CPP CPP Quality & Compliance 2 — Questions and Answers
Question 1: An employer discovers a payroll error from three pay periods ago that resulted in an employee being underpaid. Under the FLSA, what is the primary obligation?
- Correct the error in the next payroll only if the employee requests it
- Pay the underpaid wages plus applicable overtime in the next regular payroll (Correct answer)
- File an amended payroll tax return and wait for IRS guidance
- Notify the state labor board before issuing corrected wages
Correct answer: Pay the underpaid wages plus applicable overtime in the next regular payroll
The FLSA requires employers to promptly correct wage underpayments, including any resulting overtime deficiencies, in the next regular pay cycle.
Question 2: Which IRS form is used to correct a previously filed Form 941?
- Form 944-X
- Form 941-X (Correct answer)
- Form 1096
- Form W-2c
Correct answer: Form 941-X
Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund, is used to correct errors on a previously filed Form 941.
Question 3: Under IRS regulations, what is the lookback period used to determine an employer's deposit schedule for federal employment taxes?
- The current calendar year
- The 12-month period ending June 30 of the prior year (Correct answer)
- The most recent four quarters
- The prior calendar year January through December
Correct answer: The 12-month period ending June 30 of the prior year
The lookback period is the 12-month period ending June 30 of the prior year, used to classify employers as monthly or semi-weekly depositors.
Question 4: A payroll professional notices that an employee's federal income tax withholding was calculated using the wrong filing status for the entire year. Which corrective document must be issued to the employee?
- A corrected Form 1099-MISC
- A corrected Form W-2c (Correct answer)
- A new Form W-4 for next year only
- A corrected Form 941-X filed with the IRS
Correct answer: A corrected Form W-2c
Form W-2c is issued to employees to correct errors on previously furnished Form W-2s, including incorrect withholding amounts.
Question 5: An organization undergoes a payroll audit and the auditor requests documentation showing that garnishment orders were processed correctly. Which record would BEST demonstrate compliance?
- Copies of the employee's credit reports
- Payroll registers showing deduction amounts per pay period alongside the court orders (Correct answer)
- The employee's signed acknowledgment of the garnishment
- State labor department correspondence files
Correct answer: Payroll registers showing deduction amounts per pay period alongside the court orders
Payroll registers cross-referenced with the original court orders demonstrate that the correct amounts were deducted per the legal requirements.
Question 6: Under the Consumer Credit Protection Act (CCPA), which type of garnishment has the highest priority when an employee has multiple garnishments?
- Student loan garnishments
- Credit card debt garnishments
- Child support orders (Correct answer)
- State tax levies
Correct answer: Child support orders
Child support orders have the highest priority under federal law, and the CCPA also allows higher withholding limits for child support than for ordinary creditor garnishments.
Question 7: Which internal control BEST reduces the risk of fictitious employees being added to a payroll system?
- Requiring supervisors to approve their own department's payroll
- Segregating the duty of adding new employees from the duty of processing payroll (Correct answer)
- Conducting annual W-2 reconciliations
- Storing payroll records in a locked cabinet
Correct answer: Segregating the duty of adding new employees from the duty of processing payroll
Segregation of duties prevents one person from both creating a fictitious employee record and processing a paycheck for that record, which is a key anti-fraud control.
CPP CPP Quality & Compliance 2
An employer discovers a payroll error from three pay periods ago that resulted in an employee being underpaid.
Under the FLSA, what is the primary obligation?