Mixed Deck — All CPS Topics Flashcards
100 cards from real CPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 20 Mixed Deck — All CPS Topics flashcards as text
A company pays an independent contractor $650 during the tax year. What is the employer's reporting obligation?
Answer: No reporting required since the payment is below the $600 threshold
Form 1099-NEC is required only when a contractor is paid $600 or more in a tax year; $650 exceeds the threshold and must be reported.
Which state law concept requires employers to pay all wages due upon an employee's termination on a specific timeline that may differ from regular payday?
Answer: Final paycheck law
State final paycheck laws specify when terminated employees must receive their last paycheck, and the deadline often differs (sometimes immediately) from the regular pay schedule.
Which corrected form must an employer file to correct a previously filed Form 941 that understated wages and taxes?
Answer: Form 941-X
Form 941-X (Adjusted Employer's Quarterly Federal Tax Return) is used to correct errors on a previously filed Form 941.
What differentiates fixed from variable costs in CPS?
Answer: Fixed costs stay constant; variable costs change with volume
Fixed costs (rent, salaries) remain constant; variable costs (materials, commissions) fluctuate with activity volume.
Which agency enforces the Employee Polygraph Protection Act (EPPA)?
Answer: Department of Labor Wage and Hour Division
The Wage and Hour Division of the Department of Labor enforces the EPPA, which generally prohibits employers from requiring lie detector tests.
Why is payroll compliance essential for businesses?
Answer: To avoid legal penalties
Compliance ensures that businesses meet all legal requirements, avoid penalties, and protect employee rights.
Which payroll system configuration controls how overtime is calculated for an employee who works in two departments with different pay rates during the same workweek?
Answer: Blended rate rule
The blended (weighted average) rate rule computes the regular rate across all hours and rates worked, then applies the 0.5x overtime premium.
What is the role of Form 940 in payroll taxation?
Answer: To report and pay unemployment taxes
Form 940 is used by employers to report and pay unemployment taxes to the IRS.
Which investment vehicle allows employees to purchase company stock at a discounted price through payroll deductions?
Answer: ESPP
An Employee Stock Purchase Plan (ESPP) lets employees buy company stock at a discount, typically 5–15%, via payroll deductions.
A payroll auditor is reviewing multistate payroll. Which concept determines which state's income tax should be withheld when an employee works in multiple states?
Answer: Reciprocity agreements and sourcing rules
Reciprocity agreements between states and state-specific income sourcing rules determine which state (or states) may tax wages earned by employees working across state lines.
Under the FLSA, which of the following employees is correctly classified as EXEMPT from overtime requirements?
Answer: A licensed attorney earning $75,000 who exercises professional judgment
Licensed attorneys who exercise professional judgment and meet the salary threshold qualify for the learned professional exemption under the FLSA.
When an employee's Section 401(k) elective deferral exceeds the IRS annual limit, what must the employer do by April 15 of the following year?
Answer: Distribute the excess deferral plus earnings back to the employee
Excess 401(k) deferrals must be returned to the employee, along with any earnings attributable to the excess, by April 15 of the year following the year of deferral to avoid double taxation.
What does ROI measure in CPS financial analysis?
Answer: Gain or loss relative to the investment amount
ROI compares net gain or loss to initial investment cost, helping compare profitability of different options.
What is the employer's penalty for intentionally failing to file correct information returns such as W-2s?
Answer: $630 per return with no annual maximum
For intentional disregard of filing requirements, the penalty is $630 per return (indexed for inflation) with no annual maximum cap.
What differentiates fixed from variable costs in CPS?
Answer: Fixed costs stay constant; variable costs change with volume
Fixed costs (rent, salaries) remain constant; variable costs (materials, commissions) fluctuate with activity volume.
What are consequences of non-compliance in CPS practice?
Answer: Fines, license revocation, legal liability, and reputation damage
Non-compliance can result in fines, license issues, legal liability, and lasting reputational damage.
What is the purpose of a payroll bank account reconciliation at period end?
Answer: To ensure all checks and ACH transactions cleared and outstanding items are identified
Bank reconciliation matches the payroll account balance per books to the bank statement, identifying uncleared items and catching errors or fraud.
What is cash flow management in CPS practice?
Answer: Optimizing the timing of money coming in and going out
Cash flow management tracks and optimizes the timing of inflows and outflows to ensure sufficient funds.
Which metric measures the total cost of maintaining the workforce, including wages, benefits, and employer taxes, as a percentage of revenue?
Answer: Labor cost ratio
The labor cost ratio expresses total workforce costs as a proportion of revenue, helping management assess workforce efficiency.
When an employee receives IRS Form 668-W, what must the employee submit to the employer to determine the exempt amount from the levy?
Answer: The Statement of Exemptions and Filing Status (Part 3 of Form 668-W)
The employee must complete and return Part 3 of Form 668-W (Statement of Exemptions and Filing Status) so the employer can calculate the correct exempt amount using IRS Publication 1494 tables.