CPP CPP Quality & Compliance 5

Question 1

Under IRS regulations, what is the de minimis fringe benefit threshold consideration when determining whether a small-value employer-provided item must be included in an employee's taxable wages?

Accepted Answer

Items so small in value that accounting for them is administratively impractical are excluded from wages

Answer

A de minimis fringe benefit is one so small in value that accounting for it would be administratively impractical or unreasonable, making it excludable from an employee's gross income.

Question 2

An employer sponsors a nonqualified deferred compensation plan. Under IRC Section 409A, what event triggers taxation of the deferred amounts?

Accepted Answer

Only when the employee receives a distribution under a permissible event

Answer

Section 409A requires that deferred compensation be taxed only upon a permissible distribution event (e.g., separation from service, death, disability), or it may be subject to an additional 20% tax plus interest.

Question 3

A payroll professional needs to verify that federal tax deposits were applied correctly. Which resource allows direct confirmation of IRS account deposit credits?

Accepted Answer

The Electronic Federal Tax Payment System (EFTPS) payment history

Answer

EFTPS provides employers access to their own tax payment history, allowing verification that payments were applied correctly to their IRS account.

Question 4

Which scenario would create a payroll compliance risk related to the 'netting' of wages?

Accepted Answer

Reducing an employee's paycheck by a prior overpayment in a manner that brings net pay below minimum wage

Answer

The FLSA prohibits deductions from wages that bring an employee's pay below the required minimum wage, even if the deduction is for a legitimate overpayment recovery.

Question 5

An employer provides employees with employer-paid group term life insurance coverage of $75,000. What is the tax treatment of the coverage amount that exceeds $50,000?

Accepted Answer

The cost of coverage over $50,000, calculated using IRS Uniform Premium Table I rates, is included in the employee's wages

Answer

IRC Section 79 allows the first $50,000 of employer-paid group term life to be excluded from wages; the cost of coverage above $50,000 is calculated using IRS Table I rates and included in taxable wages.

CPP - Certified Payroll Professional Practice Test

CPP - Certified Payroll Professional Practice Test

CPP CPP Quality & Compliance 5