CPS Payroll Processing & Systems 3 — Questions and Answers
Question 1: Which method is used to determine the regular rate of pay for a non-exempt employee who receives a flat-sum bonus that is not tied to hours worked?
- Divide the bonus by 40 hours
- Add the bonus to total straight-time earnings and divide by total hours worked (Correct answer)
- Exclude the bonus from regular rate calculations
- Apply the bonus only to overtime hours
Correct answer: Add the bonus to total straight-time earnings and divide by total hours worked
FLSA requires flat-sum bonuses to be included in the regular rate by dividing the total compensation (including the bonus) by total hours worked.
Question 2: A payroll system's audit log shows a change to an employee's bank routing number two hours before the pay run. What is the MOST appropriate response?
- Proceed since the system accepted the change
- Contact the employee directly to verify the change before processing (Correct answer)
- Reverse the change and use the prior routing number automatically
- Notify the bank to hold the deposit pending review
Correct answer: Contact the employee directly to verify the change before processing
Direct confirmation with the employee prevents misdirected payments caused by unauthorized banking changes, a common payroll fraud vector.
Question 3: Under IRS rules, when an employer provides a vehicle to an employee for personal use, which valuation method uses the standard IRS mileage rate applied to personal miles?
- Annual Lease Value method
- Cents-per-mile method (Correct answer)
- Commuting valuation rule
- Fair market value method
Correct answer: Cents-per-mile method
The cents-per-mile method values personal use of a company vehicle by multiplying personal miles driven by the IRS standard mileage rate.
Question 4: Which payroll process ensures that employee Social Security numbers (SSNs) submitted to the IRS match Social Security Administration (SSA) records before W-2 filing?
- EFTPS verification
- Social Security Number Verification Service (SSNVS) (Correct answer)
- IRS TIN Matching Program
- E-Verify
Correct answer: Social Security Number Verification Service (SSNVS)
The SSA's SSNVS allows employers to verify that name/SSN combinations match SSA records, reducing W-2 error penalties.
Question 5: An employee works 48 hours in a workweek at $20/hr and also receives a $100 production bonus. What is the correct FLSA overtime premium owed?
- $80.00
- $84.17 (Correct answer)
- $ 88.00
- $100.00
Correct answer: $84.17
Regular rate = (48×$20 + $100)/48 = $1,060/48 ≈ $22.08; overtime premium = $22.08 × 0.5 × 8 OT hours ≈ $84.17.
Question 6: Which feature of a payroll system reduces the risk of duplicate payments when processing manual (off-cycle) checks?
- Automated check numbering with sequential control
- Pre-note verification for ACH transactions
- Dual-approval workflow requiring manager and payroll sign-off (Correct answer)
- Positive pay file generation
Correct answer: Dual-approval workflow requiring manager and payroll sign-off
A dual-approval workflow requires independent review before a manual check is issued, preventing unauthorized or duplicate payments.
Question 7: A company using a third-party payroll provider (TPSP) remains ultimately responsible to the IRS for which of the following?
- The TPSP's software licensing fees
- Timely deposit of federal employment taxes (Correct answer)
- The TPSP's internal audit procedures
- Compliance with the TPSP's SLA uptime guarantees
Correct answer: Timely deposit of federal employment taxes
Even when using a TPSP, the employer retains legal responsibility for timely federal tax deposits; penalties fall on the employer if the TPSP fails.
CPS Payroll Processing & Systems 3
Which method is used to determine the regular rate of pay for a non-exempt employee who receives a flat-sum bonus that is not tied to hours worked?