period frequency.
Question 2: Which form must employers file to report federal income tax withheld and FICA taxes for most employers?
- Form 940
- Form 941 (Correct answer)
- Form W-3
- Form 1099-NEC
Correct answer: Form 941
Form 941 is the Employer's Quarterly Federal Tax Return used to report withheld federal income tax and FICA taxes.
Question 3: A company acquires another business mid-year. Under a successor employer situation, how should the acquired employees' FICA wage bases be treated?
- Restart the FICA wage base for all transferred employees from zero
- The successor may continue counting wages paid by the predecessor toward the wage base (Correct answer)
- Apply a blended rate based on acquisition date
- Only Social Security wage base transfers; Medicare does not
Correct answer: The successor may continue counting wages paid by the predecessor toward the wage base
In a successor employer situation, the successor may take into account wages paid by the predecessor to avoid over-withholding FICA taxes.
Question 4: What is the primary purpose of a payroll register?
- To file with the IRS each quarter
- To provide a summary of each employee's earnings, deductions, and net pay for a pay period (Correct answer)
- To record employer-only payroll tax liabilities
- To track PTO accruals and usage
Correct answer: To provide a summary of each employee's earnings, deductions, and net pay for a pay period
A payroll register is an internal record summarizing each employee's gross pay, deductions, and net pay for a given pay period.
Question 5: An employee receives a $5,000 nonqualified deferred compensation payment. When is this amount subject to FICA taxes?
- When the compensation is actually paid out
- When the services creating the right to the compensation are performed
- When the compensation vests and is no longer subject to a substantial risk of forfeiture (Correct answer)
- When the employee reaches retirement age
Correct answer: When the compensation vests and is no longer subject to a substantial risk of forfeiture
Under the special timing rule, FICA taxes on nonqualified deferred compensation are due when the amount is no longer subject to a substantial risk of forfeiture.
Question 6: Which deposit schedule applies to an employer whose total Form 941 tax liability in the lookback period was $45,000?
- Annual depositor
- Monthly depositor (Correct answer)
- Semi-weekly depositor
- Next-day depositor
Correct answer: Monthly depositor
Employers with $50,000 or less in tax liability during the lookback period are monthly depositors; $45,000 falls below the $50,000 threshold.
Question 7: What does the term 'constructive receipt' mean in payroll administration?
- An employee physically receives a paper paycheck
- Income is taxable when it is made available to the employee without restriction, even if not yet collected (Correct answer)
- Wages are reportable only when the direct deposit clears the bank
- Compensation is recognized when the employer records it in the general ledger
Correct answer: Income is taxable when it is made available to the employee without restriction, even if not yet collected
Constructive receipt means income is taxable when made available to the taxpayer without substantial restrictions, regardless of physical receipt.
CPM Payroll Processing and Administration 2
An employee is paid semi-monthly.
They work 95 hours in one pay period, including 15 hours of overtime.
How should overtime be calculated?